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Prepaying a mortgage

Keeping up with the personal finance theme that I started yesterday with my post about investing on, I will admit that some of my favorite sites to read around personal finance blogs. My favorite is Get Rich Slowly. One of my favorite posts from that site deals with the topic of prepaying your mortgage. If nothing else, it shows that not even the “experts” can agree on what to do, so it really comes down to a personal choice.

For anyone, obviously, buying a house is a huge decision and investment. For me in particular, it was the first time I was putting myself in debt. And boy what a debt it is, 30 years worth. Sitting down and thinking that I’ll be making payments on this house until I’m 59 years old is hard to wrap my head around. I realize that tens of millions of Americans are in the same boat, but to me, not being used to having a debt, it can be overwhelming.

While I’ve only made 2 payments so far, I’ve been strongly tempted to include extra money towards my principal, which will shorten the length of my mortgage and ultimately save me tons of money in interest. On the flipside though, I got a really great rate on my mortgage (5.5%), and it’s very possible that I could invest that extra money and earn a greater rate of return that my mortgage, though obviously it’s no guarantee. I’m already maxing out my retirement savings options, so putting extra money towards retirement, which would be an obvious place to put the extra money, is not an option.

I think after reading all of this, I’m even more undecided on what to do. I think my best option is to pay a little extra here and there, as I can afford to, but not to go overboard and send away every penny of leftover money each month.


2 responses to “Prepaying a mortgage

  1. Ken May 2, 2008 at 5:14 pm

    Well you’re not going to get a better rate next time. It is tough to make money in the market now. I say you need to look at how much you’d actually benefit by paying more but if you were going to do it this is probably a good time.

  2. Erik Holmberg May 12, 2008 at 1:02 pm

    Instead of paying extra, look at paying the same amount sooner. My bank gives the option to pay bi-monthly or weekly, can’t remember which one.So if your monthly mortgage is $750, you would pay $375 in the middle and end of the month.Banks just want their money sooner.You might get some mailers about this soon since you just got your house.The savings could be in the tens of thousands of dollars.

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