I got confused on this thread.
Make sure you don't incur a prepayment penalty
I think the lender will recompute your payments, but NOT the length of
the mortgage (you would have to refinance into a shorter-term mortgage
for that)
While marginally lower payments will improve your cash flow a little,
as John pointed out if you can invest the prepayment at a higher rate
of return than your interest cost on the mortgage (both after taxes),
you end up better off in objective financial terms.
Your preferences and perceptions all play into your decisions. Most
take out a mortgage because they cannot afford to pay cash. But
someone who could afford to pay cask may elect a mortgage loan to
invest the amount in a higher return vehicle (such as stocks,
historically), or to leverage his returns on real estate held for
investment purposes (e.g. interest-only loans).
Many feel more secure and comfortable when all they pay on their house
is taxes and insurance, utilities and maintenance or improvements. If
that is your preference, why not ask the mortgage company (you should
definitely ask them before you write a check what will happpen) about
refinancing into a shorter-term mortgage at the same time?
On Mar 18, 8:57 pm, "John A. Weeks III" <j...@[EMAIL PROTECTED]
> wrote:
> In article
> <28859472-dad5-4d2d-aafb-409c52ef5...@[EMAIL PROTECTED]
>,
>
> Mike <m...@[EMAIL PROTECTED]
> wrote:
> > > Yes. That's 6 months worth of principal. You could knock
> > > off the entirety of your remaining mortgage payments by
> > > paying off *all* the remaining principal. Same idea.
> > Okay, I just wanted to make sure I understood the concept right... it
> > seemed right, but it seemed too easy.
>
> It isn't as easy as it might seem. That money you avoid paying
> is not a savings. In fact, if you can invest your prepayment
> amount in something that returns more, like the stock market
> over time, prepaying can actually cost you far more than what
> you save. You also give up some of the tax deduction.
>
> -john-
>
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