Mandy: Extra Mortgage Payment

Since I was feeling rather more flush with cash than usual, I decided to make an extra payment on my mortgage this month. It was so easy! I have it set up for electronic payment from my bank anyway, and if I send them an amount that doesn’t match the monthly payment exactly to the penny, it’s automatically taken as a payment against principal. It took about 5 seconds to send them $2,000.

There’s always the debate as to whether it’s better to hang onto the cash if you have a mortgage at a relatively low interest rate. Right now, I feel like interest rates are so low for savings that paying something off on my 5.85% mortgage is a very good investment. The other issue is liquidity, but I have enough cash on hand right now to cover my expenses for about a year, so I’m not too worried about shifting this $2,000 into equity I can’t easily access right away.

Someone might argue that real estate values are going down and I’m just throwing good money after bad, but that’s only true if I went into foreclosure and walked away from my condo– otherwise, even if its value goes down, by paying off principal early, I have less of a mortgage balance to pay off, and will pay less interest over the life of the loan.

Another argument might be that I should put that money into the stock market– it’s been so battered lately that it may have potential for strong gains over the coming years. But I already put other money into the stock market. And who knows, the market could still go even lower. I don’t want to have all my eggs in one basket– even if paying off my mortgage could possibly be a lower rate of return, it’s also much lower risk, so it’s a good hedge against my other high-risk investing.

But really, the reason I want to pay off my mortgage early is so I can be like my idol, Frugal Zeitgeist!