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I have 13 years to go on a 15 year mortgage. The interest rate is 6.25% (VA loan). I determined that I can pay an additional $750 per month and pay this loan off completely in a little over 7 years.Am I betteroff doing that or taking the $750 and investing it? I realize that the savings in interest is not "taxable" income whereas the gain on the investment would be taxable income.
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Did you ever get a response to your post. I'm in a similar position and deliberating whether to start accelerating payments or not.



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Subject: Paying off mortgage
Author: lou1040 Date: 5/2/00 11:58 AM Number: 10927
I have 13 years to go on a 15 year mortgage. The interest rate is 6.25% (VA loan). I determined that I can pay an additional $750 per month and pay this loan off completely in a little over 7 years.Am I betteroff doing that or taking the $750 and investing it? I realize that the savings in interest is not "taxable" income whereas the gain on the investment would be taxable income.
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<Subject: Paying off mortgage Author: lou1040 Date: 5/2/00 11:58 AM Number: 10927 I have 13 years to go on a 15 year mortgage. The interest rate is 6.25% (VA loan). I determined that I can pay an additional
$750 per month and pay this loan off completely in a little over 7 years.Am I betteroff doing that or taking the $750 and investing it? I realize that the savings in interest is not "taxable" income whereas the gain on the investment would be taxable income.>

I'm not going to do the math for you, and while I applaud your desire to pay off your mort early, that IMO is entirely too aggressive a principal paydown schedule. You don't mention what the size of your standard pmt is, but I assume if it's a VA loan it's not $5000 a month or anything like that. That's just too darn much to pay into a one-way savings account IMO. You have such an exquisitely low rate on your loan. You can't easily get that money out and if you do, it's certain to be at a significantly higher rate.

I went through the same mental wrangling when I bought my first house and ended up overpaying the payment by about $350 a month on (as I recall) about an $1100 payment. After trying to figure it out 18 different ways I came to the conclusion that the first $100 extra prin does most of the work. $750 is just too flippin' much IMO. I suggest you calculate how much $100, $200, $300 extra a month would shorten your mortgage. I think you'll be surprised. Don't be so afraid of debt on something that you get good use from. If you can even contemplate sending an extra $750/mo, then it's clearly not hurting you cashflow-wise. You can STILL buy CHC at 11-7/8 and get a 8.6% dividend, 97% tax free, amounting to about an 11% return, and cash out of it with a mouse click if need be.

AL:LA
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