Would it be more beneficial if I put that extra money into stocks and bonds? I am currently 30years old so I still have at least 35years until I reach retirement age.
2007-05-23 04:17:41 · 5 answers · asked by daweaze 1 in Business & Finance ➔ Renting & Real Estate
Assume a 30 year mortgage of $200,000 at a fixed rate of 6.5% for the loan duration. The monthly payment on such a mortgage would be $1252.80. If you multiply $1252.80 (three payments) and divide that equally over 12 months, you will add $313.20 to each monthly payment, which will be applied to principal reduction. If you follow this plan without fail, your 30 year mortgage will be fully retired in 18 years.
There are a number of calculators online for making such a determination. I happen to have used the one at bankrate.com
2007-05-23 04:42:45 · answer #1 · answered by acermill 7 · 1⤊ 0⤋
First ask yourself some questions.
What interest rate are you paying on your mortgage?
How much do you pay in taxes?
How long will you stay in your house?
Remember that all interest paid on a mortgage can be federal tax deductible. This can make a huge difference when paying taxes.
If you make 3 extra mortage payments a year you are going to pay off your loan in 19 years instead of 30. You will gain equity (the amount of money the house is worth minus the amount left to pay off on the house, or in other words the amount of the house value you own) faster doing this as well.
I would suggest doing some time value of money calculations (use Excel, it has some good functions for this). This will help you know if investing in paying off the house is better than investing in the market.
2007-05-23 04:39:46 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Lets say you have $1000 that you can either pay extra principal on your mortgage OR buy stocks and bonds. Lets also say your mortgage rate is 6 percent. The real mortgage rate may be less if you deduct your mortgage interest on your income tax.
So if you can make a greater return than 6 percent on your stocks an bonds (after taxes) you will be better off buying stocks and bonds than paying off your mortgage faster.
Reducing your debt that has a 6 percent interest rate is exactly the same as making 6 percent on your investments.
BOB F
2007-05-23 04:40:44 · answer #3 · answered by Anonymous · 0⤊ 0⤋
This question isn't easily answered without a detailed plan. I would suggest that you contact a financial planner. Things to consider are much interest are you paying vs how much you could earn, how excited are you to not have a mortgage payment, and are you likely to refi into another 30 year mortgage (surprisingly more often than not people refi, without really consider the term). There is a great excel download under microsoft office downloads-amortization schedule that allows you to put in extra payments and shows you the effect on your mortgage.
2007-05-23 04:32:36 · answer #4 · answered by Diane M 1 · 0⤊ 0⤋
Well our parents way of doing things isn't really as beneficial for todays economy...
extra payments on a 30 year fixed will not increase your overall wealth...
that's an oldskool way of doing things that most people still buy into...
There are new ways of investing in real estate that can allow a person to increase their overall wealth in a relativle short period of time...
You're 30 years old, do you really want to wait 35 years to retire...
What you want is a way of doubling your value as many times as posible over the course of your lifetime...extra payments on a 30 year fixed is not the way...
2007-05-23 04:43:33 · answer #5 · answered by Timberuno 2 · 0⤊ 0⤋
only pay extra principal!
2007-05-23 06:30:46 · answer #6 · answered by ron d 3 · 0⤊ 0⤋