Personal Finance (Not Investing) • First Post - How to pay off low interest mortgage?

Would Bogleheads advise having this 2.25% mortgage paid ahead at all (1,3,6 months etc) right now to hedge against unforeseen circumstance?

I think the answer to this depends on the size (and stability) of your emergency fund. If it's big enough there's no reason to pay ahead.

Aside: Would your mortgage company even allow you to do that? I'm pretty sure that if I send mine a bunch of extra cash they would apply it to the principle, not to the next n months principle + interest + escrow.

Op here:

To clarify - The current mortgage servicer has an option to make extra P+I payments and push out the next due date....

This is an interesting option and could be handy to have a month or two of breather room for unexpected events. What it does not do, however, is lower your total interest. Sounds like your next payment amount of P + I is the same, not matter what. You get some flexibility but don't save any money. That could be worthwhile to many people.

...and a separate option to make extra payments on just the principal which has no impact on the next due date.

This one actually lowers your principal which results in a slightly lower interest amounts on future payments. It does not give you any months of breathing room...you must make your next payment on time anyway. But in the long run will save some interest if you do it each year.

With your ultra low interest rate, I don't think the second option helps you any financially at all. But the first one could be nice.

Statistics: Posted by retiredjg — Sat Aug 24, 2024 2:40 pm — Replies 47 — Views 2922

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