mortgage

Before a move, pay down mortgage or save up?

Don TaylorDear Dr. Don,
I am a 50-year-old single man who has been aggressively paying down my home mortgage with the goal of eventually paying it off way ahead of the loan term. Recently, I've decided that I may want to move to another home.

Does it make sense to continue to put aside additional funds to pay down the mortgage, or should I take that money and invest it until I move? In this situation, won't the additional funds that go toward principal simply be returned to me when I sell it? Your help is appreciated.

Thanks,
-- Mark Moves

Dear Mark,
As someone who recently moved, I'd suggest that you put your extra money into savings, not your mortgage, while waiting to sell your current home. Building a war chest apart from the equity in your home will increase your financial flexibility. That's important because there are tons of things to spend your money on when acquiring a new home. I just spent a fair amount on moving costs and new furniture.

I wouldn't suggest investing in the financial markets with this money. Ideally, you're talking about months, not years, before you'll move into your new residence. What's the point of taking on risk to principal in an investment with such a short term?

Having your house paid off prior to retirement is a sound financial goal. Don't be so aggressive in paying down the mortgage, however, that you don't leave yourself any discretionary room in your monthly spending for a little living, too. Good luck in selling your existing home and in your move to a new one.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "Financing a home," "Saving & Investing" or "Money." Read more Dr. Don columns for additional personal finance advice.
 

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
MORTGAGE & REAL ESTATE NEWSLETTER

Timely market news and advice for consumers ready to buy, sell or invest in real estate. Delivered weekly.

Blog

Holden Lewis

Cautious BofA heeds history

Remember the wise decision that Bank of America made in August 2001 in light of the decision it's making now.  ... Read more

advertisement
Partner Center
advertisement

Connect with us