Finances & Money

Rerouted Debt Payment and Debt Scale Changes

Where to start? First, due to the changes in mortgage rates and house prices, we’ve had to think about refinancing. As I mentioned, we’re rather stuck with lower property values infringing on the equity we need to be able to refinance both of our loans into a single fixed-rate mortgage. We could just do our interest-only ARM loan right now, but its rate is lower than current rates, and we really want to get the 2nd loan’s rate down too if we can (it’s above 7%, but fixed).

Since we got our credit cards and the MINI Cooper paid off, next up on the debt list was my student loan. But as I found out this past weekend, the loan is deferred. That means the government is paying the loan’s interest while deferred. I expect it to be deferred until mid-2009. So what to do now?

Well, you’ll notice that I put our 2nd mortgage on the debt scale and raised the balance on the student loan. That’s because I canceled the $2000 student loan over-payment and sent it towards the mortgage instead. I won’t subtract it from the mortgage until it hits the account because I don’t know how much will go to principal yet. Most of it should since I just paid the regular mortgage payment and not much interest should have accrued.

So this means that for the near future, we’ll be sending our debt over-payments towards the 2nd mortgage. At the same time, I need to get a formal appraisal done on the property to see how far off we really are. This is definitely going to impact our debt payoff date of May 15, 2009, but I’m not changing the goal until I see the full picture.

Additionally, we’re still expecting a $5000 tuition reimbursement check from my employer soon, and I might send that off to the mortgage as well. The balance on the tuition is sitting on Discover Business Card at 0% until December, and I have no worries about the interest rate resetting or Discover trying to screw me over. Plus, since it’s a business card, it’s not on my personal credit report. I’ll put that credit card debt on the debt scale when we commit to sending the reimbursement towards the mortgage instead of the card.

So with the overpayment, the reimbursement check and next month’s scheduled overpayment, we could have about $9000 paid off on the 2nd mortgage in the next 30 days or so. I personally think we need $20,000 paid off, but I won’t know unless we either apply for a mortgage or pay for an appraisal separately. If anything, it’ll be nice to have some of the mortgage paid off!

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Clever Dude


  • We have the same issue. If the value was rising, refi would be cake, but it has gone to be 100% leveraged at this time (atleast it isnt more)

    I hope to flip the loan, even with higher rate/payment next year. My non-mortgage debt will be in much better shape,

    Need the FICO at 720+ (750 and the equity won’t matter much either)

  • Buddy…you can subordinate the 2nd…leave it hanging out there, and maintain operational flexibility. The 2nd is left out there, the first is redone. It’s another hoop, but it’s a 100% myth that you must pay a 2nd to get a first.

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