Quote:
Originally Posted by J-DaWg
OK, say you had a mortgage payment of $2000 per month. If I had it on a line of credit at prime (3.8%) and made the same payment as the mortgage, roughly $500 of that would be interest and $1500 would be paid to the principal every month would I not save money in the long run and pay the house off faster? Considering with a conventional mortgage you are usually only paying the interest for the first 5yrs.
I hope I'm explaining this right
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That's fine,
IF you have the discipline to pay the extra every month.
Also, on a conventional mortgage, the bulk of what you pay is interest for the first few years, but you DO pay towards principle. I'll use my loan for an example.
I currently pay $1039.28 to my mortgage company. I'm in the 10th month of my loan, and here is the breakdown for last month:
To Principal: $ 161.27 (15%)
To Interest: $ 801.75 (77%)
To Escrow: $ 76.26 (for taxes & insurance)
So, while I'm paying more in interest now, I am putting money towards the principle of the loan itself. This increases my net wealth...it's like putting it into a savings account!