LOAN STACKING Payoff Mortgage in 1/6th the time and save 100k+
I'm not sure if this is a legit term but I've thought about this before and then I ran the numbers and was pretty excited to see what I came up with. Perhaps many of you already know about this and I'm just behind the 8 ball here but here it is.
Remember how it's normally not a good idea to start paying off credit cards with other credit cards. Instead we have a transfer balance for that now.In theory using personal loans to pay off mortgages can work with the right numbers and if you qualify for lower percentages but I'll give a basic example.
If one uses a 100k loan at 4.5% interest rate and a standard 30 years the monthly payment would be 506 and an interest $375 a month at the starting date. Now taking out say a 20k personal loan well the interest rates will be higher than a home loan yes. However, you can take this loan and put it down onto the house immediately within the first month. I If you pay just the standard monthly payment the interest it would cost you is 40k extra to pay off that first 20k on the house loan. If she takes out a 20 k personal loan and makes monthly payments on that loan at 12% for say one year she would only pay an interest of 1.2k. Your monthly interest monthly payments for the home loan instantly drop from $375 a month to $300 a month.
You would have to ensure that you can consistently pay off the home loan and the personal loan at the same time as the initial 20k loan at 12% was around 1700 a month and with the house loan that would be a little over 2k a month. Manufactured homes have very low property taxes and insurance costs plus with the potential extra $2100 of extra income from renting out the place that alone could potentially cover both loans. If you continue paying with 4 20k installments of personal loans (personal loan interest rates will lower as you continues to prove that you can pay them off on time) you could potentially only pay an extra 15k in interest and have the home paid off in 5 years instead of paying off the home in 30 years and paying 82.5k in interest. That will save her a total of 66.5k. Now this doesn't include the mortgage insurance but that's taken off immediately after 20% of the loan is paid offf which is a law.
That would save around $50-$100 a month. Here are the links to the calculators I utilized to simulate these hypothetical scenarios. After the fourth installment You could just pay as much as possible each month with the 20k and only 4.5% interest. If anything this could be paid off in less than 4.5 years for sure with just an average salary job and rental property income.
Obviously the higher the home cost the more you could potentially save with this method
Calculators used:
Personal Loan Calculator | Bankrate.com Amortization Schedule Calculator - Bankrate.com