Mortgage

Pay Off Mortgage Early Or Invest? | Jabar Post Indonesia

Pay Off Mortgage Early Or Invest? | Jabar Post Indonesia/a> – This time JabarPost.Net will discuss about Mortgage.

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Pay Off Mortgage Early Or Invest? | Jabar Post Indonesia

A mortgage loan or, simply, mortgage (/ˈmɔːrɡɪdʒ/) is used either by purchasers of real property to raise funds to buy real estate, or alternatively by existing property owners to raise funds for any purpose, while putting a lien on the property being mortgaged. The loan is “secured” on the borrower’s property through a process known as mortgage origination. This means that a legal mechanism is put into place which allows the lender to take possession and sell the secured property (“foreclosure” or “repossession”) to pay off the loan in the event the borrower defaults on the loan or otherwise fails to abide by its terms. The word mortgage is derived from a Law French term used in Britain in the Middle Ages meaning “death pledge” and refers to the pledge ending (dying) when either the obligation is fulfilled or the property is taken through foreclosure.[1] A mortgage can also be described as “a borrower giving consideration in the form of a collateral for a benefit (loan)”.

Mortgage borrowers can be individuals mortgaging their home or they can be businesses mortgaging commercial property (for example, their own business premises, residential property let to tenants, or an investment portfolio). The lender will typically be a financial institution, such as a bank, credit union or building society, depending on the country concerned, and the loan arrangements can be made either directly or indirectly through intermediaries. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably. The lender’s rights over the secured property take priority over the borrower’s other creditors, which means that if the borrower becomes bankrupt or insolvent, the other creditors will only be repaid the debts owed to them from a sale of the secured property if the mortgage lender is repaid in full first.

In many jurisdictions, it is normal for home purchases to be funded by a mortgage loan. Few individuals have enough savings or liquid funds to enable them to purchase property outright. In countries where the demand for home ownership is highest, strong domestic markets for mortgages have developed. Mortgages can either be funded through the banking sector (that is, through short-term deposits) or through the capital markets through a process called “securitization”, which converts pools of mortgages into fungible bonds that can be sold to investors in small denominations.



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38 Comments

  1. He should try to pay off his house by 30. That would be about $12,500 extra per year. With his wife working that is very doable. Then invest in Gold, Silver, Individual stocks that pay good dividends in an individual account, and Index funds in a Roth IRA.

  2. I find the comment that someone making 50k a year will be a millionaire by 32, extremely unrealistic. That math just doesn't add up. Sure he can be a millionaire 30-40 years down the road, but not in 10 years.

  3. oh, Dave… [shakes head]

    The caller is 22 years old, makes 50k/year, and does NOT presently have any money invested for retirement.

    2019 maximum Roth IRA contribution = $6,000.

    Dave suggests that this young man and his wife will be millionares (ploral) by the time he is 30-32 years old, (Dave say's this at – 2:30).

    Lets do some math…

    The caller is 22 years old, according to Dave the caller has 10 years to become a millionare.

    If this young man (and his wife) both maxed out their Roth IRA's every year, they'd have to have an annualized return of approximatly 37.2% every year for 10 years on their $12k per year ($6k/year from the husband & $6k/year from the wife) Roth IRA contributions to see ($1,001,746.38) in their account.

    I don't know anyone who gets a annual return of 37.2% return on their [stock] investment without knowing a LOT about the market, and even 37.2% as an annual return in general is pretty darn high (and sadly unrealistic).

  4. Also, everyone realizes the s&p just provided a negative return for 2018 right? Assuming you will get 10%+ return on investments yoy is foolish. Repricing in equities is coming.

  5. All you folks commenting on Dave's millionaire by 32 statement and doing the math on returns. Dave didn't say he'd have a million dollars in his retirement account by then. That is total assets, my parents are millionaires but have never had a million dollars in the bank.

  6. I just started my 30 year fixed at 3.875%. By some rough math, I'm going to pay about 70% in total interest over the life of the loan. I do better than 70% per decade on my investments. A dollar I put in the market today will be worth a lot more than $1.70 in thirty years, right?
    For these reasons, any "extra" money I have will go into the market, not into my mortgage. Does anyone disagree?

  7. I’m from Connecticut, married. I paid off my house few years ago ( about 350K ) , I contribute to my retirement portfolios to the maximum , I have few investments already. I have my children funds in placed already we are very generous to our community. Also I’m debt free. I’m 35 years old. I learned how to be a good money stewardship since I was a little boy. What’s next Dave ?

  8. Question guys, I just finished his course (that my sister had for them). I have a mortgage, no student loans (So glad), contribute 11% In my 401k, started a Roth IRA last year which I maxed out contributions and have about 85k left on mortgage with roughly $40k in the bank with my emergency fund. So should I invest that 40k and make more with it even tho it's a risk or pay off the house which I think i could do in 3ish years if I buckle down? Always have been pretty disciplined in my managing so i calculated conservatively that i would have $2000 extra a month after expenses. Thanks, sorry late night thinking.

  9. What changes the dynamic is the lack of Pensions. That puts a greater burden on people to save. I know baby boomers retiring now with Pensions of 100 K plus 401 k s. The Pension elimination which has occurred over time is a retirement planning game changer.

  10. I just off my mortgage 2 weeks again, have being saving my Tax return and add other saving.. Did not waiting for bank to getting more interest from me..to me when Adding the interest on Mortgage there is not equity. if one look it in that way to get equity one pay buy off quickly .. Thanks Dave Ramsey.

  11. Wonder which mutual funds give such payback. Around here in Eastern Europe, all I can find are 2-4% (on average) yearly increase mutual funds. No way you'll get to a million $ in 10 years, with 5-15k$ per year investment with funds like that. Are things really that different in USA?

  12. I am not sure I am doing something wrong but… I am debt free except the mortgage. I completed baby steps 1,2 and 3 and it seems I switched baby step 4 and 6. Actually I put 5% saving for the kid and the rest towards the mortgage (about 40% of the income). Should I really put 15% on retirement or I can still continue pay off the mortgage. If I keep the current pace I will payoff the mortgage in 3 years.

  13. No. Get a mortgage with the lowest rate possible (3.25%), pay it off slowly, plough everything else you can into low-cost index funds which typically return ~10% over the long term. You come out 6.75% ahead compared to paying off your mortgage early.

  14. Dave's math might be off for the 10yr plan but if they max out their roths save a little more put extra into a another fund pay off the house and no matter what…..DONT LIFESTYLE CREEP!!! They will definitely be millionaire's by 40!!!
    More power to them!!!😁👍

  15. Millionaires by age 30-32? No way. He's maxing out $6000/year in a Roth IRA, but what rate of return is Dave assuming? Let's assume a maximum Roth IRA contribution of $6000 at the start of every year and an average annual return of the S&P 500 at about 10%, which is a bit optimistic (mine is returning 9%, and I'm glad to have even that!).

    22. $6000 -> $6600
    23. $12600 -> $13,860
    24. $19,860 -> $21,846
    25. $27,846 -> $30,630
    26. $36,630 -> $40,293
    27. $46,293 -> $50,923
    28. $56,923 -> $62,615
    29. $68,615 -> $75,476
    30. $81,476 -> $89,624
    31. $95,624 -> $105,187
    32. $111,187 -> $122,305

    What rate of return is Dave assuming? Dave claims to have a mutual fund that has an annual return of 12%, yet he does not identify it. I seriously question his math.

  16. Why is paying off a house a big deal? First u still have taxes and insurance and than if you bought a home in a decent location u should get some appreciation. Invest that extra money especially if you have a low rate

  17. My mum is stuck in an underwater mortgaged condo that she owns – $250 000 CAD in debt. I've been helping her pay off her credit card and various other debts, and she should be debt-free minus the condo in about a year and a half. At that point I'll be able to dedicate my extra earnings to retirement investing, however I'm not sure what to do property-wise. It would take (estimated) over 35 years to pay off the condo unit while I continue investing 15% of my annual earning into retirement investments. My mum needs to save much more than that due to her age. She would be 84 years old by then and I would be 67 years old.
    Plus I don't necessarily want to spend the rest of my life living with my mum either. What are my options?

  18. f you are 3 years from retirement and already have plenty for retirement funds (401k and pension), should you stop your 15% contribution to 401k, take it down to company match amounts, and use the extra funds to pay off a mortgage in 3 years?

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