I'm 32 years old with 793 Credit Rating.. I'm renting out my home for 2800 bucks.. which is 1000 above the mortgage. Should I put the 2800 I earn on the rent towards the principal? so my total mortgage payment is $4600? If I did, I would pay off my house by August 2012. I'm living in the Philippines right now with only $1700mo comfortably. What should I do with my extra money??? Pay off my house first? then Invest like a madman??
2007-08-30
10:36:38
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8 answers
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asked by
confused
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Business & Finance
➔ Investing
The reason I could pay an additional 2800 on top of my 1800 mortgage payment is because.. my house payment was $1800 and now that I'm renting it out for $2800 starting these past 3 months.. I could put that on top of my original Mortgage payment totaling $4600.. Right?? I'm not using the income from my rent because I'm on a fixed income right now at $3500 a month and all I need is $1700 in the Philippines so that's more than enough for me here.
2007-08-30
11:20:17 ·
update #1
My interest rate is fixed at 7.25 percent
2007-08-31
00:15:48 ·
update #2
I do not have pre-payment penalty.
2007-08-31
00:17:17 ·
update #3
This is a classic investing argument.
What is the interest rate on the house? Can you find an investment that you are comfortable with that can give a better return? If so, then invest the money.
Do you value stability and look forward to owning property that cannot be repossesed because you fell behind on payments? If so, then pay ahead on the house.
Do you have an emergency fund set up? If you were to lose your job or have to go to the hospital and not be able to earn money, how long can you last? You may want to divert some of that money towards savings.
Do you have a retirement account set up? Can you get a 401k, 403b, or 457 plan where you work? Are you contributing to it? Does you employer match any funds? You may want to think about the tax advantages of contributing to these. Also, planning for the future is never a bad idea. (I have no idea if this affects you while living in the Phillippines though).
Also, it is not a bad idea to invest a little, save a little, and pay a little extra to mortgage. It sounds like you might be ablet to afford another investment property. You may want to look into that as well.
2007-08-30 10:45:32
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answer #1
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answered by A.Mercer 7
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First of all, good job! Most people don't even think about paying off their mortgages. Your math doesn't make sense to me, so I'll try to figure it out. If you are renting the home for $2800 and it is $1000 more than the mortgage payment that means your mortgage payment is $1800. I'm not sure where you are getting the $4600. I think one of your numbers is a typo. I would evaluate how long are your renters are going to be there, how much interest you are paying vs. how much you would make, etc. Both your ideas are good. I would do both.
2007-08-30 10:49:49
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answer #2
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answered by Brain 4
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First you had better check your mortgage. Some will only allow an extra payment once a year. If you pay more than once a year then it is projected on as another months pay so they can collect the interest.
Mortgages are in many different packages so be sure you know what you are doing if you want to pay it off early.
If it were me and I could pay it off I would do so as soon as possible. Interest rates are not stable and can go up a lot in a short time.
2007-08-30 11:05:15
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answer #3
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answered by Anonymous
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First, if your mortgage is $1800/month, you'd only be able to put $1,000 more towards the principle portion of your note.
Now, do you have at least 6 months worth of living expenses already set aside in a separate account. If so, then find out what your interest rate is on your loan. If it's low enough, you might make more investing the money, assuming you know how and what to invest in. If the interest rate is high, you might consider paying off sooner. Just remember that you'll want to live in the house again for at least 2 out of 5 years due to capital gains.
2007-08-30 10:48:43
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answer #4
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answered by liveinaustin 3
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your math doesn't add up. rental income 2800, mortgage payment is 1800. your net rental income is 1000. You can pay up to 2800 toward your mortgage from your rental income unless you want to add more to the payment from other income source. So, I don't understand how you got 4600.
In any case, if your mortgage interest is low, then invest in stocks or other property. If it were your principle resident, then I would advise you to pay off the mortgage.
2007-08-30 10:49:37
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answer #5
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answered by Matrixcm 3
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well, if it were me, I would take the 2800 rent,add my1800 mortgage[giving you the 4600] and send it to the bank.
some people argue that you should keep a balance, but I think thats BS. Providing the mortgage you have lets you pay off early , its a no brainer. think of that house as a big piggy bank. everything you put in you will get back, and you have renters helping you cram cash into it,too!
SWEEEEEEEET.!!!!!!!!
2007-08-31 13:09:28
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answer #6
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answered by haffded 1
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My financial advisor told me to always have a mortgage open if possible. Reason 1. Its good for your credit. 2. Tax write off
2007-08-30 10:45:32
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answer #7
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answered by Anonymous
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There is not enough information to answer your question.
Is your interest rate FIXED or VARIABLE?
What is your interest rate?
Some companies actually charge you if you pay before the date you are supposed to pay. Check if this is your case.
Some companies actually offer discounts if you pay before the date you are supposed to pay. Check if this is your case.
Email me more details and I will give you a more detailed answer.
I am a Portfolio Manager with over a decade of experience in the Stock Markets.
2007-08-30 17:30:14
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answer #8
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answered by Anonymous
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