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 bbarbowski
Joined: 20 Aug 2008
Posts: 1
1.40 Dollars($)
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Posted: Wed Aug 20, 2008 6:29 am Post subject: Should I pay off some of my mortgage, or invest elsewhere?
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If I suddenly have $2000, should I use it to pay off my mortgage, or invest somewhere else?
I am early in my mortgage, so I'm paying significant amounts of interest with each payment. Because of that, to me it makes more sense to make the down payment on my mortgage.
For example, suppose I have a $200,000 mortgage, making monthly payments of $1000. With every payment, about $800 is being wasted on interest. If I make a down payment of $2000, my principal becomes $198,000. If I invested that $2000 elsewhere, it would take me about 10 months to get my principal to $198,000, and I would have spent almost $8000 in interest.
Is my logic flawed? I have a colleague that still insists investing elsewhere is better, depending on the rate of return.
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kpatrick
Joined: 29 Oct 2007
Posts: 155
Location: Atlanta, Georgia
41.72 Dollars($)
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Posted: Wed Aug 20, 2008 6:50 am Post subject:
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Hi Bbarbowski,
Well, you friend is right. When you are looking at where the better place would be, you have to consider the rate that you have on your mtg, vs the rate you would receive if you invested you money.
Right now, depending on where you are planning to put your money...the mtg may make better sense. For example, CD's and a lot of Money Markets are only returning around 2-3%. In which case, paying down your mortgage would make better sense.
If you have no savings, or rainy day fund at all, then that should be your first "investment". You should have no less than 3-6 months of monthly expense set aside "in case".
In today's economy, it is wise to secure the investments that you have worked hard for, and if 1 month without income would put you on the street, THAT should be your first priority.
Kim
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