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      02-16-2013, 07:02 PM   #1
schnell325
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Responsible money advice-bankers wanted!

I'm getting back ~$15,000 from income tax.

Now we all know refunds should be spent solely on our M's, BUT here's a "hypothetical" situation.

I have a Line of Credit currently @ 3.5%, and I have a rental property with a mortgage @ 3.09%. Do I throw the $ on the LOC or on the mortgage.

My first thought is the LOC for the simple fact it has the higher interest rate (~$60,000). But, would the mortgage benefit in the long run by knocking that much off the principle (which is currently at ~$113,000) thus decreasing the length of the mortgage?

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      02-16-2013, 07:10 PM   #2
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Just send me the money, I will look after if for you.
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      02-16-2013, 07:21 PM   #3
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Just send me the money, I will look after if for you.
Message me your Nigerian bank account number please.
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      02-16-2013, 07:23 PM   #4
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Message me your Nigerian bank account number please.
Nigerian? Nah I want it in my own bank account I set up for scamming...er i mean HELPING people....
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      02-16-2013, 07:25 PM   #5
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Quote:
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Nigerian? Nah I want it in my own bank account I set up for scamming...er i mean HELPING people....
Something's fishy here......but I can't put my finger on it......
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      02-16-2013, 07:26 PM   #6
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Seriously though, without really getting into the details of the rent situation etc. Pay the LOC down. Your renters are paying off your mortgage and you are getting a tax deduction of the mortgage interest anyways. Use your refund to improve your personal situation
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      02-16-2013, 07:28 PM   #7
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Quote:
Originally Posted by Jaypod View Post
Seriously though, without really getting into the details of the rent situation etc. Pay the LOC down. Your renters are paying off your mortgage and you are getting a tax deduction of the mortgage interest anyways. Use your refund to improve your personal situation
That was my thinking too.
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      02-16-2013, 07:40 PM   #8
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That was my thinking too.
Thats what I would do, good luck!
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      02-16-2013, 09:10 PM   #9
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Pay your mortgage debt. I own 2 investment properties and if theres one smart move I ever made, it was paying down what I owed on them.

Once you pay your debts down, your next problem becomes income tax and how to shelter yourself from it.
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      02-16-2013, 10:40 PM   #10
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Quote:
Originally Posted by Jaypod View Post
Seriously though, without really getting into the details of the rent situation etc. Pay the LOC down. Your renters are paying off your mortgage and you are getting a tax deduction of the mortgage interest anyways. Use your refund to improve your personal situation
this.

also, you should have cleared your LOC before buying an M3

DAT SILLY!
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      02-17-2013, 02:31 AM   #11
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My loc is for the down payments for two rental properties, and an X5.
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      02-17-2013, 11:55 AM   #12
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Answer is simple: line of credit!
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      02-17-2013, 12:59 PM   #13
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money management is something i really wished was gone over more thoroughly in high-school / university.

the tax rules change all the time and there is so much style and preference involved that it's nearly impossible to develop a strategy that you could really be confident as being 'the best' for ones application / needs / income. in the end it comes down to guessing and comfort zone.

worst part is people also hate talking about it with other people. and then using good accountants and lawyers is soooooo expensive...
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      02-17-2013, 07:55 PM   #14
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Make a spreadsheet, the result will show you to pay the loan down ... add the interest you save to your tax return and it will become a no brainer ... whatever you do don't send the moony to anyone here ... all have enough money otherwise they all would drive a Toyota

If you have the desire to help someone out ... I find the The Salvation Army the best
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      02-17-2013, 08:01 PM   #15
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Quote:
Originally Posted by bing240sx View Post
money management is something i really wished was gone over more thoroughly in high-school / university.

the tax rules change all the time and there is so much style and preference involved that it's nearly impossible to develop a strategy that you could really be confident as being 'the best' for ones application / needs / income. in the end it comes down to guessing and comfort zone.

worst part is people also hate talking about it with other people. and then using good accountants and lawyers is soooooo expensive...
I highly no let me rephrase that "I strongly" recommend a good Financial Advisor (I don't mean the one at your local bank - they seam to play musical shares too often - change branches or you meet a new one every time you have a question about your money). The kind that work for you and look out for your money.

Once you find one ... you be thankful you did when you retire ... Good Luck!

PS. Ask around your friends etc ... see what they do and then make a choice.
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Last edited by Mr. ///M3 RD; 02-17-2013 at 08:03 PM. Reason: slight addition made
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      02-18-2013, 12:11 AM   #16
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Pay money down on the mortgage, 3.09% on $113,000 is a lot more interest per month than 3.5% on $60,000. Not to mention, everything you put into the mortgage is equity!!!
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      02-18-2013, 07:56 PM   #17
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Quote:
Originally Posted by schnell325 View Post
I'm getting back ~$15,000 from income tax.

Now we all know refunds should be spent solely on our M's, BUT here's a "hypothetical" situation.

I have a Line of Credit currently @ 3.5%, and I have a rental property with a mortgage @ 3.09%. Do I throw the $ on the LOC or on the mortgage.

My first thought is the LOC for the simple fact it has the higher interest rate (~$60,000). But, would the mortgage benefit in the long run by knocking that much off the principle (which is currently at ~$113,000) thus decreasing the length of the mortgage?

take that 15K borrow another 100K against it, and invest it in some risky high return assets...

Joking aside,

The prudent financial thing would be to pay down your LoC (best to reduce higher cost debt first, you're renters are paying for the cashflows, mortgage interest tax deductible and you'll still be able to draw on LOC in the future if for whatever reason you need the money again).

That being said, if you're more concerned about cashflows, then you may want to consider putting it against the mortgage. Putting it against the LOC will save you $40/month in payments. Putting it against your mortgage will save you ~$70/month in payments since its applied to both prinicipal and interest (by my rough calcs, your current mortgage pmt is around $550/month). $30/month (and that's pre-tax) shouldn't be a make it or braek it amount so probably best to put it against the LoC.
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      02-18-2013, 09:13 PM   #18
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Thanks for everyone's input. Still on the fence.
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