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Discussion Starter #1
Hi there financial gurus,

Just wondering if I can get some advice and help.. I'll try to keep in short and to the point as much as possible.

Currently I have 2 debts:
1. Mortgage - ~200K
2. Used vehicle - ~14K (It was a bit of a rushed purchase, but also necessary)


Currently i have 14k to put into one or the other. The mortgage is currently is a 5 year fixed 3.75% (just finished 2nd year)

I can't remember what the finance rate for the vehicle is, but I remember doing the calculation, and if I continue with the current bi weekly payments, my total interest paid will be ~$4300.

Originally, I was going to pay off the car. But I'm wondering if it would be better if the money goes towards the Mortgage?

I used the RBC mortgage calculator, and putting in the conditions (200k/184k, 20 years, 3.75, acc bi weekly) My interest savings is about ~$5600ish, which is about $1000 more vs paying off the car? Am I doing the calculations correctly? I guess this also assumes that i have around 3.75% rate for the whole time.


I'm leaning towards putting it to the mortgage as the savings in interest is better (although not by much), but also i am assuming that a fixed 5 year 3.75 will only go up when i renew...

So, did I do my math right? Would the mortgage be the better choice?

Thanks in advance.
 

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I haven't verified your calculations so if the difference is about $1,000 I'd personally pay off the car.
Not that $1,000 is a small amount (it is not), but it is one less debt account, one less thing to worry about.
The mortgage is here to stay and will go through several terms and several rates before it's done so you always have a chance of catching up.
 

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Discussion Starter #3
I haven't verified your calculations so if the difference is about $1,000 I'd personally pay off the car.
Not that $1,000 is a small amount (it is not), but it is one less debt account, one less thing to worry about.
The mortgage is here to stay and will go through several terms and several rates before it's done so you always have a chance of catching up.
Thanks Harold,

That was my original choice as well.. most cuz i like to cross things off a list :D

I guess the big thing is whether or not I can get something similar to 3.75 again when I renew.. or if It'll be a huge jump!! decisions decisions...:(
 

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there is no need of any math for this. just pay off whichever loan has a higher interest. pull out your finance document or call them to get your finance rate.

since you have a fixed mortgage (i am assuming its closed), if you are expecting more lumpsums, then check your mortgage anniversary so you can utilize the prepayment for the current year.
 

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I can't remember what the finance rate for the vehicle is, but I remember doing the calculation, and if I continue with the current bi weekly payments, my total interest paid will be ~$4300.

Well, that's an important variable... What's the duration of the car loan? If it's 6 years, then the interest rate would be roughly 9% to get $4300 in interest off $14000. Thus, it's much better to pay off the car loan.

It looks like you neglected to assume that the money that would have gone to your car loan would then go to your mortgage/investments if you choose to use the lump-sum to pay off the car, but assumed that if you paid off the mortgage, you'd continue to find the few hundred per month to service the car loan.

One caveat is that sometimes car loans are structured so that the interest is charged up-front, so prepayment doesn't actually save you on interest expenses. You should check into the details for your car loan (or even if prepayment is an option).
 

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Discussion Starter #6
Well, that's an important variable... What's the duration of the car loan? If it's 6 years, then the interest rate would be roughly 9% to get $4300 in interest off $14000. Thus, it's much better to pay off the car loan.

Just looked it up, 84 months, 7.29%. After 90 days you can pay off the balance of the vehicle.



Guess it might be better to pay off the vehicle.
 

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Does anyone here watch Futurama? I loved the scene in last week's episode, when the Professor can't figure out how to switch everyone's brains back into their bodies, and says "we are going to have to use....math."

(And, as it turns out, one of the show writers has a PhD in math and actually created a new math theorem to handle all the brain-switching in that episode.)
 

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Pay off the car then either increase your mortgage payment by the amount you used to pay for the car or put the money and put it in savings or TFSA and do an annual payment on the mortgage.

I say do both!
 

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Pay off the car then either increase your mortgage payment by the amount you used to pay for the car or put the money and put it in savings or TFSA and do an annual payment on the mortgage.

I say do both!
Thanks, this is route I had initially in place and most likely will do as well.

I think I got caught up in the fact that if I did put the 14k to the mortgage now, and if i renew at a higher rate, then I would be ahead of the game.
 

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Totally agree pay car if you save the interest. Places like GMAC now Alley you pay interest.

One small point with your mortgage is you cal. your interest savings to be $5600. You will also be paying more off the principal every month.

So your money works harder for you.
 
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