Mortgage question

crikker · #1 07-16-2008, 10:34 PM

I might have read it here but not sure. Sometime in the past, I recall hearing that if you don't plan on staying in the house that you're paying a mortgage on, you should only pay the minimum payment. Even if you have a little extra, it's best to invest that money rather than put it on the mortgage. Does that make sense? I'm in that boat now. Need the larger house due to family size, but eventually, it'll be the misses and myself and won't need the larger home.

fourstringdrums · #2 07-16-2008, 10:51 PM

Applying extra toward principal is always smart I think because that way you're actually paying down the loan, you're not just paying interest. But then again, I'm no expert.

We're planning on staying in our home at least for a good 10 more years or so, and I only pay the minimum payment. I can't afford to put down any extra because the money needs to go toward savings and other areas.

niftydog · #3 07-16-2008, 11:11 PM

Unless you're making more in interest by investing that money than you would SAVE in interest by paying it off the principle, then you're mad not to pay it off the mortgage.

wazzel · #4 07-17-2008, 06:02 AM

If you are planning on staying in a house 5 years or less I would invest in other areas rather than pay extra towards the mortgage. If you are planning on staying longer I would pay more towards the mortgage. If it is the house you want to keep till your croke I would try to get one extra P&I payment per year. That will knock approx 7 years off your mortgage if you have a 30 year.

crikker · #5 07-17-2008, 09:08 AM

Thanks for the replies. I'm guessing here, but if I'm not staying and I pay extra on the mortgage, that will pay off when we decide to sell as we'll have more equity in the home, as long as the value of the home doesn't drop?

**WillPlay4Food** · #6 07-17-2008, 09:11 AM

Quote:

Originally Posted by crikker

Thanks for the replies. I'm guessing here, but if I'm not staying and I pay extra on the mortgage, that will pay off when we decide to sell as we'll have more equity in the home, as long as the value of the home doesn't drop?

True, but if you can make more investing that extra money (as mentioned by niftydog) than what you save in interest expense, then you should go the 'make more money' route.

jive1 · #7 07-17-2008, 09:28 AM

If you're not planning on staying there long, the only advantage to paying additional principal is if you have a mortgage that will automatically adjust the interest paid on each payment as the principal is reduced. This can happen on some interest-only mortgages. But, the savings is very minimal in the short run.