Second mortgage

Dave has no problem with rolling a balloon 2nd mortgage into the debt snowball and gives his rules for dealing with 2nd mortgages.

QUESTION: Listener asks if Dave has issues with rolling a balloon second mortgage into a debt snowball and paying it off within a year instead of refinancing it. Dave gives his rule of thumb for dealing with second mortgages.

ANSWER: That’s exactly what I’d do with it. Getting rid of it is a fabulous idea. The rule of thumb on a second mortgage is this: if your second mortgage is more than half of your annual income, then consider making it Baby Step 6, and maybe refinancing it into your first mortgage. If it’s less than half of your income, put it in Baby Step 2.