I have a 15-yr mortgage for $175,000 at an interest rate of 5.25%. I have a checking account with $33,000...?

Question

I have a checking account with $33,000 which earns 5.1% APR interest.

Is there any reason why I should put the money toward the house? Would I save a lot of money in the long run by doing that?

I don't get how amortization works. Would it be better if i paid down the mortgage?

I do like having a lot of money liquidated and making interest. But is this a bad decision??

Answer 1

If you're half through the 15 year mortgage, you paid about 70% in interest. That's how banks and mortgage cos make their money. If it's fairly new, and you have the amortization, the last to rows should be  "Interest"  Ptincipal. If you pay the add'l principal, when you make the extra payment, you saved next months interest. The monthly payment stays the same until paid in full.

Answer 2

I'd like to know which bank is paying 5.1% on checking right now.

Answer 3

Well, if there are no penalties for paying early, you should use the cash in your checking account to pay your mortgage. Make sure you remember however, that you need to have around 3-6 months of income in a liquid account just in case something happens. So depending on your situation, pay as much toward the mortgage as you can, because you are paying more interest than you are getting.

Answer 4

Keep the cash. You should always have 6 months to a year of living expenses saved.

Answer 5

If you pay down the mortgage with the $33,000, your payment is permanent - you can not get it back.  It will increase your equity in the house but not your liquidity.

That is a great rate for a checking account, and it's very close to the interest rate you're paying on your mortgage.  The only advantage to paying down your mortgage would be the interest savings, and if you're able to receive a tax deduction for your mortgage payment, then you're not that far ahead by paying the mortgage early.

If you have no other savings, then keep the $33,000 set aside in case you lose your job or you're hurt and cannot work for awhile.  That way, you can make your mortgage payments until you get back on your feet again!