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Home Equity question
Posted on 8/2/13 at 11:53 am
Posted on 8/2/13 at 11:53 am
So I am looking at trying to sell my home in the next 3-5 years and for the past few months have been putting money away for a down payment. I am currently at around 12k and would like to get to 60-70k to have 20% down on a 300-350k house.
My question is this. I am currently just putting this money in a savings account but would it make more sense to put it all toward the principal on my current house thus reducing the interest I will pay over the next 4-5 years at higher rate than it will earn sitting in a savings account?
Is equity as simple as saying I owe 120k on my house that I just sold for 185k and now I have 65k at my disposal?
My question is this. I am currently just putting this money in a savings account but would it make more sense to put it all toward the principal on my current house thus reducing the interest I will pay over the next 4-5 years at higher rate than it will earn sitting in a savings account?
Is equity as simple as saying I owe 120k on my house that I just sold for 185k and now I have 65k at my disposal?
2
Posted on 8/2/13 at 11:56 am to RandySavage
quote:
make more sense to put it all toward the principal on my current house thus reducing the interest I will pay over the next 4-5 years at higher rate than it will earn sitting in a savings account?
It won't reduce the interest that you would pay as it is already figured into your monthly payments over the life of your loan.
It would if you were planning on completely paying off the house early, as you would not have anymore payments once you paid off the principal.
Maybe I'm looking at it wrong
Posted on 8/2/13 at 12:05 pm to RandySavage
Yes, it is that simple. But also take into account the amount of money you will spend to sell your house (realtor fees, fixing up, etc).
Also, if your house takes longer to sell and you want to buy/build a new one then that equity you see as down payment is tied up.
As for what makes sense...you will definitely "save" more money by paying towards principal. But if you can invest the money for a higher rate than your mortgage interest rate then do that. But a short term savings account will not earn much.
Also, if your house takes longer to sell and you want to buy/build a new one then that equity you see as down payment is tied up.
As for what makes sense...you will definitely "save" more money by paying towards principal. But if you can invest the money for a higher rate than your mortgage interest rate then do that. But a short term savings account will not earn much.
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