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Pay extra monthly on Mortgage or invest the extra?
Posted on 7/21/14 at 1:11 pm
Posted on 7/21/14 at 1:11 pm
I have been paying an extra $100 per month on my mortgage. I have a 4.5% interest rate.
Would I be better off putting that extra $100 in my 401k instead ?
I have averaged 12.5% return over the last 3 years and 9.2 percent over the last 12 years.
Would I be better off putting that extra $100 in my 401k instead ?
I have averaged 12.5% return over the last 3 years and 9.2 percent over the last 12 years.
This post was edited on 7/21/14 at 1:12 pm
6
Posted on 7/21/14 at 1:13 pm to SG_Geaux
There may be more "credential'd" opinions on here, but I'd imagine if your return on investments is greater than your interest rate, then you'd be better off investing that additional money.
This post was edited on 7/21/14 at 1:14 pm
Posted on 7/21/14 at 1:17 pm to SG_Geaux
I don't know if there is a black and white, wrong or right answer to this. I believe it comes down to how confident you are that you will not lose your job, and fail to fulfill your debt obligation and lose your home. If you think that situation is unlikely, the answer maybe to invest the extra.
This post was edited on 7/21/14 at 1:18 pm
Posted on 7/21/14 at 1:24 pm to SG_Geaux
Since mortgage interest is tax deductible, you're only "buying" a ~3% after-tax "return" by paying the mortgage early
It's only logical to pay extra on a mortgage when you are trying to refinance out of unfavorable terms (e.g. PMI on FHA loans), you have a terrible interest rate, or you are making your final payment on the mortgage
Invest the $100
It's only logical to pay extra on a mortgage when you are trying to refinance out of unfavorable terms (e.g. PMI on FHA loans), you have a terrible interest rate, or you are making your final payment on the mortgage
Invest the $100
This post was edited on 7/21/14 at 1:25 pm
Posted on 7/21/14 at 2:25 pm to SG_Geaux
paying down your mortgage seems to be a nice way of diversifying your investments. The same way someone whould be in CD's, equities, bonds, etc you are using your mortgage as an investment tool.
I like the idea of paying down a mortgage as part of your investment plan. I pay down about $50 a month rather than the $100 but it really does help long term on interest savings. I'd say stick to the mortgage pay down, but understand it is just a part of your investment strategy.
I like the idea of paying down a mortgage as part of your investment plan. I pay down about $50 a month rather than the $100 but it really does help long term on interest savings. I'd say stick to the mortgage pay down, but understand it is just a part of your investment strategy.
Posted on 7/21/14 at 2:35 pm to SG_Geaux
I do the biweekly payments which adds up to one full payment on principal a year. It works better fit our budget. I would invest the hundred though.
Posted on 7/21/14 at 2:37 pm to LSUSUPERSTAR
quote:
I do the biweekly payments which adds up to one full payment on principal a year. It works better fit our budget. I would invest the hundred though.
My monthly note is no more than a nice 1BR apartment. By paying an extra $100, I would be making 1.5 extra payments per year.
I will probably switch to investing it.
This post was edited on 7/21/14 at 2:38 pm
Posted on 7/21/14 at 2:59 pm to SG_Geaux
pay extra on the mortgage get out of debt.
Posted on 7/21/14 at 3:26 pm to SG_Geaux
As someone else already pointed out, if you are itemizing deductions your rate is lower, maybe more like 3.5% or so.
That's about the rate of inflation. In other words, it is free money and you should not be in any kind of hurry to pay it off. The real ROI is right around zero.
The traditional advice to pay down a mortgage early has more relevance in a higher rate environment, but not here.
That's about the rate of inflation. In other words, it is free money and you should not be in any kind of hurry to pay it off. The real ROI is right around zero.
The traditional advice to pay down a mortgage early has more relevance in a higher rate environment, but not here.
Posted on 7/21/14 at 3:53 pm to Double Oh
#ramseysessed
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