Ok, new mtg. question -

[Mom2Joseph]

the only debt we have is our student loans and our mtg. Student loans are 42K, combined and in my name, the mtg is 224K in my dh's name. We have around $500 extra income each month to put somewhere. If I got *real* frugal (I mean, fanatical frugal) we could increase that to $900. We are already investing in our 401K's/IRA's and kids 529 plans, have $ in savings as well as sufficient life ins. Our mtg has the highest int. rate and is a 30 year fixed. So which would be better to pay down?

[LEAW]

If you can manage just one extra mtg payment a year (pay 1/2 the mtg every 2 weeks instead of once a month) you will change a 30 yr to an 18-22 yr with that alone.

I would pay off the student loans first, and make sure you have the retirement and college funds set up so that those things WILL be funded completely and then pay the mtg down after that...

[Mom2Joseph]

thanks - I was thinking that we would at least do the extra mtg payment a year and then maybe apply the rest of the extra $$ to the principal of the student loan. If my DH had it his way -we would pay on those stupid student loans for the rest of our lives...:

We are happy to keep putting $ into the kids 529 plans but I have no intentions of fully funding their education. I want them to work and pay for some of it so that they feel vested in their education. Actually, I have no idea just how much money we would have set aside for them at $50 a month for 18 years....

anyway, thanks for the advice!

[velochic]

Even though your mortgage is higher, you have to figure how much it is going to save you in taxes each year if you itemize and take the interest + prop. taxes as deductions before you can determine if it's worth paying off first. Are your student loans deductable?

If you want to pay off the mortgage, an extra payment a year or paying bi-weekly will only get your loan term down to about 24 years, actually. If you look at an amortization table of your loan, you will see that if you pay a payment equal to your principle early in the loan (when most of your payment is going to interest), you can pay it down much more cheaply than later on.

You would be best served paying your mortgage payment + principle payment each month in the early years of your mortgage (and continue that as long as you can). That is, if your payment is $1300 and about $160 of that is going to principle, you would be better off paying $1460 each month and instructing the mortgage company to apply the extra $160 to principle. You have to look at an amortization table, though, because as your mortgage gets older, those principle payments increase. In year 6 of the loan, for example, the principle payment would be around $230 instead of $160.

You pay off your loan in half the time by using this method. On a $200,000 loan, you save yourself about $160,000 in interest.

HTH!