Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 0
This will be just enough to cover your (simple, not compounding!) mortgage interest

Interest is interest. There's no difference between "simple" and "compounding" interest.

The only difference is whether you can earn the same rate of return on an investment in the future.

Paying off your mortgage is the same as investing in an no-risk perpetual bond with a coupon the same as your interest rate (but that you can't sell). I'd argue that this interest does "compound": When you prepay on your principal, the amount of your future payments that goes to principal increases.

But when you've paid off your mortgage, you can't make further investments into it.

Still, you should make your cash allocation decisions based on what you believe will earn you the best long-term rate of return at a risk you're comfortable with.
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.