How much should I pay to reduce principal? (interest rate, foreclosure, credit card)

[Lucky Seven]

My current mortgage balance is 68,000 and I have $52,000 in the bank. I plan to put $20,000 toward the principal this month. My question is should I apply all of my money in the bank toward my mortgage to reduce the balance to $16,000?

Thank you

[Lacerta]

Do you have other reserves in case of an emergency? If not, then absolutely not. It won't reduce your payment any, just the length of the loan, so if you have an emergency or job loss 6 months from now, and have no available funds, you could wind up going heavily into debt at a high interest rate by charging things on credit cards, or even still wind up losing the house to foreclosure due to inability to pay off that last $16k.

But you might be able to do more than $20k. I would add up your annual living expenses. Then keep at a MINIMUM, at least half that in reserve. A full year in reserve is better. Anything above that could be used to pay off the mortgage, if that is your only debt. Note: If you do have any credit cards, car loans, etc that are a higher interest rate, pay them first.

[stan4]

No. Not if you don't have any other money as an emergency fund.

What about retirement? Is that maxed out? Other debt?

[aneftp]

Like others have stated. Before you pay extra into the principal
1. If W2, you should have at least 6 months of reserves, may 12 months if you are the sole or primary bread winner
If self employed, you should have 12-18 months of reserves

2. Max out your retirement deductions first.
3. Pay off other higher interest debt first (like credit cards, car loans).


If you still have ample cash reserves after that, than consider can you safely invest that $52K into something that can generate more than the 4-6% interest you are paying for the mortgage.