The perfect MP3 player

Chris Strieby cstrieby at gmail.com
Mon Sep 19 09:51:55 MDT 2005


On 9/18/05, Grant Shipley <gshipley at gmail.com> wrote:
> I am not a big fan of paying extra on my house every month.  Lets say
> a house payment was 1000.00 a month but you had 1500.00 a month you
> can spend on a house.  Wouldn't it be better to pay the 1000.00 and
> put the other 500.00 in a savings account?  At the end of three years
> you would have made your house payments and 18000k in a savings
> account.  Then, when you lose you job, you can make your house payment
> for 18 months (while looking for work) as opposed to owing a little
> less but not having the money to make payments with the possibility of
> losing your home.  When you have enough in your savings account to pay
> off your home, do it then.
> 

Surprisingly, paying down your mortgage can have a huge effect over
the lifetime of your loan.  Yes, you could have saved $18,000 by
putting the money into a savings account (more if you want to add the
interest you could earn), but the savings can be even greater by
paying down your mortgage.  Every penny you spend over your monthly
mortgage payment goes directly toward principle and reduces the amount
of interest you'll pay over the life of your loan.

Working from the example you've given of having a $1000 dollar monthly
mortgage payment and being able to pay $1500 toward it, you'd save
approximately $100,000 in interest over the life of your loan and
you'd pay the loan off in about 15 years.  If you're interested I have
more exact figures I could give.  For reference I was figuring a
30-year $200,000 loan with a 5% interest rate.  If the interest rate
were higher, you'd save even more.

I know this a random post, but working for a mortgage company has
opened my eyes to these sorts of things.  In the end, as you've
pointed it out, it's all a matter of where you think your money is
best placed.

-Chris



More information about the PLUG mailing list