Or others?
Do you have an mortgage interest rate limit that you feel is worth paying off early rather than saving while paying the regular payment?

I ask because, I am just purchasing a house (double with 1/2 rented) with an interest rate around 4.6% @ 30 years.

I have the capacity to begin paying $300-400 extra/mo.

I have no other debt and am disciplined.

My intent is to hold this property long term as it's a sound income earner. I think it would be wise to pay the regular amount and save the extra $.

I obviously would need $ to buy my next property. Do you believe cash on hand is more valuable(to me) than the additional equity in the long term investment? Or is the interest rate 4.6% at a high enough level I should consider paying it down quickly?

Sorry, not trying to hijack. I feel this fits into this thread. Lots of info to consider and just curious what those wiser than me think.

ETA: House is in the Uptown NOLA area. I believe the values are unlikely to depreciate and finding tenants will take days not longer.

TIA

This post was edited on 8/14/13 at 10:17 am

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Posted by Tigersfan

Member since Feb 2006

2642 posts

Posted on 8/14/13 at 10:14 am to Oenophile Brah

When discussing paying off a mortgage no one seems to be mentioning the neighborhood that it is in being a factor. For example, if someone has a house in the Kenner area (or somewhere where the property value may be perceived to be depreciating) why would anyone dump anymore money into their mortgage than necessary regardless of interest rate?

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Posted by Ace Midnight

Between sanity and madness

Member since Dec 2006

89618 posts

Posted on 8/14/13 at 11:05 am to Oenophile Brah

quote:
I have no other debt and am disciplined.

quote:
I think it would be wise to pay the regular amount and save the extra $.

You do not need Dave Ramsey's Baby Steps.

This house is primarily an investment vehicle for you. However, I would do the A/B comparison regarding forming an LLC and renting from yourself, vice your homeowner's tax deduction - if your CPA and legal counsel think it is wise, I would consider that. The catch is - you can't go fully leveraged if you are not the owner occupier. SO, I would at least have enough equity to choose this option as soon as possible - then, if you decide to move, you rent your initial residential half - and you have an instant, profit producing business, already with a nice LLC.

So, I would suggest you commit some of the $300 to $400 extra a month now. The smartest way to do that is to figure what your 15 year payment (no reason to refi right this second, unless you haven't closed, then do the A/B with a 15-year) and at least make a principal only payment for the difference between your 30 year and 15 year - even if you just do this for 24 months or so, you'll knock years off the end and get you to the equity needed, or at least more quickly, to live elsewhere and hold this property as an investment.

30-years is a sucker play, in my mind, for residential financing.

This post was edited on 8/14/13 at 1:15 pm

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