Popping The Balloon
Where should this listener fit her balloon mortgage into her Baby Steps?
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 what I would do. Get rid of it. The rule of thumb is this; on a second mortgage, if your second mortgage is more than half of your annual income, then you need to consider making it Baby Step 6 and refinance into your first mortgage. If it’s less than half of your annual income, throw it into Baby Step 2.