Debt Reshuffling to Reduce Interest

I'm thinking of doing a little debt reshuffling to save up to $500 annually in mortgage interest (the 1st year at least). As regular readers know our recent focus has been on 1) increasing our cash position, and 2) increasing cash flow by paying off our highest mortgage interest debt, currently a mortgage on Rental #1, @5.63%, $41.7k balance.

Here is a current snapshot of our debts all financing for various real estate holdings:

Loan	Description	Property	Balance	Payment	Matures
1	5.6% 30yr fixed	House #1	$41,747	$1,031	Aug-31
2	HELOC @ 3.25% var.	House #1	$25,890	$75	Aug-23
3	IELOC @ 4.25% var.	House #2	$7,726	$100	Jul-29
4	4.375% 30 yr fixed	House #3	$248,116	$1,508	Sep-40
5	5.0% 30 yr fixed	House #4	$120,753	$996	Sep-41
		Total	$444,232	$3,710

Previous Debt Snapshots Sept 2011, March 2011

I'm gearing up to bite the bullet and move that $41.7k remaining balance to our IELOC (investment equity ling of credit) on Rental #2. The intent would be that we still continue to focus on paying down this balance, but I expect to save 1.4% interest annually on the balance as I don't expect rates to rise much if anything in the next 3-5 years. My intent is to pay off this balance in the next 2-4 years so I think its a calculate risk.

We made a similar play back in 2009 with a larger chunk on the original mortgage on Rental #2 transferring $95k from a 6.5% fixed mortgage to variable IELOC to save over 2% annually and was able to successfully pay down the bulk of that debt while variable rates have held steady at these historically low rates.

I'm ok taking a little calculated risk here as I know we have the discipline to continue to pay off this balance over the next couple years before I believe rates would rise significantly unless we have a catastrophe such as a long term job loss.

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Comments (2)

Why not refinance?

All your rates are much higher than the current bank rate. You probably can get as low as 3.75% for your primary home.

Posted by Jen | July 31, 2012 10:20 PM

Jen,
I am looking at refinancing options for the larger mortgages - our primary home and newest rental. However both of those are near or above the max LTV (80%, 75%) ratio for those loans so adding this debt to those loans isn't really an option at this point. I could look into refinancing this mortgage ($41.7k), but I don't think I can get a no closing cost refi because the balance is so small. Paying closing costs to refi doesn't make a whole lot of sense because the costs would like offset most/all of the interest savings.

Posted by 2million | August 1, 2012 7:36 AM