Pay extra on mortgage or no?

[gregintenn]

I paid mine off. Broke people and lenders will tell you to keep debt. I have no debt, and I'm not broke. I don't care what the housing market or the stock market does. Money is no longer a concern for me. It's a good feeling.

[R1100R]

Same here. We paid our mortgage off in 9 years and are at zero debt. Great feeling.

[enfield]

Free advice is worth what you pay for it.  Including mine.

 

Live long and prosper . . . .

[runco]

I have followed the Dave Ramsey financial model since the early 1990s.  Not rich, but we are sure not broke either, and I do have some disposable income for my hobby.  No short term debt, no auto debt, and no mortgage debt first!  Then invest, invest away.  Personal wealth is best measured without any IOU! 

 

Don't give in to impatience, and pass on the BMW until all things are paid for. 

Edited February 14, 2016 by runco

[2.ooohhh]

I should add that we currently live off my income and save 100% of my wife's income so it's not like we are not putting money aside.

 

I'd like to start by saying congrats! Learning to live within your means is seemingly harder than many people realize these days. If that is indeed the case I would put your surplus earnings towards the home loan. When I was younger some people always told me I "had to have good credit", keep a credit card, or a car note, ect. I NEVER bought a car I couldn't pay cash for, and never kept a credit card other than a small expense card for one of my jobs. When I was house shopping the market was in full collapse. Many banks wouldn't let me get past that I wanted to purchase my first home before hanging up or stating that they couldn't help me. When I finally found a friend who could help me apply for a mortgage he was worried I would have a bad rate or that a bank wouldn't take me since I had no credit history. He said it was slim to none that I would get approved for a loan just looking at my lack of a credit report, but you're the client so lets at least give it a try. As we filled out the application for my mortgage he got to the questions pertaining to the down payment. He had in his notes from his secretary that did my pre-interview over the phone that I had "50k to put down". He started saying that with the "min. down payment" I would need to pay for PMI insurance ect. and I said hold on, she's got that wrong I have 50% down. His ears perked up and he revised a few things on the app and said I think you may have a chance. We faxed it in and I went home to wait. Needless to say I was approved and at a very acceptable rate, but I believe I wouldn't have gotten there at that age had I had a car payment, or other debt holding me back.

 

I've just actually completed my first mortgage last week for a friend. Investment wise nothing I've found is more rewarding than helping a friend purchase land to build on or a home. Just make sure you do it all with money you can invest(won't put you in jeopardy should you lose it all) and through a reputable attorney to register it properly with the county and such to CYA.

Edited February 14, 2016 by 2.ooohhh

[btq96r]

Do you think this is your last house? There is probably a difference in this formula if you think you may move, or just need a bigger house in 5-15 years.

[USMC8672]

The only thing I can add is you should look at the numbers. If you put the money in a reg savings account, it will earn less than 1%. Your mortgage is probally around 4%. That's a big difference.

 

As some of the others said, no short term debt,no long term debt and the house.

 

I personally put extra on my house every month and have no short term debt. Bust butt and you will be surprised at how much you can kill in 10 years. Just make sure it goes toward principle.

[Omega]

I never understood when folks say to pay off higher interest first and include the home in that reasoning.  I say  look at your loans in an amortization table and find the highest interest in $$ not percentages and pay those down first.  Doing this, most will find that the home is where you pay the most interest, in $$.  A simple example: 5% interest on a $150k loan is $7,500,  8% interest on a $50,000 loan is only $4,000.  That's $3,500 savings in one year.  This of course is just a simple example, not quite how an amortization table will do but it gets the idea accross.

 

As for money in the bank, not a good idea; best to put it in a Roth IRA or into Investment Funds so you have access to it, with no penalties, in an emergency.  401k, no brainer, always put in at a minimum the amount that your employer will match; it's free money.  

[Erik88]

Solid advice all around. You guys have me rethinking our strategy. If we pay off both vehicles that's an additional $700 month we could put toward the mortgage. My wife car will be paid off in 10 months anyways.

 

I appreciate the responses.

[gregintenn]

...and don't borrow any more! Save up and pay cash.

[Erik88]

...and don't borrow any more! Save up and pay cash.

 

 

Trust me, that is the goal! It's been a challenge to put money away each month with me being the sole provider. Now that she is working that will change.

[runco]

One suggestion I didn't see, sell your guns at half value, and let me have first dibs. 

[Sam1]

One suggestion I didn't see, sell your guns at half value, and let me have first dibs. 

 

I'll give you half-value + a TGO coffee mug.

[56FordGuy]

I'll give you half-value + a TGO coffee mug.

There are coffee mugs?

[nightrunner]

There are coffee mugs?

I was thinking the same thing. I've never seen any. Closest is the tumblers coming soon...

[Caster]

Debt free living is the only life to live.

Cash is king
Debt blows goats

[ReeferMac]

The question is a little tough to answer, as it's predicated on your belief about the short-term future market direction.

Of course that can't be known, however from a technical perspective, the markets are not healthy, to say the least. We're looking at a short-term bounce for a little spell here, but I'd advise lightening the portfolio and moving into more protective asset classes.

As to the mortgage, I've had a couple... the most recent one we opted for a bi-weekly mortgage. Half the monthly nut every 2 weeks, however due to the calendar, you end up putting down 26 half-payments vs. 12 full one's.... and if you're quick on the math, you'll see you're making 1-full month's extra payment. Some people kick part of their tax return over annually and accomplish the same thing. However having studied my amoritization tables until numb, you DO chip a little off the principle every 2-weeks, which compounded over time, reduces the interest total paid on the loan. If it fit my pay-schedule, I'd opt for a bi-weekly mortgage again any time. It did make a difference in the principle IMO.

[Erik88]

The question is a little tough to answer, as it's predicated on your belief about the short-term future market direction.

Of course that can't be known, however from a technical perspective, the markets are not healthy, to say the least. We're looking at a short-term bounce for a little spell here, but I'd advise lightening the portfolio and moving into more protective asset classes.

As to the mortgage, I've had a couple... the most recent one we opted for a bi-weekly mortgage. Half the monthly nut every 2 weeks, however due to the calendar, you end up putting down 26 half-payments vs. 12 full one's.... and if you're quick on the math, you'll see you're making 1-full month's extra payment. Some people kick part of their tax return over annually and accomplish the same thing. However having studied my amoritization tables until numb, you DO chip a little off the principle every 2-weeks, which compounded over time, reduces the interest total paid on the loan. If it fit my pay-schedule, I'd opt for a bi-weekly mortgage again any time. It did make a difference in the principle IMO.

 

This is good advice that a lot of people don't think of. I did this on my last house in Florida. Had we kept the house a full 30 years it would have shaved 7 years off the life of the loan and saved us over $15,000 in interest. I actually called CHASE last week to do that with my current mortgage but they don't offer biweekly payments.

 

Good post though.

[Omega]

This is good advice that a lot of people don't think of. I did this on my last house in Florida. Had we kept the house a full 30 years it would have shaved 7 years off the life of the loan and saved us over $15,000 in interest. I actually called CHASE last week to do that with my current mortgage but they don't offer biweekly payments.

 

Good post though.

You could do the same thing by paying extra every month.  If you spread a payment or more across your 12 regular payments, you shave off quite a bit of interest because all extra goes to principal.

[Sam1]

There are coffee mugs?

 

No, but if his guns are half price I get some made :P

[Erik88]

You could do the same thing by paying extra every month.  If you spread a payment or more across your 12 regular payments, you shave off quite a bit of interest because all extra goes to principal.

 

Oh I know. I think I'll take the advice listed here and pay off the vehicles first. I mentioned this to my wife and naturally she claimed that she actually came up with this idea a while back but I didn't listen to her....Knowing how bad I am at listening she's probably telling the truth.. :whistle: 

[Tedro2022]

I was thinking the same thing. I've never seen any. Closest is the tumblers coming soon...

Wrong thread, I know, but what's up with the tumblers, anybody know?

Anywho, back to the topic at hand, I'd pay the extra toward the principle of the home loan every month if you can afford it. Whether it's going to be your retirement home or not doesn't matter, you either pay it off quicker or have more principle in it if you decide to sell before you retire. Win/win to me.

If you have the extra cash, save up a down payment for a large track of land that could be used as an investment property. A good real estate agent will be able to turn you on to this.

There are plenty of other things you can do to invest the rest of it, start a business, invest in gold, silver or other precious metals, or start stock piling goods for that rainy day. Bullets, beans & band aids right? While on that note, invest in yourselves. Training is the easiest way to better yourself. Learn everything you can from shooting classes, medical classes, etc. never stop bettering yourself and your mind.

Just my .02, take it for what it's worth.


Sent from my iPad using Tapatalk

[ReeferMac]

You could do the same thing by paying extra every month.  If you spread a payment or more across your 12 regular payments, you shave off quite a bit of interest because all extra goes to principal.

 

Yes and no... While true, adding extra to your monthly payment does reduce the principle....

The Bi-weekly payment schedule reduces the balance by 50% of the monthly principle payment 14-days earlier than sending in extra at the end of the month. While not huge (maybe a couple hundred bucks for most people?), you're not paying interest on that portion of the principle for 14 days, that you would be if you were just paying extra on a monthly mortgage. It's getting the principle off quicker, that reduces the interest payment over time more greatly, than simply whacking extra on the tab? The bi-weekly schedule puts the payments on the principle faster, and more frequently, so the interest will be reduced... One reason some banks don't offer it! I had to shop around.

Edited February 15, 2016 by ReeferMac

[45guy]

What we did.

Paid off the lowest payment first.
Added that money to the next lowest payment until it was paid off.
Added that to the next and so forth.

It was not long before all we had left was the house. The key is to not add any more dept during this process.

Doing it this way we were living off the same money. A earlier post was correct. 1 extra payment a year on a 30 year mortgage will save you 13 years worth of interest. If your house payment is $500 a month that would save you $78,000 worth of interest. Once you have your house paid for you can get a home equity line of credit for emergencies. We also have a car savings account so each month we put what would be a car payment in that account. When it is time to buy a car that is what we use. We have not had a car payment in 25 years.

[10-Ring]

Forget paying extra on the mortgage.  Get some 24" spinners for that Tundra!