Upside down on mortgage

**GREENBACK** · 02-21-2009, 03:07 PM

I wouldn't prepay any real estate loans right now. Not sure of your interest rate(mine is 3%) but I'm sure it's low. After you consider the tax break it's even lower. Why even concern yourself?
Even in this market you're better off investing in hopes that when it turns around you might make several times the gains that you might not ever see by paying off a HELOC in a enviorment where real estate will take some time to recover.
You might be better off putting any extra money in a CD.

**greenelf** · 02-21-2009, 11:06 PM

Thanks for the advice. Its similar to what I was already recommended.
Just wanted to get a second opinion.

I appreciate it.

**TBH** · 02-23-2009, 06:36 AM

I disagree. In spite of the low interest rate, it seems like you should try to pay the loan down as much as possible so you'll have a better loan-to-value ratio. What if you need to sell? What if you lose your job? What if you put money in the stock market instead and it goes down another 20 percent?

Sometimes the numbers don't tell the whole story. I get greenback's point about the low interest rate, but I think you should try to eliminate that HELOC as soon as you can.

**jIM_Ohio** · 02-23-2009, 07:56 AM

Just as much as the rate went down, it can go up when things improve. If you will be carrying a balance on HELOC for more than 10 years, I would pay at least more than the minimum payment.

Just because your rate is low does not mean to invest. There are more factors-

1) taxes- how much is the HELOC lowering your tax bill?
2) if the payment was at triple the interest rate it is now, what would that do to your budget?
3) Would the investment be in a tax advantaged or taxable account?
4) What short and mid term financial goals do you have (kids college, new cars, new house, vacations, other)?
5) How is your cash flow month to month? Variable or fixed? Not enough or enough?

**greenelf** · 02-23-2009, 08:40 PM

A lot of good points.
I will take this all into consideration.

**arthurb999** · 02-24-2009, 08:13 AM

Pay off your other debts first if you have them... car, cc's, etc

**tripods68** · 02-24-2009, 10:00 AM

Originally posted by greenelf View Post

Our home/condo is worth about 25% less that what we paid.
We have a fixed 30 yr and an adjustable HELOC. Making the payments has not been a problem. But I am wondering if I should try to prepay the HELOC as much as I can or just keep paying the agreed amount.

Someone suggested that I shouldn't prepay because of the loss in value and the low intrest rate that I have right now.

Any suggestions?

Thanks!

Personally I would not pay it off since the housing price won't be coming back in next 5 or 10 years anway. I do agree that you should pay off your other debts like cc, student loan, car payment, or build EF if you haven't done that.

Upside down on mortgage