Laura M asked:
I’m guessing this varies based on the loan details, but generally speaking, if you make extra payments, is it better to target the mortgage (30 yr. fixed, 80% of purchase amount) or a home equity loan (15yr interest only, roughly 20% of purchase amount)
Just to make sure the question is clear…which is better to do (as far as which makes better financial sense)? Apply the extra toward the mortgage or apply the extra toward the home equity loan? If I can only apply extra payment toward one or the other.
DEREK
I’m guessing this varies based on the loan details, but generally speaking, if you make extra payments, is it better to target the mortgage (30 yr. fixed, 80% of purchase amount) or a home equity loan (15yr interest only, roughly 20% of purchase amount)
Just to make sure the question is clear…which is better to do (as far as which makes better financial sense)? Apply the extra toward the mortgage or apply the extra toward the home equity loan? If I can only apply extra payment toward one or the other.
DEREK
MIKE
You have to indicate on the payment to apply towards the mortgage
ALDO
I would put the extra towards the home equity loan, usually a higher interest rate. By making your payments every two weeks instead of once a month this will shorten your mortgage to approx a 8-10 year loan instead of a 15 year, saving you tons of interest. If the bank does not allow you to make partial payments, just split your monthly payment in half and save this amount every two weeks, until your monthly statement arrives, then mail in the payment. The reason this cuts off so much interest is those few months that have 5 weeks and will cut years off the mortgage.
Once the equity is paid off, do the same with your first mortgage.
GLENN
I think that if you go 30 yr. fixed with 20% down you’re getting into a more stable program (in case something comes up where you can’t make those high payments) and then whenever you have extra money you make an extra payment but make sure you tell them to “APPLY IT TO THE PRINCIPLE” that way it goes toward the original loan amount instead of going towards interest. This way you pay off your loan earlier and save yourself thousands in interest.
But I am definitely not an expert, just some else who is going through all this lending BS