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Which should I pay more of right now? Mortgage, student loan, or neither. Should I invest instead?
Posted on June 2nd, 2010 3 comments
Nick K asked:
I have a home mortgage for $260,000 and a student loan for $20,000. My interest rate on my home is 6.75% and my rate on my student loan is 3%. My student loan is much easier to pay off since because of the amount and I know I probably will never pay off my home before I end up selling it (I just purchased the home). I know the rate is higher on the home but I’m not sure if it’s worth putting more towards it if the payments are going to stay the same regardless. Just more principal will be paid off. It does not seem to be the best time to invest but it may be my best way to beat the system. My savings account is yielding 4% but has been dropping lately. I don’t have an auto loan because I made the mistake of leasing a car 2 years ago so I’m paying those payments when I wished I had bought instead.Any advice from people who have been in this situation before. I’m a new home owner looking to get the most for my dollar.
What’s your opinion? Any good tips out there?
NelliePersonal Finance Advice From, Auto Loan, Best Time, Home Mortgage, Interest Rate, Invest, Leasing A Car, Leasing Car, Mistake, Mortgage Loan, Principal, Savings Account, Student Loan3 responses to “Which should I pay more of right now? Mortgage, student loan, or neither. Should I invest instead?”
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The best advice I’ve heard is that it is better to pay off amounts owed than to earn interest on money you have. Usually the interest you earn is a lot less than the interest you are paying out.
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themurph2000 June 3rd, 2010 at 12:57
I guess it depends. If the student loan is from the government, they are typically a bit more forgiving than your bank will be with your home. The bank can seize your home if you don’t keep up with the payments. Not to mention, what you’re paying on your mortgage right now is about 90% interest. I’ve had my home 3.5 years, and only about 4,000 of the over 45,000 in payments I’ve made thus far have gone back to the principal.
Keep making the payments on the house for now, make the minimum payments (if you can) on the student loan, or see if they’ll refinance it for more payment periods (and thus less per month) If you have any credit cards, take the highest-interest one and pay that off first, then work your way down.
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Make your normal mortgage payments and get rid of that pesky, student loan. They are like making payments on a candy bar you ate years ago. Once it’s gone, concentrate on doubling up on the home.
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Em's_The_Word June 2nd, 2010 at 22:55