Comments on: Poll: Do You Pay Extra On Your Mortgage Each Month?

By: LaVida

LaVida — Thu, 08 Jul 2010 09:54:14 +0000

I voted ‘No. I prefer to put extra money in savings or investments.’ Although I am not much of an investor by any means (at least not yet; right now I’m just focused on saving for life and retirement)I don’t see the benefit of paying putting extra on the mortgage for someone like me. I bought a house that I could afford and one that I love. It’s a one bedroom/one bath house with a detached in-law suite (with a kitchen/bath/laundryroom) so it is not a house for a family to grow into. I am still young (26) and I have good reason to believe I would not see this house to the end of the mortgage (even if I put every extra penny towards extra payments, on my single, meager income, it would still take 10 plus years to pay it off). I am currently one year into a $63,000 30year 5.375% fixed rate mortgage and my monthly payment, which includes principal/interest, insurance, and taxes) is still hundreds of dollars less than rent for the same house, so I already feel ahead, even if 100% were to be going towards interest (which it’s not). I have a roommate living in the detached suite that pays for all of our utilities + internet as part of the living agreement. Mine is a case of using a mortgage as a tool, a tool I’m willing to pay for because it’s useful.
Back to my original leading question before I went off on a tangent—What is the point of paying extra on a mortgage you don’t intend to reach the end of before selling? All of the examples I’ve ever seen given indicate a savings on interest AT THE END of the term. I’m still researching info about mortgages because even after a year into my first mortgage I still feel lost when it comes to amortization calculations. How often, or does the interest on a fixed rate loan get applied to the current principle? Meaning, if I pay extra on my principle, will the percentage of next months interest be based on the remaining principal? I can see that being worth paying extra on a mortgage you don’t plan on paying off. But I haven’t seen any examples, or explanations on if this is a common practice.
Having more equity does nothing to motivate me because my equity has no bearing on the value of the house. It’s going to go up, or down no matter how much extra I pay. I also don’t need a forced savings; I spend what I intend to spend, and I save what I intend to save. It’s not an incentive to me to give someone $10/month for 10 months and then they give me $100 in the 11th month. Great, you gave me exactly what I gave you, except you got to earn interest on it and I lost interest on it. That’s how I see getting the extra principle back on a sale, but without saving on interest–you already save yourself from not having to pay x amount of years of interest by selling the house before the term was up, so it seems like a moot point. Hmm, I’d rather use my money to help increase the value of my home with repairs/upgrades, towards retirement and/or other investments, or just enjoying life without sacrificing hard just to come out even in the end.

By: nickel

nickel — Wed, 23 Jun 2010 03:14:25 +0000

Not anymore. We used to, but we’ve since paid it off.

By: C in DC

C in DC — Mon, 21 Jun 2010 16:03:46 +0000

No, but we make 26 payments a year biweekly, instead of 12 monthly payments. That’s one extra month’s payment a year.

By: StJohnsWood

StJohnsWood — Fri, 18 Jun 2010 17:38:41 +0000

I pay nothing extra. I invest all the extra including any equity I may have in my home. This allows me to take the biggest tax break I can get each year. It also has allowed me to have a 7 figure investment portfolio. I plan to keep the mortgage until I die. What other tax break will I have in my 70′s while I take distributions from my 401k’s. A 4.25% 30 yr mortgage is pretty cheap money.

This way may not be for everyone but financally I am in great shape. I have two years of cash and gov’t bonds for cash flow. The rest is in long term stocks.

Just remember that there are other ways. Just because you think you are right doesn’t necessarily mean you are right.

By: lochlet

lochlet — Thu, 17 Jun 2010 23:58:37 +0000

This doesn’t help people already with mortgages.. but a key part of being able to afford extra repayments on your mortgage is to borrow less instead of stretching yourself too thin. When I went for my mortgage 2 years ago, the bank offered to lend me up to 800k. I opted to get a smaller place and borrowed just 230k. I’ve paid back my mortgage like it was a 800k one though, and will be debt free by next year.

By: IceBear

IceBear — Thu, 17 Jun 2010 14:39:18 +0000

Although I have a lower rate of 4.75% on a 30 yr mortgage, I am paying extra each month to get rid of PMI and also to pay off the mortgage early. I could have used the extra money to increase contributions to my emergency fund or ROTH IRA but it is psychologically important for me to pay the house off.

By: Amy

Amy — Thu, 17 Jun 2010 12:56:17 +0000

We’re still working on building our emergency fund right now. Any extra money is going toward that. In the mean time we refinanced to a 15yr mortgage. We plan to start shoveling money toward the mortgage after w’re done with the emergency fun. In the mean time we’re also balancing all this with investing for retirement. We should have the mortgage paid off in about 8 years by our calculations. Can’t wait!!

By: seo web service

seo web service — Thu, 17 Jun 2010 05:10:34 +0000

Our extras always go toward the mortgage because it will have SUCH emotional satisfaction when we no longer have to make that monthly payment.

By: Evan

Evan — Thu, 17 Jun 2010 03:37:07 +0000

I am just rounding up for now, I have a need for additional liquidity right now plus other debts I’d like to get rid of first.

By: Aury (Thunderdrake)

Aury (Thunderdrake) — Thu, 17 Jun 2010 00:41:40 +0000

At the time of writing, I currently don’t own a mortgage. I plan on knocking off a huge chunk of it via investments and savings before I actually saddle myself with a standalone mortgage.

In that case, I’d compare and contrast it to my asset and liabilities. Is the interest rate high, are my investments low? I’d use the avalanche strategy to determine how much I’d pay.