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What is your interest rate magic number to accelerate a payment?
Posted on 11/2/26 at 10:33 am
Posted on 11/2/26 at 10:33 am
I normally never accelerate payments...for a decade rates were so low that it didn't make sense. Now, I have two loans (rental mortgage and HELOC) at 7.5. I think this is the first time I am tempted to accelerate the payment as opposed to loading buying stock with my monthly surplus. Anyone have a hard feeling about this?
Posted on 11/2/26 at 10:53 am to rpg37
At 7.5, I’m going to make additional payments on interest. I don’t know what my “number” would be, but I’m pretty risk adverse and don’t like debt. So probably somewhere around 5-6%?
Posted on 11/2/26 at 10:56 am to Suntiger
7.5% risk free return is pretty good; probably not totally 7.5% due to the tax benefits that are foregone, but still, never hurts.
Posted on 11/2/26 at 11:01 am to rpg37
I accelerate everything because I hate having payments and like to pay stuff off early. Kinda of a split between paying extra on payments, HYSA, brokerage. My regular retirement stuff 401k and Roth IRA never changes as those are automated.
At 7.5% I would put more towards that than the others but my loans are currently at 3.9% auto 4.90 auto, 6.3 home.
At 7.5% I would put more towards that than the others but my loans are currently at 3.9% auto 4.90 auto, 6.3 home.
This post was edited on 11/2/26 at 11:03 am
Posted on 11/2/26 at 11:01 am to rpg37
Depends on what the payment is per month amd duration of the loans
But if you could make 2 extra payments per year on each loan I think that would be a great goal to have
On a 30 year mortgage your shaving off 10 years
But if you could make 2 extra payments per year on each loan I think that would be a great goal to have
On a 30 year mortgage your shaving off 10 years
Posted on 11/2/26 at 1:53 pm to rpg37
Without doing any hard math, I would say anything above 6.5% for me. Any lower than that and I would rather either invest it in something better or take a haircut on the investment to keep the liquidity.
Posted on 11/2/26 at 4:59 pm to rpg37
6.0% starting point to make me pause and think about it.
7.0% + likely paying down debt.
Unless that accelerated payment can be invested at (and for longer term) or more return (%) than the debt IR.
7.0% + likely paying down debt.
Unless that accelerated payment can be invested at (and for longer term) or more return (%) than the debt IR.
This post was edited on 11/2/26 at 10:17 pm
Posted on 11/2/26 at 4:59 pm to rpg37
6-6.5% is where I'd start prioritizing early pay off.
I'd focus on the HELOC first since it's presumably an adjustable rate and leverage against your primary residence.
Splitting the 2 as suggested earlier probably isnt the way to go. Getting one or the other paid off reduces your risk exposure sooner while by splitting your efforts you'd still be on hook for both monthly payments if you find yourself in a financial crisis.
I'd focus on the HELOC first since it's presumably an adjustable rate and leverage against your primary residence.
Splitting the 2 as suggested earlier probably isnt the way to go. Getting one or the other paid off reduces your risk exposure sooner while by splitting your efforts you'd still be on hook for both monthly payments if you find yourself in a financial crisis.
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