10 Additional

[bones72]

If you're beating yourself up over a minor issue - you should really change your focus. Focus on the major points of your budget. ex: sell your $55k Mercedes to eliminate $48k of debt (big deal) vs change from brand name soap to generic (minor deal)

If you didn't pay the $10, I'd be more concerned that it greatly bothered you, than that you didn't pay it down. Such an amount shouldn't emotionally impact you one way or the other.


There are things that should bother you, but this is wayyyyy down the list.

Several things, perhaps I used overly emotional text in describing my feelings towards my only debt, which is my mortgage. I can live without that infintesimal mortqage reduction. Secondly, being a long-time career car dealer, I would sooner do something incredibly fun than own an overpriced so-called luxury status symbol that has actually mediocre performance. Tertius, in my business of selling cars, I see far too many people buying vehicles that they cannot afford. That has made me extremely adverse to debt of any kind.

[disneysteve]

I pay extra also, but with a 4.25% loan, I have to admit I am being stupid.

I think "stupid" is overly harsh (especially since I'm doing the very same thing - ).

As I've said in various other discussions, not every financial decision is just about money. Getting debt-free, especially paying off one's home, is about more than just the money. It is about security and mental well-being and all of that intangible stuff.

Could I earn more by investing the money that I'm sending into the mortgage? Most likely yes. But the thought of having a paid for home 8-10 years before retirement is a powerful draw. We already max Roths for each of us. My wife puts 50% of her income into her 401k (plus gets a company match). We auto-fund a taxable investment account each month that is earmarked for retirement. And we have various other savings and investments. Part of our overall plan includes pre-paying the mortgage. I'm okay with that even if it means getting a lower return on that portion of our savings.

[GREENBACK]

As I've said in various other discussions, not every financial decision is just about money. Getting debt-free, especially paying off one's home, is about more than just the money. It is about security and mental well-being and all of that intangible stuff.

This subject has been discussed over and over here and I'm sure it will continue be discussed in the future. It's probably not a bad idea either way as long as every other aspect of your finances are under control. I think it really does come down to the quote above. I'm satisfied with carrying a long, low cost mortgage and some aren't. It's the only type of loan I would treat this way because the numbers work in my favor in the long run.

[bjl584]

This comes up a lot on here. I would argue that paying extra is fine so long as the rest of your finances are in order. In other words, don't pay extra on the mortgage if you aren't currently saving for retirement (or saving enough for retirement.) Also, I would advise against paying extra on a mortgage if you currently have other debt. (Credit cards, car loan, etc.)

[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.

[jpg7n16]

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]

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]

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]

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]

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]

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?