Pay The 1st Or 2nd Mort?
I am a buy & hold, hope this is the right forum, any financial comments appreciated.
I am thinking about paying down the 1st or 2nd mortgage on a personal residence w/ rental- but which is best? The one w/ the higher rate (in this case the 1st) or is it better to pay down the 2nd because you can always* take your money back, that is *assuming the HELOC does not get frozen. Looking to pay it down to get a positive cash flow while paying principle / pay the loan off quicker.
Here are the stats, its an 80/10/10:
2-Unit in SF.
1st @ 6.375% IO/7yr :590k
2nd ARM, 5.6% IO: 70k
No pre-payment penalties, No other debt, Excellent Credit
Or is it better to buy more property (for long term) in this market?
What happens to the first at the end of the interest only period? Does it convert to a fully amortizing loan, and if so, does the rate adjust to whatever the prevailing rate is at the time?
How long is the interest only period on the second? What happens at the end of the interest only period? Does it convert to a fully amortizing loan, and if so, what is the loan term? When the loan converts to an amortizing loan, does the rate adjust to whatever the prevailing rate is at the time?
How long do you plan to stay in this house? Is there a high probablility that you will be moving somewhere else or into something else in the next seven years?
We need the answers to these questions before anyone can give you an informed answer.
[ Edited by NewKidInTown3 on Date 05/27/2008 ]