Interest savings: This is one of the biggest benefits of paying your loan off early.Benefits of Paying Off Your Mortgage Early There are many reasons why you might choose either to pay your mortgage early or invest more. Of course, life isn’t just about cold, hard numbers. Investįrom a financial perspective, it’s usually best to invest your money rather than funneling extra cash toward paying your mortgage off faster. If you decided to pay your mortgage early after all, you could use your investment funds and still have $55,293 left over. In fact, after that length of time, you’d have about $105,487 left on your mortgage. That’s more than double your potential interest savings. If you want to be extra conservative, however, we can assume an average annual return of 8% on your investment.Īt the end of 19 years (about the length of time it would take to pay your mortgage early), you would have $160,780. Historically, the S&P 500 has returned an average of 10% to 11% annually since its inception in 1926 through 2018. On the other hand, you could take that $300 per month and invest it in an index fund that tracks the S&P 500 Index instead.
PAYOFF VS PROFIT OPTIONS PLUS
You’d shave off 11 years and one month from your repayment period, plus save $67,816 in interest. Now let’s say that you’re able to come up with an extra $300 per month to put toward your mortgage. Your monthly payments would be $1,013 (not including taxes and insurance), according to our mortgage calculator, and you’d spend a total of $164,813 in interest over the life of the loan. Say you have a 30-year mortgage of $200,000 with a fixed rate of 4.5%. That leaves the opportunity to grow your wealth more through other investments. Especially now, with mortgage rates so low, it’s cheap to hold debt.
PAYOFF VS PROFIT OPTIONS FREE
Being debt free is an admirable goal, but it might not make the most sense financially. You probably dream of the day when you no longer have a mortgage payment hanging over your head. Pay Mortgage Early or Invest: What Does the Math Say? So what’s the right answer: Should you pay your mortgage early or invest your extra funds? Here’s what you should know to help you make a decision. But considering how well the stock market has been performing lately, it might feel like you’re missing out by not investing more. Though you may be a proud homeowner, you probably don’t love the thought of having to make a mortgage payment each month for the next few decades.
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