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Best way to payoff mortgage early?
Posted on 2/9/17 at 9:14 pm
Posted on 2/9/17 at 9:14 pm
Currently, 5 years into a 30 year fixed at 3.875%. Would it be best to invest $X per month into a decent mutual fund for the next 6-10 years and then use that to pay off the mortgage or would it be best to put the same $X towards principle every month?
10
Posted on 2/9/17 at 9:16 pm to cstev12
At 3.875, I wouldn't pay it off any faster than they forced me to
Posted on 2/9/17 at 9:20 pm to Croacka
quote:
At 3.875, I wouldn't pay it off any faster than they forced me to
Quicker I pay it off the quicker I can use the monthly payments to invest. I'd rather be getting paid interest then paying it.
Posted on 2/9/17 at 9:23 pm to cstev12
Or you could invest the money you'd like to pay if off with now.
Keep in mind that with the Tax benefits of interest, your effective rate is closer to 3%
If you can beat 3% investing, invest now
Keep in mind that with the Tax benefits of interest, your effective rate is closer to 3%
If you can beat 3% investing, invest now
Posted on 2/9/17 at 9:25 pm to cstev12
I agree with Croacka
stash that cash away in a saving account, emergency fund, some blue chip stocks, etc.
stash that cash away in a saving account, emergency fund, some blue chip stocks, etc.
Posted on 2/9/17 at 9:28 pm to Croacka
Right, I was saying instead of putting, let's say $500 a month directly to the principle I'd put it in a mutual fund for next 6-10 years. Once that account reached remaining principle I'd pay off mortgage then start investing the $500 + Old Mortgage payment into another mutual fund (Or something similar).
I'm not very keen on investing so I'm sure there's plenty of holes to punch in this plan.
I'm not very keen on investing so I'm sure there's plenty of holes to punch in this plan.
Posted on 2/9/17 at 9:36 pm to cstev12
quote:
Once that account reached remaining principle I'd pay off mortgage then start investing the $500 + Old Mortgage payment into another mutual fund (Or something similar).
I get what you're saying, but in 6-10 years you'd have a nice interest earning nestegg and you'd have to cash that out and start over.
If your money at the time is earning more than 3% annually, id continue to let it grow since it's making more than you stand to gain by eliminating the mortgage interest.
Posted on 2/9/17 at 9:49 pm to cstev12
Can't. Borrow money at 3.8% 15 years from now most likely
Posted on 2/9/17 at 9:51 pm to Croacka
Yeah makes sense. Not sure why I have this urgency to pay it off. Thanks for the advice.
Any go to investment accounts you'd suggest? I already have emergency funds, 529's for both kids, 401k maxed yearly, and put 5% into ESP. Just looking for something to drop 500/month over next 10-15 years.
Any go to investment accounts you'd suggest? I already have emergency funds, 529's for both kids, 401k maxed yearly, and put 5% into ESP. Just looking for something to drop 500/month over next 10-15 years.
Posted on 2/9/17 at 11:25 pm to cstev12
quote:
Best way to payoff mortgage early?
Attack the principal
Posted on 2/10/17 at 2:04 am to Chad504boy
quote:
Can't. Borrow money at 3.8% 15 years from now most likely
That's what they said when mortgage rates were at 14%, 9%, 6%, 4%, etc. When I landed a 14.5% rate on my first home mortgage around 1984 the general opinion was you had better buy a house now rates will never be this low again, if you don't act now you may never be able to afford a house. During my lifetime financial predictions have been about as reliable a astrology.
Posted on 2/10/17 at 7:20 am to cstev12
This is one of those things that rationally makes sense, but emotionally the thought of having the biggest debt albatross of your life removed from your neck makes it hard to justify taking it to term.
I know better, i know i know better, but i still can't stop myself from paying extra towards it every month.
But i suppose I've put a dollar value on knowing i own it.
I know better, i know i know better, but i still can't stop myself from paying extra towards it every month.
But i suppose I've put a dollar value on knowing i own it.
Posted on 2/10/17 at 9:49 am to Croacka
quote:
I get what you're saying, but in 6-10 years you'd have a nice interest earning nestegg and you'd have to cash that out and start over. If your money at the time is earning more than 3% annually, id continue to let it grow since it's making more than you stand to gain by eliminating the mortgage interest.
Maybe he should borrow an additional $250,000 on his mortgage and invest it?? to get them returns
Posted on 2/10/17 at 10:14 am to EA6B
quote:
That's what they said when mortgage rates were at 14%, 9%, 6%, 4%, etc. When I landed a 14.5% rate on my first home mortgage around 1984 the general opinion was you had better buy a house now rates will never be this low again, if you don't act now you may never be able to afford a house. During my lifetime financial predictions have been about as reliable a astrology.
Should you be right he can always refi and still get compounding interest by investing.
Posted on 2/10/17 at 10:20 am to Hudson00
quote:
Maybe he should borrow an additional $250,000 on his mortgage and invest it?? to get them returns
Refi's are expensive products. that amount (if he has in equity) will be expensive load on front end. Could do HELOC, but that money would likely be at prime +2. With prime rate set to raise 1-3 times this year that money may cost him almost 6% by years end and be max of 10 years before fully repaid so he'd be penalized paying off by pulling money out early if not eligible by age.
Yes I know you were being a smart arse but you need to know why your logic isn't apples to apples.
This post was edited on 2/10/17 at 10:22 am
Posted on 2/10/17 at 10:35 am to cstev12
quote:
Not sure why I have this urgency to pay it off
It's a natural reaction to want to get rid of monthly obligations. Best way to look at it is to find a free amortization schedule and play around with your additional payment amount. That will let you know when you would have it paid off if you put XXX additional towards the principal. You could then create a quick schedule to see how much you would have if you put the same in an investment and make your decisions from there.
I would do a combo of the 2, I like to round my payments up to the next $100 ($500 for mortgage payment), but that's the OCD in me.
Posted on 2/10/17 at 10:42 am to ItNeverRains
My personal opinion is to never pay off extra principal to the bank, but to stash the extra money into a savings account on your own. Once you give it to the bank, its gone. You have to loan it to get it back. Automatically move some into a savings account every month, then if you get to a point you want to drop a large chunk or you saved enough to pay the house off, do it.
The "investing" and "maximizing' of your returns is IMO not worth considering with your home mortgage. Work on paying it off, and not worry about the small time money you'd save on your taxes or on investing it elsewhere. I just don't think its worth paying the bank anything extra until you can pay the loan off.
The "investing" and "maximizing' of your returns is IMO not worth considering with your home mortgage. Work on paying it off, and not worry about the small time money you'd save on your taxes or on investing it elsewhere. I just don't think its worth paying the bank anything extra until you can pay the loan off.
This post was edited on 2/10/17 at 10:43 am
Posted on 2/10/17 at 1:02 pm to RJSambola
quote:
This is one of those things that rationally makes sense, but emotionally the thought of having the biggest debt albatross of your life removed from your neck makes it hard to justify taking it to term.
This! I nuke that sucker as much as possible.
Posted on 2/10/17 at 1:02 pm to cstev12
quote:Make weekly payments
Best way to payoff mortgage early?
Posted on 2/10/17 at 2:08 pm to cstev12
quote:
Would it be best to invest $X per month into a decent mutual fund for the next 6-10 years and then use that to pay off the mortgage or would it be best to put the same $X towards principle every month?
Assuming I have to choose from these two options, A is clearly better than B because it preserves liquidity in the meantime. Remember that there is no benefit in paying your mortgage down, only in paying it off.
That being said, I agree with everyone else saying what's the rush?
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