Does it make sense to keep money in an interest bearing savings account when you have a mortgage to pay off?

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The savings account obviously pays quite less and the money can rather be used to pay off part of the mortgage loan (principal). Is this the right way to go? Any other view/suggestions??

My wife and I own a house about an hour away from where we currently live and work. Currently we have renters in the house, but they are moving out soon (2-3 months). Also, my wife and I are both relatively decent earners ($ 60k-70k/year), however her job is stressing her to the point of emotional and physical breakdown… she needs to get out and do something less stressful (which means significantly less money, which means we won’t be able to afford the house). Basically, we need to get rid of the house.

The problem is, our mortgage is at $ 189k, while most comparable houses in the area are selling for ~$ 135k. Is it possible/advisable to get a $ 50k loan from a reputable institution that we can bring to a closing so we can sell the house? Our current mortgage payment is $ 1300/month… we’d like to halve this with any loan we might get.
If an unsecured loan for 50k isn’t possible, what about a secured loan? Is it possible to get a 50k secured loan using 2 cars that currently have loans as collateral?

8 Comments
  1. Reply
    My Big Bear Ron
    February 11, 2011 at 8:54 am

    Well, the difference might be that money in the bank is a liquid asset — you can get it out and use it when you need it ….. almost immediately.

    One could say that one should pay off the higher interest Credit Cards with the moneys in savings account, but, gee! it’s does feel good to have money in a bank, doesn’t it.

  2. Reply
    David
    February 11, 2011 at 8:58 am

    It’s better to be in the savings acc for a long period of time, save that money, after several years you can rifinance your house and then use all that money that you saved and pay some the amount that you just refinanced, that will lower your monthly payments and you will be able to save even more money for improving the house and make it more valuable.

  3. Reply
    fisuiks
    February 11, 2011 at 9:13 am

    Paying off a mortgage is the equivalent of “investing” at your mortgage interest rate, so it will save you money in the long run and is generally a good idea if you have no other use for the money (such as paying off credit card debt or expenses).

    If you need to access the money you paid in, you can generally get a home equity line of credit (HELOC) on your home for free. You can then reborrow the money you put into your house at that interest rate (which normally fluctuates). You can check out current rates at http://www.bankrate.com.

  4. Reply
    wizjp
    February 11, 2011 at 9:16 am

    uh…the loan is due when you sell the house; it accomplishes nothing.

    If you are talking about a personal loan for 50 K; not much chance of that unsecured.

    Cars? Possible; but not probable.

    Why not talk to your lender about a short sale or a modification?

  5. Reply
    RED
    February 11, 2011 at 10:10 am

    You would be better off trying to get a short sale from your bank, than to take out another loan. You won’t be able to get an equity loan… you need equity to do that. So I think a short sale is your only chance… or let the bank have it.

  6. Reply
    OldJimmy
    February 11, 2011 at 11:00 am

    You would have to have a much higher family income to qualify for an unsecured 50k loan.

    Because the cars already have loans on them, no one will likely loan more on top of that unless you have a couple of Bentleys with very low loan balances. Cars are notoriously bad collateral for anyone (no reflection on you).

    More bad news – not very likely you’re going to be able to swing a refinance deal that can cut your mortgage payment in half. That would take huge principal reductions and interest rate reductions to accomplish.

    Based on the info you’ve provided, I think your best bet is to keep renting that other house out until prices recover (which may be a while). Also, your wife needs to see if there is some way she can address the stress at the job so she can keep it. You don’t need a lower income right now, and the stress of having a foreclosure threatened, bill collectors calling, etc. is probably worse that what she is facing at work.

  7. Reply
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    February 11, 2011 at 11:33 am

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  8. Reply
    Chris R
    February 11, 2011 at 12:02 pm

    if you are serious, I would be glad to help you
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