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Category Archives: personal finance

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.