how to lower mortgage payments

[frannie01]

Hello- I am a 47 y.o. divorced female. I owe about $25,000 on my mortgage- interest rate 5.5% and $120,000 on my home equity line, which will require me to start paying P and I in about 2 years. Interest rate is 3.5%. I pay extra each month-usually 500 on the mortgage and at least 200 to the home equity line. My question is, should I try to pay off the mortgage with the line, or just continue to make larger mortgage payments. I earn about 48,000 per year and have 2 years left of helping my son pay for college- my yearly cost is about 12,0000. My main goal is to decrease my monthly mortgage payment, but I don't want to still have a mortgage when I'm in my late 60's.
Please advise.
Thanks!

[disneysteve]

Can you refinance into one loan and take advantage of today's lower rates?

If not, stop paying extra on the 3.5% loan and put all of your extra payments toward the 5.5% loan. That will save you a lot more in interest.

The fact that 25% of your income is going to pay for college is a whole other problem. How much is your son contributing to that? I don't know what your agreement is with him or what you may have promised him but I think you need to revisit that arrangement.

How much is the house worth by the way? You owe right at the limit of what you can afford - 3 times income. I'm guessing you've got to be struggling to make ends meet.

[Slug]

I definitely am with DS in recommending a refinance if you qualify. I just wrote a long post on the process I went through to get my rate down to 4%.

No Cost Mortgage Refinance | Sunk Costs Are Irrelevant

[jpg7n16]

With everything you've got going on, I agree with DS - it's gotta be tough to make ends meet.

I'm literally more concerned about your ability to save for retirement than I am about accelerating payments on a 5.5% tax deductible loan.

What are you doing for your retirement savings?
How much have you been able to build up so far?

[frannie01]

thank for the responses

Thank you all. I may try to refinance after reading your posts. As for my son and college, he is taking loans out on his name also. He works and is a great kid- never caused me any problems, so I'm doing what I can for him. My daughter graduated last year, although from a less expensive school. Retirement? I get 6% taken from each paycheck to a 401K and the employer matches it. However, I've only had this job for 3 years (only got a 55 cent raise in all that time)and this is my only source of retirement funds.

[disneysteve]

TAs for my son and college, he is taking loans out on his name also. He works and is a great kid- never caused me any problems, so I'm doing what I can for him.

Retirement? I get 6% taken from each paycheck to a 401K

It is very nice that you want to help your son but you can't afford to be spending 25% of your income for his college costs. Retirement comes first. There is no financial aid for that. Get your retirement savings up to as close to 15% as you possibly can. At 47, it should probably be even higher than that. Stop prepaying the mortgage as that is not as important as the retirement savings. It will mean your son needs to work some extra hours or possibly borrow more but it beats having to support you in 20 years because you don't have enough saved to live on in retirement.

[papa_squat]

Disney Steve is absolutely right. You should really focus on your retirement ahead of prepaying the mortgage, but refinancing may still be a good option for you to get that payment down. If your son doesn't have a job, a part-time gig might be a good way to lighten the load. If he's just in an undergrad program, he should be able to handle 10-20 hours a week at a job. A work-study job through his school would be a great option because they will work around his school schedule, and I got some great work experience through my work-study job.

If a work-study or other PT job isn't an option for him, it would be smarter for him to take out more loans in his name than for you to sacrifice your retirement savings. Student loans are there for a great reason, plus it's a great way for him to safely build his credit once he gets out of school (as long as the bills get paid ontime of course). If it makes you feel guilty for him to take on more debt, you can always help with the loan payments in the future. However, my student loans taught me a great lesson about managing my finances. I've been out of school for 5 years and I'm about to pay off my private student loan; once I snowball that payment to my federal loan, I should free of student loans in less than 10 years after my graduation. It a good feeling, so in that sense, I've never regreted my student loans.

[YLTL_Dan]

Sorry, it posted twice

[YLTL_Dan]

It is very nice that you want to help your son but you can't afford to be spending 25% of your income for his college costs. Retirement comes first.

I totally agree with DS on this one. It's very noble of you to want to help your son with college costs, but he has a lot of time ahead of him to earn money, pay down debt, and save for retirement. However, you don't!

If you still want to help him, you can help him research scholarships and grants that will replace your contributions.

My parents helped me out some to get through college, but I paid for most of it with scholarships, work, and student loans. I don't look down at my parents at all for this... in fact I respect them more because they did as much as they could, and I learned a lot from taking care of myself and paying off my debts.

[BuckyBadger]

I agree with everyone else -- paying toward your retirement is better in the long run than paying for your son's college. Student debt stinks, for sure, but it stinks a lot less than not having enough money to support yourself when you stop working.

You can get loans for school. No one gives you loans for retirement.