Wednesday, July 05, 2006

Extra $7200 to Equity Today

Today, as our mortgage payment processes, we've made an additional $7200 payment to our principal balance this year. Our fixed rate is 5.125%. Because interest earning rates have been below that, we've made extra 1/2 payments each month for a year, as a guaranteed return that's extremely safe (thousands of dollars in interest spared).

Now that savings and Money Market rates are paying nearly 5% (Vanguard's Money Market fund is currently paying 4.95%) it's time to reassess whether the extra principal payments or stashing the cash makes sense. Because we're already maxing out 401(k)s and IRAs, only taxable options remain. Thoughts?

2 comments:

Nick said...

I think at this point you're only talking about a difference of a few dollars one way or another, so it's probably more a matter of personal preference as to whether you put money toward the mortgage or in savings. But I have a feeling savings rates will hit 6% before long, so the decision will become much easier for you to make in time.

the Prince of Thrift said...

great work on the extra payment