Refinance Mortgage or Pay Car Loan?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
ddorsett
Posts: 14
Joined: Wed Apr 29, 2015 12:48 pm

Refinance Mortgage or Pay Car Loan?

Post by ddorsett » Thu Mar 15, 2018 12:32 pm

Greetings,

I currently owe about $45K on my house at 4.8% interest (yes, I know, didn't understand what I do now) with no PMI. I am currently paying an addition $200 a month to pay it down. I would really like to be done with it in the next 5 year or less. My only other debt is the car, 14k, at $266 a month. I have an extra $10K, out side 401k,IRA, and emergency fund.

Which would be my better option for the $10K?
  • Refinance home loan and continue the extra $200
  • Apply the $10K to the home loan, continue as is
  • Pay off car with 10K+ and put an extra $466 to the home loan
  • Pay into HSA and/or IRA early and put that differnce to the loan
  • is their another option, I have not thought of?
Which option seems best?

Thanks!

User avatar
Sandtrap
Posts: 5324
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Refinance Mortgage or Pay Car Loan?

Post by Sandtrap » Thu Mar 15, 2018 12:37 pm

ddorsett wrote:
Thu Mar 15, 2018 12:32 pm
Greetings,

I currently owe about $45K on my house at 4.8% interest (yes, I know, didn't understand what I do now) with no PMI. I am currently paying an addition $200 a month to pay it down. I would really like to be done with it in the next 5 year or less. My only other debt is the car, 14k, at $266 a month. I have an extra $10K, out side 401k,IRA, and emergency fund.

Which would be my better option for the $10K?
  • Refinance home loan and continue the extra $200
  • Apply the $10K to the home loan, continue as is
  • Pay off car with 10K+ and put an extra $466 to the home loan
  • Pay into HSA and/or IRA early and put that differnce to the loan
  • is their another option, I have not thought of?
Which option seems best?

Thanks!
How much will it cost to refinance, and at what new interest rate?
3. Pay off car first. Go from there.
Generate no additional debt.
j

User avatar
Meg77
Posts: 2392
Joined: Fri May 22, 2009 1:09 pm
Location: Dallas, TX
Contact:

Re: Refinance Mortgage or Pay Car Loan?

Post by Meg77 » Thu Mar 15, 2018 1:19 pm

I don't think you're going to get a much better rate on your mortgage. It's more expensive to refinance a mortgage under $100k, and it may be difficult to find a lender that will do one under $50k. And the closing costs will likely be prohibitive since you plan to pay it off in just a few years anyway.

I don't know the rate on your car loan, but I'm assuming it's less than your home loan. However, the balance is smaller and you can probably wipe it out today if you dip into your EF a bit (or wipe it out in a few months anyway if you throw the $10k at it and then make a few more monthly payments).

Based on the limited info here, I would throw the $10k at the car loan, pay it off asap, and then pay $466 extra on the mortgage.
"An investment in knowledge pays the best interest." - Benjamin Franklin

Dulocracy
Posts: 2288
Joined: Wed Feb 27, 2013 1:03 pm
Location: Atlanta, GA

Re: Refinance Mortgage or Pay Car Loan?

Post by Dulocracy » Fri Mar 16, 2018 1:59 pm

What what is the interest rate on the car? My wife has an interest rate of 1.9% on the car, which we are not paying early. We are paying extra on the mortgage, however. I would look at it as a function of where you are going to be saving the most money.

Also, where is that $10,000 invested? It would be silly to take it out of an investment and put it towards your debt if that would skew your asset allocation. If it is in cash and it is not your emergency fund, I would drop it on whichever one has the highest interest rate. Realize that with such a low balance on your mortgage you probably are not getting any interest deduction benefit.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

Hillview
Posts: 311
Joined: Fri Feb 02, 2018 7:27 am

Re: Refinance Mortgage or Pay Car Loan?

Post by Hillview » Fri Mar 16, 2018 2:11 pm

Dulocracy wrote:
Fri Mar 16, 2018 1:59 pm
What what is the interest rate on the car?
If the car interest rate is higher than the house, pay the car. If not put it on the house.

mortfree
Posts: 1273
Joined: Mon Sep 12, 2016 7:06 pm

Re: Refinance Mortgage or Pay Car Loan?

Post by mortfree » Fri Mar 16, 2018 2:20 pm

45k mortgage vs 14k car loan.

I was in that situation before and focused on paying off the mortgage.

Don't bother with a refinance.

YOLO

Post Reply