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Christine's Blog: A Smarter Way to Handle Multiple Mortgages (6/29/09)
Christine does a mid-year assessment of her rental goals and learns a better way to pay down the mortgages on her vacation rental properties
Hi everyone!
This past week I spent some time assessing my mid-year goals. Each year I set rental goals for all of my properties and periodically I like to look and see where I am compared to my goals. So far, despite the economic uncertainty, I seem to be on par for all of my rentals except one, which I’m still pretty sure we'll have back on track by the end of the year.
Now that all of my refinances are done, I also sat down and worked out a strategy for paying down our mortgages. Normally, my husband and I take the earnings from each rental and apply any overages toward that property’s mortgage to accelerate the loan. After a recent conversation with my accountant, I’ve have changed directions.
Now what we’re doing is taking all of the excess and applying it toward just one mortgage. This way we’ll be able to pay off one property in full, rather than just paying all of the properties a bit at a time. You’d think it be easy to choose which mortgage we’d pay off first — the one with the highest interest rate — but it didn’t exactly work out that way.
Because mortgages are amortized you have to look at the full amortization table and see where you are with regard to the maturity of the loan. For instance, we have one loan that is at 6.625% and another that is at 6.125%. As it turns out, we’re actually better off paying down the loan with the lower interest rate, which is only in its second year, rather than the higher-interest loan, which is in its 9th year.
If we continue at the current pace, it looks like we can pay off one property in a just couple of years! All in all, it was actually a very gratifying exercise.
Hope you all have a safe and fun 4th of July!
Christine
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How is your summer season shaping up so far?
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© Copyright 2009 Christine Karpinski
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