BellaOnline Forums Money Home Ownership Should I pay the mortgage off?

I would like some input as to what you all would do in this situation. If you had the option to pay your mortgage off by making extra payments to the principal, would you do it?.... OR....would you put all of the extra money (and pay only the minimum towards your mortgage) into a high interest-bearing account of some sort (say, 8% if that's even likely to get) and pay off the mortgage whenever you've accumulated enough cash?

Let me know what you would personally do. Thanks!

Hi Katie

Welcome to the forum and thank you for posting your question here?
Your desire to pay off your mortgage is a great thing. These are the things to consider. What is the interest rate on your mortgage? Is it less than a high interest bearing account that you can deposit the money to? Savings account interest rates have come down recently. Do you have some savings that you can fall back on in case of emergency?

Honestly, we did do this with our mortgage several years ago. We had a 30 year mortgage at 6.875% to which we paid an extra $100 per month to principal. In a very short time, we had reduced the length of our mortgage from 30 years to 22 years. When the rates fell, we refinanced to a 15 year mortgage at 4.875% fixed rate and our payment was $20 cheaper as the 30 year payment plus the $100 extra. And we cut off another 7 years. Now I'm not saying that there are fixed rates out there like this. But by reducing your principal each month, you are reducing life of the mortgage plus interest. When I was in mortgage operations, some people wanted to put every last penny they had towards their purchase. I would tell them to keep some for emergencies and prepay the principal each month. If something comes along and you can't make that extra principal payment, there is nothing lost. It is not mandatory.

It is my belief that getting rid of that mortgage payment is the best thing that you can do. It is usually your biggest bill to pay and your biggest investment and to own your home clear and free is a great thing.

So in a nutshell, not many accounts are going to give you such great interest on savings plus you will pay taxes on that interest. As long as you have some back up emergency money, try to get rid of that mortgage as soon as possible.

Hope this helps.

Rosemary
Editor-The Home Ownership Site

I think the best interest rate I've seen on even high end accounts is 4.5% right now - so unless your mortgage is somehow below that, it is in your best interest to pay the mortgage off with any money you have!

Or did you *really* see 8% somewhere?? If so where?

I haven't been able to find any worthwhile savings rates out there. I saw a credit union advertising this: deposit $100 per month for one year and you will get 7% on the first $500 and 2% on the rest. They have got to be kidding. Why bother doing the paper work!

Rosemary
Home Ownership Editor

I can only go by what I've been reading -

Suze Orman wrote in Women and Money - pay off the mortgage and give yourself peace of mind. This is especially true for women and more so if they plan on retiring in that house.

Smart Women Finish Rich by David Bach said basically the same thing - it's the American dream to own your home and it's securing peace of mind for yourself in retirement.

My suggestion too, you may want to seek the advice of a professional, maybe a financial planner.


~Sharon