Mortgage Math Question

[Allison Karrels]

I was running the numbers the other day comparing stack vs snowball for my 4 rental property mortgages and I wondered if there was a 3rd option for debt repayment specific to mortgages. For a mortgage your payments change overtime from going towards mostly interest at the start to around midpoint of the length of your mortgage shift towards more principal and then towards the end mostly all principal . I wondered if it made any sense at all to pay down a debt until the balance shifted to more money went towards principal than interest and once that happens move to the next loan, etc. Example right now on a loan my payment is $582 but only $103 of that reduces the principal. If I paid it down until around $300 each month was going towards principal and then moved to a different loan does that make any sense at all. Or if I had $20,000 that I wanted to put towards debt - does it make sense to put $20k on one loan or $5 on 4 loans.

One reason I was thinking of this vs just paying off the highest interest rate loan and then moving to the next one is you can deduct mortgage interest on your taxes. So perhaps having 4 loans with some deductible interest has value vs paying off one loan and only deducting on 3 loans.

In case someone wants real numbers - Loan 1 - 4.75% $70,000 balance 30 years remaining , Loan 2 - 3.75% $70,000 balance 28 years remaining, Loan 3 - 4.125% $56,000 balance 15 years remaining, Loan 4 - 4.75% $94,000 balance 20 years remaining.

As you can see the interest rates are all within 1% of each other. I am currently putting around $700 a month towards loan 1 as an extra principal reduction payment but I was wondering if perhaps I should rotate which loan gets the extra payment each month or just stick with the normal practice of focusing on one debt at a time. I think since these are rental properties and there are tax implications the answer might be different than if we were just comparing credit card debts but perhaps not.