If you put money in your bank savings, you’ll make around 1% or less nowadays. Plus you pay income tax on that interest. However, if you contribute that same money or something extra to your mortgage payment every month basis instead, you will earn at the mortgage interest rate you are paying. And that is guaranteed rate of return since you are paying down your own debt! In most cases that is 4 to 5 times more than you’re getting at the bank.
The benefits of sending additional principal contributions to a mortgage include, saving interest, paying off debt early and building equity at a much faster pace. An extra $100 a month in our previous example can save thousands of dollars in mortgage interest and greatly reduce the length of the mortgage overall.
Reducing the burden of housing costs is another way to accentuate the investment in your house. Ending up debt-free is a notable goal that is obtained with discipline and smart well executed decisions. Suggestions like this are part of our ongoing education to help clients, friends, and acquaintances be better homeowners when they buy Northern Virginia Real Estate, sell, invest, refinance and the time in between.