Quote:
Originally Posted by JinCO
My wife and I have a considerable debt load in the form of our home mortgages and student loans. Our focus in the past couple of years has been to reduce the interest rates where possible through consolidation or new loans and attempt to pay off as much debt as we can as quickly as we can afford to.
Our current debt load is:
Primary Mortgage: $405K @6.25%
Home Equity LOC: $70K @ 4.49% (tied to prime so will rise as prime increases)
My student Loan: $35K @ 4.12%
Wife's student Loan: $90K @ 3%
We are currently paying down each of these line items faster than we are required to. The issue with this approach is that we do not have anything left over to invest except for our 401K accounts. We both max our 401Ks at $15.5K per year. I receive a 7% employer match and my wife receives a 4% match.
I am trying to figure out at what point it makes sense to switch some of the money we are paying on our debt to investments. We are currently paying about $20K more than we need to on our debt items. Should we reduce some of the amounts we are paying on our debt items and purchase stocks or other investments?
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I would look at the following- with current 20k extra payments, when will each debt be paid off?
If all 20k extra was applied to one loan (student loans is where I would look first), how soon would it pay thay loan off?
More than likely you will see some trends:
sending all 20k to one loan is better than sending 5k to 4 different loans.
investing a portion of the 20k will probably come out ahead (net worth wise) than paying down the debt.
you need to track this based on the date you would have zero debt, the tax writeoffs the various loans offer you, and how much risk you want to take.