Help! I'm all turned around around about what will grow my mustache faster.
I have some spare cash I'd like to put towards one of my mortgage payments, but I can't figure out which one to blast away. It is very tempting to try to knock out the smaller balance on my rental property, and get rid of the debt entirely this year.
But, on the other hand, the mortgage on my residence is pretty new, so just about two-thirds of my payments are just going towards interest. Not to mention having to carry PMI on it until I get to 78% LTV.
*And just to keep it simple for this exercise, investing is not an option.
Here's the run-down:
Spare cash for one-time principle reduction: $15,000
Monthly extra payment towards principle: $3500
Mortgage 1 (Rental Property)
Original amount: $47K in July 2009
Balance: $26,350
Rate: 6.875
Income: $650/month
Taxes: $2000
Mortgage 2 (Residence)
Original amount: $123,500 in November 2011
Balance: $121,841
Rate: 3.875
PMI = $130/month (will drop off when balance gets under $101,400)
Taxes: $2200
I've tried to run different spreadsheet scenarios to what each option will look like down the road, but I don't trust my own numbers. Between taxes and interest, I get overwhelmed when I try to compare outcomes and revert back to trying to pay off the rental because it seems like the "cleanest" way to manage things.
So, which mortgage would you put the extra principle payments towards? Rental, residence, or both? (If the answer is both, help with the ratio would be greatly appreciated).
Thank you, Mustachians!