U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Economics
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old Yesterday, 10:51 AM
 
209 posts, read 97,644 times
Reputation: 567

Advertisements

Quote:
Originally Posted by ukrkoz View Post
OP, you live in a country that is run by keeping people in debt. They so much became used to it, by everpresent "it is better to be in debt" tune that they can't think outside that box.
Finally. A voice with reason. Thank you.
Reply With Quote Quick reply to this message

 
Old Yesterday, 03:36 PM
 
590 posts, read 157,070 times
Reputation: 1383
I made extra mortgage payments early only twice. Once was when my first husband and I had a weird mortgage with a fixed rate but payments that started out artificially low, increased 7% for each of the next 4 years, then stayed level til it was paid off in 15 years. At the end of year 1 we owed about $1,000 more than we'd borrowed. I paid an extra $1,000 because it was an immediate tax deduction and it was pure interest.

In 2010 or so, second husband and I refinanced our 15-year mortgage (taken out in 2003), which would have been paid off when I hit 65. I made extra principal payments calculated to STILL get it paid off when I was 65, rather than 7 years later. I ended up retiring in 2014 and backed our payments down to the original amount the bank actually required. We sold the place a year later.

Now I just round up the payment; actual required payment is $690.58 and I round it up to $700. I'm still making more than the 3% mortgage interest rate on my investments over the long run; no need to pay it off early.
Reply With Quote Quick reply to this message
 
Old Yesterday, 03:43 PM
 
Location: USA
16,899 posts, read 16,527,069 times
Reputation: 12854
Quote:
Originally Posted by homelessinseattle View Post
Finally. A voice with reason. Thank you.

Is that why you are homeless in seattle? lol jk


It's not difficult to understand when debt is better. In order to get truly ahead, you have to learn how to make money work for YOU. If the interest rate for a loan is 1.5% then are you better off paying cash or getting a loan and putting that money in a CD that pays 3%? It's simple math.
Reply With Quote Quick reply to this message
 
Old Yesterday, 04:17 PM
 
Location: Phoenix, AZ
1,304 posts, read 519,070 times
Reputation: 3047
Quote:
Originally Posted by oceangaia View Post
That's an impossible question. You can calculate precisely the effect of applying extra payments to the principal on your mortgage but you have no idea what will happen in the stock market. You could double your money or lose it all. Given current bearish market conditions, closer to the latter unless you invest like a genius.

All we can say is that your best "guaranteed" option is to pre-pay the mortgage. That will shorten your loan term and save you lots of interest cost.
The voice of reason.


My house was paid off in 1998 when I was 52. With no mortgage payments I was able to bank a lot of my earnings. In 2002 I paid off my car. With nothing but a few hundred in monthly bills I was able to bank most of my income. I retired when I was 60 and took Social Security when I was 62. Social Security pays all my bills and then some. I have no debts and have close to $400,000 in savings and that was after losing $100,000 in the stock market crash.


The word from here folks is pay off your house as fast as your income will allow, and never refinance. You can lose your ass in the stock market but you don't lose anything by owning your house free and clear.


The added benefit is that you aren't a slave to the vultures at the mortgage companies.


There is only one thing more euphoric than making that last house payment. It's opening your checkbook the next month and realizing that you get to keep that money.
Reply With Quote Quick reply to this message
 
Old Yesterday, 04:19 PM
 
685 posts, read 1,351,690 times
Reputation: 1057
I'm definitely going with putting it towards your mortgage. I'm not sure how many years you have left, but they probably gave you a sheet that told you how much of your monthly payments go towards interest and principle each year that you pay. Typically, some ridiculous amount such as 80% will be going to interest the first year. It tapers during the life of the mortgage, but the bank makes sure it gets a lot of it's money at the beginning.

Below is a good summary of the advantages of each. The Motley Fool definitely seems to advocate investing the extra cash if you have a low interest rate. Me personally, I would still put more money towards the mortgage, even with the chances of making more on the stock market (which will be taxed). Granted, this assumes you are already investing well in your retirement funds, have an emergency fund set aside, and an education fund if you have children.

https://www.fool.com/mortgages/2018/...or-invest.aspx
Reply With Quote Quick reply to this message
 
Old Yesterday, 04:36 PM
 
17,783 posts, read 12,468,525 times
Reputation: 13108
Quote:
Originally Posted by TXRunner View Post
I'm definitely going with putting it towards your mortgage. I'm not sure how many years you have left, but they probably gave you a sheet that told you how much of your monthly payments go towards interest and principle each year that you pay. Typically, some ridiculous amount such as 80% will be going to interest the first year. It tapers during the life of the mortgage, but the bank makes sure it gets a lot of it's money at the beginning.
The bank gets the most money when you owe them the most and the reason your payment contains so much interest is due to the amount borrowed and the length of time.

Quote:
Below is a good summary of the advantages of each. The Motley Fool definitely seems to advocate investing the extra cash if you have a low interest rate. Me personally, I would still put more money towards the mortgage, even with the chances of making more on the stock market (which will be taxed). Granted, this assumes you are already investing well in your retirement funds, have an emergency fund set aside, and an education fund if you have children.

https://www.fool.com/mortgages/2018/...or-invest.aspx
You canít really comment on what will or wonít be taxable in the future
Reply With Quote Quick reply to this message
 
Old Yesterday, 05:41 PM
 
3,651 posts, read 2,084,480 times
Reputation: 8331
Quote:
Originally Posted by inquisitive2 View Post
I'm about 4 years into my mortgage. Am I better off to make some extra payments on my mortgage or invest in some stock?
Are you going to try investing in individual stocks? That can be a nightmare. A mutual fund or s&p fund, ir index fund might be better.

But here is my main question: why not do both?

All to often we get stuck in "All or Nothing " thinking. All extra funds to mortgage or all extra funds to investments.

You will certainly pay it off early and reduce interest outgo if you, say, rounded up your mortgage payment and invested the rest.
If your payment is, say $1125/m, why not round up to an a payment of $1200/month SPECIFYING the extra $75 goes only towards principal, or else they may just apply it to total balance and interest. You can afford to do more, you say? Round up to $1500/m then, and invest the rest.

Or, if you have a 30 year mortgage, figure out what the payment would be for a 15 year, and pay the extra above your payment to principal only, then you will cut your mortgage roughly in half.Got a 15 year? Plan it out fir 10 years instead, and pay extra towards principal to make it happen in 10 years.

We took out a 30 year at ages 52 and 56. Wed be 82and 86 before wed pay it off on regular payment plan. Now we are target for early payoff by extra payments

Run some numbers. Real estate can be paid forcearly but also lose value in a housing bubble burst again. So can losing money in individual stocks or even funds.
At least paid off early you have a place to call home payment of only taxes and hoa fees if any. No one can take away a paid for home ( unless you fail to pay taxes, insurance and a disaster happens. or the like)
You CAN lose a your money in a stock market though.

I'd do both if i were you ( which im not), pay extra to mortgage and invest, perhaps safely, the rest.
But thats my opinion, im not in your shoes and i dont know what will help you sleep better.

Best of luck in your decision....

Reply With Quote Quick reply to this message
 
Old Yesterday, 07:16 PM
 
209 posts, read 97,644 times
Reputation: 567
Quote:
Originally Posted by bmw335xi View Post
Is that why you are homeless in seattle? lol jk


It's not difficult to understand when debt is better. In order to get truly ahead, you have to learn how to make money work for YOU. If the interest rate for a loan is 1.5% then are you better off paying cash or getting a loan and putting that money in a CD that pays 3%? It's simple math.
OMG thank you. I'm going to run out and buy a new car on credit that will depreciate immediately. Then invest the cash in a CD and score big time.
Reply With Quote Quick reply to this message
 
Old Yesterday, 07:21 PM
 
65,856 posts, read 67,167,185 times
Reputation: 44114
zero percent auto loans were a no brainier for a long time . took 2 .
Reply With Quote Quick reply to this message
 
Old Yesterday, 07:30 PM
 
Location: USA
16,899 posts, read 16,527,069 times
Reputation: 12854
Quote:
Originally Posted by homelessinseattle View Post
OMG thank you. I'm going to run out and buy a new car on credit that will depreciate immediately. Then invest the cash in a CD and score big time.
So if you want to buy a car for $50,000 and have the option to get a loan for 1.5% no fees, no prepayment penalty, youíd rather pay cash then put that money in a CD at 3%?

Do you not have any credit cards too? I use credit cards for all purchases that donít have a fee. I pay no annual fee and get 2% cash back.

Itís all about self control and making your money work for you homeless in seattle.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top