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I've Been Thinking--Mortgage vs. Final Card

January 18th, 2013 at 09:46 pm

Do you think it would make more sense to me to try to pay off the mortgage quickly or to pay off the 0% interest credit card? The plan has been to pay off the card, but I ran the numbers and if I used the money I had planned to use for the Chase card and continued to pay minimum payments on it and instead threw that at the mortgage, I could have the mortgage paid off by the end of June.

The Chase card is at 0% through the end of 2013. Acutally I think it is until January 2014. And then with no mortgage to pay as well as all the extra money we were throwing at it, we will be able to have that credit card paid off by the end of the year, while it is still at 0%.

Part of my hesitation is psychological. For so long my goal has been to pay off the credit cards. It's been my number one priority. I am not naive enough to believe our house will sell quickly once it goes on the market in spring. So it seems like it would make things a lot easier if it is paid off when it sells, one less round of paperwork. Plus the mortgage is at 5.5%. So it seems silly to not take care of it first.

No matter which way I do it, they'll both be paid off by the end of the year. How do I get past these psychological barriers? Common sense me, people.

12 Responses to “I've Been Thinking--Mortgage vs. Final Card”

  1. ceejay74 Says:

    That is a tough one! I may face a similar dilemma near the end of this year or maybe next year, when the only remaining student loan will be the one that's lower interest than our mortgage. We'll have no hope of paying our mortgage off as quickly as you will (ours has a $160K balance), and the interest rate difference is only .25% right now, so we'll probably stick with getting rid of the student loan first. But in your case? I don't know, the thought of saving that couple bucks of interest, and of having the house paid off before it sells, would be pretty darn tempting.

    I think there's no wrong answer, so it's more what you think will be more psychologically satisfying for you.

  2. creditcardfree Says:

    The only negative to paying off the mortgage early would be a tax deduction advantage...if you are itemizing. Can you run the numbers to see how much if any that may effect your taxes?

    However, I'd almost lean towards paying off the mortgage. You'll pay less interest and have it paid off before you sell. If you sell before you pay off the card, you could put some of the proceeds to the card, and wouldn't be out any extra interest since your card is a 0%.

    It really is a matter of preference since they will both be paid so soon! Let us know what you decide.

  3. MonkeyMama Says:

    Personally, I'd pay off the credit card. The credit card is 0% for now, but carries MUCH more risk. Frankly, they could really change the terms at any time. (Or, if *anything* happens and you can't pay it off in time... The interest rate could be absurd).

    Paying the balance off when you sell the house is really no big deal. I can't imagine it complicating things in any way that you would notice. Except having to provide a mortgage statement so it gets paid off in the process (maybe a couple of more forms to sign?). I almost think it would be easier just to pay it off when you sell the property. Just take care of the title and mortgage legalities in one fell swoop.

  4. Beawealthywarrior Says:

    I follow Dave Ramsey so I saw to get out of CC debt first. His steps:

    1. Build Emergency fund($1000)
    2. Pay off debt excluding mortgage
    3. Build Fully Funded Emergency Fund(3-6 months of living expenses)
    4. 15% to retirement
    5. Save for kids college
    6. Pay Off Mortgage(that's what step I'm on)
    7. Live like noone else

    Alot of people do steps 4-6 at the same time but as others have pointed out this is "personal" finance so it's up to u. What a great position to be in!!

  5. Petunia 100 Says:

    I'd pay extra towards the debt that was costing me the most. For you, that's your mortgage.

    ETA: Unless there was a cash flow problem. If I had a cash flow problem, I'd pay towards the one which would be gone the quickest. You don't have a cash flow problem.

  6. LuckyRobin Says:

    CCF, we don't itemize. It has never been worth it to do so, even with our medical expenses. And our mortgage interest is less than $70 a month now.

    MM, I pretty much figured that was what you were going to say.

  7. Thrifty Ray Says:

    What a nice dilemma to have! Since both are budgeted, and both will be paid by the end of the year, I would pay the credit card since it is the one you feel more stress towards. But either way, you have much to be excited about this year!! yay!

  8. twest Says:

    I think I would go with the credit card as well just in case something did come up. I would hate for you to pay interest on that credit card. Congratulations on all your debt payoffs!

  9. creditcardfree Says:

    Good point on the risk with the credit card debt.

  10. FrugalTexan75 Says:

    I too would go for the CC. Too risky the other way.

  11. Momma and the boys living on budget Says:

    I would pay off the credit card even with 0% you never know what if you miss one payment by one day you can get dinged with interest. It is also psychological to me as well.

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