Anchor Intro: When it comes to cars, should you buy or lease? What type of retirement plan is best? if you have extra money, should you invest it, or pay down your mortgage? These are a few examples of the complex questions we all face in our daily lives. Bankrate dives into answer some of the most complex financial questions.
Voice over 1: If our homes are our castles, then our mortgages are the dungeons because they lock us into debt. Best way to escape? Paying extra principal every month.
Voice over 2: Say you've got a $170,000 6%, 30 year Mortgage: Make the normal monthly thousand dollar payment every month and you'll pay it off in 30 years...and pay $197,000 in interest.
Voice over 3: But suppose you paid $2,000 a month instead of one? You'll be free and clear in 9 years instead of 30, and you'll pay $52,000 in interest, thus saving yourself $145,000.
Voice over 4: So paying down the mortgage is smart...but is investing it smarter? To find out, compare what you're paying on your mortgage with what you could earn elsewhere.
Voice over 5: Mortgage interest is often deductible: if you're in the 25% bracket, and if you can deduct your interest, after tax you're only out of pocket 4 and a half percent.
Voice over 6: And stocks have historically done twice that over time. And put that investment in a 401(k) or IRA, and you bypass taxes too.
Voice over 7: The numbers say if you've got extra money, you're probably better off investing it rather than paying down the mortgage.
Standup: But that's just the numbers: paying down a mortgage also buys you peace of mind, and investing in stocks might not. And that's especially true when you're reaching retirement age. So you really have to think it all the way through...then decide. For Bankrate.com, Iím Kristin Arnold.