Discover how to get lower mortgage interest rate charges and a better way to invest in yourself. Yes you can actually get a return on your home mortgage loan!
I’d like to start with the idea that you are a homeowner and currently pay your monthly mortgage and at the end of the money there is some disposable income left over to be used to invest in something. As such, what type of investment are you going to put your money in? Bond funds have really low returns so you are going to find something that is safe, but worthwhile. Something that has a monthly or even a yearly compounding effect as well as the fund being accessible (liquid) is a good start.
The generation of the 1950 and 1960’s, known as baby boomers always believed that putting their money into a safe place like a bank CD or bank money market account was a good idea. Many did it including my parents. Bank products are insured by the FDIC. So if the bank goes belly up, your money is not at risk. You simply go to another bank and open an account with what you had in the other. Unless your core beliefs are to use only certificates of deposit or money market accounts, then expect to receive returns maybe a half percent. More like a tenth of a percent, plus you get to pay income taxes on those small earnings!
Instead of trying to invest in bonds, bank products, IRAs, SEPs, stocks or mutual funds how about considering using the extra money you have to pay down your mortgage principal. . So in other words each month pay your mortgage payment plus some extra. My personal feeling is that money saved is money earned. The money being saved in this scenario is what you would of paid into the interest of your mortgage loan.
A Little Extra Money With Big Returns – Here’s The Savings Math
Were going to use a fixed rate mortgage that has a starting balance of $100,000 and it is amortized over thirty years at 7%. By paying an extra $25 per month we would pay this mortgage off 39 months early. Check my math, but I calculate that would save us 39 (month) x $665.31 (monthly payment amount) = $25,947 minus 321 months that we made extra payments each of $25 or a total of $8,025 would leave us $17,992 in savings growth. $17,992 divided by 321 months is an average of $55.83 a month in tax free growth. Annualized that amount for a yearly average of $669.96. Divide that by our yearly investment of $300 ($25/month) and we get a whopping average return of 223%. This is something that every homeowner should seriously consider.
The interest in an amortized mortgage loan is what is actually being paid (credited) in a monthly mortgage payment. Not much money gets credited to the principal, especially in the first 15 years of a 30 year loan. I hope this article is able to illustrate a way to save money on mortgage loan interest. However the choice is now yours as to invest in Wall Street products, what’s offered at your local bank, or anything else that comes your way.