Comments on: Increase Mortgage Payments Above Minimum

By: Debrajoy

Debrajoy — Tue, 02 Dec 2008 03:22:35 +0000

We love our home and don’t plan to sell. I see it like this: When I get a good deal (my home at a good price) the idea that i will pay more than twice the price of the home, with THIRTY YEARS of accrued interest — it just rubs me wrong. So we are trying to pay off our home, by paying down, up to $200 each month, as we are able, directly to the principal. (But we are flexible — the past 6 months, we have not done this.) Similarly, when we bought our washer and dryer at SEARS at an exceptional good price, I feel proud of myself that after doing all the necessary research beforehand, I got that front loader for 50% OFF — if I keep that on my SEARS credit card with all that accrued interest for many months — I have essentially cancelled out my “good deal”. So unless i have something essential to spend it on, i would just as soon pay off my house in a shorter time thereby keeping the total “PRICE” of my home down.

By: Scott

Scott — Thu, 12 Apr 2007 17:53:04 +0000

I too don’t understand the point of paying money into a house. When you pay money into a house, that money just sits there as if it were under mattress. It doesn’t grow, it just sits there locked in as equity until you sell.

If you do an interest only loan and put the rest of your money into investments like well diversified mutual funds or even high yield CD’s, savings, you’ll come out ahead. But, you do have to have the discipline to actually save that money and not spend it, and you have to be decent at managing money and investing, in which case this strategy wouldn’t work for everyone.

By: jim

jim — Tue, 10 Apr 2007 19:22:26 +0000

Unfortunately I don’t think the line is drawn that clearly because he’s not throwing every last dollar he has into the debt, just a what he can handle for his financial situation.

By: plonkee

plonkee — Tue, 10 Apr 2007 17:12:09 +0000

To me, 30 years seems like forever. I won’t really see the results of paying the mortgage off early at this stage even taking a couple of years off the end of the mortgage isn’t sufficient incentive.

Also, I can get a better return on investment just by saving extra money in a savings account. 6.5% interest on savings, compared 5.48% interest on mortgage. The mortgage interest is not tax deductible and the savings interest is tax-free (different tax regime).

Watching a pile of savings grow out of practically nothing really motivates me. So for me this is a no-brainer, it works strictly on the figures, and it suits me psychologically as well.

By: JimmyInGreatLakes

JimmyInGreatLakes — Tue, 10 Apr 2007 12:08:33 +0000

Like anything else, I like to diversify in this area. While I pay a little extra into our house each month, I don’t put in everything I could. It used to be I’d pay $100/extra per month but that’s forfeited for the entire time I own the house (which I plan a long time) so I cut that down to about $30/extra now and put the other money into auto-invest in other funds. I earn a certain 5% return on the extra house payment. The funds are volitale but lately have been coming out way ahead so, for now, I’m glad I scaled down my mortgage pre-pay amount.

By: bctips

bctips — Tue, 10 Apr 2007 05:17:44 +0000

BTW I was assuming 3% annual inflation.

By: bctips

bctips — Tue, 10 Apr 2007 05:16:51 +0000

I’m paying a little extra per month but I want to save up for other expenses. If I had nothing on the horizon I’d probably pay as much as I could toward the mortgage debt.

Another thing to consider: Dollars are worth less every day. A fixed-rate mortgage is one place where inflation actually works in your favor! Paying off the debt is very good, don’t get me wrong. But that fixed payment of $1,798.65 is worth $1,744.69 in today’s dollars next year. In year 30 it would be worth $721! You miss out on the inflation if you pay off early.

I expect nothing but inflation in this country until the sun falls to earth.

By: kurt

kurt — Mon, 09 Apr 2007 23:53:09 +0000

Blaine,
Given the choice, would you prefer to have no debt, and no assets, or $11 in assets and $10 in debt. Not saying that there is a right and a wrong answer (I think this is a derivative of a risk tolerance question).

By: Blaine Moore (First Time Home Owner)

Blaine Moore (First Time Home Owner) — Mon, 09 Apr 2007 20:37:01 +0000

I’d rather not have the debt hanging over my head.

Not counting the extra grand I throw at it from bonuses and such, my average extra monthly contribution gets me paid off w/$80k less in interest and paying it off 10 years early. My goal is to pay it off in 12-15 years, but I figure at our current rate it will probably be about 18 years.

Of course, once my wife gets out of school and starts working, we’ll be able to accelerate things more than the extra $200/mo.

By: dong

dong — Mon, 09 Apr 2007 20:14:20 +0000

I think the main reason to pay down your mortgage is psychological. There are lots of people who like to own their house free and clear. I’m not one of them myself. Like many people who has gotten a loan in the last couple years, I can beat my after tax rate on my loan with other investments.

By: kurt

kurt — Mon, 09 Apr 2007 19:36:08 +0000

So few people actually have mortgages with rates they couldn’t beat elsewhere (accounting for the interest tax deduction) I find it hard to believe this is truly in anyone’s best interest, assuming they have the fortitude to invest the incremental $50 a month.