| Mortgage and money, what to do? |
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thekenpokid
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| Mortgage and money, what to do? |
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Hi there,
I'm trying to figure out whats the best thing to do with my money. Should I pay down the principal or keep it in savings. here's my numbers:
28 years left on a 30
Balance Principal $208,000
interest: 5.375%
monthly payment including escrow for taxes: $2100.00
#1 Savings: $60,000 (by June, company will fulfill phantom share plan)
#2 Savings: $30K
reserve savings (just in case) $50,000
Total that I can give up now: $100,000.00
Should I take the $100,000 and pay off the principal? Or pay the principal and do a refinance for 15 years with a lower interest rate? or Just keep the money in the bank with a 1% interest rate (I know it stinks).
I do want the mortgage off my back, who doesn't right? But just want to see whats the best possible scenario for me.
Thank you all!
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Thu May 12, 2011 1:10 pm |
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littleroc02us
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Your going to get different opinions on this one, because some will say to play the interest rate game. but IMO that's to risky. What I would suggest is to use the 100k and pay down your principal so that all you have left is 108k. You won't need to refinance because you already have a historically pretty low interest rate, plus who wants to pay the extra fees. Work on paying off the mortgage, depending on your income how long would that take? Good luck!
Risk comes from not knowing what you're doing. (Warren Buffet)
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Thu May 12, 2011 1:16 pm |
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thekenpokid
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Thanks for the quick response. I'll take some of that money and see if I can put it into savings just in case of job loss, emergency repairs, etc.
Thank you again.
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Thu May 12, 2011 4:57 pm |
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littleroc02us
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Cash: $ 384.35
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quote:
Originally posted by thekenpokid
Thanks for the quick response. I'll take some of that money and see if I can put it into savings just in case of job loss, emergency repairs, etc.
Thank you again.
Yes, I did forget to mention an EF account. You made it sound like you had 100k to spend. 3-6 months is important for EF's.
Risk comes from not knowing what you're doing. (Warren Buffet)
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Thu May 12, 2011 6:35 pm |
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oldguy
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quote:
I do want the mortgage off my back, who doesn't right? But just want to see whats the best possible scenario for me.
Who doesn't? Well, I don't, I continually refi my houses, I have done that for 35 yrs with all of my rental houses.
Using your situation as an example -
Your loan payment is about $1170/m. If you prepay $100k, that cuts about 20 yrs off of your loan, that lowers your total cost by about $210,000. But if you kept that $100k and invested it at 11%/yr (the historical average) for 30 yrs, it is $2,300,000. The point is - if you pay that $210,000 of interest for the use of the $100k capital, it earns an extra $2 million.
But the key is - you can't make money with savings accounts and CDs, they are designed to provide safe storage of wealth, not build wealth. You will need to invest the money to build wealth.
I would never prepay a 5.375% long term fixed rate loan, IMO that's a 'keeper'.
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Thu May 12, 2011 7:00 pm |
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Adria.John
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Debt reduction is a possible solution and do not worry. It can be a fact that the burdens which come along with debt are very heavy to deal with, but bankruptcy is not the only option. There is a solution and it is name debt reduction. Everyone must understand some basic facts that are required in debt reduction.
Check it online, you will get plenty of tips.
Loan Expert!
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Thu May 19, 2011 11:23 am |
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Sylviabb
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| Good post |
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Sounds interesting, thanks for sharing.
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Mon May 23, 2011 9:12 am |
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ttammie98
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I understand your wanting to get rid of the mortgage. However, if you decide to take money from your savings to pay it down, be sure to keep extra money set aside for emergencies. I would put some of the money as prepayment on the mortgage rather than having it set aside.
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Mon Jun 06, 2011 3:47 am |
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scot184
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The idea is to beat your interest rate...1% isn't beating 6%...so if you're investing in stocks or elsewhere, that'd be the argument to keep the mortgage intact. Otherwise paying it down some would make sense, so long as you keep an emergency fund.
There's also the tax deduction from paying mortgage interest to consider. That's a benefit you'll want to hang on to.
You could always make larger payments each month on the mortgage and reduce your interest considerably without refinancing.
But because you're mortgage is so new, refinancing would make sense if you can get an interest rate a point lower...that would keep the 15yr payment similar to your current payment, and you could always pay even more on top of that when warranted.
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Sat Jul 16, 2011 12:02 am |
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