I did not have your numbers exactly, and wrote that post quickly before work this morning. I am an engineering & business major, and took a number of economics / statistics and accounting classes that all touched on had a big part on compound interest, and ROI. From what you are telling me, you are not fully understanding the principles behind it. No matter what your numbers are - if the interest of the personal loan is greater than that of the mortgage - you will come out behind, rather than if you just put that money into the mortgage. The ONLY reason you are saving money is this scenario is because you are increasing your monthly payment. It doesn't matter if it's in a different loan or tacked on to the same mortgage, you are paying it down faster.
I'm not quite sure where your thought of saving money is coming from, unless you are thinking that the mortgage will "compound faster" than the personal loan. It does not matter how much $$ is in either loan - it is the interest rates, and to some degree the number of compounding periods that drives everything.
No, these are not your numbers. BUT IT DOESNT MATTER! Let me show you 3 breakdowns with different loans all at the same rate.
$100,000, 5% interest - 10yrs - monthly payment = 1060.66 total amount paid (principle + interest) =$127,278.62
$95,000, 5% interest - 10yrs - monthly payment = 1007.62 total amount paid (principle + interest) = $120,914.69
$5,000, 5% interest - 10yrs - monthly payment = 53.03 total amount paid (principle + interest) = $6,363.93
$20,000, 5% interest - 10yrs - monthly payment = 212.13 total amount paid (principle + interest) = $25,455.72
Now, lets add the totals so we have 3 sets of $100k loans....they all come out equal! So this means, no matter the loan breakdown - if interest rate and repayment periods are the same, the total interest is the same as well. With a shorter repayment period (as I detailed previously) the total interest paid goes down. The total interest paid goes up if you increase the interest rate.
Long story short - Will you save money overall by taking out a personal loan, so you are not only paying the mortgage, but the personal loan as well? Yes. Will it be as much money as you could have saved if you invested the same monthly payment regularly into the mortgage instead? No. Not by a long shot. Unless the personal loan has a lower average interest rate over the life of the loan. Also, by taking out personal loans, you are not only hurting your credit, you are sacrificing $5,000 x % interest in tax write offs. ALSO, with the method I propose - you are not committing to a higher repayment amount. So, if for some reason, you cannot afford that extra payment one month, you can skip it with no actual penalty. Try doing that with a personal loan!
I'm sorry if you don't see it now, or don't believe me. But here is a quick mortgage calculator to show you the amortization tables as well as adding extra money monthly, yearly or balloon payments as you suggest. You can then prove to yourself how what I am saying is correct. http://www.bankrate.com/calculators/mor ... lator.aspx
Seriously, overpay your mortgage. And your car loan. And student loans. Etc. Mortgage will get you equity - but equity will only help you get new loans / improve credit score at this point. My advice is to overpay everything a little, and overpay whatever loan you have that is the higher % the most. Currently, I am overpaying my mortgage the most, even though it is the lowest interest rate, because I have PMI. Once I pay that off, my interest rate drops 1.2%. This means I can lower my monthly mortgage payments by $100/mo when it finishes.