Should you invest or put it in your mortgage?
My husband and I are looking for a house, instead of using our current home sales as a down payment, and we’re thinking about investing. Or would it be wiser to use our extra cash to lower our new mortgage? It is worth noting that we are relatively young (considered millennials). This will make our economy better: invest in excess cash or put it into houses, mortgage balances low and interest savings?
Most of us think that if you have some cash savings and you want to buy a family, you should always keep the cash on your down payment to reduce the loan, right?
Many traditional financial experts, such as Dave Ramsey, have pushed for the elimination of debt as the quickest and safest way of financial freedom. After all, without debt, you are free to take your money, but the job you want. Avoid at all costs, however, the debt of a single key may not be suitable for all people, especially young millennials, they can benefit from into the house, at the same time can also establish a retirement portfolio.
When you are on the whole to consider your financial situation, consider short-term advantages that the loan will not be repaid (cash) and in other ways to use the long-term advantages may be more meaningful investment funds it more than you can actually save interest).
If you are buying a home, consider several issues when deciding how to deal with “extra” cash. At first glance, the obvious answer is to pay off as much of the mortgage as possible. But first, ask yourself a few questions:
Can you put more money away?
‘answering this question really depends on you,’ says Kyle Tank, 24, a financial adviser at Ameriprise financial services in Troy, mich. For example, compare how much money you spend on the entire life cycle of your loan (based on the speed you plan to pay) and the average return on market investment.
The tank adds that paying your debts in your home may have other economic advantages, especially if you consider tax breaks and interest rates.
“Mortgage rates tend to be more reasonable than other types of credit and may be deducted,” the tank explained. In other words, it’s better to take out a mortgage and have extra cash on hand instead of putting too much money on your house and eventually settling your balance on your credit card. Mortgage rates are significantly cheaper than credit card rates. In addition, in addition to tax advantages, housing is a value-added asset.
What kind of return can I get on my investment?
There are great advantages to being young here. If you are looking for a house, the millennial generation not only do you have time to repay your mortgage loan (currently at historically low levels), and your house will also have plenty of time. At the same time, you can increase your wealth through an investment account.
In addition, if you put money into the market at a young age, these investments have a lot of time to develop into a fairly large nest egg. Another thing to consider is that you don’t have to choose high-risk stocks like older investors because the investment growth is short.
“Millennials are likely to start investing because they have time,” the tank commented. “The sooner you start investing, the sooner you start using compound interest.”
For financial coach Juliana Valverde, there is no question what route is best for a young millennial to invest in retirement. She points out that the benefits of compound interest should not be underestimated and far exceed the debt of mortgage loans.
She explained: “if you delay the pension investment, until your mortgage payments, you will lose valuable time, you will not be able to make up – even though increased contributions to your retirement account.”
Although millennials have time, investment does not deliver guaranteed returns. As the tank points out, your return on investment will depend on market conditions, risk tolerance and financial conditions. A 30-year-old couple living in the country with several children will have different needs and different results than a 30-year-old professional in the city plans to remain single.
Are all your ducks continuous?
Before you do other things, to make sure all your ducks in line, suggested that Ford financial solutions company CFP ® and Julie Ford (Julie Ford) certified public accountants. If you have additional cash, ford recommends that you first ensure that all your financial needs are met and prioritized.
Ford’s recommended priorities include:
Have at least three months of emergency funds.
Eliminate credit card debt.
Handle any other high interest debt, such as school loans.
Mark’s retirement savings employer matches.
If you meet the criteria, or accumulate other tax deferred savings in your 401 (k), IRA, 529 college savings, then contribute to your Roth IRA.
From there, ford pointed out that deciding how to deal with excess cash flow depended on personal goals and tolerable debt. “Before I save to a joint brokerage account, I often tend to take on additional mortgages,” she says. “Even with cheap loans, faster repayment of debt creates more opportunities and flexibility for customers. This is a guaranteed return compared to the unpredictability of market returns. “
Can you separate the differences?
If you are still unsure, consider compromise. Can you invest in some cash flow and pay extra for your loan? Can you fill an emergency fund with your savings?
According to the type of mortgage you get, you probably don’t have to invest more funds according to their own idea, and the remaining cash investment rather than automatically converts it to a mortgage may be meaningful. Talking to a financial adviser, he can help you figure out what you can expect to earn, not the interest you save.