it is better to pay off a mortgage sooner?

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enough money to pay my loan 150K (5.2% for 14 years)

  1. Reply
    January 27, 2011 at 5:15 pm

    Yes you should pay it off, it is better to own your house than to let the bank keep owning it. The longer you wait the more interest you pay and the more it costs in the end.

  2. Reply
    Billy Cunningham
    January 27, 2011 at 5:29 pm

    chances are that over 50% of you rmoney will be going to the principal. being there is only 14 years left. and 5.2% is really good rate.

    what if you need the money someday??? wil the bank loan it back to you at 5.2%??? i don’t think so!!!

    However there is NOTHING wrong with paying off your mortgage early, “i mean you will be debt free you know.
    that might not be a bad thing to do either.

  3. Reply
    Chris C
    January 27, 2011 at 6:28 pm

    ABSOLUTELY! The sooner you pay it off the less interest you pay! Get a mortgage calculator, and play with the numbers….start with a a 40 year ammortization, then try a 20 year amortization, then try a 10 year ammortization, then try 1 year to see roughly how much you’d save by paying it off now. You can find calulators that compare situations as well…take a look at the amount of interest saved and you’ll be VERY suprised! You will save litterally 10s of thousands if not hundreds of thousands of dollars if you outright pay it out now as opposed to 14 years.

    Pay it off now, then you have the equity. Use the equity to invest and you’re off to the races!

  4. Reply
    January 27, 2011 at 6:31 pm

    Yea, it’s always good to pay off your payments if you are financially able to. The interest can end up costing a lot. I would make sure to put aside a significant amount of money first, though, just in case you need it for something.

  5. Reply
    Y!A 4ever
    January 27, 2011 at 6:37 pm

    Yes the faster you pay your mortgage off the better. Especially in these trying times. You never know what will happen in the future. What if we have a terrible recession, worse than this one, you lose your job etc… The faster you pay if off, the better your life will be. You’ll be debt free, more money in your account and financial freedom 🙂

  6. Reply
    January 27, 2011 at 7:08 pm

    Hi Dave! The answer depends on what you’d do with that money if you didn’t pay off your mortgage and if you can get a better “deal” with other investments. To figure that out, we have to do a little math. To calculate what rate of return you’d need to earn in another investment to make it a better deal than paying off your mortgage early, here’s the formula:

    Mortgage Rate / (1 – Your Marginal Tax Rate)

    If you pay 5.2% on your mortgage and your tax rate is, say, 30%, then the rate you’d have to earn on another investment to make it a better deal than putting that money toward paying off your mortgage early is 7.43%.

    If you can find an investment – perhaps a mutual fund – that will earn you at least 7.43% or better, consider investing those funds rather than paying off your mortgage early to make the most of your money. It’s a bit more complex depending on your income level, but this should give you a basic idea of how to compare apples to apples. If you have a weak stomach for investing, there still may be better uses for your money, like your retirement fund.

    Of course, you can’t put a price tag on peace of mind. So if paying off your mortgage would give you that and that’s more important than the best return on your money, then go ahead and pay it off. Just make sure you have other money socked away in case of an emergency.

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