Financial pundits have always advised that the debt with the highest interest rate has to be paid off first. This makes mathematically and hence financially more sense than tackling the debt with the lowest interest rate first. Though it may make financially more sense to do this, I personally would prefer to pay off the lowest amount debt first - the psychological and the emotional boost that I will get from doing this is highly valuable to me.

But whichever debt you choose to pay off first, you have to first make the minimum required payment for each debt first. Only when thats done, you can then decide on which debt to put your extra repayments into.

What About Mortgages - all with the same interest rate? Then in this case, the property which does not get any tax deductions has to be at the top of the list (like the mortgage for the property you are living in). Only after thats paid off, we should move to the next one.

This is hard to follow though - it is so tempting to focus on the mortgage with the lowest amount but doing so will mean I will miss out on valuable tax deductions that I would otherwise get from this mortgage….I need to first focus on the one that I don’t receive any tax deductions from. Makes sense doesn’t it…..Share your thoughts…Which would you pay off first?

Topics: Property |

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