First and Second Mortgage Strategy – Do I focus on 1st or 2nd?

1st loan – 6.875 30 yr fixed with 10 yr interest only option / 2nd loan 9.875 25 yr fixed with 10 year interest only option. If I want to pay more than the interest only, should I just follow the regular amortization schedule, or pay interest only on lower rate and max out payment on high rate loan? I know for credit card focus on high rate, but over 30 years does it make a difference, especially if I am going to refi the loan eventually to get rid of the second??

First general strategy is to pay off all other interest bearing debts, like credit cards or auto loans, that are not tax deductable. (More specific figures can be shared if you need to know specifics to your case)

Then, when all the debt that you have is your two mortgages, pay off the higher rate first.

But consider this, if you are in a 25% tax bracket, you are essentially paying 9.875*.75=7.4% after the potential tax deduction. You could be easily investing that extra money into your 401K and be getting more than 7.4….so depending on your tax bracket, you should do neither and just save your money.

Feel free to email me for more specific advice to your situation.

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