From a financial perspective, it's usually best to invest your money rather than funneling extra cash toward paying your mortgage off faster. ... There are many reasons why you might choose either to pay your mortgage early or invest more.
It might make sense, for example, to put the money into paying off your mortgage early if you struggle with keeping money in the bank. Your home can be a forced-savings tool, and making extra mortgage payments can save you thousands of dollars in interest over time, plus help you build equity in your home faster.
Ramsey is averse to debt of any kind and believes you should pay off your mortgage as fast as you can. In fact, he recommends that people only take out a 15-year mortgage that is no more than ¼ of their take-home pay.
1. There's a big opportunity cost to paying off your mortgage early. ... Another opportunity cost is losing the chance to invest in the stock market. If you put all your extra cash toward a mortgage payoff, you're losing the chance to earn higher returns and benefit from compound growth by investing in the stock market.
The biggest drawback of paying off your mortgage is reducing your liquidity. It is far easier to get money out of an investment or bank account than it is to get money from the equity you've built in your home.
Adding Extra Each Month
Just paying an additional $100 per month towards the principal of the mortgage reduces the number of months of the payments. A 30 year mortgage (360 months) can be reduced to about 24 years (279 months) – this represents a savings of 6 years!
The additional amount will reduce the principal on your mortgage, as well as the total amount of interest you will pay, and the number of payments. The extra payments will allow you to pay off your remaining loan balance 3 years earlier.
Pay off other debts
If you've finally paid off your mortgage debt, keep that trend going by applying your monthly mortgage payment to other debts. Start with high-interest debts, such as any unpaid credit card balances.
Making an extra mortgage payment each year could reduce the term of your loan significantly. The most budget-friendly way to do this is to pay 1/12 extra each month. For example, by paying $975 each month on a $900 mortgage payment, you'll have paid the equivalent of an extra payment by the end of the year.
Yes! There's no such thing as “good debt.” Pay off your mortgage as soon as you can, get a guaranteed return on your money equal to your mortgage interest rate. It's the only sensible thing to do. ... With mortgage rates so low, you should be investing any extra money at a higher interest rate.
The answer to that question won't make it clear whether you should pay off the mortgage. Even those that plan to move in a few years might be wise to retire the mortgage now. ... Depending on your total financial picture, that may suggest using the inheritance to pay off the mortgage.
The fastest ways to pay off your mortgage may include a combination of the following tactics:
Yet No Comments