Homeowner · NYC · Member since 2023 · 8 posts · 4 votes
I’m a first time home buyer and looking for some advice. I purchased a condo in December 2020 (in DC) and currently live in my unit. I’m moving to NYC in mid May and will be renting out my DC condo around June 1st. I have a good interest rate (2.75% rate) and have been paying an additional $250 down on principle each month. At this rate it’s estimated that I’ll pay off my loan 10 years early saving ~$31k in interest payments.
If I stop paying additional $250/month on my principal my cash flow will be more or less break even on month. However, if I pay down $250 extra on principal each month I’ll have negative cash flows but I’ll build equity in the property faster and avoid paying more interest in long run. What’s the general guidance when considering additional monthly payments on principal? Am I doing the right thing or should I forgo paying extra down on principle each month?
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
3y
Paying more on the mortgage every month isn't building equity...it's buying it. Paying that extra each month isn't negating negative CF...it's just paying it upfront. If you are at a breakeven after moving out, like this is, then you are really at negative CF waiting to happen. You aren't the one paying the interest, your tenant is since the source of funds is the rent. If you make cash added payments out of pocket, like you're suggesting, that comes out of your pocket and actually is an added cost to you since that principle you are paying for was part of the mortgage payment, which again was being paid for by the tenant's rent.
I would sell, take your equity/profit, and put it into a different deal with positive CF. This is a losing property for you.
I’m a first time home buyer and looking for some advice. I purchased a condo in December 2020 (in DC) and currently live in my unit. I’m moving to NYC in mid May and will be renting out my DC condo around June 1st. I have a good interest rate (2.75% rate) and have been paying an additional $250 down on principle each month. At this rate it’s estimated that I’ll pay off my loan 10 years early saving ~$31k in interest payments.
If I stop paying additional $250/month on my principal my cash flow will be more or less break even on month. However, if I pay down $250 extra on principal each month I’ll have negative cash flows but I’ll build equity in the property faster and avoid paying more interest in long run. What’s the general guidance when considering additional monthly payments on principal? Am I doing the right thing or should I forgo paying extra down on principle each month?
I glanced at some of the responses, but i'm of a different mindset. I'd continue to put the money towards the mortgage on the condo, take out a second loan (if possible), and buy another property with the money. In DC, cashflow is not the name of the game, but equity is. And the housing shortage in DC attracts more people to the condo market. So I wouldn't stress too much about the money "lost," so long as you can afford to float that expense.
Lastly, if you can slowly, but surely, increase the rent $50 - 100/mo over the course of the next few years, you'll very likely make up that $250. Just my two cents.