What to use $2.5k for? Mortgage or loan?

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tortuga
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What to use $2.5k for? Mortgage or loan?

Postby tortuga » Fri May 12, 2017 12:28 pm

We're getting $2.5K in a few months. I'm conflicted about what to use this money for. We don't have credit card debt or student loans or car loans. The options are: Use it for the mortgage (3.75%, 27.5 years to go) or for the home improvement loan (5.99%, 7 years to go).

The idea of using it for the mortgage is we want to get rid of PMI and some principal only payment will help, also since the loan is recent, the impact of making principal payments will help us finish paying it earlier and save us more money on interest.

Thoughts?

DJFlare99
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Re: What to use $2.5k for? Mortgage or loan?

Postby DJFlare99 » Fri May 12, 2017 11:26 pm

Will the 2.5K actually get rid of the PMI? If it will only get you closer to getting rid of the PMI, but not actually get rid of it, then it's better just to pay down the home improvement loan since you earn the benefit right now.

TCstr8
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Re: What to use $2.5k for? Mortgage or loan?

Postby TCstr8 » Mon May 15, 2017 9:25 am

I would suggest checking with your mortgage company on their process for removing PMI. I'd have to go back and look, but I'm fairly certain that the Homeowners Protection Act of 1998 allows you to request the PMI be cancelled early, it isn't a guarantee that it will be. I'd get it in writing what their requirements are, and if it were me, I'd probably talk to at least 2 different people there (mortgage servicers are notorious for having lackluster customer service reps).
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Lis
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Re: What to use $2.5k for? Mortgage or loan?

Postby Lis » Fri Jun 09, 2017 10:37 am

Agreed with the above. Unless you know for sure the $2.5k will get rid of the PMI, I wouldn't put it towards the mortgage. Your loan is at a much higher interest as well - financially it most likely makes more sense to throw the extra money at that.


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