Hump Day Help – Round Up the Mortgage Check

by | 16May2018 | Debt, Hump Day Help, Mortgage | 0 comments

Welcome to the Hump Day Help. Each Wednesday we take one of the weekly actions from Jonathan Clements‘ blog Humble Dollar and “militarize” it for you. Jonathan Clements was a longtime personal finance columnist for The Wall Street Journal, and he offers great advice at the best price you can get…free. Here is this week’s Hump Day Help:

ROUND UP THE MORTGAGE CHECK. If you’re paying $1,512 a month, send the mortgage company $1,600 instead. It’s a painless way to increase savings, the extra $88 a month could allow you to pay off your mortgage years earlier and you’ll earn a pretax return equal to your mortgage’s interest rate. That rate will likely be lower than the long-run return on stocks, but should be better than you can get with high-quality bonds.

 

Paying off your mortgage early is one of the major financial goals you want to achieve before retirement. There’s nothing more freeing than knowing your mortgage payment is a thing of the past.

The other concept that he mentions, that paying off your mortgage gives you a pretax return equal to your mortgage’s interest rate, is something to think about if you are investing in bonds and a topic we cover in our 4th Step to Financial Security. Why invest in bonds, which have a low yield nowadays, when you can lock in a potentially guaranteed higher return by paying off debt? Although interest rates and bond yields are slowly rising, it doesn’t make sense to me to invest in bonds when a guaranteed return is easily achievable by paying off your debt.

When faced with putting a six figure amount in bonds versus paying off my mortgage early, the choice was easy. I paid off the mortgage! And I haven’t regretted it a day since. No sure what you should do? Here’s a very detailed article that discusses paying of a mortgage early. In my opinion, you should make paying off your mortgage by retirement one of your major financial goals.

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