Paying extra on mortgage?
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Paying extra on mortgage?
| Sun, 02-05-2006 - 4:08pm |
I was just wondering how many people are paying extra on their mortgage even though they are still paying on debt? You hear that if you pay an extra payment a year it takes off something like 7 years of payments. Is that recommended? I will admit, I pay a little over $100 extra each month on my mortgage. I used to just round up to the nearest $100, but now my payment is something like $1496, so it wouldn't be much. So, I have been paying $1600 a month.
What's everyones take on this? Really curious of everyones responses!
Donna

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Well, here at our house, we don't pay extra on our mortgage for a couple of reasons.
All my best,
Danni
I only round up to make it an even number which is $1.77 added.
Becky
CL of 4th, 5th & 6th grade Scoliosis
I always pay *something* extra on my mortgage. Sometimes it's only like $3, sometimes more like $75. It depends how much extra cash I have at the moment. I really like watching that amount going to interest come down each month as more principal is paid!!
btw, I have a Jenna, too. :)
Edited 2/5/2006 10:08 pm ET by jacysmama
I suppose it depends on how you look at it....we did not have 20% for a downpayment and did not want to pay PMI. So, we did a first mortgage and second mortgage at the same time. The second mortgage had a substantially higher interest rate and that is currently our target debt. We moved it to a CC to have a lower interest rate (2.99 for life of the balance) and it's now down to around 6,000 (it was about 20,000 when we took it out 3 years ago). So, on our primary mortgage-no but on the second one yes.
Personally, I wouldn't pay extra simply because I'm targeting one debt so I pay minimums on everything else. I think I get more impact for my money that way. Plus, I agree with whiz about the tax deduction. It's not so much that it's great to get that refund but I'm definitely not getting a tax break for my CC debt, plus the amount due can change and it's generally considered bad debt so I'll deal with that first.
Taleyna
Last year, after my debt came out to my husband, he told me not to worry about the credit card and put all our extra money to our 2nd mortgage. It was at a whopping 10% interest, and the card was at 4%, so he wanted that paid down faster.
It really benefitted us greatly when we refi'd our house last Fall. We had paid down enough on the 2nd mortgage that when we combined the 1st and 2nd, we ended up with a payment that was the same as what we were paying for the two loans separately...but were able to drop our loan from 22 years down to 15 years.
So for us, I'd say that paying extra to our mortgage definitely helped. :-D
Pat :-D
I think the general wisdom among the 'pros' is that you should never pay additional on a secured, tax deductible loan like a mortgage while you are still paying higher, non deductible interest on unsecured loans. It's sort of like using a water hose on a campfire while an inferno blazes next to you. Ultimately, the 'right' financial decision is to pay things off by highest interest rate down to lowest interest rate, unsecured down to secured and non-deductible down to deductible. Unless your mortgage is substantially higher in interest rate (after you adjust for the tax break), you should apply that money to the other debt. Now, the 'right' decision for your family may be to pay it towards the mortgage because you WILL pay it toward the mortgage and not spend it in the local restaurant or coffee shop instead. If you're getting the motivation to do it where you might not be as disciplined with the other, keep doing what your doing. This kind of comes back to my good, better, best theory. Is it the best thing to do with that $100 per month? Probably not. Is it a good or better choice...probably.
Take what you can use and leave the rest. ;)
Peg
Donna
Oh, in that case, the $100 per month is not going to make a huge difference in your picture and will help make a difference long term for the mortgage. The only other thing you don't mention is your eFund/Freedom funds so that would be another consideration.
Looking great! Won't it be wonderful to be out from under that car payment? I'm looking forward to that in a BIG way!
Peg
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