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Ask Dave

Where Does This Debt Belong?

Sherry isn't sure where her second mortgage belongs in the debt snowball. Dave says it depends on the amount.

QUESTION: Sherry and her husband are on Baby Step 2 and should be debt free in a few months. They have 2 mortgages totaling $240,000, and the home is worth $250,000. Should they roll the mortgages together to a 15-year mortgage, or put the $40,000 second mortgage on the debt snowball?

ANSWER: If the second mortgage is less than half your annual income, put it in the debt snowball. Knock it out and then you won’t have to worry about it. Interest rates are low right now. In your case, put it on the debt snowball. It will delay when you get out of debt, but it’s the right thing to do. You don’t need to refinance on your house, just calculate what it will take to pay off your house in 15 years.