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Comparing Adding More into Savings or Paying Extra Mortgage Principal Payment

Thursday, May 13, 2010 - 7:33 AM
Is making extra mortgage principal payments a good investment? Jonathan at MyMoneyBlog reviews this question. He compares it against another safe investment, long-term Treasury bonds. There are some advantages with paying extra on your mortgage, but there are some downsides such as the loss of liquidity.
1
Ken TuminKen Tumin5,469 posts since
Nov 29, 2009
Rep Points: 125,077
1. Thursday, May 13, 2010 - 1:50 PM
Don't forget that in an inflationary environment which we may well be entering it is good to have debt because it gets inflated away. Most people pre-pay mortgages for emotional reasons or because they have poor impulse control and would just spend the money elsewhere.

More logical minds realize debt is good in an inflationary environment.
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AnonymousAnonymous2,282 posts since
May 9, 2010
Rep Points: 3,922
2. Thursday, May 13, 2010 - 4:13 PM
Debt is only good in an inflationary environment because the intrinsic value of your dollars is worth less than before.  However if you have one of those adjustable rate loans or mortgages, having a high unpaid balance will hit your pocketbook since you have to pay out more dollars each month.  The best scenario is not have any debt regardless of the interest rate trends.
1
AnonymousAnonymous2,282 posts since
May 9, 2010
Rep Points: 3,922
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