Pointing Out the Obvious wrote:
Well that's just stupid.
Just like me!
Personal Finance Question
Non-Running
Finance/Jobs
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kartelite wrote:
What the What wrote:
INCORRECT! once again.
While the terminology confuses many (apparently including you) the effect of paying down the principle on a mortgage is EXACTLY the equivalent of compound interest regardless of the terminology involved. It reduces the principle outstanding, thereby reducing the interest accruing the following month, thereby increasing the principle part of the normal payment the following month, thereby further reducing the principle outstanding two months hence, thereby...ad infinitum.
i.e., compounding
And as far as making the most advantageous decision, just in case you were not aware - reducing one's debt IS investing one's money and has PRECISELY the same impact on one's wealth as increasing one's assets.
As I said, one ought to invest in wherever you can get the best return.
This is correct. Paying down one's mortgage gets the same compounding benefits as interest on other investments. I'm not gonna throw my CV on here, but I know my shit when it comes to math and finance.
If you pay down $30,000 and your annual PMI is close to $1500, that's an extra 50 basis points of return, so basically risk-free 4.6% yield.
A bit of irony in my post haha - just noticed it's an additional 500 basis points until the point at which your PMI would be gone, so ~9% annualized gross return.
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PMI does not compound though, so it is a static value. Let's say it would have been paid off in 5 years had the 30,000 not been put down, that's only $7500. Pittance when compared to the return on investment if it was in the stock market over the course of the mortgage (I'd guess ~25 years given the OP). Also, you need to subtract out the amount of interest that is deducted from taxes.
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brasky wrote:Pretty sure you're ventolin, only using allcaps, bold, and italics in place of >,
eh ?
only advice i'd offer is buy gold when cheap
then sell slightly outta-money calls off underlying stache
( i believe midas himself originally posted the "method" )
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