Which mortgage should I pay down first?

[Deryck C.]

Hi investors, If you can pay down a mortgage, which one would you pay down aggressively first, a rental that has high appreciation and little cash flow, or the rental that has a higher cash flow but little appreciation? Thanks in advance

[Justin Phillips]

@Deryck C. I have a 1st position Heloc on our property, referred to as an “Offset Mortgage” in other countries. It’s a credit line tied to a zero balance sweep checking account. Every deposit made sweeps directly to our remaining balance. That lowers our remaining balance, and thus lowers our interest cost. So we’re able to aggressively pay down our remaining balance with idle funds, but we have full access to that money. Whenever an opportunity arises, we’ll simply write a check out of our credit line and purchase in cash. Each additional property purchased or paid off with the line pays off faster than the last with the additional cashflow.
It maximizes flexibility, and allows deposits/idle funds to work for me, rather than BoA or Wells Fargo.