Do you own your own house or apartment? How big is your mortgage? We took out a mortgage that was over $400,000 on our home about one and a half years ago. I was always under the impression that it was great to take out a mortgage because you can leverage your savings and use that additional money to invest and make more money (8% +) investing than your interest rate (our interest rate is about 4.25%).
So why pay down your principal early?
It wasn’t until recently that I changed my mind and now am paying down my mortgage early every month. Thanks to me reading Tony Robbin’s book Money Master The Game. To me the numbers don’t lie. I went to bank rate.com and put in my mortgage info and tested different additional principal payments. Here are the results:
By paying down an extra $1,500 per month I will save a whopping 188K in interest over 14 years. Yes, at a tax rate of 20% it will cost me 37K in those 14 years I am not paying interest so the net true effect is really 150K or so. Are you curious how much you can save in interest, view your calculator HERE.
Pros & Cons
This blog post is not going to cover the pros and cons of paying down your mortgage early but I found a few articles and blog posts about the pros and cons for you.
If I can be debt free in 15 years and save over 150K in interest (less tax effect), to me that is achieving financial freedom. It is simple as that – live debt free. In order to do this, Tony Robbins, argues that you can pay off your mortgage with pocket change. Write your normal check to the bank for your mortgage payment and write a second check for additional principal that month. If you are early on in your mortgage like I am your principal payment will be relatively low. I have taken a step further as my current principal payment is $600 and I am paying 2.5x that amount.
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David & Lynn’s Twenty-Eight-Plus-Blog
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