I HAVE ABOUT 26 YEARS LEFT ON MY MORTGAGE. I OWE ABOUT 225000.00. MY RATE IS 4.75% FIXED. I HAVE NO OTHER DEBT. SHOULD I TRY TO PAY IT DOWN OR INVEST IN A ROTH IRA. I AM 37 AND WILL LIKE TO RETIRE AT 55. NEED SOME ADVICE..MY INCOME BETWEEN MY WIFE AND I IS ABOUT 67,000.00
2006-12-12 06:00:01 · 6 answers · asked by TERRORS_2000 1 in Business & Finance ➔ Personal Finance
If you are making $67K per year, you're probably paying about 20% of your gross income in taxes. So you're effective rate on your mortgage is only 3.8%.
From an investment standpoint, you'd need to earn at least 4.75% to break even, and realistically 5.7%, to offset taxes on the money. There's perfectly safe investments paying that much right now in today's interest-rate environment, such as a CD or bonds.
If you have no other debt, and a sweet rate like that, at your age you are probably better off investing.
You can put up to $4000 into a Roth IRA annually. So do the math.
Your P&I payment on the mortgage should be about $1260. If you added $333 per month, you'd reduce your payments from 312 to 208. As it sits today, you have about $392,500 left to pay on your mortgage (including the $225K principal) over the next 312 months. That's $167,500 in interest.
If you added the $333 per month to your payment, you'd pay 208 payments of $1593, a total of $331,400, for a total of $106,400 in interest, saving you $61,100 in interest.
If you are able to find a reasonably safe mix of investments that would give you even a 6% return, and put in $333 per month each and every month, you should have a balance after 208 payments of $121,400. But you'd still have a balance of $107K left on your mortgage, so you could pay it off and still be $14K ahead, except that you can't draw the funds off the Roth at 55.
I'd stick the money against your mortgage, because that same $333 added would leave you mortgage-free by the time you hit 55. Since you can't access most retirement funds for another 12 years after that, the less money you need to live off the better you'll be sitting during that period.
Unless you can put that money into a non-tax advantaged account, but then after taxes on the gains, you'd be about even if you only got a 6% return on your investment. And you took on much more risk.
Start adding the $333 per month today. If you have more money, put the extra into investments.
2006-12-12 06:19:29 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Invest in a Roth. Your interest rate is low enough already. You can think that you can pre-pay your mortgage and save 4.75% in interest or you can invest it and hopefully make a better return on your money. For example the S&P is up over 10% this year on a return. If you put money in a CD you could get a 5% return. Your best bet is to diversify you investments pick some low, moderate, high risk. Your home is an investment too. Max out your 401K as well especially if you employer offer a match. That is free money. I hope this advice helps you out.
2006-12-12 06:07:27 · answer #2 · answered by robhelm 1 · 1⤊ 1⤋
Go with the roth. You're still young and need the credit leverage that that mortgage gives you. When it's time to retire you can use some of the roth money,(wich will be growing all that time), to pay off the balance of the mortgage wich will be considerably smaller by then.
2006-12-12 06:11:13 · answer #3 · answered by Ricky J. 6 · 0⤊ 1⤋
Mortgages and rentals are 2 distinctive animals! Is this a rent with choice deal you have been doing? If so, within the contract, did you comply with supply him again his loan cash? Are you speakme approximately the deposit? I do not fairly comprehend the query I wager as you intertwine the phrases rent and loan! I would not supply any person a refund earlier than they go back the important thing and do a stroll via with you. You must be definite your situation isn't broken.
2016-09-03 15:38:37 · answer #4 · answered by salguero 4 · 0⤊ 0⤋
Having a house, free and clear of debt, is the best retirement gift you can give yourself and your wife.
Pay it down, and then later you can invest in that Roth IRA.
2006-12-12 06:06:29 · answer #5 · answered by Ambassador Z 4 · 1⤊ 1⤋
I think you should do both.
Send one extra payment a year to your mortgage. You can do this buy dviding your min. payment by 12 and sending that amount w/ your regular payment. Just be sure to have them add the extra to the principle. It shouldn't be hard to do, and will save you years and tens of thousands of dollars off your mortgage.
Take the rest of what you have extra and put it into an IRA.
Hope this helps!
Happy Holidays!
2006-12-12 07:08:51 · answer #6 · answered by Josi 5 · 1⤊ 0⤋