Mortgage debt snowball

[trivialator]

Can anyone wade in here. I have my mortgage split into 6 parts (mostly as top ups). It has kinda just come about as we have fixed for 18 months each time. It's sort of worked out like the debt snowball, e.g when the 1.5 year loan is paid all that goes onto the next one. Is this a wise set up or am I doing something catastrophically bad here?

$10200 at $256 per f/n for 1.5 years
$6773 $80 per f/n for 3.5 years
$9300 at $80 for 5 years
$14289 at $85 for 8 years
$8716 at $32 per f/n for 14 years
$175,500 at $606 per f/n for 21 years

 

[calvin_1985]

@trivialator it makes sense if you are able to pay down some of the debt early and you should be paying down the debt with the highest interest rate first.

there are some debt snowball approaches where you aim to pay off the smallest chunks of debt first, but whilst that makes sense from a progress perspective its a waste of capital.

if you arent able to pay down any debt, its not a debt snowball, just laddering debt, which is a bit beneficial because you can ride out some degree of interest rate fluctuations

 

[newb787]

@trivialator We ended up with 7 mortgages after a renovation. We turned the smallest into an offset, then used savings to offset interest payments so we didn’t pay any interest.

With offset mortgages, you can make lump sum payments of any amount, at anytime via the banks app. So we focused 100% on paying the smallest off.

Rinse & repeat with the next smallest - focus on increasing savings so it matches your debt, then focus on getting rid of the debt so it’s gone altogether.

Plus you have a comfy level of emergency savings. Win-win.

You can also use other people’s savings to offset your debt as long as they are with the same bank & give their consent. They won’t receive interest income from their savings though.

Paid an extra $70k off our mortgage in 2 years during Covid with this method.