Question for the Money Doctors
Question submitted on Sep 23, 2013.
We have paid off all of our credit card debt and have an emergency fund equal to about 1 month''s expenses. What we have left to pay is a car note of about $19k at 1% interest, a first mortgage of about $84k at about 5.5% interest, and a second mortgage of about $38k at about 7.5% interest. Does it make more sense to pay the second mortgage off as quickly as we can because the interest rate is higher than the others? Or should we try to pay the car note off first because the mortgage interest is tax deductible?
I would first make regular payments on your debt until you get your emergency fund up to 3-6 months of living expenses. If you have an emergency, 1 month will not go far.
Second, if any of your remaining debt has adjustable rates where payments go up as interest rates rise, I would pay those debts off first. If not, plan on attacking the highest interest debt first - the second mortgage. Once you have that paid off, pay off your car then the first mortgage. Good luck!
For additional information visit http://www.360financialliteracy.org/