I live in a condo with my wife and the mortgage is upside down to the tune of $50k. The mortgage is actually a split mortgage with the second mortgage at 9% and there is a 50k balance on it. This was done to avoid PMI. I have decided to rent a larger space nearby to accommodate a future family and rent out the condo that I am in now. I don't want to own two homes.
I have the ability to completely eliminate the 2nd mortgage (approx 50k) in its entirety. By doing that, I free up about $500 a month in mortgage payments. I actually end up in the positive by $50 each month since the rental income will become greater than the mortgage. If I decide not to pay off the second mortgage, I am in the negative about $500 a month since the mortgage will be greater than the rental income.
Here is my question. Even though I can financially swing being in the negative by $500 a month, is there any reason I should hold onto the 50k that I would use to eliminate that second mortgage? Basically, I am treating that second mortgage like a high interest credit card. My sense is I should eliminate it and replace that money over the next 6 months to a year.