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Thanks for the helpful responses so far, everyone. To answer the earlier question, at 3 and 2/3 percent, the interest rate isn't that high at all. A few other points to clarify:
The timing isn't an all or nothing approach. For every $1,000 either invested or paying down the mortgage in a year, $300.00 may be paying down the mortgage (to give a hedge against volatility and the possibility of buying stocks that are high price plus work to remove debt), and of the remaining $700.00, about half would be invested faithfully each month on the exact same date each month, and the other half would be invested at a time during that year when it appears the market is in a dip (which may have some risks but it's not saving a fortune and then dropping it all in the market when things look like a good buy but could fall).
That's what the rough proportions of each approach would be which is essentially 30 percent mortgage paydown/35 percent dollar cost average/35 percent "conservative" market timing.
It essentially goes from guaranteed earnings (albeit at a low interest rate), to moderate risk (dollar cost averaging on autopilot), to being a little more risky by trying to buy at a bargain on the dips but not going crazy with that concept by putting lots of capital on the line by doing that.
Thanks for the helpful responses so far, everyone. To answer the earlier question, at 3 and 2/3 percent, the interest rate isn't that high at all. A few other points to clarify:
The timing isn't an all or nothing approach. For every $1,000 either invested or paying down the mortgage in a year, $300.00 may be paying down the mortgage (to give a hedge against volatility and the possibility of buying stocks that are high price plus work to remove debt), and of the remaining $700.00, about half would be invested faithfully each month on the exact same date each month, and the other half would be invested at a time during that year when it appears the market is in a dip (which may have some risks but it's not saving a fortune and then dropping it all in the market when things look like a good buy but could fall).
That's what the rough proportions of each approach would be which is essentially 30 percent mortgage paydown/35 percent dollar cost average/35 percent "conservative" market timing.
It essentially goes from guaranteed earnings (albeit at a low interest rate), to moderate risk (dollar cost averaging on autopilot), to being a little more risky by trying to buy at a bargain on the dips but not going crazy with that concept by putting lots of capital on the line by doing that.
Too complicated for this old brain, but if that works for you, go for it. Personally, I like simplicity. When I had a mortgage, I had a set dollar amount that went to principal only on my mortgage and a set amount that went to investments. It happened every month without fail. I never had to think about it. That plan served me well, and I'd say I have done better than most. At some point, I just decided to pay the damn thing off.
i got better things to do than to try to squeeze every possible dollar out of the stock market. As long as I have enough to satisfy my needs I'm good.
If you're going to pay extra on a mortgage, DO IT EARLY.
The amortization schedule causes the highest amount of interest on the first payment then slowly reverses the amount applied to principle. You accrue more equity in the later stages of the loan. The effect is much like a sliding rate on the note. Your APR is merely an average over the term.
If you get this concept you'll make better decisions concerning mortgage payments vs. stock investments.
If you're going to pay extra on a mortgage, DO IT EARLY.
The amortization schedule causes the highest amount of interest on the first payment then slowly reverses the amount applied to principle. You accrue more equity in the later stages of the loan. The effect is much like a sliding rate on the note. Your APR is merely an average over the term.
If you get this concept you'll make better decisions concerning mortgage payments vs. stock investments.
You idea is incorrect on the interest. The interest rate always applies to the outstanding principle so even the last payment on a 4% 30 year mortgage is carrying the same rate. Your first payment is 4% interest and so is the last
You idea is incorrect on the interest. The interest rate always applies to the outstanding principle so even the last payment on a 4% 30 year mortgage is carrying the same rate. Your first payment is 4% interest and so is the last
I think he meant the actual dollar amount is reduced, not that the interest rate changes or is reduced. A 4% loan is always 4%, but early payments in the life of the loan will reduce the total amount of interest paid. This is correct isn't it?
I think he meant the actual dollar amount is reduced, not that the interest rate changes or is reduced. A 4% loan is always 4%, but early payments in the life of the loan will reduce the total amount of interest paid. This is correct isn't it?
Any payment to princ on any simple interst loan will reduce the total interest paid. Thats clearly not the poster's point as they discuss the proportion of payment to interest/princ, there's no sliding rate of the note
You idea is incorrect on the interest. The interest rate always applies to the outstanding principle so even the last payment on a 4% 30 year mortgage is carrying the same rate. Your first payment is 4% interest and so is the last
Your math is correct, but the EFFECT will shave the amount of interest paid.
Rereading your last post, even carefully as though I didn't understand it the first time changes nothing that I said
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