QDoes It Make Sense To Prepay My Mortgage Or Should I Use The Money To Invest Elsewhere?
APre-paying your mortgage shortens the term of your loan which will save you thousands of dollars in interest. As a general rule, on a 30-year mortgage, you save $3 for every $1 you pre-pay. You get back $2 for every $1 you pre-pay after taxes. So, pre-paying your mortgage is a risk-free and easy investment. Even rounding your monthly payment up to the nearest $100, it will save you money over the long term. (If you pay $989.00 each month, write a check for $1,000.00). For instance, if your mortgage rate is 6 percent per year, that's what you'll earn on your pre-payment. Compare that return with what you'd earn in other comparably safe investments. However, don't forget to weigh the advantages of pre-paying your mortgage against paying off debt. If your credit card interest rate is 19 percent, it doesn't make sense to pre-pay your 6 percent mortgage before paying off this higher-interest debt.