To pay off my mortgage, should I pay more on the principal loan or pay more the home equity loan first?

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My first mortgage has a lower interest rate but a much higher amount. The home equity loan is a smaller amount but at a much higher interest rate.

  1. Reply
    February 4, 2011 at 11:06 pm

    Which loan has the higher interest rate? That is the one you should buy down first.

  2. Reply
    Brian G
    February 4, 2011 at 11:47 pm

    Always pay off higher interest debt first. Even though you are paying more interest in dollars because of the higher loan amount, it is actually costing you more when you pay a higher interest rate.

  3. Reply
    bush deathgrip
    February 5, 2011 at 12:46 am

    check your records to see which cost you more interest annually….im betting the higher interest.

  4. Reply
    February 5, 2011 at 1:28 am

    Pay off the higher interest, lower balance equity loan first. You’ll save more in the long run, and you’ll be able to see the results of your effort sooner.

    Good luck!


  5. Reply
    February 5, 2011 at 1:55 am

    You did not say how long you had been in your house and if the first mortgage was an adjustable or not, or if it is an interest only loan.

    There are a couple of things you should consider before you start throwing your hard earned money around and perhaps for no reason what so ever. You are not paying principal for the first 5 years or so and if you have an interest only loan you will have t figure out if it is in your best interest to pay anything toward the principal.

    You might want to sit down with a mortgage professional to see what your options are. It might be that combining the two loans with a refinance is a better 1st option for you. Then once you have accomplished that then start on your principal pay down.

    You might consider a 4-1 payment option loan. You have four options to pay your loan and you are not penalized for which ever option you select and you can change your option when it suits you.

    I find that most individuals refinance their homes approximately every 5 years for some reason. Of course this also seem to be a regional thing as it happens more often in the western Unites States more so than in the southern United States.

    I hope this has been of some use to you good luck.

  6. Reply
    February 5, 2011 at 2:08 am

    Definately pay off the higher interest rate first. Don’t worry about the first mortgage right now. Believe me. Great question.

  7. Reply
    Kathleen M
    February 5, 2011 at 2:34 am

    What? You want to pay to your principal. Your escrow pays your insurance and taxes. That is adjusted every year by your loan company. I don’t think they’ll let you pay a bunch more on your escrow.

  8. Reply
    February 5, 2011 at 2:58 am

    Adding extra money to your escrow does nothing for you, unless you have reason to anticipate you will have a shortage in your escrow account. Otherwise, the bank will actually have to refund your excess money once a year when they review your escrow accounts. They are required by law to do so.

    Put your extra money against principal. It will save you money on interest every month thereafter.

  9. Reply
    February 5, 2011 at 3:31 am

    Escrow is simply a holding company that acts as intermediary between you and the lender. You pay escrow fees when you close a mortgage deal, and they can put aside an account for you to pay taxes and insurance, known as impounds.

    But paying principal refers to paying off equity in your home. This is ideally what you strive to do as a homeowner. Once you pay off all the principal, the home is yours, free and clear. You own it!

    You can also pay interest-only, which means you’re only paying the interest, and gaining no principal, or ownership in your home.

    It’s great to pay off more principal if you can…it gets you that much closer to owning your home. If that is your desire. Some people don’t care about ownership, and prefer to leverage their money elsewhere, such as in other investments. These people just pay off the interest, or even less than interest with negative amortization loans.

    Educate yourself about credit, finance, and mortgage at:

  10. Reply
    February 5, 2011 at 4:07 am

    Pay more money to the principal. If you put too much in your escrow acct. (taxes and ins.) the lender will send the $ back.
    Paying more on the principal pays your mortgage down quicker.

    More questions?

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