Extra Money Towards Mortgage or IRA

[Jodi1980]

If you had an extra $300 per month, would you put it towards your principal on your mortage or towards a ROTH IRA?

 

[Dan Murphy]

How about $250 to Roth, $50 to mortgage, as $3,000 is most you can do this year, $4,000 next year till '08, then $5K. Not serious on my thoughts there as it is hard to say what is best, Jodi, quite a bit more info would be needed to make a good recommendation. You should talk to a financial planner there. (The limits are correct)

 

[makaylee]

I would do what Dan said and put your limit in an IRA and put the rest toward your mortgage. Even an extra $50 a month can make a big difference. I would go to a site like bankrate.com and use their mortgage calculators and see how much of a difference you can truly make by paying a certain amount extra each month and this might help you decide.

 

[pirateofthecarolinas]

Dan, our mortgage co., Wells Fargo, will only let us apply any extra money to the back end of our loan. Would it still be a good idea to pay extra each month?

Thanks,

Lori

 

[Gupsmom]

If you can make 1 extra payment a year toward your mortgage, you can knock as much as 7 yrs off. You just need to make sure that you are paying toward the principle! Make that clear when you make the payment.

I like the idea of splitting it. Save part of it to make that extra payment and put some of it away long term (IRA). Also, you can see if your mortgae company will let you pay bimonthly. The total amount per month stays the same (half in the middle, half in the end of the month). That will also take time off your mortgage.

We were lucky enough to refinance last year. We cut our mortgage in half (30 down to 15) and only increased our payment by $20 a month. We had an 8.1% and cut it to 4.8%. Depending on what rate you have, you can work wonders by considering this too.

Jess