Should I try to pay off home loan ?

[parafly]

Hi,
I looked at the bi-weekly program offer that I got . I called them and they said I need to pay 3.50 extra every 2 weeks so it comes to around $7 per month extra for enrolling in this program.
when I gave my specific loan amount, I see a savings of $76,770.63 overall. This will cut down my loan years by 6 (24 years).

Looks like i have to absolutely be in this program for 6 months. If i cancel before 6 months, there is around 1000 penalty.

What do you suggest ? Yes $7 per month which comes to 2016 in 24 years but overall isnt there an advantage.

Don't do it! You can pay down the mortgage yourself without joining any "program" which is designed to do nothing but put more money in the pockets of your lender.

Here is what I do. Take your regular mortgage payment and divide by 12. Every month when you send in your regular mortgage payment just tack on the extra amount. Most lenders automatically put the extra amount towards principal as long as the account is in good standing.

[parafly]

One last question. The main reason for this thread was to see if paying off home loan is the right thing with some extra cash coming from options. Is it better to starting to put money in 529 for college education for my kid or use that towards home payment ?

In most cases, a "best of both worlds" approach works very well. Why not put a little extra toward the mortgage and fund a 529 at the same time? It doesn't have to be one or the other.

[Goldy]

I was worried about your bank charging you a fee to do that. When we banked with wells fargo they offered it free of charge but with our new lender it is not the case. I agree with everyone else that you should not pay a fee to pay your loan.

Will the lender allow you to make additional payments to the loan principle? If so I would just add a few hundred bucks per month and it will work out to be the same as bi weekly. Its also easier to budget this way since its fixed.

As for the 529, I agree with Parafly that doing both is probably the best option but keep in mind that your kids can always get a loan for college.

If you haven't already I would recommend that you make a budget and see how much money you have left over each month. Once you know how much you have you can start distributing it into things like 529 and additional mortgage payments. mint.com is a fantatic resource for budgeting.

[dawnwes]

Could you pay as if you have a 15 year loan? It would mean about $1,000 more per month according to my calculations, but would save you almost 50% in interest over the life of the loan, savings of almost 200,000 on the bottom line.

You might also look at refinancing to a 15 year loan when you can. We have a 2.37% interest rate on our mortgage on a 15 year loan.

Dawn

[Weird Tolkienish Figure]

I recently bought a house. The loan currently is around 550K. Our interest rate is 4.00%.
We got a 30 year loan. Both myself and my wife are working. We both maximize 401K. I put money in ESPP. I have some stocks that is vesting in few months (if i sell all of the vesting stocks, it would be around 30-35K depending on stock price at that time). I generally invest around 2K in stocks. If I make profit in selling stocks/options,I move the profit to savings. We have about 30K in reserves.

This is our first home and its hard for us not to think about the home loan we have. Once I get some extra cash as part of the vested stocks, should I pay additional principal towards the loan or should I save that amount or should I invest it somewhere else ? I cant make a decision here.

Please advise. Sometimes i think because the interest rate is only 4% , may be I am better off re-investing the stock money in stocks (not my company ofcourse) so I can get better return on investment.

I'll take a different path than the other's, are there any home improvements or maintenance you'd like to have done to your home? Maybe some soft of efficiency improvement?

[aim-high]

Yes the lender will allow additional payments so I have decided to just do the additional payments instead of going through another company to do bi-weekly. My lender does not offer this program directly.

I have to do some more research on 529 but thanks for your suggestions.

I was worried about your bank charging you a fee to do that. When we banked with wells fargo they offered it free of charge but with our new lender it is not the case. I agree with everyone else that you should not pay a fee to pay your loan.

Will the lender allow you to make additional payments to the loan principle? If so I would just add a few hundred bucks per month and it will work out to be the same as bi weekly. Its also easier to budget this way since its fixed.

As for the 529, I agree with Parafly that doing both is probably the best option but keep in mind that your kids can always get a loan for college.

If you haven't already I would recommend that you make a budget and see how much money you have left over each month. Once you know how much you have you can start distributing it into things like 529 and additional mortgage payments. mint.com is a fantatic resource for budgeting.

[aim-high]

I did not want to push myself to do a 15 year loan because my wife is also working now. Just in case, she decides to not work, I dont want my budget to be tight. I totally understand 15 year loan wud cut interest big time.

Could you pay as if you have a 15 year loan? It would mean about $1,000 more per month according to my calculations, but would save you almost 50% in interest over the life of the loan, savings of almost 200,000 on the bottom line.

You might also look at refinancing to a 15 year loan when you can. We have a 2.37% interest rate on our mortgage on a 15 year loan.

Dawn

[aim-high]

I thought about home improvement. My house is like 7 years old. Pretty everything is good in the house except some blinds. When we bought it few months back, it already had new carpet, new wooden floor, new paint throughout.. No need to buy any appliances. It does not have a yard so no work except to buy plants in a pot. I have already checked the AC/Heater/Attic and they are all good to go. To increase the value of the house, I can convert a 1/2 half into full but not sure if we need to spend that money right now.

I'll take a different path than the other's, are there any home improvements or maintenance you'd like to have done to your home? Maybe some soft of efficiency improvement?

[autoxer]

One last question. The main reason for this thread was to see if paying off home loan is the right thing with some extra cash coming from options. Is it better to starting to put money in 529 for college education for my kid or use that towards home payment ?

Your questions are very good things to be thinking about, but they are really dependent on your individual goals and tolerance for risk, not necessarily a right and wrong way of doing things. Set some long term goals and a plan will fall into place. My ultimate goal is financial independence, which right now is a balance between paying down debt and investing. If you have a long term outlook and a good tolerance for risk, then it makes more sense to invest. If you are more comfortable with the 'guaranteed return of 4%' by paying down your mortgage, then do that instead.

If you have a retirement goal, then maybe you can schedule your advanced mortgage payoff around that. Some people will be comfortable with a mortgage in retirement, while others would rather not carry any debt.

I feel that my own financial independence is more important than funding my childrens education, so that I don't ever become a burden on them. But I do intend to help my children with tuition.