What to pay off first?

[$ hoarder]

Hi I'm so excited I found this website...

I am struggling with a decision on what to do with some excess cash. I have 6.5k left on a heloc I really would like to pay off to be done with...4.25 percent...

However I am also paying pmi on a new home and don't know if it would be best to put the money on the new mortgage to get close to getting rid of pmi...current loan to value around 92 percent. The heloc is on a rental property and the new home we plan to stay in forever. We have an EF and put a lot aside for retirement and now I'm antsy to start paying down the smallest debts we have. The new house mortgage is 20 yr fixed at 3.875. What would you do?

[Invest05]

Need a bit more information. What is the remaining balance on the 1st mortgage and your estimation or last appraised value? This will help see how much of a dent the 6.5K will make towards your LTV.

Also, is the rate on the HELOC variable or fixed? I'm assuming variable. Given that it is the higher rate and probably variable in nature (though rates wont increase above prime for some time) I would lean towards paying it down first. UNLESS the 6.5k puts a big dent in your LTV and gets you very close to the 78% mark.

[$ hoarder]

Let me clarify...one our old home we have two mortgages...the heloc fixed 4.25 and a 129k variable currently at 3 percent with the value probably around 100k. the new house has 202k left with a value of 225k. We only have pmi on the new home not the home with two mortgages.

[Invest05]

Let me clarify...one our old home we have two mortgages...the heloc fixed 4.25 and a 129k variable currently at 3 percent with the value probably around 100k. the new house has 202k left with a value of 225k. We only have pmi on the new home not the home with two mortgages.

Sorry, I misread your original post to say you had 6.5k available to pay down whereas you have 6.5k remaining on your heloc. The amount you have to pay down the 1st mortgage on the new home to rid yourself of PMI payments is $26,500 assuming 225k is the value and 202k is the remaining balance. If the amount of money to put towards the extra payment is significant and you can put more towards one payment monthly then I would choose the new mortgage. The PMI is awful as it doesn't benefit you at all and the difference in interest rates is not that much especially considering the small amount remaining on the HELOC. Once you pay the 1st mortgage down to get rid of PMI, then you could allocate the extra amount to the HELOC until paid off.

Hope that helps. Good luck!