More alternatives to loan consolidation

Last week I shared some criticism I received about a recent column on loan consolidation.

But really, it was all about my shortcomings as a columnist.

This week's reader responses to that April 1 column also took issue with the advice I passed along, but with more specific suggestions.

As a reminder, the April 1 piece dealt with a reader who wished to remain anonymous. She said she and her husband had a first and second mortgage and a pile of credit card debt. She wanted to know whether they should pay off their existing debts as they stand or try to save on interest by consolidating loans. The expert I contacted suggested that they consolidate into one new mortgage and pay it off over eight years, saving $10,492 in interest.

A reader named Brian suggested (as did last week's e-mailer) that I must have been making an April Fools' joke. He wrote that he just turned 62, and he feels there is no need to pay off any mortgage principal.

"(Maybe) there is an emotional, psychological or some other sappy rubbishy reason, but there is no financial reason to pay off principal," Brian wrote. "And why amortize over 15 years? At 75 (you're going to) say, 'Wheow! I paid off my mortgage! Yee-hah! What a hero I be.'

"Why not 30 years? You can be secure at your (90th) birthday in the knowledge that your house is paid off? Nonsense. The only thing you're worried about at that age is whether your bladder and bowel are secure."

Brian suggests that our anonymous e-mailer get an interest-only loan, noting that at 6.5 percent it would cost her and her husband about $1,121 a month.

"(Forget about) looking at total interest paid for all these screwy alternatives," he wrote. "You just can't beat this interest-only deal. They could even get megabucks cash out if they want to do a little self-hedging against rising interest. But no matter — they have a huge advantage."

That's an interesting idea, Brian, although it sounds a bit risky. Our anonymous e-mailer may not have the stomach for such a plan. Perhaps she feels that paying off her mortgage would give her a sense of financial peace as she faces retirement. I don't think that can be ignored.

I also received a note from Michele, who read the April 1 column while visiting Utah from California.