[USER]

I have a mortgage that with an interest rate of 3.25% and I contribute an extra $500 towards the principal. Should I not be contributing extra or does it not matter?

I’m currently considering my mortgage payment strategy and would appreciate your insights. I have been contributing an additional $500 monthly towards my mortgage, which has helped me reduce the principal balance faster and save on interest payments over the life of the loan.

However, I’m at a crossroads and would like to evaluate whether this practice is the best financial decision for me.

I have a stable income and an emergency fund set aside, but I’m also keen on exploring other investment opportunities that could potentially yield higher returns.

My main concern is balancing the benefits of paying down my mortgage early against the possibility of investing that extra money elsewhere.

I would love to hear your thoughts on the following: Is it worth continuing to contribute that extra $500?

Are there specific financial factors I should consider when making this decision?

Any advice or personal experiences regarding this would be greatly appreciated!

[Catherine]

I wouldn’t contribute extra because the interest rate is so low. Even if you put it in a high yield savings account they’re still at ~4.5% so essentially you’re losing 1.25% at minimum.

[Steve]

I wouldn’t pay any extra on anything under 4 percent. You can’t borrow money that cheap any more.

Invest that extra money.

If you are conservative, buy an s&p index fund, if you are aggressive, invest in the magnificent 7 stocks.

[Philip]

Invest half, other half against mortgage. That should satisfy all members.

[Philip]

Invest half, other half against mortgage.

[Justin]

Yes, I would. Once the mortgage is paid off, invest what you were paying in the stock market.

[Tom]

Everyone’s situation is to some degree different. The answer to me is to balance growth and stability.

If your income and foreseeable future is looking good I’d invest more.

The more uncertainty creeps into your life I’d focus on eliminating debt.

In my case, we lived on my wife’s income and used mine to pay down debt while investing.

We paid off our 15 year 6.8% mortgage in 4.5 years, while maxing out our 401k and IRAs.

Then we had 15 years of no debt and 100% of my income went into our retirement allowing us to retire comfortably in 2019.

There is no one size fits all formula.

Do what allows you to sleep well at night.
Intentionality is a powerful thing.

[Justine]

I pay extra as I am not retiring with a mortgage when I take early retirement from my career, even at 3%.

When I also ran the numbers, for me the added benefit is that it significantly decreases my monthly retirement budget, affording me to increase my investment pool at a lower tax bracket.

Everyone’s situation is different.

[Sy]

I pay extra because I want it done sooner even though the rate is lower.

If god forbid something happened to my spouse then even this low rate payment would be difficult.

So, peace of mind for me.

[AC]

I would put the extra in a Roth IRA with Vanguard VTSAX and let it ride. Anything under 4 percent is like free money

[Rob]

We each manage our own money. For me, there’s 0% chance I’d pay extra on that. I have a 2.25% and I’ll ride that our for 30 years or until I sell it.

[Chris]

I did and paid off the mortgage early while still investing. That personal choice was due to not wanting to owe anyone and have that peace of mind.

My portfolio is still in great shape.

[Eric]

Your rate of return on the excess payments is 3.25%. Even less if you are able to itemize your deductions vs taking the standard deduction.
The real question is can you out earn 3.25%?

If so, then it makes zero sense to prepay the mortgage as you can retire the debt on your personal balance sheet faster than retiring it with prepayments.

[Rebecca]

I stopped paying extra on my 3.875 mortgage. It’s in HYSA instead now, even though rates are starting to come down.

I’ll reevaluate each time the HYSA rate changes.

[Author]

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