Should I invest spare cash or reduce my mortgage?
I have $10,000 to either invest or put into my mortgage. My retirement savings are on track and as I am a low-risk SRI type of investor, my ROI is roughly two to three percent above my mortgage interest rate in a good market. My monthly mortgage payment (including taxes and insurance) is about 45 percent of my monthly take home income. My total mortgage is about 44 percent of the current value of my home, but since home prices are currently high in my area I am concerned that ratio could go up. Should I invest this money or reduce my mortgage?
Ww you are right at the max on that debt to income ratio to qualify for a mortgage. With that in mind I would say I'd like to see you invest the $10,000. If you use your SRI fund in a non-retirement account this can act as an extended emergency fund in case you ever need more for home repairs etc.
Putting that money towards your mortage will save you interest over the life of the loan but will not lower you payments now. Also depending on your mortgage balance paying your mortgage down is not as beneficial under the new trump tax plan morgtage rules.
Great question, but it’s tough to answer given the limited information. Without knowing the specific amounts, it’s hard to say for sure. You would probably be better off investing the money vs. putting it toward the mortgage. To know for sure, I’d need to know your age, your savings rate, your current investment portfolio size, your current mortgage details (balance, rate, term) among other things. I’d be happy to provide additional guidance if you can fill in a few blanks for me! Feel free to contact me if I can be of assistance.
Thanks for your question!