Why you shouldn’t pay down your mortgage faster

7 comments:

• loaning cash posted at 1:40 am on Tue, Sep 4, 2012.

  Posts: 3

  Paying of mortage is the most popular quiestion now. You have to have a really well-paid job to afford it. SO maybe we should better start from basics of this question. I am not saying that reducing mortage rate isn't important. I wish it was as easy as getting cash loan online , but probably it'll only happen in future

  • Link

   

• remo303 posted at 10:04 am on Sun, Sep 2, 2012.

  Posts: 63

  Hmmm....let's think about this:

  Pay off mortgage, leaving an extra $1000-1500 each month to then pay off other debts, which will then free up an additional $1000 or so to then combine with the (now extinct) mortgage payment for solid and suitable investment for retirement.

  Or...

  Listen to people in the banking industry tell you "what is best for you."

  What was the question again?

  • Link

   

• wdgnas posted at 6:22 am on Sat, Sep 1, 2012.

  Posts: 549

  You could take the money you borrowed at 3 percent and try to reinvest it in a way that earns more than that. If you have time to ride out ups and downs of the market, 3 percent should be relatively easy to beat.
  if the reinvestment fails your money ends up where? why money heaven of course.
  show me a guaranteed 5 % over 15 years. better yet, guarantee me 5% over 15 years. not going to happen.

  • Link

   

• Ron S posted at 8:19 pm on Fri, Aug 31, 2012.

  Posts: 4

  This is a really interesting subject. Although a number of points above are certainly valid, there are a couple of caveats. I often listen to Dave Ramsey, an anti-debt guru who has a nightly radio call-in program, and this question comes up almost every night. It is true that high-interest and/or smaller debts should normally be paid off first, so that that freed-up money can then be applied to larger amounts. But, as touched on above, some people have enough cash to pay off or pay down their mortgage, but wonder if it's a better idea to invest that money in potentially risky but also potentially higher yield devices. The way to answer that question is this: If your house was paid off completely, would you go and take out a new loan against that house to invest in the stock market or some other endeavor where you might lose that money if things go south? Most will answer no to that question, but you are doing exactly that if you invest instead of paying off the loan. The other point is one of taxes. Think about how much interest you pay vs. what you get back in April. Let's say you pay the bank $10K in interest, are able to deduct it all at the end of the year. If you're in a middling tax bracket, you'll get back maybe $2500. Where did the other $7500 go? It went to put the banker's kid through college or buy them that bass boat. Wouldn't it make more sense to just pay the extra $2500 but keep the $7500 in your own pocket, to maybe put your own kid through college? Finally there is the emotional aspect, and the long-term repercussions of that reduced debt. I paid off my first house ~20 years ago. It was a feeling like no other, and by having the discipline to do that then I have not had a mortgage since, 3 houses later. It gives you a freedom that the person paying $1500/month simply does not have. If you can do it, then do it--you won't regret it. As Dave says, "Live like no one else now, so you can live like NO ONE ELSE later."

  • Link

   

• mwmike posted at 9:59 am on Fri, Aug 31, 2012.

  Posts: 91

  We've been over that Bush/Republican cliff already. The American people will never make that mistake again.

  • Link

   

• clotheshog posted at 9:13 am on Fri, Aug 31, 2012.

  Posts: 3

  and if R & R get elected, there will be no mortgage deduction....
  

  • Link

   

• chatmandu002 posted at 9:03 am on Fri, Aug 31, 2012.

  Posts: 1051

  Pay all debts down as fast as possible. If re-elected the president is taking us over the cliff then it's already too late.

  • Link