Pay Down Your Mortgage With ‘Found’ Money

Written by Nickel - 7 Comments

It seems that a common question for homeowners is whether or not it’s a good idea to send extra principal along with (or in addition to) their mortgage payments. The answer to this question varies from case to case, but here’s what I do…

We have a very reasonable mortgage rate (5.75% for a 30 year mortgage — we could have done a bit better, but we pulled the refi trigger just a touch too soon), so it hardly makes sense to aggressively pay it down. In the long run, we’ll most likely come out ahead by doing things like sending extra money to our retirement accounts rather than to our mortgage company. Yet, I still feel some strange compulsion to pay off that darn mortgage as soon as possible. So…

I’ve taken to making additional principal payments with ‘found’ money — things such as credit card rewards, rebates for stuff that I would have bought anyway, etc. The way I look at it is that money like this is just gravy, so I won’t miss it anyway. Yes, I could probably do better in the long run by investing it, but this approach allows me to scratch the prepayment itch without affecting our day-to-day finances.

Published on May 18th, 2005 - 7 Comments
Filed under: Debt Reduction, House & Home, Real Estate
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About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

Comments (scroll down to add your own):

A few other ideas:

*Income tax returns
*Work bonuses
*Gifts (birthdays, Christmas, etc.)
Comment by FMF — May 18th 2005 @ 8:31 am
… website revenue.
Comment by jim — May 18th 2005 @ 7:29 pm
hey,
the comments preview code is part of the equix theme i have on my site, the comment include code is here:

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Comment by jim — May 18th 2005 @ 8:36 pm
Although I see the reasoning for paying down your house, the interest you have is still preety low.
You would probably do better by using “found money” in better investments.

The goal of paying down the house is sweeet. But most people move from their home every 10 years or so. They don’t really have time to pay off the house.

Better save and invest the money on the side, earn a better rate of return, and when you have the full ammount to pay off the house, do so if you want to.
Comment by Jose Anes — May 26th 2005 @ 1:30 pm
I agree with Jose remember; “debt elimination is NOT the same as wealth creation”
Comment by CK — Aug 8th 2005 @ 2:19 pm