I’m in a Financial Battle with My Husband

Updated on November 04, 2008
A.E. asks from Hammond, IN
62 answers

Hello Moms,

This is not a normal request you see on this site but I’m hoping there may be some moms out there that can help me realize I’m either wrong or right in this decision. Well here it goes. My husband and I own several rental properties, namely 2 bedroom condos. We bought one in 2001 for very cheap (because it was in serious need of fixing up). We fixed it up and are currently renting it for $800.00 a month. We have a 30 year loan on it with 10.75% interest. We are currently paying over $200.00 a month in interest. We have built up enough of a nest egg to pay it off, thus saving ourselves thousands in interest. We will still have a considerable amount of our nest egg left over. The mortgage company is willing to take a fourth of the amount owed off as a payoff. We only owe $24,000.00 on the property. We can't refi because we don't live in it. My husband and I are at odds about paying it off. He wants to keep the money in our savings account because the bank we have the savings account in, suggests we keep it there. Which they only give us 2% interest on our money. I on the other hand want to pay off the condo and save not only the 1/4 of the amount owed but the remaining 23 years of 10.75% interest as well. Not to mention we also gain an $800.00 a month pure profit (minus a little over $100.00 a month in taxes). It will only take us 2 years to recoup the money! What do you think we should do?

Thank you

A.

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So What Happened?

Dear Moms,
I never thought I would get so many responses from a question that had nothing to do with being a mom. Shows you how diverse this website is! I received great answers that made me think long and hard. Hence the long wait to update you on what we finally did.
Before I tell you what we decided on, I want to inform you on how we came about our decision. As far as tax shelters are concerned, believe me we have more than enough come tax time. My husband day trades (that’s another story), and with the way the market is now he is finally listening to me and investing in our business instead of losing all our hard earned money in someone else’s. He invested in Enron, Worldcom, Providian and many, many, many, many more that took a dive on him.
As far as having some thing to fall back on if one of us died or lost our job. We still have a considerable nest egg to tie us over for at least 2 years or better.
YES WE PAID IT OFF!! The decision was a “NO BRAINER.” It was very hard for my husband to let go of the money but when I put the numbers in front of him he went along willingly.
The numbers speak for themselves. I didn’t have to go to any financial expert to tell me that I would be making more money and coming out ahead in the long run if I invested in my own business (rental properties). We’re doing very well right now.
Thank you all for the fantastic advice and your concern. I don’t know what I would do without you ladies. Oops MOMS.
Love you all.
A.

Featured Answers

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N.S.

answers from Chicago on

As long as you will still have a considerable amount in savings and get the money back in 2 years, I would definitely pay it off, especially since they will knock off 1/4 of what you owe.

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H.C.

answers from Chicago on

Every financial advice book I ever read says that you need to save first. And every financial advice book says that, if you have outstanding debt at a high interest rate (credit cards or others -- like a mortgage!) that should get paid off first as quickly as possible.

Definitely bring in a financial analyst to show him the numbers. YOU ARE RIGHT!

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S.H.

answers from Chicago on

A., it sounds like it would make sense to pay off the building,but perhaps you could get an independent financial planner involved to discuss with both of you, someone with no vested interest in either of you or the property. I have worked with a financial planner from MetLife for about 7 years. Perhaps both of you could talk with him. His name is Howard Rein and his cell is ###-###-####. You are welcome to mention I referred you. Good luck.
S.

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L.L.

answers from Chicago on

If I understand this correctly, you're paying 10.75% interest on this loan, and the bank is giving you 2% on your money. Wouldn't you be saving 8.75% by paying it off? Also, if a mortgage company is willing to wipe out 1/4 of your loan, thats another $6,000 in savings. This is a 'no brainer', unless of course you feel an obligation to pay this mortgage company for the next 30 years with a 10.75% interest rate. Jump at the opportunity to end this loan, and maybe invest in something else.

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D.N.

answers from Chicago on

Everyone that has posted a response makes sense. But you have to consider many points. First, if you refi, then think about the fees you will have to pay to do so. Also, paying off, you lose your nest egg so if something were to happen, would you be able to recover? Also, paying off would cost you a deduction so how much would that be? How much is the deduction lowering your taxes? I am not sure what deduction ou get for investment properties since you do not live there you cannot claim as primary residence and taxes are different. Maybe a better solution would be paying an extra half payment each month, cutting the time you owe on the property and taking some of your nest egg and investing in something better. Maybe a CD would be good. They generally pay better than 2% and are short term unless you roll it over. I think an advisor would be an excellent investment.

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E.N.

answers from Chicago on

Of course the bank wants you to keep the money in your savings account - if you take it out you're taking it from them and their ability to reinvest in their own schemes. You need to look at the big picture, what will be more beneficial to you, because it is YOUR hard-earned money. It sounds like your plan of paying the loan off is much more beneficial to you - you'll have another piece of equity that you own outright, some rental income, and you'll save a LOT int he long run. He needs to look at the big picture as well, and you need someone other than the biased bank to help out with that.

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L.S.

answers from Chicago on

Can you refinance the condo to a lower rate? That would help some. You have to remember that you get a tax break from owing that money. You have all this money in this nest egg for a purpose, it's a nest egg for the future not now. I would suggest you take some of the money in that nest egg and put it into a CD. If it is just sitting in a bank making 2%. Why not let it sit in a CD and make 4%. With our economy the way it is right now......I wouldn't be too interested in getting rid of my nest egg if I were you.

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M.J.

answers from Chicago on

I would pay it off! your money would do you a far better service paying off an interest rate of 10.75% than only earning 2%. As long as you won't be putting yourself in any financial jeopardy or incurring penalties by paying off/withdrawing funds.

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M.R.

answers from Chicago on

A., I think you are right. It is hard for a lot of us to make ends meet right now, but if you have it available at least you know that's a source of income and in the event it becomes vacant you won't have to worry about coming out of your pocket. In my opinion the less debt and payment's you have to make the better for you and your family. Best of luck to you!

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S.R.

answers from Chicago on

My husband who is in the financial industry says-
1st - pay it off if you handle surviving what will be left in your savings.
2nd - if not then
A- shop the bank your using. 10.75% is not good for you and you can do better.
B-pay down as much as possible, again all is best in this situation but the most you possibly can.

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A.S.

answers from Chicago on

Compromise! Pay half of it off. You still keep the benifit of the tax right off, you have a nest egg still, your making a huge dent in your interest. You both win!

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C.S.

answers from Chicago on

I would pay that off.

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J.A.

answers from Chicago on

Pay it off as long as you have enough savings with a cushion of 6 months living expenses(not a 401K or IRA)! It is a debt that is costing you profit. You could get a professional opinion, depending on the complexity of the situation. You can do your own research, start with Suze Orman and her books. Weigh out the pros and cons on paper and with a calculator, and if the $$$s point in favor of paying off, hubby can't argue with that.
Good luck.

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E.A.

answers from Chicago on

A. that's a no brainer. Pay down the interest and get rid of that loan! Invest that $800 a month to boost ur nest egg. The WORST place you could have the money sitting is at a bricka nd mortar bank earning 2%. The e-banking through paypal will earn you more! if you are shy on the market right now - however when things are down it's time to buy! regardless of what you do 10.5% is high and if you have the surplus sitting around with income to boot - start paying it down. i am assuming the bank requires a "set amount" to pay the loan down?? if not and there are no penalties then throw that $800 a month at the loan as a compromise.

HTH

E.

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V.G.

answers from Champaign on

I am surprised your husband is dragging his feet. I can't imagine any financial advisor would tell you to pass on this deal. It will cost you so much more money to keep the mortgage than to pay it off. Just imagine owning it free and clear, versus paying on it for years and all that interest. Plus, you don't even have to pay the entire balance if you settle right now. Tax savings aren't that fabulous that you should hold on to the mortgage. Plus the money you are saving could go toward paying down other properties or just replacing your savings.

Ask a financial advisor or accountant to discuss this with you. Sounds like your husband needs a third party decision.

V.

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O.P.

answers from Chicago on

I'm in agreement with you; MY husband is also...LOL. Banks are going to tell people to keep their money in their bank and it's not always in the person's best interest. They're not looking out for you and your husband.

Do you and your husband watch or listen to Suze Orman? THAT is something Suze would say and HAS said in the past..."If you're able to, PAY IT OFF."

I hope your husband comes to his senses and follows your, mine, and Suze's advice.

Good luck to you!

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K.Z.

answers from Chicago on

I am no money guru by any means....however I agree with you on this. If you pay off your morgage now you will be saving a lot of money per month. If he's really worried about the nest egg. After you pay off the property suggest that the money that was going towards that bill will go directly towards your nest egg to build it back up. you wont be missing out on any money because you are already used to paying out that amount. so no life style changes are needed and you will be saving in all acuality probably thousands of dollars in interest charges. The bank is only out for one thing. there own profit. of course they dont want you to take your money out. it doesnt make sense to have a large amount of debt and have money being saved.
K.
hope i made some sense.

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M.M.

answers from Chicago on

Unless there is another financial worry that he has, you ought to pay it off. Perhaps he is like myself, sometimes I know I should pay off something but the secure feeling of having that big lump of money is so nice. But my common sense usually prevails, as interest is such an evil thing. Get it paid off!

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S.K.

answers from Chicago on

It seems like your dilemma is a no brainer! Your idea is the best & smartest, considering the economy at this time. Good Luck A.!
PS. Suze Orman (sp) has a talk show on one of the cable channels in the overnight hours, where you cn call or write in your finacial questions. She's great.

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L.P.

answers from Chicago on

Pay it off and then start banking some of that money in a retirement account. Your bank might loose initially but will gain in the long run. If they can not help you - find another bank> definately talk to an outside professional - someone nota t the bank where your account is.

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K.L.

answers from Chicago on

I'm with you. Interest is UGLY! Why pay for something several times over when you can pay once? Not only that but paying off a debt is the responsible thing to do if you have the means-why have that hanging over your head? Of course the bank says to keep the money in-they only gain if you leave it in! They don't benefit if you take it out-esp with the panic banks are in right now. Their advice is clearly not in YOUR best interest. I know that if you asked some kind of financial councelor, they would agree with you. Good luck! You are very wise.
Here is a resource that might help you and hubby get on the same page regarding finances. I don't know if you've ever heard of Crown Financial but they are a moral and practical resource. They have a radio show and I'm willing to bet that if clicked on "Hey Howard" on the right hand side of the webpage and filled out the form, they would take your question and answer it on air! Check it out...they have something called a money map that helps you get debt free and it shows you the order in which to do things.
http://www.crown.org/Media/default.aspx

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B.D.

answers from Chicago on

I would also pay it off. That is a VERY high interest rate. The money you are "making" as interest in the account is useless because you are "wasting" it with the payment and interest each month on this investment.

IMO, you are actually losing money, not making or saving money.

If all the information you gave us is correct, it appears to be a "no brainer". I would pay it off.

Sorry your hubbie doesn't see it that way. Good Luck!

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K.B.

answers from Chicago on

I guess I am not sure which of the advice I would take. We don't know enough facts about you and your hubby. Do you and your hubby have recession proof jobs? Are you close to retirement? Are you planning on retiring early? It sounds like you are sitting pretty good, but if the economy takes a turn for the worse, will you still be o.k? My first thought was that I would wait a little while to sell, and move your money into something FDIC insured with a better interest rate. Perhaps see how the election goes and look into this after the first of the year. What's the rush? Good luck to you! It sounds like you guys are well on your way to a secure future! : )

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C.F.

answers from Chicago on

Hi A.

I am a mortgage consultant and United 1st Financial Agent.

You should pay off the mortgage or pay down the mortgage quicker than continuing to only make 2% through savings.

The amount of interest saved is dollars earned!

Those who understand interest earn it, those who don't are destined to pay it.

If you will still have a next egg after paying off this mortgage I suggest you do and save the thousands of dollars in interest, if you don't at least pay it down quicker and eliminate 50% of the interest.

I am United First Agent, check us out at http://www.unitedfirstfinancial.com

We teach people how to leverage their money and pay off all debt in 1/3 to 1/2 the same with NO INCREASE IN INCOME and little changes in their spending.

We are haveing a luncheon this Thursday in Naperville at 11:30am til about 1pm, if you would like to come see how our program works.

you can reach me at [email protected]____.com, or ###-###-####.

Thanks have a great day!

C.

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C.

answers from Chicago on

I am all about being debt-free so I would defiantely pay it off - especially if they will take only $6K for payment in full! If you do pay it off for this lower amount please be sure that you get everything in writing and perhaps even have an attory look it over so that they cannot come after you for the balance in the future. The words "payment in full with no recourse" should be in there somewhere.

Just buckle down and work diligently on getting the savings back up, write out a budget and stick to it. I also wanted to respond to other posters that mentioned "what if your husband gets laid off?"...if he gets laid off you will still have that payment so the savings will dwindle just as fast - it's not like you will be able to sell it fast these days.

Also, you interest is way to high - another reason to get that thing pais off and done with. The write-off you get from mortgage interest is not worth keeping that mortgage around.

Check out Dave Ramsey - his financial advice has done very well for me!

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M.B.

answers from Chicago on

A.,

I would say oay it off. You are losing 8 3/4% every month you don't. I'm guessing the interest tax shield you get isn't near that. In the reading I've done, it's always been financial analysts advice that you pay off the highest interest items first especially if you aren't making a return on your money. You can plow $800/month back in savings and after a year you have almost $10,000 and after 23 years you will have over $250,000 in the bank.

Good luck. It sounds like he wants to have a cushion in these uncertain economic times, but in this particular case, it makes more sense to save money by paying off the mortgage.

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J.F.

answers from Chicago on

Money is always a tricky thing in relationships. It's good that you are at least talking about it together! From what you describe, the best choice would be a payoff because 1) you get a discount, 2) your interest rate is sky high and you can't refi and 3) it will leave you with 800 a month surplus to your budget!

The bank will of course try to keep your money since THEY earn money from investing it overnight.

I always believe that a life debt free is a better one and if you can do it, go for it!

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N.O.

answers from Chicago on

Pay it off...you need to have an advisor show your husband the hard numbers - you could call any advisor's office and ask for a consult on your finances as a whole and bring this question with you...math is math and you would be foolish to keep paying a ridicuous interest rate monthly...

You should also consider puting your savings account money in to a money market account - you can get a much higher rate of return than on a traditional savings and the restrictions are very few...you can still withdrawl and transfer funds...if you just have it sitting in a savings you are making a big mistake.

Good luck!

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A.W.

answers from Chicago on

without knowing all of the details...from what you have written it sounds like you need to put your foot down about this one. seems like a no brainer. i am guessing your husband is concerned about the economy and wants to keep some assets liquid. i guess i am not that into the doomsday picture (and i hope i am not proven wrong!) i would keep making sound decisions like not losing 8% on your money every month- and greatly reducing your debt load. that being said, i am not a professional and you might want to talk to one if your hubby is adamant.
good luck

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M.F.

answers from Springfield on

The math makes sense to me and you too. He right now is looking at the stock market and the politics going on with it. Hang on to your cash for a few more months and then re evaluate the situation. You are right about the being money ahead but there are some what ifs..
How long did it take to get that nest egg?
Will you really push it back into the savings after paying off? Or will it be, great now we can afford a boat?
Funny thing is the more money we get, the more we spend!
It might be time to suggest using a financial advisor to better use your funds and make a bit more money on your investments and savings.
Guess what I am saying is that most of the men I know are scared to spend a dime right now, wait til the election is over to even discuss it with him.

But you are right!

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T.R.

answers from Chicago on

PAY IT OFF!!! I'm sure your husband want to keep the money in savings since it's more liquid but since you still have some left over paying it off is definitely the way to go. Maybe if you met with a financial advisor they could crunch some numbers and show him exactly how much this loan will be costing you over the next couple years versus getting rid of it. If he sees an exact dollar amount of the money that will be lost, maybe he'll change his mind. Just a thought?

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K.T.

answers from Chicago on

Hi A., My name is K. I have 2 grown kids 1-28 and 1-25 they are both here at home trying to save to buy something~_~ Anyway I would payoff the house. I know it seems the safe thing to do keeping the $ in the bank however if you have a good renter so you can plan to recoup for 2 years that is great. The savings of interest over 23 years is HUGE. Ask your bank if they will give you an amoritization schedual so you can see just how much you will be saving. Maybe seeing the savings in black and white will help you husband feel better about the decision. Good Luck, K.

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R.S.

answers from Chicago on

I agree with you pay it off and be done with it.

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G.H.

answers from Chicago on

Sounds like you have all the $ making saavy and he prefers the play it safe way of life. In this day and age I'de get every mortgage away from the banks that I could. Does your husband realize how much $ you'de be saving in interest? Add it up for him. Sometimes they need a little black and white proof. Had you thought about it ahead of time you could have been sending hundreds extra on the principal monthly to pay off early. It's too late now dont fall into that;you'de still be paying that rediculous interest every month. Good luck honey. Banks are too unstable now and Wall Street's a mess. Since the government just put us all in 700billion debt, I won't let them do it any more. It's our $ they used for the bailout and they still needed more. That'll teach us to listen to them!

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W.P.

answers from Chicago on

I would get professional 3rd party advice-not from the place you have an account or mortgage. I doubt hubby is going to listen to a bunch of moms on mamasource if he won't listen to you, but a pro will know.

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M.K.

answers from Chicago on

Hi A.. You said that your Mortgage Company is willing to take a fourth of the amount owed as payoff. If this is true, you are saying that they will accept $6,000 instead of $24,000 and call it even. Is this right??? I have trouble believing this could possibly be true. But if it is: PAY IT OFF NOW!!!! Even if they are willing to take $18,000 as complete payoff of the $24,000, I would do it in a heartbeat, assuming that you have, at least 6-9 months of savings remaining and no other outstanding debts.

There is something very true and real about NOT putting out cash for an investment that is not costing you anything (another poster mentioned this). In most cases, this is usually the right advice. HOWEVER, you are looking at receiving a HUGE (tax-free!) credit against the principle amount of the loan. This is SO much more significant that even the savings you will get from not having 22 more years of interest payments. Why would you pass up an opportunity to pay significantly less on the prinicple?

I strongly suggest you quickly find a financial adviser and discuss the situation immediately. I wish I had one I could recommend. You should also look into putting your savings into a money market and getting more than a 2% interest return on your money.

PS Don't put too much trust in the advice your current bank gives you! They are afraid of losing your money and will say anything legal that they can to save your business.

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M.W.

answers from Chicago on

Hi,

My initial reaction was pay it off. However, I'm wondering if you and your husband agree on how much is safe to keep in your nest egg. Times are tough for many people, and there certainly are many people making emotional decisions about finances. In any case, I agree with a previous poster. Get your nest egg out of a 2% savings account and at least into a money market fund or CD.

My first suggestion (if you haven't already) is to run the numbers through an online financial calculater, or with an accountant or planner if you have one. Show the savings, net of the loss of the 2% interest.

If that doesn't convince your husband, is it an option to take out a equity line on your primary residence and use it to pay off the high rate mortgage? You would still have the same amount of principal, but the rates would be cut in half, at least.

Finally, if that doesn't work, try doubling the payments every month. That will at least bring your nest egg down gradually, but still save on some interest. If you find that you would rather have more in your nest egg, you can stop paying the extra principal.

I'm not in favor of paying interest if you don't have to. Some people say the interest deduction shelters some income. True, but you are still ahead by over 60% (100-tax rate) on any interest savings. That's my two cents from a former accountant.

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D.B.

answers from Chicago on

I'm with you, pay it off! It's always better to avoid paying interest if you can, it's just throwing money away, especially if you can afford to buy it outright! I would also suggest checking into a money market or short term CD for the remaining money. There's no risk and you'll gain higher interest than your savings account.

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J.I.

answers from Chicago on

Not enough time to read all your other responses, but yes, I'd say pay it off! 10.75% vs. 2%?! Plus another 1/4 benefit of some sort. The only reason I would see not to do it is if it was leaving you with no money at all in savings/nest egg, because with this economy, you never know when you might need cash. But if you have other solvent $, then I would definitely say pay it off.

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K.C.

answers from Chicago on

Hi A., I would say Pay it off. But Iam assuming you guys have either a tax advisor or a lawyer. So make an appt, and have him/her right out the numbers both ways and see which way would be better for you and your husband. With the way the economy is right now you just never know. But you are right that interest rate is really high and the banks dont always keep what is in the best interest for their customers, just for them especially right now.So crunch those numbers. Good Luck to you.

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C.S.

answers from Chicago on

Write out the finacial facts either way. One senario to pay it off the other to keep getting 2% interest. Work each senario out 5 years. It sounds clear that from a finacial stand point it would be a good idea to pay it off (although I haven't run the numbers). Be very thourough and include tax right offs,etc. Then present each to your husband, give him time to process them and say you'd like his help understanding where he's coming from. he may be feeling the pressure to provide and that nest egg is his security. he may not realize the benifits, etc. Be respectful even when you disagre or he will shut down. Voice afirmation for all you can in the process and don't get personal/critical.

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S.K.

answers from Chicago on

I am certainly not a financial expert, but I would vote for paying it off. Another benefit to paying it off (besides all the money you save in the long run), is if your tenant hits hard times and is unable to pay, you won't be stuck with the mortgage with no rent coming in. Maybe you could compromise and refinance to get a lower interest rate, 10% is very high. And you can always pay over and above your mortgage every month to pay it off faster. Any amount you pay over the minimum goes toward the principle, saving you so much money in the end. If you can't get him to agree to paying it off I would definitely refinance, and consider paying even $100 over each month to pay it off faster. Good luck.

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M.M.

answers from Chicago on

Since you can't refinance, crunch the numbers using three scenarios. What does the next year look like 1: without doing anything differently; 2: after paying it all off; 3: after paying part of it off. For each, what are you saving/spending? Then can you take part or all of your new savings in scenarios 2 & 3 and invest it in CDs or a money market account, which is low interest but no risk? What does that look like during the year? The hard numbers should help you find the right solution.

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S.S.

answers from Chicago on

Of course the bank is going to want you to keep the money in a savings account.I am trying to understand why you don't try to sell it. I realize this is not an economy where these things go fast, but that would give you more for your pocket right now. I can see both points. If something happened to one or the other of you you would be forced to either give it up, sell it, or find a way to make the payments with the 200. interest. You said you can't refinance. Are there no other banks around? Did you sign something saying you can't get a different loan with another bank? Why am I saving all these flyers that come in the mail if we are only permitted to use one bank. There are millions of banks,and I think since you sound like you have good credit someone will give a loan with a low interest rate. And you don't have to live in the condo. Boy are there a few people out there trying to crank your wrenches so to speak. But personally, since I wouldn't want to be stuck with the payment, I'd try to to sell. I wouldn't use the next egg as other emergencies would possibly come up. So I hope you take this all lightly. Good for you for being so good with your money!

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K.S.

answers from Chicago on

Hi A.. My suggestion would be to pay it off. If you only owe a small portion and your profit is $800/month you can reinvest that for potentially a larger gain that what the bank is offering. It seems like a no brainer to me...

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S.A.

answers from Chicago on

Seems very obvious and I can't see how your husband doesn't see this unless there is something about his feelings that you aren't telling us. Maybe he will agree after the election and it looks like things are going to normalize again. ????

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L.K.

answers from Chicago on

I would speak to a real estate attorney before you do anything. If the bank will take only a fourth of what you owe will you still own the property? It sounds pretty fishy to me. David Seil in new lenox is a great , professional real estate attorney . I would have him look at this if I were you. Good luck :)

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K.C.

answers from Chicago on

No question about it--YOU PAY IT OFF TODAY! There is no way it makes sense to keep money in a 2% account for the privilege of paying 10.25% on a loan. Pay if off right now, then sock the savings into a good growth mutual fund (get it out of the bank--at 2% it's better off under your mattress) where you can still get to it in a real emergency, but it's earning far more than 2% (the good ones earn about 10-12% per year--you can research them online at morningstar.com).

Don't listen to anyone at your bank tell you that it's a good place to park your money. It's not. Those people get promoted and paid based on "deposits" and are not at all concerned about helping you to maximize your savings or improve your financial health. They are interested in you giving them bundles of money that they can use to finance someone else. Get it out of there. Banks are for fee-free checking accounts!

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W.S.

answers from Chicago on

hi A.,

There are options of refinancing. We also owned a condo that we fixed up and rented out - talk to a mortgage specialist before ruling out the refinancing option, there are ways around refinancing and not residing there; I assume the rent you collect is considerably more than your mortgage payment on the place (so you are making some profit on it right now I assume).

Do you wish to remain in real estate investment or do you want out from under the responsibility? Times are not favorable right now to selling, but it seems to me if you can just ride it out until the economy picks up, then put the place on the market and sell it you will stand to gain the most. When you sell it, invest that money into another rental (or two) and do the same thing again to see the greatest long-term profit.

We kept our property in good condition, refinanced at a lower rate a couple of years before selling and sold within 1 week of listing and it proved to be a great investment financially, doubled our money.

Sure that 800.00 / month is clear income - but crunch that number against what you would make if you sell the place in a few months or a year and see where you come out ahead. Also, I'm sure I don't have to tell you that you don't want to show much monthly profit on the place 'on paper' at tax time, you will lose some of the money you get back at tax time.

If you pay it off, you are just spending your nest egg on something that will pay for itself anyhow eventually in equity in my opinion (but please - I am no financial wiz, talk to some financing people, your tax person and even to an experienced realtor so you and your husband can make an informed decision).

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M.H.

answers from Chicago on

Hello A., I'm no pro but looking at the market right now, I would say refinance not pay it off, let's say your original loan is $100k minus they'll give you one fourth off so your balance is $75k, how long is it going to take you to make that money again, a long time, another thing how about if you lose on the property because of the bad real estate market, I guess it all depends on how much you owe, you should always have a cushion to fall back on.

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M.P.

answers from Chicago on

I agree that maybe you should try to refinance. You could probably cut your interest rate down significantly and shorten the amount of time you have your loan for. You may also be able to put more money down on what you owe and then refinance for a smaller amount and bring more in at the end of the month. This way you are not taking all the money out of your nest egg but saving on the interest also. This way with each monthly rental payment you get you can put some in the bank and pay the rest on the loan. Good luck.

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C.T.

answers from Chicago on

I would pay it off...that is very high interest and you don't say if it is a fixed rate. But after you pay this off and put the money back in the funds, I would keep a separate account for these rental properties. You really don't want to touch the savings. Anything can happen. One only knows you cannot depend on a renter to pay the rent every month. Things happen.

C. T.

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S.E.

answers from Chicago on

The Lord tells us that look to our husbands for guidance. My husband would agree with your husband because you do not reside in this home. Do you have your own home paid off?? My husband said consider getting a home equity loan on you own home to pay off the mortgage. Home Equity interest is so low right now and home equity interest is 100% tax deductible.

S.

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S.A.

answers from Chicago on

HI A.,

I am not a financial person at all, but I just thought I'd offer my opinion. And right now, I tend to agree with your husband. Only because of the economy. Would you need that money if one of you were to get laid off? Or if you became ill? However, I don't know what your total nest egg amounts to, if taking this $24,000 out is less than 10% of the total, go for it. You won't be making such a huge dent into your savings. You'll do much better that way. Otherwise leave it for now, at least until the market picks up. I'm just the cautious type, especially when we have no idea what's going on with the economy!

Hope this helps a bit.

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D.V.

answers from Chicago on

My friend's name is Sue Schwegler. Go to her site and watch the video and see if this is something that might help you both out. It would actually handle both of your issues. www.myloanispaid.com

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L.F.

answers from Chicago on

I would not pay it off with the economy the way it is right now. If you are getting to the end of your loan, the interest payments are getting smaller and smaller each month and more goes to principal. I would also take the money out of the 2% account and put it in a CD or money market that gets around 5%. Another suggestion that I do each month is pay extra money to the principal on the loan. Make sure you specify that the money go to your principal. Put $100 or $200 or whatever you can afford each month and your balance will go down faster AND you will pay less interest.

Also I think you need to speak to an accountant regarding the tax consequences if you pay it off...you will lose the write off and possibly end up paying more in taxes thatn you do in interest for the year!!

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D.N.

answers from Chicago on

I would suggest to keep your money in the bank and make extra payments or larger payments each month. This will cut down the principal and pay off the loan sooner, but will still give you the advantage of using the interest on your tax return. And then refinance the loan, you should be able to get a rate (even as a non owner occuppied building) less than 10.75%.

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A.B.

answers from Chicago on

What about refinancing to maybe a 15-20 yr at a much lower interest rate? That interest rate seems very,very high to what you can get now and I tend to kind of agree with your husband about keeping money in the bank for the uncertainty of economic times we are going through and will continue. Plus, if you pay the rental property off, you will no longer be able to use it as a deduction for taxes at the end of a year.

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C.K.

answers from Chicago on

Your husband is absolutely correct. Here's what other posters arent reading...because you did not say it. This property should NOT BE "COSTING" YOU ANYTHING! This is a business, do not make gut check decisions about finance right now. BAD NEWS BEARS! You are not saving yourselves as this property if set upcorrectly should be paying for itself...taxes and all.

My family has been in the investment property business forever and while we now primarily own commercial real estate now, we have dipped a few times into heads and beds(not something I do willingly anymore...you're brave.). Leave your money be.

Let it pay itself off. Do not put any more of your personal money into this property...Only use the rent. (this is unless you're taking a loss, though it doesn't sound like it) You only have $24000 to pay off which will take like what...30months.. (I didn't add in the interest, but that's about right.

The only way to recoup the funds you have already put into this in the initial purchase and renovation, is to let it pay itself off and then enjoy the profits. If you put more of your own money into it, it's like paying an extra $24,000 for it. You will not be able to get that equity back. It's condo, no matter what deal you made in the original purchase, the values of all dwellings have gone DOWN though they havent even hit rock bottom. It's going to be a very long time before they get back to where they were, if ever. values were so inflated and people even when getting a steal overpaid. You'll end up taking a $24000 loss if you use your own money at this point. DONT DO IT!!!!!!!!!!!!!!!!

Also interview other banks for a refinance. You're needing to refinance as a business not as an inhabitant. You should be able to. Though this is an area where I don't have a lot of experience. Any time I've gotten an interest percentage that high I've flipped the property (with regard to Condo's and homes. totally different ballgame commercially)

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A.C.

answers from Chicago on

I say hang onto the nest egg, don't payoff the mortage. Mortgage interest is one of the biggest write offs on your federal income taxes. Maybe you could refinance into a 15yr mortgage at a lower rate. That will cut 8yrs off the mortgage, lower the rate and you will still have that deduction on your federal income taxes.

A.

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S.S.

answers from Chicago on

I would currently have to agree with your husband. In today's times I'd rather have the money in the bank. I believe however it could benefit to refinance/get an equity line to reduce the interest rate because 10.75% is pretty high. (As long as you qualify you could get a loan) In most cases it is good to maintain a loan on a investment property because you could use the interest paid out to deflect part of the rental income and pending what tax bracket you're in it could be a must to have a loan on the property. I would however speak to accountant to get a professional opinion. Best of luck and if this is your biggest problem god bless we should all be so lucky. I mean it sincerely.

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S.W.

answers from Chicago on

Hi A.,
Listen to the advice Cortney K gave you further down in this chain. She is spot on correct in this situation. Do not deplete your savings to pay off this investment. Instead, use the full amount of the rent to pay directly to the mortgage.

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