@Finance Nerd: I see what you’re saying, but for me it would still make me nervous I can see how if you bought near the top and then couldn’t sell that it would put you in a rough spot. Glad you seem to be through it now, too.

As it was, we paid on two houses for an entire year, and ended up taking an offer that was less than we owed. It was a financial crusher, and many people have told me they would have just walked away, but I didn’t feel right doing that, so I paid off the deficiency on the old house.

But I didn’t feel like backing out of the deal was an option because a) I had made a commitment to do it, and I don’t break commitments easily, and b) we really needed to get into that school district for my son who is a special needs child.

With an amortizing loan, your payment on your first is higher, which leaves you less money to pay down the second. On an I/O you can just pay the interest and put all of your principal to the second, paying it off much more quickly.

Look at it this way, if you had a first and a second, and the payments totaled $1500 per month, with $1000 of that being interest and $500 being principal, wouldn’t you rather that all of the principal went to one loan so you could pay it off faster? That is much more focused than paying $250 of interest on each.

Consider that the actual monthly principle amount on a 30 year loan is so small, it is easy to double your payment power without actually having to double your full payment.

So once you’ve (relatively) easily trimmed a 30 year mort into a 15 year obligation the mighly snowflakes can help you chip away from there.

Good luck with your efforts… I’m eager to get back in the job market so I can pound our 2nd mort and begin attacking the primary!

Thanks!
Dave

@Corporate Barbarian: Yea, you can run through an extra payment calculator and the difference in years and dollars is staggering.

@LAL: Yea, every situation is different. Like I said if you have other debt or really important savings goals, then the mortgage extra payments can wait.

@Golfing Girl: Sounds like a great plan.

When we get our new house we’ll put every penny on that new mortgage. I can’t wait to live in a paid for home!! (Please keep in mind we already fund retirement at 25%, make monthly deposits into our 5-year-old’s 529 plan, and plenty of life insurance, so we’re not sacrificing those things to get the home paid for.)

But, once the old one sold, we kept the I/O on our new house, mainly because it makes it easier to focus our payments. If I am going to pay $x of interest and $y of principal every month, I would rather put all of $y on the second, so I can get rid of it faster.

So, we pay about $1000 extra a month on our second, and hope to pay it off in about 5 years. Then we can take all of that and add it to the first and get that paid off too. I won’t lump sum the first, I’ll just pay that much extra every month.