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RE: where do you get more, pay more?
if your mortgage is 5% but you only make 4% on your 401 then put it in the mortgage. If your 401 gives you more than the mortgage put it in the 401.
I used to think it was as simple as comparing interest rates, but then I learned better. Things like taxes play a role, as does your home's potential to increase in value.
An interest rate comparison is still interesting, though. I estimate my home mortgage will have an interest rate of about 6.5% and I expect to pay it off in less than ten years. My Roth IRA at Fidelity has the following profile from 1926-2006:
- Average Annual Return: 9.25%
- Worst 12 month return: -52.92%
- Best 12 month return: 109.55%
- Worst 5-year return (annualized): -10.43%
- Best 5-year return (annualized): 27.23%
- Worst 20-year return (annualized): 3.10%
- Best 20-year return (annualized): 15.62%
RE: where do you get more, pay more?
I kind of disagree. Debt is not always bad, if you approach it the right way. Just ask any real estate developer. If I can borrow money at 8% but get a return on it at 12%, thats a no brainer.
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where do you get more, pay more?
what are the interest payments like? if your mortgage is 5% but you only make 4% on your 401 then put it in the mortgage. If your 401 gives you more than the mortgage put it in the 401.
As my father always says, Borrowed money is the most expensive money. Paying off debt quicker leaves more money for saving. Not spending it in the first place is the cheapest. (I would probably wait a little bit long to buy a place anyway - depending on where you live. Foreclosures are so high, that you might be able to snap a cheaper house. The market has not bottomed out yet. - Or so I am told)
Anyway, why would you listen to a complete stranger on the internet?
go to fool.com for some more sound advice.... (-:
And good luck!
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