@Anonymous wrote:
I had a remarkably good year financially (over now, 2009 will be back to norma - much less income, but still enough to keep things goingl). Here is the situation and question:
House in CA = 6 years into a 15 year fixed at 5.25 - mortgage $1770 month - value (after slide) $650K - leave it alone.
Duplex in New Orleans (rental) - rent $2100 - refinancing in progress to bring principal, interest, taxes and insurance to $1650 - before refi mortgage was $2075
@second on CA Home to pay for down on New Orleans house - $50K @6.75
$400K in 401K = Now in MM so should stop the slide
$122K in cash MM
$38K in Credit Union
$40+in checking account (temporary, good comission checks)
I save $1500 cash, max my 401k and pay all cc debt every month. Fico's from 806-819.
So, do I pay off $40K of that 50K second with the money in my checking account? That's my inclination. I know it's a tax write off, but the MM's are at 2.5-3.5%...
@am I on track? The reason I wonder is everyone is talking about hanging onto cash and in my situation I just think killing off the $50K @ 6.75% makes sense...
Wow, you're in pretty good financial shape! Good nest egg, lots of cash, great interest rate on your primary residence with what seems to be a good amount of equity.
Not much to suggest, but if I were in your position I'd pay off that second loan. After factoring in the tax deduction for the interest, you're probably paying around 4.5% in interest. After taxes, your MM is yielding less than 2%,
After paying off that loan, you could hedge your bet by opening up at HELOC. With your credit scores (and with the assumption that you have a hefty amount of equity), you should be approved with a good interest rate. HELOCs have variable rates, and I'm guessing that most banks have eliminated below-prime HELOCs for new accounts, but if you did have to tap the line in the near term, it would be at a lower interest rate than 6.75%. And the interest could still be tax deductible.
