No. of Recommendations: 12
I just love paying off things, spreadsheets and what-if.

And by paying a mortgage down you get rid of your mortgage quicker - bam - and on auto-pilot- you get it at a lower interest cost. Really! Pay it off earlier.

Putting more on principal, to reduce the mortgage, adding onto your mortgage payments is a no-brainer.


Kind of a brainer.

Let's open up a spreadsheet and do some what-ifs. Let's say you have a $250,000 mortgage at 4.5% and pay an extra $100 per month. You wind up paying off the loan four years early. Nothing wrong with that.

Now, let's say you put $100/month in an nice index fund and get 7% per year for 26 years (realistic, yet conservative). At the end of that time, the fund has $85,000, and something like $43,000 left on the mortgage.

There are still two more steps to make this an apples to apples comparison. In the first scenario you are now free to invest your mortgage payment, and in the second scenario you still have to make your mortgage payment. So you have to take into account those four years of payments to come up with the final comparison.

But to make it easy, let's just say in scenario B, you simply pay off the note, leaving you with no mortgage and roughly $40,000 in the bank, verses scenario A, where you simply have no mortgage.

One of those things is a lot better than the other.
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