When it comes to saving money, especially for your future, it can be hard to decide where to put that money to get the best bang for your buck. If you have loans, like a mortgage, you might consider an early pay-off. What feels better than being debt free, right? But building wealth can be tricky.
When it comes to saving money, interest rates rule the world. You want your money to earn more than it would cost you elsewhere. So, if your rate of return on investing is more than you would save in paying down interest, then investing would earn you more money and be a smarter option. However, if your mortgage interest rate is higher than your rate of return on investing, then you would save more money by paying down aggressively on your mortgage instead.
Before you start down either path, it’s important to make sure that the rest of your finances are in order first. Are you already contributing to a 401k or IRA and are you maxed out? Do you have an emergency and savings fund already established? What other debt do you have – student loans, credit cards, etc.?
Once you have all your finances in order, you’ll be better prepared to choose. If you find that mortgage rates are much lower than your current rate and paying down your home early will net you the best rate of return, you may even consider refinancing your home vs. just paying extra on the principal. You can learn how to tell when refinancing your home makes sense by checking out this blog: CLICK HERE.
Investing in the stock market is always a gamble. Your returns are not guaranteed, and they aren’t always consistent year after year. You may want to start conservatively until you feel more comfortable. A financial advisor can guide you on the best investments for your personal situation and how much money you feel comfortable investing.
Retirement is a long-term goal that requires a lot of thought and careful planning. Your first step should be gathering up all your financial information, including 401k/IRA information, mortgage information including interest rate, savings account balances and interest rates, and any other debt you have. Then consult a financial planner to determine the best path for you to take.
If you have questions about refinancing your mortgage, how much money you may save, and how many years you can knock off your mortgage by refinancing, we’d love to help. We believe every customer counts and when you achieve your financial goals, we celebrate in that success with you. Stop by any of our convenient locations or give us a call.
Vice President, Senior Mortgage Lender
NMLS MLO ID: 532621