So I'm in a situation that a lot of people are in across the country.
I bought a property about 7 years ago that I'm living in, that I never thought I'd have to own beyond 5 years, because my plan was to sell it for an equity gain at some point. Flash forward to today, and there has been no equity gain -- and I'm past the 5 year interest only period, so the 1st has begun to pay itself down. The rates has adjusted down to 3%, so I'm quite happy with how this is working out. The principal balance on the 1st is about $205k right now. The payment is about $1050, and almost $500 goes towards principal now (Which is awesome...) I have a HELOC also, which was obtained to avoid paying PMI, because I basically bought the house with zero down. The heloc has about $55k left on it, and it's interest rate is also tiny, so the payment is around $160 a month if I don't add to it. Just about 5 years ago, this payment got to be $700 a month when interest rates shot up for a bit -- so I know this payment can change rapidly with rates, but it's stayed under $250 for a few years now (Knock on wood...)
So the question is: What would you do? Should I be adding extra principal payments towards the 1st or the heloc? I'm predicting rising interest rates in the next few years, so at some point if I take zero action -- I may be faced with a rapidly rising payment, if I don't pay these balances down. If catastrophy strikes, I could end up being foreclosed on because if rates go to double digits, there would be no way I could afford such a payment. Re-fi'ing doesn't make a lot of sense to me, because I probably already owe what the house is worth, and a refi would put me under water and start my amort schedule over again, which is currently paying some nice chunks of principal down each month.
I have a strategy in place, but I want to know what your strategy would be and why.
Thanks!
Hakrjak :banana:
I bought a property about 7 years ago that I'm living in, that I never thought I'd have to own beyond 5 years, because my plan was to sell it for an equity gain at some point. Flash forward to today, and there has been no equity gain -- and I'm past the 5 year interest only period, so the 1st has begun to pay itself down. The rates has adjusted down to 3%, so I'm quite happy with how this is working out. The principal balance on the 1st is about $205k right now. The payment is about $1050, and almost $500 goes towards principal now (Which is awesome...) I have a HELOC also, which was obtained to avoid paying PMI, because I basically bought the house with zero down. The heloc has about $55k left on it, and it's interest rate is also tiny, so the payment is around $160 a month if I don't add to it. Just about 5 years ago, this payment got to be $700 a month when interest rates shot up for a bit -- so I know this payment can change rapidly with rates, but it's stayed under $250 for a few years now (Knock on wood...)
So the question is: What would you do? Should I be adding extra principal payments towards the 1st or the heloc? I'm predicting rising interest rates in the next few years, so at some point if I take zero action -- I may be faced with a rapidly rising payment, if I don't pay these balances down. If catastrophy strikes, I could end up being foreclosed on because if rates go to double digits, there would be no way I could afford such a payment. Re-fi'ing doesn't make a lot of sense to me, because I probably already owe what the house is worth, and a refi would put me under water and start my amort schedule over again, which is currently paying some nice chunks of principal down each month.
I have a strategy in place, but I want to know what your strategy would be and why.
Thanks!
Hakrjak :banana:
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