[quote=SK in CV][quote=ocrenter]
ok, forever is a slight exaggeration. 🙂
long term as in 10+ years would be a no brainer to pay off the MR. mid term as in 5+ years the numbers could still work.[/quote]
My apologies for thread jacking, this is a bit off-topic from the OP, but I have to question the whole pay off MR thing…
My understanding, and maybe some RE professionals can chime in here, is that paid off MR doesn’t generally bring a higher sales price.
I suspect that the interest rate on MR bonds are probably a few points higher than prevailing mortgage rates, so on a $60K MR liability, the interest differential might be $1800 a year.
From what I’ve read here, paying off MR early does eliminate future increases in MR assessments, though I’m a bit confused exactly why this is so.
But for a homeowner who has a mortgage, why wouldn’t it be better to pay off a big chunk of mortgage debt rather than paying off MR? Paying off mortgage debt is a guaranteed increase in equity, and paying off MR may generate zero increase in equity, and the interest savings compared to equity build is pretty minimal. Are any of my assumptions way off? What am I missing?[/quote]
If you assume another 30 years of MR the effective interest rate for MR is 9%+, and that is if MR was flat (in theory it can be flat or get reduced, but in practice it increases the maximum allowed 2%/year every year).
Also, if you prepay the principal today you won’t see the effects until you pay off the mortgage or sell the house. If you pay off your MR your monthly expenses go down almost immediately.
