Paydown Home Mortgage vs. Invest
Hi Terry,
My wife and I disagree about the best use of extra income $$. We have an extra $300 a month above our budget. My wife thinks we should use it to pay down our mortgage. We are 10 years into a 30yr, 3.5% fixed, $650 monthly payment. I roughly calculated that we could pay off the mortgage in 10 to 12 years with the extra $300 a month. I think we should invest the extra $300 into our Roth IRA so that we have available funds when our kids are college age in 8 and 10 years. Which option will get us the best return on our money?
Thanks for your wisdom,
Terry Says
With kids that young, I have a third — and I think better — option. Open a 529 college savings account and put that money away every month to grow tax-FREE for college! It can be shared between your two children. And if one gets a scholarship the other can use all of it. Read this article explaining how they work.
And while you’re at it — consider refinancing your mortgage to a rate below 3%, while rates are low. It will be worth it. You might even shorten the term to a 15 year loan, which may not lower your payment but will get it paid off faster. Yes, you can do both!!
