Mortgage situation – 15 years fixed, so prepayment, or 30 a. approved the extra money to put aside?

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We can not allow a larger lump sum and pay off your mortgage with a loan of 15-year fixed rate. Is it reasonable to build equity in our home where we do not intend to move or go for a fixed period of 30 years and use the difference is about $ 1 000 monthly payments to invest? And what investments are recommended?

  1. Reply
    May 16, 2011 at 5:48 am

    2 trains of thought here. I know people that do both and neither are wrong.

    1st one will go for a 30 year at a very low fixed rate and use that money to invest. They know that interest on the home is taxed deductable so they put that into the equation. So a 6% 30 year fixed is really maybe around 4% after the rebate assuming you pay taxes.

    2nd will pay off their house as quickly as possible and put their earnings into their home thinking or hoping it will appreciate.

    Pros and cons. Number 1 option you could be wrong in your investment. But you could build a nice equity using that money to invest. Number 2. You are losing out on possible equity and the tax advantage, but you are buying security.

    It depends on what type of investor you are, there are risks either way.

    Good Luck

  2. Reply
    May 16, 2011 at 6:08 am

    Well, lower interest is always better. Then I’d pay more than your payment. Even if it is $ 25 a month more you can knock off several years from your mortgage. Or some people make one additional payment a year. I’d get the 30-yr fixed and pay $ 500 more on principle and invest the other $ 500. There are several ways to pay off your 30-yr fixed sooner. Just make sure you don’t over commit yourself to something that is going to leave you too tight and eventually not be able to pay. Plus make a plan so you can keep focused on paying it off. K? Hope this helps.

  3. Reply
    Caleb Q
    May 16, 2011 at 6:47 am

    Since you have no plans on moving, you might just want to get the 30 year fixed rate. But then again, the faster you get out of debt the better right? This is totally you decision on which road to take. You might want to read up on home loan loan refinance before you decide. Here’s a good read:

  4. Reply
    Deo Vindice
    May 16, 2011 at 7:36 am

    Take the 30 yr and invest the rest. Compounding interest is a beautiful thing. That’s $ 180,000 invested over the first 15 years.

    Watch it grow…..

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