Don’t pay your home off too quickly

Don’t pay your home off too quickly

“Poverty keeps together more homes than it breaks up.” – Saki

In the “good old days” the conventional wisdom was that you paid your house off as quickly as possible and then considered investing elsewhere. Now, I recommend you aim at paying your home off over 10 years. If you use precious resources to pay off any faster, the interest you save will be minimal and you’ll also be wasting precious time. Suppose You have a loan of $200 000 at 7% interest. To pay it back in 10 years will require $2322 a month and the total interest you will pay will be $79 000. To shorten the term to five years you’ll need to raise your payments to $3960 a month (that’s an extra $377 a week) yet you’ll only save $41 000 of interest. You are far better off to talk to an adviser about borrowing for an investment portfolio and using the extra $377 a week to pay the interest.

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