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draconisskye

Paying down a second mortgage

draconisskye
16 years ago

I would like some unbiased opinions on paying down our second mortgage. I understand the tax benefits gained from interst paid, but I HATE looking at that second mortgage and watching the balance go down soooo sloowly, when I know we could pay off at least a portion of it right now from savings. We can't refinance to a lower rate, because we're still well above the 80/20 mark. At least we got out of the variable HELOC before it killed us.

We would like to have kids in the next couple of years, and I would really like to get rid of that second mortgage before that happens. It just doesn't seem like we gain enough in tax benefits from the second mortgage not to get rid of that monthly payment that could go towards so many other unknown things then. I figure we could pay it off in the next two years by using half our current savings and putting any extra cash towards it, instead of adding to our savings or retirement accounts. When it's gone, the same monthly payment would be set up to increase our regular savings and retirement savings accounts. (We're both in our mid-20's, by the way)

I think my emotions get in the way when I look at the amount in savings vs. amount owed on mortgage, and I just can't get beyond wanting to see that second mortgage gone. Anyone have any sensible advice to give?

Details:

Approx. 60k per year household income (gross)

110k first mortgage @ 6.00% fixed (25 years remaining)

17k second mortgage @ 7.85% fixed (9 years remaining)

11k savings in a money market account paying 4.26% currently

save approx. 10% of income in 401k/Roth (none maxed)

no car loans or CC debt

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