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Lv 5
? asked in Business & FinancePersonal Finance · 7 years ago

What loan is better to pay off first?

I have a mortgage at 4% ($400K) and HELOC at 2% ($100K). I have a little extra, should I put it into the mortgage (saving interest) or HELOC (paying it off so I only have one major loan to work on? I have rental income coming in from another property that covers 75% of the mortgage.

Update:

Already have emergency fund.

4 Answers

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  • webjnke1
    Lv 7
    7 years ago
    Favorite Answer

    I would pay off the small one. Then put that payment towards the bigger one.

  • Goonhilda
    Lv 6
    7 years ago

    Pay the extra off the mortgage. You always need to pay down the highest interest rate debt as the priority because it is costing you the most per dollar owed. You say you already have an emergency fund -- you could possibly look at using the redraw on your mortgage or the offset account on your mortgage (if they have either) as the place to store your emergency fund, because this way you get the added benefit of less bank interest.

  • Anonymous
    Lv 7
    7 years ago

    4% is more than 2%

  • ?
    Lv 7
    7 years ago

    with the little extra start a savings account for emergencies.

    not a sin to save money

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