Do you pay extra down on your mortgage principal each month?

[rj.phila]

This is precisely why I do not pay extra. I recently refied into a 4.3% 30 yr loan. I can certainly earn more than 4% in my retirement investments and I can retain a lot of liquidity with a very small mortgage payment. If a major, major emergency occurs it's good not to be tied up with a big mortgage payment or those extra payments made. Let the bank collect a little interest. You'll laugh at it in retirement with a monsterous nest egg. BTW, you'll probably be able to pay it off with the stroke of a pen.

My retirement investments earned around 12% last year. That beats the measley 4% paid to the bank any day. I'm just saying.

just to be clear, you picked one of the best net years in recent history as a benchmark. what would be a more accurate estimate is this: look at what products you hold, and look at it's average returns over the same lifespan you anticipate holding your mortgage. if it has beat your mortage rate, thats a promising sign.

here's where i think i diverge w/ the board status quo: holding a mortage at X rate while earning interest on investments at Y rate is essentially a gamble that you will have an opportunity for Y rate will beat X rate, consistently, over Z years. i RARELY see people quote actual metrics to support that the odds for this are in their favor.

remember, if you pay a minimum payment on a mortgage w/, say, interest that looks like 8k-7,5k-7k-etc progressively year over year, in the hopes to earn Y rate (assuming Y beats X, for sake of argument, and Z is term of loan), you just paid the sum of that interest as an ante of sorts for a bet that your investment rate vs. loan rate will come out ahead in the future.

in short, the question often comes down to whether you would rather lock into a future savings now, and pass up the chance to "out-earn" your mortage rate in the future, or realize losses on interest now for the OPPORTUNITY to out-earn your mortage rate in the future. for most people, this is the question they really should be asking themselves.

[TBH]

I round up a little bit every month, and when I have a windfall I usually put a little bit toward the mortgage. I really want to pay it off early. It weighs on my mind. However, I can't afford to meet all my other savings goals and make significant early payments on the mortgage.

I also am concerned about not ending up like a close relative of mine, who valued owning a house "free and clear" over other forms of savings. When she wanted to retire, almost all her assets were tied up in her house, and it took a long time to sell because the market had tanked. In the end she didn't lose too much money, but she had to delay her retirement while she waited for her house to sell.

What is "free and clear" about having all your eggs in one basket?

I would love to throw everything I've got at my mortgage. It is my impulse to do that. But I hold myself back, focusing on retirement, college and liquid savings. At the moment, I can't afford to do all that AND prepay the mortgage.

[disneysteve]

I would love to throw everything I've got at my mortgage. It is my impulse to do that. But I hold myself back, focusing on retirement, college and liquid savings.

Same here. We have the means to write a check and pay off the mortgage but I'm not doing that. We're prepaying the mortgage as part of our overall saving and investment plan. We could do it faster. I've thought about doing it faster. I've run the numbers on doing it faster. So far, I've resisted. As the balance gets smaller and smaller, I'm sure we'll reach a point when I decide to just pay the remainder in a lump sum and be done with it but we're not there yet.

[moneyclass]

Yeah i always try to put extra towards my mortgage every month. trying to get this house paid for along with everyone else. i cant wait for the day its paid for and dont have to make that stupid paymnet anymore lol.

[jerrycates]

If you can afford to pay for in excess to principal, then it is much better. Why not? It is yours anyhow.

[PatientSaver]

I've prepaid every one of the 15 years i've owned my home, contributing an extra $400 a month when I could do so, and pulling back to no prepayments when i was out of work. Some years i only prepaid $100 or $200.

I'm not prepaying at all now becus I'm underemployed. But the balance is down to $30,000 and paying it off is my biggest and most immediate financial priority. It wouldn't pay to refinance such a small loan, so any prepayments is like a guaranteed 6% saving rate. Once I get rid of the mortgage, my day to day expenses will be much more manageable.

[SteveBlissLaw]

This is one of those things where I said I would.....but I never did lol

[Ronin]

I get paid biweekly so I do biweekly payments on my pay days, so it equals one payment extra per year. That's all I can really afford to do in between paying college savings, retirement, EF savings, and vacation savings. I get to deduct a lot of propert taxes and interest, so it's not totally bad having a payment... Better than rent! I still owe $226K though....