3 ms·

You should be able to pay off your mortgage and still maintain & increase savings. If you can't, you have too much mortgage.

mod 11y ago
Is there a reason, generally speaking, why you shouldn't use the excess money to pay off your mortgage faster, rather than increasing savings? (Assuming you already have enough savings to cover emergencies etc)
- patejam 11y ago
  If your mortgage interest rate is less than your investment account rate.
  - ghaff 11y ago
    After tax. Adjusted for risk. There's also the liquidity angle (which might be mitigated on the pay the mortgage early side with a LOC).
lmm 11y ago
I've been overpaying on my mortgage by 150% all year; that's the money that I would otherwise have saved. Savings account would give me 3% tops; stocks would give me more but not risk-adjusted more. Paying my mortgage off early is 4.2%, risk-free. Am I being dumb? It's quite possible there's something I've missed.
- AjithAntony 11y ago
  Long term fixed rate? Why bother paying early. Interest rates must rise eventually. If even if they don't the future dollars are much cheaper anyway becuase inflation won't stop. In real terms, your interest rate goes down every year, to the point where is can reach 0 or negative. Locking the money in the house means opportunity costs to take advantage higher rates later.
  - lmm 11y ago
    Medium-term I guess. I've got 2 years left on the fix, then it floats. Everyone says rates have to rise eventually. But so far we've gone 7 years of near-zero rates. If there were a dramatic shift I could take a payment holiday and put it all into savings, but I doubt I would. As for inflation, it affects any form of saving equally - nominal 4% interest is better than nominal 3% whatever that is in real terms.
- AjithAntony 11y ago
  Long term fixed rate? Why bother paying early. Interest rates must rise eventually. If even if they don't the future dollars are much cheaper anyway becuase inflation won't stop. In real terms, your interest rate goes down every year, to the point where is can reach 0 or negative. Locking the money in the house means opportunity costs to take advantage higher rates later.

mod 11y ago

Is there a reason, generally speaking, why you shouldn't use the excess money to pay off your mortgage faster, rather than increasing savings? (Assuming you already have enough savings to cover emergencies etc)

patejam 11y ago
If your mortgage interest rate is less than your investment account rate.
- ghaff 11y ago
  After tax. Adjusted for risk. There's also the liquidity angle (which might be mitigated on the pay the mortgage early side with a LOC).

lmm 11y ago

I've been overpaying on my mortgage by 150% all year; that's the money that I would otherwise have saved. Savings account would give me 3% tops; stocks would give me more but not risk-adjusted more. Paying my mortgage off early is 4.2%, risk-free. Am I being dumb? It's quite possible there's something I've missed.

AjithAntony 11y ago
Long term fixed rate? Why bother paying early. Interest rates must rise eventually. If even if they don't the future dollars are much cheaper anyway becuase inflation won't stop. In real terms, your interest rate goes down every year, to the point where is can reach 0 or negative. Locking the money in the house means opportunity costs to take advantage higher rates later.
- lmm 11y ago
  Medium-term I guess. I've got 2 years left on the fix, then it floats. Everyone says rates have to rise eventually. But so far we've gone 7 years of near-zero rates. If there were a dramatic shift I could take a payment holiday and put it all into savings, but I doubt I would. As for inflation, it affects any form of saving equally - nominal 4% interest is better than nominal 3% whatever that is in real terms.
AjithAntony 11y ago
Long term fixed rate? Why bother paying early. Interest rates must rise eventually. If even if they don't the future dollars are much cheaper anyway becuase inflation won't stop. In real terms, your interest rate goes down every year, to the point where is can reach 0 or negative. Locking the money in the house means opportunity costs to take advantage higher rates later.