Mortgage Investment and Interest Rates

Invest in Yourself: Invest in Your Own Mortgage and Reduce Interest Charges

As a homeowner with a mortgage and some extra money to invest each month, consider putting those funds toward paying down your mortgage. This strategy offers a safe investment with a high return, compounding benefits, and easy accessibility. Here’s how it works:

Why Pay Down Your Mortgage?

Traditionally, the baby boomer generation was taught to save money in the bank, where it is insured by the FDIC up to $100,000. However, the interest rates on savings accounts and certificates of deposit are relatively low, often around 5.5% and subject to taxes.

An alternative to investing in stocks, bonds, and mutual funds is to apply your extra funds directly to your mortgage principal. By doing so, you reduce the overall interest you pay on your mortgage and potentially save a significant amount over time.

The Savings Math

Let's consider a new fixed-rate mortgage with a starting balance of $100,000, amortized over 30 years at 7% interest. If you pay an extra $25 per month toward your mortgage, you could pay it off 39 months early. Here’s the breakdown:

1. Monthly Payment: $665.31

2. Extra Payment: $25 per month

3. Total Extra Paid Over Loan Term: $8,025 (321 months x $25)

4. Total Savings in Interest: $25,947 (39 months x $665.31)

Net Savings: $17,922 ($25,947 - $8,025)

This translates to an average monthly savings growth of $55.83 ($17,922 ÷ 321 months) or an annualized tax-free growth of $669.96. Given an annual investment of $300 ($25/month), this yields an impressive average return of 223%.

Additional Benefits

By checking out competitive mortgage rates, you might save even more. Investing in your mortgage not only reduces your debt faster but also provides a guaranteed, tax-free return on your investment.

For those still inclined toward traditional investments, exploring resources like [Property Shares Internet](http://www.propertysharesinternet.com) can guide you toward smart choices in both mortgage management and market investments.

Happy Investing!

Anthony Simon