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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Re: Real-Estate Leveraging Date: 9/1/2005 11:35 AM
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If you plan on having $43000 in the bank within 2 years, why couldn't you first use a portion of that to pay off the car loan, then use the extra savings that puts in your pocket to pay off the other loan?
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The reason is because if I refinance and have a small payment, this will enable me to save the $43000 a lot easier within 2 years. If you notice above, I will cut my payments in half. That's why they call it leveraging.


You are currently paying $833/mo on your loans. You're estimating the mortgage payment would be $253/mo. That's a difference of $580/mo multiplied by 24 months = $13,920. So if you intend on saving $43,000, you must contemplate saving an additional $29,000 from other sources during the 2 years, which is over $1200/mo.

Your car loan is $15,500. All I'm saying is to apply that $1200/mo first to the car loan. You should have that paid off within 1 year. That will reduce your monthly payments from $833 to $542. You can then use both the $491 regular payment on your car loan, plus the $1200 'other' savings money to pay down the personal loan, a total of ~$1700/month. That should pay off the remaining balance on the installment loan pretty quickly! (less than 2 years maybe?)

Also the installment loan is secured with my home property with a 5.8% interest. The car loan is around 5% as well.

As of this week, a 30 year fixed mortgage is 5.26%, so there is very little difference in interest rates among the various loans, and on a mortgage you would have to absorb closing costs and fees.

You might be trying to find a way to justify a decision you're already determined to make, but IMHO, the reasons you have given are just not good enough to gamble away your home.

Read the post below and you will see that I know of what I speak:

http://boards.fool.com/Message.asp?mid=22786802

2old
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