I don't actually know which I value more. I have a non-deductible mortgage (since its not big enough to allow me to itemize) at 6% apr and a deductible student loan at 5.15% apr. Come July, I am going to have to decide which I want to start prepaying. If I prepay the student loan, I increase cashflow by $200 once its gone (and its only about $13k now so not big). After that, I can throw all of that at the mortgage.
If I prepay the mortgage (which has fha insurance on it) I get to pay off much more interest but I don't free up my cashflow for a long time. The student loan will naturally be paid off before the mortgage even though the mortgage is a 15 year.
Course all of this changes again if I refinance next year(if I refinance, it would be without the fha insurance thanks to equity in the home) which would also lower the interest.
I have awhile to solve this question or to have things change on me so its not a huge deal, its just surprising that I can't decide which choice I like better. They are a little too close.
Cashflow vs bang for your buck
December 11th, 2009 at 03:23 pm
December 11th, 2009 at 04:06 pm 1260547579
Then we have a ton of really low-rate loans, but most are variable, which means those nice rates aren't going to last forever.
I finally settled on the 3.99% credit card. Even though it's one of our best rates, A) it'll be psychologically beneficial to be credit card free, B) we don't get tax breaks on the interest we pay, and C) since it is a credit card, just paying the minimum could make payoff years away, since the monthly payment (and principal paydown) gets lower as the balance gets lower.
But it's not like I don't go back and reexamine my options frequently. Now the obviously worse debts are gone, the other debts are hard to compare because they're not the same beasts at all.
December 11th, 2009 at 04:34 pm 1260549253