10 Additional

[jpg7n16]

Originally Posted by snshijuptr

Additionally, you can hopefully get a higher return on the money.

See suggested correction.

But remember, OP was talking about $10 - or some other nominal amount. If that's the only amount you have free, it won't make much difference either way (paying down, or not).

Especially since most investments worth anything have comissions and fees. That would prohibit investing of the $10.

[krantcents]

I guess it is a matter of perspective! It depends what stage you are in life, how much you are earning and what alternatives you have for investment. I max out my other investments already. I have a 5%, 15 year mortgage and prefer to pay it off vs. finding an investment yielding 5 or more percent. As I already indicated, it is important for me to have my mortgage paid off. There are a lot of other factors which I may discuss in an article on my blog (www.krantcents.com). Thanks for the idea!

[disneysteve]

Originally Posted by krantcents

I guess it is a matter of perspective! It depends what stage you are in life

There is an article in this month's Kiplinger's that touches on this topic. One person quoted said that people under 40 should not be prepaying their loans but rather saving for retirement while people over 50 should be prepaying their loans. I believe the point was to be mortgage-free before retirement.

Of course, at age 46, I'm right in the middle of that gray zone. I'm doing both - saving for retirement and prepaying the mortgage.

[mommytoc]

One thought that I have is if you were to lose your job at a time when the market was down. If you couldn't afford your mortgage, you would be selling low, and could also be paying penalties if the cash was all tied up in retirement. Many people in recent years were faced with this problem. Like Dave Ramsey says, 100% of forclosures happen on houses with mortgages. I feel comfortable paying off my loan as quickly as possible while keeping a liquid emergency fund in case of emergency. We do put a decent amount in retirement, although we could do more. But with 25+ working years without a mortgage, I'm certain we will be in excellent shape at retirement.

[Hector]

Originally Posted by disneysteve

If you have a fully-funded emergency fund, are saving 15% for retirement and are debt-free except for your mortgage, I think prepaying your mortgage is a great idea. Personally, we are pretty aggressively prepaying our loan, putting hundreds of dollars each month toward principal. We just refinanced to a 15-year loan and I'm hoping to pay it off in half that time.

Saving 15% towards retirement is very good rule for people who started doing this in their 20s. It might not be enough for people who start funding retirement in their 30s or 40s. You are a doctor. One might assume that you started earning in your late 20s or early 30s. If so, did you start with 15%? If so, is it working for you?

[disneysteve]

Originally Posted by Hector

Saving 15% towards retirement is very good rule for people who started doing this in their 20s. It might not be enough for people who start funding retirement in their 30s or 40s. You are a doctor. One might assume that you started earning in your late 20s or early 30s. If so, did you start with 15%? If so, is it working for you?

Very true. The later you start, the more you have to save. I did not start with 15%. We started with 6% and gradually increased it as we could and as we paid off debt. We currently save at least 22% of my income and 50% of my wife's income goes into her 401k.

[snafu]

I wonder how many people run the figures on their mortgage. In the 1st 5 yrs., nearly the entire sum goes to interest so any extra is what reduces the principal. It's only the later yrs. when the figures work out more equitably. [Other countries do not have an interest deduction...will you have this benefit going forward?]

Employment required moves to 3 different cities resulting in buy/sell/new mortgages. Paid a 25 yr mortg. in 12 yrs. with balloon [extra] payments; bought condo for cash to facilitate our choice to take out-of-country contracts. Even with incredibly increased cost of utilities over time we continue to use that old mortg. payment sum for monthly investment program.

[greenskeeper]

always pay double principal per month. Look at the interest charges in your monthly statment, by doubling the principal you are more or less saving that amount per month.

[Hector]

Originally Posted by snshijuptr

Those of you paying extra, have you thought about investing the money in something like a savings bond and then paying off the mortgage in a lump sum when you have enough? That way you aren't tying up your money in an illiquid asset while also "paying down your debt" in an indirect way. Additionally, you can get a higher return on the money.

And how much does this savings bound pay? Would it pay more than mortgage interest rate?

[Hector]

Originally Posted by greenskeeper

always pay double principal per month. Look at the interest charges in your monthly statment, by doubling the principal you are more or less saving that amount per month.

That is an interesting theory. If one has enough money to pay double principle per month, wouldn't that person go for 20 yr mortgage vs 30 yr one?

[greenskeeper]

Originally Posted by Hector

That is an interesting theory. If one has enough money to pay double principle per month, wouldn't that person go for 20 yr mortgage vs 30 yr one?

yes I have thought of going with a 15yr vs the 30yr as the interest rate would be lower.

However it is nice to be able to fall back on the lower payment if necessary....for instance, when my wife stayed home with our newborn for a couple months we were on one income for that time.

[disneysteve]

Originally Posted by Hector

That is an interesting theory. If one has enough money to pay double principle per month, wouldn't that person go for 20 yr mortgage vs 30 yr one?

The longer loan gives you flexibility. If something comes up, like a major car or home repair or big medical bill, you can drop back to the lower payment. You aren't locked into the higher payment.

[Fern]

I dont think it's worthwhile to pay closing costs on my own mortgage with a balance of about $36K, and until very recently, i was unemployed, so i couldn't refinance. So with a 6% mortgage, I've been doubling my monthly payments. I have savings, and no other debt.

[MonkeyMama]

Originally Posted by disneysteve

The longer loan gives you flexibility. If something comes up, like a major car or home repair or big medical bill, you can drop back to the lower payment. You aren't locked into the higher payment.

Plus, there is no lower interest rate for a 20-year loan. Not recently, anyway. So, why lock in larger payment without the benefit of a lower interest rate cut? Only if you are the type of person who needs the "forced savings."