About three years ago, my mom bought three condo units and took out a PAG-IBIG loan under my name to fund one of the units (for the other 2 units, she used my sister and dad's PAG-IBIG benefits). The units were leased as dormitories to the students in the nearby school, and the rent payments used to pay the monthly mortgage.
Two years later, my husband and I moved out of our rental in Sta. Rosa, Laguna and moved into "my" unit. I took over mortgage payments and am currently repaying my mom what she paid for the equity. The original loan from PAG-IBIG was Php750,000 with a 30 year fixed interest rate, and the mortgage is pegged at Php5,600/mo. After two years of payments, my mom remitted about Php130,000 to PAG-IBIG, but the balance still stood at Php720,000. After 24 months of payment, only Php30,000 or so of the Php130,000 was applied to the principal, the rest went to interest payment.
And that's why when I assumed paying the loan, I decided to pay an extra Php5,000 on top of the monthly mortgage, since the extra would be automatically applied to the loan balance, thus considerably shortening the mortgage period.
But my husband and I want to move to a house in about 2 years time, and we intend to sell our present condo unit to add to our house fund. Considering that, I'm now thinking twice about paying extra every month because obviously, shortening the mortgage period is no longer a priority.
Our loan balance is now at Php670,000++ and if I continue paying an extra Php5,000 to our mortgage for the next two years, an extra Php120,000 will be deducted from the balance. While if I only pay the mortgage, the bulk of my payments go to interest payment and only about a fourth or a fifth go to the principal.
Here's the scenario:
With extra payments= Php670,000 - Php120,000 - Php30,000= Php520,000
W/o extra payments= Php670,000 - Php30,000= Php640,000
So should I continue paying extra every month, or should I just take that money and add it to my monthly stock/mutual fund budget or emergency funds? Our condo unit is currently priced at Php1.2M and in two years time, it will probably be at Php1.3M-Php1.4M, so the Php80,000 savings seem minimal.
What do you think?