Is it better to 1) pay down your house loan considerably OR 2) invest your money OR 3) both?

Question

If you have a disposable income of $1000 to $1500 per month, would it be better to pay down your house with the money, or invest the money (even though I have no idea where to even begin and there is NO way I will get a broker to do it) or divide the money maybe and do both?

Answer 1

Its always good to put away money but paying off your house will lead you to a place in your life where you don't owe anything. At that point everything you make can be spent without worry.  I would put away some money but my focus would be on paying off my house.

Answer 2

The simple answer is to invest your additional money in a safe, secure and liquid investment.  You gain no financial advantage by paying down your mortgage and in fact decrease your tax deductions at the end of the year and place yourselves at additional risk of loss in the event of disability or job loss because you will have no savings to carry you through.  Think of it this way, you can either give your money to the bank which will simply shorten the term of the loan and provide you no other benefit or you can invest your money in the "Bank of You" so that you earn a rate of return on your money and so that you are liquid in the event of a catastrphic loss, disability or job loss.  By keeping yourself liquid you will have the money to carry yourselves in the event of job loss or disability.  However, if you pay all of your available cash into the house and then lost your job you would not qualify for a loan regardless of your previous on time payment history or the amount of available equity in the house.  It has been said that a house is intended to house people not money.  So keep your money working for you in a safe, secure and liquid investment vehicle.  And maintain your higher tax deductions so that you keep more money in your pocket at the end of the year.  To learn more about available investment vehicles you should contact a Certified Financial Planner in your area.  If you need a referral to a Certified Financial Planner give me a call.  If you want to learn more about Mortgage Planning and how to use your mortgage loan as the centerpiece of your overall financial plan to help you achive your short and long term financial goals and increase your wealth and net worth then contact me.

Terrence Tormey - Mortgage Planner - Benchmark Lending

Office: [phone] - [e-mail] - www.BenchmarkLendingSolutionsUSA.com

Answer 3

If your mortgage is fairly new, request an amortization that will give a break down between interest/principal. You should be able to pay at least an add'l 300 per month to bring down the interest.. The rest you can put away in high yield savings or 3 to 6 month CD's. I would not play the stock market because the rtns are not as good as they were 20 years. Better to be safe than sorry later.

Answer 4

Good question.  You're right about not using a broker.  Do it yourself as much as possible.

I think you have to find a way to do both.  One thing I've learned - at least, it's very important and works for me - is to never go overboard with any one investment strategy/decision in the short term.  You might be able to totally pay off your credit card today, but if that means you have to use it again to buy groceries, there's no point.

So try to do a bit of each, to be moving towards your goals on each all the time.  Or you could alternate month-to-month.  

As for investing, I'd go with dividend-producing companies like JNJ (Johnson and Johnson) etc. that grow and are consistent earners.  Enrol in their DRIPs.  I talk alot about that on my site, feel free to contact me if you want.  I really think they're almost a free lunch for a lot of people, they can be a great way out of the rat race.

MoneyEnergy

http://www.getmoneyenergy.com

Answer 5

With the economy in such bad condition presently I would stick with paying down the home...

When your house is paid for you can have something to show for your money and that would free up probably another 1000/month then you could play the market

If you still have 20+ years on your home then I would pay half of the extra income to the home and put the additional money into a money market account.. They are high interest and you have no chance at losing your hard earned money..

Also, Have you thought about retirement....

Maybe that extra money should be going into an IRA

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Answer 6

in my (no where expert) opinion your home is the best investment you could make. so I'd say put it all into your home.