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re: When does it make sense, mathematically, to accelerate mortgage payments?
Posted on 12/9/23 at 11:47 am to rpg37
Posted on 12/9/23 at 11:47 am to rpg37
I think it depends on your age, and if you can get a return in the stock market that exceeds your mortgage rate...
Regarding the latter, paying extra principle in your case is essentially like investing the extra principle amount and making a 6.5% return...if you think you can do better than 6.5% in the stock market, you are better off doing that.
Regarding age, I just wouldn't want to have a bunch of years left on your mortgage as you approach retirement. Paying extra principle every month will reduce the time it will take to pay off the mortgage (as well as save you mortgage interest payouts over time).
Be that as it may, I would always make sure you have at least 6-12 months of emergency funds saved up...I would get that nest egg up before considering paying extra principle...
Regarding the latter, paying extra principle in your case is essentially like investing the extra principle amount and making a 6.5% return...if you think you can do better than 6.5% in the stock market, you are better off doing that.
Regarding age, I just wouldn't want to have a bunch of years left on your mortgage as you approach retirement. Paying extra principle every month will reduce the time it will take to pay off the mortgage (as well as save you mortgage interest payouts over time).
Be that as it may, I would always make sure you have at least 6-12 months of emergency funds saved up...I would get that nest egg up before considering paying extra principle...
This post was edited on 12/9/23 at 11:50 am
1
Posted on 12/9/23 at 12:07 pm to Chicken
quote:
...if you think you can do better than 6.5% in the stock market, you are better off doing that.
Why wouldn’t it be =6.5%/(1-your highest marginal tax rate)
You pay principal with post tax dollars, so wouldn’t you need 8.5% or more return to compare?
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