Do you know why most people hate their mortgage?
It's because they know that over the life of that 30-year loan, they will have spent more in interest than the house cost them in the first place!
So what's a soon-to-be homeowner and an existing homeowner to do?
A bigger down payment upon purchase is always an option,
So is making additional monthly principal payments...
and then there's a 3rd option for those who subscribe to the Missed Fortune philosophy of accumulating wealth,
Invest your otherwise additional monthly payments in an interest baring account whose rate-of-return is higher than the interest paid on your mortgage. Essentially, you accumulate enough assets to pay of your mortgage in fewer than 30, even 20 years... [give me a call or send me an e-mail, I can show you the math]
Now some will argue with what I'm about to say next (in fact quite a few of you might)... Ultimately, no one way is better than the other. What's really important is, which method brings you greater piece of mind?
Best,
Mortgage Planner
p: 323.572.8322
e: rbueno (at) worldwidecredit (dot) com
Author of www.industry-report.com
Richardo, nice to see you! Thanks for commenting on my pix of the day. Re mortgages, every day I dream more and more about living in an Airstream or a houseboat on a lake. I know it's not a smart financial decision; however, anchors don't work for me!! Have you been invited to the Triiibe?
Hiya Susie! Good to see you :-P
So what's all this talk about Triibe? I hear it's all the rave and yet nothing!
Richard, I think that you are correct, what ever brings you piece of mind. But cultural norms change, that's why we are in this mess if the first place. No longer can you find kids wanting to live in their parents homes. So we have what amounts to be rent.
Ricardo - Where have you been?!?! It is so good to see you again! I know I hate my mortgage - count me in that group! Great advice about the interest bearing account - make your money work for you!
Richard,
Great post! I, also, subscribe to the "Missed Fortune" philosophy of mortgage planning. I am sad that many of our best tools have left the market for a while, but sound planning still makes a difference in the life of our clients!
Billy Manders
I hate my mortgage. I hate the fact that I have to pay back 300K in interest over the term. Maybe. I bought some lottery tickets.
Ricardo, I think you are right, it hurts to think about all the interest paid to the bank. Yes the points you outlined can certainly lessen the pain.
INteresting post. I always try to pay extra when I can on the mortgage. Hey it got me in the house so I do not hate it. I just want it to go away
Mortgages are a necessary evil
Just my opinion
Bill
Ricardo - I'll check out the link later when I have the time. It's good to see read you my friend.
@Leesa: hiya there! Good to be back here on A|R. Talk to you soon...
@Billy: Missed Fortune is a great read and the lessons in there are priceless!
@Laura: wouldn't we all love to cash in on a big lottery!!!
@Jennifer: yup. And I'm not necessarily saying that a mortgage is a bad thing either (it's a great asset to have). It's just that the fact of the matter is, these are the kinds of things people think about...
@Charlie: I know what you mean. I usually create an amortization schedule for clients showing them the time of payment necessary to pay of their mortgage in X amount of years...
@Bill: yes they are. But they're a good thing to have. Leverage!
@Jason: It's good to be back! Nice seeing the A|R crowd ya know!?
Ricardo, Yes it is that "Peace of Mind" that influences what direction many of us will take. I think cultural and generational will influence that "Peace of Mind" decision. But, for those that save that "extra" discretionary income in some type of income generating investment vs paying down the mortgage, they will have to stick to the goal and not use that income for other purposes. AJ
Ricardo, I always go for options #1 when I can afford it and absolutely utilize option #2. Option #3 is a bit difficult in today's market. I'd like to be able to put some money in the bank at an interest rate higher than my current 6.25% mortgage. :-)
There are people that always are telling home owners to never pay off their mortgage an I say, if it makes you feel better and secure knowing that no matter what the house market does your house can't be taking away unless you don't pay taxes, then do it!