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We did that about 6 yrs ago, with a lump sum, instead of investing the extra cash in the market. We're so glad we did. It's very comforting in this econimic times to know that it is all ours. Plus, it enabled us to save so much money since than, and has given us lots of choices. People think that having a mortgage for 30 yrs is a good debt, but don't realize how much more than the purchase price they end up paying in those 30 yrs. In the long run, its the banks that benefit the most.
There are so many good (and some few bad) comments.
Everyone forgot to mention a very important asset: human capital.
Is your human capital positively correlated with the market? If so, then investing in the market instead of paying off a fixed rate loan makes your portfolio riskier. In gambling term, you are doubling up. In this case, you are better off paying off the loan to hedge against your human capital.
On the other hand, if your human capital is negatively correlated (which is not common), then you have more incentive than otherwise to keep the loan and bet on the market. Don't get me wrong. I'm not suggesting you should bet everything on the stock market.
We did that about 6 yrs ago, with a lump sum, instead of investing the extra cash in the market. We're so glad we did. It's very comforting in this econimic times to know that it is all ours. Plus, it enabled us to save so much money since than, and has given us lots of choices. People think that having a mortgage for 30 yrs is a good debt, but don't realize how much more than the purchase price they end up paying in those 30 yrs. In the long run, its the banks that benefit the most.
I agree. Don't be confused by every theory everyone has to offer. Go look at the results people gets. Most people struggle to retire, you only have to read around on the forum to see that. See what they are doing and don't do that. You might win sometimes by investing in the market, but like a lot of people who lost their homes will tell you, you don't always win. Paying back your mortgage is a very good and sure investment that isn't risky at all.
I don't trust the "conventional wisdom" of the finance industry. They make money when they sell you an investment and they make money when the sell you a mortgage. Of course they want to do both! My question is this:
If it is so easy to borrow money at 4% and invest it and earn 8% in the market, then why is the bank lending the money so cheaply-they could be earning the 8%! Instead they are lending to me at 4%? Why? It's becuase this 8% number is a myth created by Wall st.
Sure is now.
When I was in RN school 30 years ago, an older male student borrowed the max allowed for the two years, about $10K. He put it in money markets for the two years of deferments, and got 14 percent (while the rest of the world was cursing the government for high interest rates. He worked every weekend, paid off the loans when we finished school, and went on his frugal and merry way.
I'd rather pay off my 4 percent mortgage in this environment than try to make a few bucks... where? More equity is always good. The house goes down in value, you have more equity if you need or want to sell. If you don't sell, you have no mortgage payment, and are in a better position to save money or make some if an opportunity comes up.
Especially in the environment where values have gone down (and might go down more) it seems the safest thing to do is to have the max equity for whatever plans you might have.
Pay it off.
We're just paying an extra $1000 a month (our monthly bill is $2117 - so we send $3117) and that knocks off 15 years and over $220,000 off our INTEREST.
Do the math yourself on a mortgage calculator if you need convincing. It's sick.
I wish more people would realise what you have Stan4. You can save so much on interest by paying extra. And it is a sure way, no gambling involved like on the stock markets where you sometimes gain a lot and then loose more. Keep it up.
the problem is most folks wont invest the money they would have used to pay off the mortgage, it just ends up getting spent
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