Yesterday I wrote about the joy of reducing the power of compounding interest by making extra payments. While what I am doing is great, it is unfortunately not enough to meet my goals.
My goal is to have my second mortgage paid off before I have to start paying principal on my first mortgage. That starts in 2017, a long way off but all too short a time to get $125,000 paid off for my second mortgage. I'd also love to have a year or two of breathing room without any second mortgage payments before starting principal payments on my first.
I like to play around at Bankrate.com and use their mortgage calculators to figure out how long it will take me to pay off the mortgage if I pay more in monthly principal payments or if I make a one time payment. It is fun to see how much time I am taking off my loan repayment schedule by paying extra, but also scary because it makes me realize I am not paying fast enough.
In order to meet my intermediate goal of paying off my second mortgage in six or seven years I really need to do more than pay off the $10,000 in principal I set as my goal for this year. I still have $11,000 of my tax refund left, and I am thinking about what to do with it. In order to meet my goal I not only have to put the tax refund towards the mortgage, I also have to increase my principal payments to about $800 a month. Yikes. I just increased from $300 to $500 a month last fall, and increased my monthly car savings from $100 to $200 a month. Where will I find another $300 a month?!
Two interesting faces
1 day ago
I think you have a great goal to pay off your second by 2017. Finding $300 extra every month will be tough. But even if you can't pay off the second, perhaps in 8 years, the market would have stabilized enough that you can refinance the first? Don't lose hope.
ReplyDeleteI say keep at it as best you can, you never know what might happen in the future. In a few years you could receive a windfall, get a big raise or have some other life event that totally changes the game. Just do the best you can with what you have, put as much as you are comfortable towards the principal. I look at how much extra I could pay towards the house and it seems pointless, it would barely make a dent :(
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