Hi all,

I been fighting with the wife for an issue. She wants me to pay $100 extra towards mortgage principle which I think it is not worth it. Our conversation and debate went nowhere because we always fight because she is always right. I told her to call the mortgage company and see how many years we actually going to pay it off sooner by paying a $100 per month extrac for the principle - then she got mad. I then gave her a scenerio saying instead of paying an extrac $100 every month, why don't we save that money in the bank and then pay to the mortgage company every 5 or ten years. That way at least we get some interest - she got mad by saying bank only offer 3% while the mortgage is 6.25%.

anyway, I need advice here. I still don't see paying $100 extrac to the mortgage co. will do much good. I rather save those money in a saving acct or better yet in a mutual fund acct. What the pros and cos on this issue? thanks.

cyclone, your wife is RIGHT!

You have to look at this another way......

YOU ARE earning 6.25% in a reverse sense on that extra $100 paid toward the principal on your mortgage by NOT having to pay 6.25% interest on that $100 extra payment over the life of the mortgage.

Consider this.... a $200,000 fixed rate mortgage @ 6% interest has a principal and interest payment of $1,200 per month. That's $14,400 dollars per year one HAS to pay from current income.

By paying off the mortgage as soon as poosible the $14,400 PER YEAR stays in your pocket as YOUR money.

Look at this another way, what's the cash equivalent one would have to have on deposit @ 5% interest to generate income of $1,200 per month or $14,400 per year?

The answer is $288,000!

I believe both you and your wife would be quite pleased with yourselves if you had $288,000 cash on hand and were debt free with no mortgage payment.

Your wife is right!

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert

Gary hit the nail on the head. Placing any extra money on your home each month will save you money in the end. I will take this one step further though. You need to get on the same page with your wife regarding financial goals and priorities. Remember that money is near the top of the list for reason for divorce in the United States. Sit down once a month and create a budget, develop spending and saving priorities and overall financial and life goals.

With that said, it may not be best to put that $100/month into the house. I would look to do several other things first: 1) Make sure that you have some money in the back for an emergency fund, 2) Pay off all consumer debt such as credit cards and student loans, 3) Work on retirement by maxing out a Roth IRA for both yourself and your wife as well as contributing to a company matched 401k if available, 4) Put money away for the kid's college fund if applicable and something you wish to help them with, 5) Pay down to mortgage, 6) Start investing in mutual funds.

It is imorprtant that you and your wife get on the same team when it comes to financials. I agree with that.

A budget plan may also be benefical.

I have to completely disagree whenit comes to mutual funds.

Persoanlly, I thik that will be among the worst financial mistakes any investor can do but that's just my opinion. Many will disagree.

Follow the crowd and you will be left out.

Start an emergency fund instead (unless you already have one). If you only plan to put the $100 in a savings account then listen to your wife...put it towards mortgage payments (personall, I wouldn't do that).

Otherwise start an investment account. Put the $100 in to a money market account and accumulate a certain amount.

Keep your optios open...you will have many choices.

The first thing you need to do is sit down with your wife and discuss what you want to do.

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It is not smart to play it safe but it is safe to play it smart.

Save your money and invest it on something else.

Refinance and get a 15 year mortgage and then just pay that one off.

SCCA, that sounds good.

Cyclone,

Before you just throw a $100 on your mortgage I would want to know more about your overral financial picture. With the information you listed I would want to see if you would be able to get your mortgage interest rate lower, next as already mentioned do you have an emergency fund? Next question would be the debt load, are you liquid? Do you have any children? Do you contribute to you and your spouse's 401k or any other qualified retirement plans and how much? The list goes on and on to gather your overral financial blueprint.

Before you take up others advice you need to take a snapshot of where you are, how you got here and where you and your spouse want to go. This will open up the picture and let you see exactly where the best use is of your "extra" cash flow that will accomplish your goals both in the short and long term. Let me know if I can be of further assistance. We create these kind of plans everyday for our clients and stay with them as their personal financial advisors without the hassle and exorbant fee's that most charge. I guess you can say we are truly here to help you!

__________________
Alex M. Ramirez
Founder & CEO
Trusted Mortgage Pro

Interest that you pay on your mortgage is tax depuctable. No other interest is.
If you have extra money to pay to anything, I would pay off the high interest rate credit cards.

Try reading these books "Missed Fortune 101" and "Rich Dad Poor Dad", they may give you some ideas on what to do with that extra $100.00.

Paying off your house sounds really good, but what happens if you need cash and all of it is tied up in your house.

Good Luck