extra principal payments? (mortgage)

[greenskeeper]

How many of us make extra principal payments every month to OWN our home sooner?

[twest]

We pay extra on our mortgage. We paid extra on our first mortgage and paid off the house in 4 years so we are firm believers in paying extra on any debt we have. Interested to see what others are doing.

[disneysteve]

I voted yes, because I do, but if the question is 'should you?', the answer is really - it depends. For the average person, I'd say no because the average person doesn't have all of their other financial needs in order - emergency fund, retirement savings, college savings, other debt repaid, etc. I think all of that stuff should be taken care of before putting extra toward the mortgage.

[maat55]

I'm currently doing a refi. My payment will drop 133.00 per month on a 15 year note. Had I refied to a 10 year note my payment would have been 1054.00(303.00 difference). I'm going to take that 303 and invest it, then payoff my house whenever this investment will payoff the house, which I hope will be sooner than ten years.

[photo]

When we had a mortgage, we did, and it saved us thousands of dollars. It's been about a decade since the mortgage was paid off, so I don't remember the precise figures, but we had the mortgage for about 8 years, I think.

[MonkeyMama]

I currently am, but certainly have not always. (Pretty much never, the first 12 years). Paying off a mortgage ASAP is great, but I have had other priorities (financial and otherwise).

Our goal has always been to be mortgage-free by age 45. (Well, that's the plan since having kids and cutting our income in half). Is very likely we can beat this goal if my spouse re-enters the workforce. Then, we'd probably just pay it off in a few years and be done. I suppose I believe in hitting it hard if it can be done fast, but not so smart if it still takes decades (which is where we are at on one income).

[GREENBACK]

I don't and won't as long as I can borrow at 4%. If the interest rate was higher I likely would pay extra.

[Frugal]

If we had enough to make any extra payments right now, I most certainly would! I am making extra payments on my student loans in the same vein.

[feh]

We did, when we had a mortgage.

[Redraidernurse]

I am unsure if this would benefit us. We have 13 years left on our mortgage but plan to have more children (currently have 1 with 1 on the way) and see ourselves in a bigger home in 5 years. We could comfortably pay extra on principle now but should we since we see ourselves moving in 5 years? Our interest rate is 4.8% ( I believe) on 68,000 mortgage.

[bjl584]

I used to pay an extra $100 a month on mine. I had a 15 yr note, and many say not to pay extra on a 15yr loan, but my other debts and investments were in order, so I did. It worked out to 2 extra payments a year.

[LivingAlmostLarge]

Nope can't afford to and save for other things period. We're saving for retirement and paying bills and saving for a newer car, paying off newly purchased car, college, so mortgage is low on the totem pole. Maybe in 10 years. For now we just have a lot of bills and growing our income.

[krantcents]

I am making extra principal payments to pay off my mortgage to coincide with retirement.

[greenskeeper]

interesting that the majority of us that responded to make extra payments.

Even the smallest amount ($100/month) can takes years off the note and save thousands in interest.

[humandraydel]

Originally Posted by greenskeeper

Even the smallest amount ($100/month) can takes years off the note and save thousands in interest.

Well, if the choice is to spend $100 per month or pay extra on the mortgage, the choice is clear. If the choice is mortgage vs invest, the choice is not as easy.

[disneysteve]

Originally Posted by greenskeeper

interesting that the majority of us that responded to make extra payments.

I'm not surprised by that. This board is frequented by a lot of people who don't represent the typical American. Many of us have our financial lives well in order. We are living below our means, have little or no debt, saving for retirement, setting money aside for college costs, maintain a good EF and still have money to spare. Paying off the mortgage is a reasonable next step.

For most people, this isn't true and prepaying the mortgage shouldn't even be on their radar as they have many more pressing needs for their money.

[greenskeeper]

Since stocks and most of the economy has been propped up by QE since 2006, I have moved a good portion of my monthly cash going to retirement savings and put it towards the mortgage. Three reasons of the top of my head:

1)it's a 5+7/8 return on my money through interest savings.
2)my house will always have SOME value
3)I can live on a heck of a lot less an income if I don't have a mortgage.

If things were different in the world today I would probably put more towards retirement.

[GREENBACK]

Originally Posted by greenskeeper

interesting that the majority of us that responded to make extra payments.

As one who doesn't choose this route I'll say that my goal isn't to make banks rich early with extra payments but to build my own wealth through payments to myself. I don't argue with those who choose to give their banks extra money but I say why give them extra cash to invest (especially at the current loan rate) when you can invest the extra cash yourself as well as build liquidity to pay off the loan anytime you like.

[jpg7n16]

Originally Posted by greenskeeper

Since stocks and most of the economy has been propped up by QE since 2006, I have moved a good portion of my monthly cash going to retirement savings and put it towards the mortgage. Three reasons of the top of my head:

1)it's a 5+7/8 return on my money through interest savings.
2)my house will always have SOME value
3)I can live on a heck of a lot less an income if I don't have a mortgage.

If things were different in the world today I would probably put more towards retirement.

I don't have a mortgage, but I'll give the voice for the other side of this discussion.

1) If your mortgage is at 5 7/8%, you should probably refi if you can, down to the low 4's. And then with the tax benefit your net interest cost will be 3.something. I expect my portfolio to easily grow more than 4% after tax. (more than 6% for that matter)

2) The stock market will always have SOME value. It's not like EVERY company in the world will go to $0.

You can lose money in real estate too. Housing prices tanked in Detroit and Arizona (and several other places) not too long ago. Losing money in real estate is just as bad as losing money in stocks.

And if QE has propped up the stock market, what did the tax credits do for housing markets?

3) You could have a heck of a lot more income if you grew your portfolio.

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Just saying for anyone reading this thread, that paying extra on the mortgage isn't ALWAYS the best thing to do for everyone.

True you can save thousands by paying early, but you may have been able to earn 10's of thousands by investing that money instead.

Just something to consider...

[DebbieL]

The previous poster is correct of course, but I (I rent and don't own due to our insane housing bubble which still hasn't burst here in beautiful British Columbia) think for people who own a house they feel more secure paying that off. They can always live in their house once it's paid off. It doesn't really matter whether its value fluctuates at that point. Their living expenses will be less once mortgage free. I can truly see both sides, and I think it is mostly a psychological thing. I don't have enough confidence in my ability to invest the money compared to my ability to do a sure thing (prepaying on the loan).