My mortgage is paid till 04/2008, shall i continue to make advanced payments ? should i change to make principle only payments, should I stop paying my mortgage for that 1 year and invest the money ? I would like for my mortgage to be paid thru all of 2008, it that dumb ? my mortgage is a 15 year fixed at 4.875 I owe $220,000. Thanks
2007-02-04 05:07:33 · 8 answers · asked by just me 4 in Business & Finance ➔ Investing
I am maxed out on 401k and do not qualify for roth. I am in the 33% federal tax bracket.
I am still able to save after paying double mortgage payments.
2007-02-04 05:33:54 · update #1
You should not be paying your mortgage ahead. That is a waste fo money. Pay down the principle. For every dollar that you pay down the principle you will save yourself 2 dollars in interest payments, especailly with a 200k mortgage.
Actually, I would think that if you made advanced payments they would go agains the principle. Are you sure they are not?
Paying down the principle is one of the best ways to invest your money. Absolutely certain return.
2007-02-04 05:55:14 · answer #1 · answered by Anonymous · 1⤊ 0⤋
Depends largely on your tax situation, but it is likely that you are better off investing the money elsewhere. 4.875% is a pretty good rate to have. Since you can deduct mortgage interest, there is a good chance that you can get better than 4.875% interest elsewhere (even a guaranteed return investment like a CD)! This means that you may be better off not paying the mortgage early, investing the money, and winning both on the tax deduction and the investment interest income. Are your IRA and 401(k) maxed out? If not, and you don't need the money any time soon, invest in a Roth so the interest is tax free or your 401(k) so the contributions are tax deductible.
2007-02-04 13:14:18 · answer #2 · answered by violentquaker 4 · 1⤊ 1⤋
Congratulations on your good financial situation. I paid down my mortgage for a long time, until I realized I was really only saving myself a few percentage points by paying it off early. I would have been much better off investing the money in the stock market. My advice to your would be to put the money into a taxable investment account. Buy a stock for the long-term, and hold on to it. You won't have to pay taxes on any gain you might make until you sell.
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Hope this helps.
2007-02-04 13:40:15 · answer #3 · answered by Anonymous · 2⤊ 0⤋
After the tax break on your mortgage interest, your effective rate of return is around 3.3% when paying off additional principle. I would take a gamble and put some of the money you have been prepaying into equities. The historical average return is around 10% for the S&P500. After taxes, you would be looking at a 7-8% theoretical return.
Better yet, put the money into a Roth IRA and save for retirement with a tax free investment device.
2007-02-04 13:17:02 · answer #4 · answered by Michael D 2 · 0⤊ 0⤋
Paying off your mortgage is a great discipline to save, and should be encouraged. Having said that, you should also consider it as an investment in your house, and there may also be alternative good investments you may want to consider instead of your house, depending on the interest rate you pay and your tax situation. So if it makes you save keep paying off, but think about alternative investments and not about spending the money.
2007-02-04 13:14:53 · answer #5 · answered by Cheanea 3 · 0⤊ 0⤋
Keep making you mortgage payments but to principle so that you will pay off your mortgage sooner, then you can save all of the money you are paying in payments.
2007-02-04 16:36:25 · answer #6 · answered by Anonymous · 0⤊ 0⤋
You should be paying off the principal. Otherwise you are just giving the company money.
2007-02-04 14:18:27 · answer #7 · answered by Nelson_DeVon 7 · 2⤊ 0⤋
try to make 2 payment a month and pay it off early and you will save on the APR rate. it will boost your credit rate
2007-02-04 13:19:27 · answer #8 · answered by alleykhad607 5 · 0⤊ 1⤋