I have been doing this in order to pay off the loan faster. Then a friend told me that paying off your house is an old-fashioned idea as these days people do not buy their houses for life. Therefore if I am going to sell it anyway before the loan matures (in 28 years)- which is likely- there is no reason to try to pay off the loan. What do you think??
2007-04-23 03:35:53 · 10 answers · asked by jenjroma 1 in Business & Finance ➔ Renting & Real Estate
If you can afford it, then do it. It will not only help you build equity in your home so that when you go to sell it you make a better profit, it also helps you credit score. And, if anything ever happens you can take out a home equity line of credit which you can use to fix it up before you sell it, or whatever you want. (No closing costs, either.) And for most people it's a tax writeoff.
2007-04-23 03:40:47 · answer #1 · answered by becky m 4 · 2⤊ 0⤋
Mortgage interest is usually at a cheaper rate than any other loan you have - cars, credit cards, etc - because it's secured by an asset that is almost always going to increase in value. Also, you can deduct mortgage interest on your taxes, so it's even cheaper.
All this means that if you have other forms of debt - those credit cards, car loans, student loans - you're better off to pay them off first before you start making extra principal payments. Those other debts are much more expensive, and it will save you money in the long run.
Once those are paid off, you can make more payments on the mortgage if you want. It will cost you a bit in the way of a reduced tax deduction, but the tradeoff is peace of mind. Or you can use the money to buy a boat, take a trip, or save even more for retirement. Which option you pick is up to you.
2007-04-23 03:43:40 · answer #2 · answered by Ralfcoder 7 · 2⤊ 0⤋
This is why the number of foreclosures is at an all time high. People are getting bad advice from lenders, friends, etc about not paying extra money towards a mortgage. Sure, if you are going to invest the money somewhere else and earn more than your interest rate on the loan (ie, can earn 7% and mortgage is at 6%), you should consider it.
Otherwise, paying extra principal is like guaranteeing you a return on your assets of the mortgage interest. Plus when you do sell the house in a few years, your check from the closing will be that much bigger, allowing you to have a bigger downpayment on a new house.
How many old-fashioned people do you know who got kicked out of their house?
2007-04-23 03:42:27 · answer #3 · answered by Edgar 3 · 2⤊ 0⤋
It is always a good idea to get rid of the principal balance owed on your home if you can afford to do it. NO mortgage lasts longer than five to seven years before it is refinanced or sold. But paying down the principal builds the equity in your home, so that when you do refinance or sell, you will owe less on the principal balance, and have access to more money. The more equity you have in your home, is more financial worth for your real estate owned, and comes in handy when refinancing, because as your loan to value goes up, so does the interest rate. Hope this helps you sort it all out. Good Luck!!
2007-04-23 03:50:26 · answer #4 · answered by novastarbanker 3 · 0⤊ 0⤋
Whoever told you not to pay extra toward your principal is an idot. Thatis extremely smart to do! You are only helping yourslef either way - and of course you are not going to spend the rest of your life in that house. But paying extra on it will help you when it is time to sell the house...it will give that much more to put as a down payment on your next home purchase. And then your monthly mortgage will be lower! Tell your friend to take some common sense classes.
2007-04-23 03:40:54 · answer #5 · answered by Anonymous · 1⤊ 0⤋
Making extra payments on your mortgage is a simple techique for saving, because each payment reduces your liability on the loan. It also reduces your interest charge. So, its not a bad thing to do.
Whether you plan to stay in the house or not is irrelevant. You could just as easily put the additional money in some other investment (or spend it but then it wouldnt be savings).
2007-04-23 04:19:48 · answer #6 · answered by Anonymous · 0⤊ 0⤋
If you don't plan to stay there then don't pay sny extra. If you are 29 and live in a 2 bdr condo , then NO. If you are 50+ and plan to stay through retirement then yes.
If your mortgage is over 7% it would be wiser to refi if you can get a lower rate.
Paying off a chunk on your mortgage doesn't lower the payment.
I paid mine off after I lived there for 15 years. I'm still there.
The thing about real estate is the leverage you get by having a mortgage. You put 10% down but take advantage of the appreciation on 100% of the value.
2007-04-23 03:47:11 · answer #7 · answered by zocko 5 · 0⤊ 1⤋
yeah you might sell up but them you might but something else as well. at least if you pay the loan off sooner that is less money you would pay back to the bank & more money for you to buy a different house & also less money you would have to borrow next time round. you are always going to need somewhere to live or would you rather pay rent & pay off somebody else's morgage?
2007-04-23 03:45:13 · answer #8 · answered by ? 3 · 0⤊ 0⤋
It is still a good idea to make the extra payments. Your home is appreciating in value every day.....the less you owe on it, the better off you are, keeping it or selling it.
2007-04-23 03:40:00 · answer #9 · answered by tandkalexander 6 · 1⤊ 0⤋
You should certainly try to pay off your loan earlier rather than later if you can afford it. You save paying interest and, when you move, you will have greater equity.
2007-04-23 03:40:49 · answer #10 · answered by Brian 2 · 1⤊ 0⤋