2 down, 1 to go, what next

[frogguruami]

So I finally convinced hubby to cash in our stock so we could pay off our credit cards. I just didn't make sense to me to have all this money in stocks when we had SOOOO MUCH debt. So we had enough in stock to pay off ALL of our CC. Two of the payments went through and I am still waiting on the third but it has been sent. So in a few days we will be completely CC debt free!!!!!!!!!!!!!!!!!!

Now I have to figure out what to attack next. We have student loans, and first and second mortgage. I think I am going for the second mortgage. Mainly because we are not paying anything toward principle yet. The other two debts have an ending date. There is a light at the end of the tunnel. I can't see it yet but I know it is there, LOL. The other one, though, has no light, not even a dim candle. So that is the one I am going to work on.

I am still trying to decide what to do with my tax refund. I am affraid if I send it all to the second mortgage I will not have enough money in reserves to pay the mortgage bill later in the year. SO, I will see what we get. Maybe I can send half there and save the other half in savings????

Anyone out there with a crystal ball that can tell me what to do?

[mightymoo]

Congratulations! I agree, keeping a stock that has no guarantee of return while paying huge interest rates doesn't make any sense.

Do you have a cash reserve fund? I would use the tax return to start that. You don't want to have an emergency and have to turn back to the credit cards. The mortgages and student loan are probably reasonable interest rates, CCs are insane, so I would put the money toward the emergency fund and maybe even try to put some additional savings in there over the next few months so you have a good cushion.

The second mortgage - is it an equity line of credit? (I'm assuming it is if you aren't making paymetns, but I could be mistaken) - you might be able to get them to lock your rate and put you on a payment plan - that's how our old HELOC worked, we were able to lock the rate up to two times, once the rate was locked, you start on an amortized payment schedule like your first mortgage, paying off interest and principal and are no longer subject to the fluctuations in the prime interest rate.

How long ago did you buy your house? If it was long enough ago (in some areas as little as 3 years) that in the recent boom your house went up in value & you may own 20% now thru payments and value appreciation, I would look into refinancing it into one mortgage payment. A good way to tell is what your city and town has appraised your house at for tax purposes - usually they are pretty conservative with tax appraisals, so if you are close to owning 20% then it might be worth a try. Rates are pretty decent still, so it all depends on your current interest rates between the two, etc. But definitely consider it if that's the case. That way rather than having a higher interest rate second mortgage tied to prime say, you could have a fixed rate across the board, but of course it might not be worth it if you have to refinance into a much higher interest rate than your current first mortgage.

[LEAW]

I'd work on paying the HELOC/2nd mort. down/gone first... then the other debt.. but like pp said, make sure you have a cash reserve for emergency too... maybe $2k and once everything BUT the 1st mort. is paid, then save 3-6 months expenses, and then pay off the 1st mort. with extra payments.