Mortgage / Investment Question

B

beckman55

New member
Joined
Jun 4, 2010
Messages
4
Currently I'm renting my home out and was wondering how I should invest my money. Here are the facts:

Mortgage $811.67
Taxes $189.34
Assoc $167
Total - Assoc $1,001.01
Total $1,168.01

Mortgage Left $147,881.30 28 years 8 mo 5% interest

Rent + $950 /month

What is my best option:

1) Continue to pay my mortgage at $1,001.01 along with paying the $950 towards the principal each month or

2) Invest the $950/mo into a CD, bond, etc at a certain percentage?

If option #1 what is my gain each year?
If option #2 what is the minimum % interest I would need for it to make sense

Thanks in advance
 
Kwicky answer: paying 950 against mortgage means you're "getting" only 5% (mortgage rate).
So invest IF at greater than 5%.
 
But paying down the principal twice as fast...means less interest paid on the loan, etc.
 
I plugged some numbers into a mortgage calculator and a compound interest one.

Paying that $950 to my mortgage gives me a rough 10 year payoff instead of the 30 years - saving me $98,422 in interest. The chart had a pretty straight line so I think it's safe to say I'm making $9800 a year.

I ran a compound interest calculator over 3 years to get an idea and at a monthly $950 mo addition I would have to get 33% interest to match the $9800 a year with the mortgage.

Someone let me know if I'm crazy...I just tried to logic my way through it.
 
I caught myself and decided I should do 10 years on the compound interest to make it apples to apples. Now I'm really confused haha.

At $950mo or $11,400 yearly addition over 10 years with ZERO interest = $114,000

So I might pay $98,000 more going the full 30 years but I make more than that in 10 with ZERO interest let alone stopping at that point and just collecting interest alone with no more investment.
 
Let's use mortgage balance = 148,000 and current monthly payment = 812 (no need to be penny-precise!).
We also have 28 * 12 + 8 = 344 as months left. Let's assume you can invest at a modest 6%.

1: apply 950 to mortgage
=====================
Payment will be $1,762: mortgage will be repaid after 104 months.
After 104 months, you can invest the $1,762 monthly at 6%.
After 240 months (344 - 104), you'll have accumulation of $814,116 *****

2: start investing $950 at 6% right away
==================================
After 344 months, mortgage is repaid.
After 344 months, accumulated ($950 per month) will be $866,523 *****

*****866,523 - 814,116 = 52,407

Get my drift?
 
You must log in or register to reply here.
Top