[‎‎‎‎USER]

Hi all, I’d love to get some perspectives. I currently have $40,000 in savings, and I still owe $150,000 on my home mortgage. The interest rate on the mortgage is 2.5%, and my savings account earns a very minimal interest rate (almost negligible).

Given the current economic climate and interest rates, I’m trying to decide what’s the smartest move financially. Should I use a chunk of my savings to pay down the mortgage early?

Or is it better to keep the cash on hand for emergencies or potential investment opportunities?

I’m not in any immediate financial stress, but I want to make sure I’m using my money wisely and planning for the future.

If you were in my shoes, what would you do?

Thanks in advance for your insights!

[Ellen]

stop saving, start putting every single penny you have extra every month towards the principal of the mortgage.

[Lisa]

Keep 3-6 months of expenses – whatever that amount is and put the rest towards principal.

If job is very secure and you are in good health, you can lean towards the lower end.

Then pay as much as you can extra each month if this is your only debt.

[Lind]

I would make damn sure the 40k is in a high yield savings account at the very least.

I would also keep 4-6 months minimum monthly expenses untouched liquid in the high yeild savings for peace of mind / unexpected income loss etc.

I would then look at investment opportunities vs interest rate you are paying on the home.

[Michael]

Depends entirely on your interest rate. If the interest rate is 8+ then it’s reasonable to throw it into the mortgage.

If it’s less than 4, youre basically getting the house for free.

Between those points, it’s more about your confidence in the economy.

[Loretta]

Depends on your interest rate and how far along you’re in for your mortgage.

Check your amortization schedule to see interest vs. principal.

[Kaitlyn]

I would keep the savings intact in case of catastrophe and keep plugging away at the mortgage.

[Laure]

Depends on interests rate on savings account vs home loan. Also, home loan no tax, savings account you get taxed on interests paid.

I put all my savings on home loan offset account but I can withdraw all extra repayments whenever.

So, it also depends what kind of loan you have.

[Esther]

Not knowing your situation, for me I think paying off the mortgage would generally be a much better investment. You won’t end up paying so much interest.

Paying off your mortgage gives so much freedom, the sooner the better!

[Kym]

My enough information, do you have any other debt? If so, pay that off. Do you have an emergency fund of six months, if not establish one first. Do you have to save for kids’ college?

If so, start a college account with some of it. Do you have adequate retirement savings?

If not, start a Roth and deposit the maximum for the year for you and a spouse if you have one.

Do you have any big expenses coming up like a car replacement or a new roof or a new baby or a surgery copay and time off?

If all of those things are taken care of, sure put it toward the house.

[Kay]

40k is a great nest-egg… leave it alone. It makes for the emergency fund needed for any possible income loss due to unexpected circumstances.

It will also cover any home/vehicle repairs, medical Bill’s, etc.

[Jac]

Make sure your savings is in a high yield savings account with at least 4%. Use the interest (free money) every month to put on your mortgage as principal only.

This will get your mortgage payed off faster and you will owe less interest as time goes on.

Good Luck!!

[Danielle]

I wouldn’t do anything. You need that much at least for an emergency fund. Maybe try to put down an extra 1000 a month towards the principal.

I’m trying to quickly pay my mortgage down too, my goal is to have it paid off in 3 years

[Annette]

Questions like this are difficult to answer because we do not know the whole of your financial health.

One need sit down and do all the math, interest rates, length of loan, tax benefits and also look into investing and high yield savings.

The idea with money is to diversify, don’t put all your eggs in the same basket.

[Lucinda]

Max out your retirement fund yearly allowance first. If your mortgage is a low rate, don’t put any of the $40k towards it.

But maybe add a little to the principal (we topped off to the next hundred and didn’t miss it).

The rest into a high yield savings account/stock index fund.

[Gina]

IMHO. What are your monthly expenses? Keep a year of that in savings and the rest to the mortgage.

For example, if monthly expenses are $3k, keep $36k in savings and put $14k towards mortgage principal.

Also, look into splitting your mortgage payments into 2x a month.

[Colleen]

Pay an extra payment so you can get to a bi-weekly (2 payments a month) payment plan. We cut 6 years off our mortgage by doing this.

We also added $50 a payment to the principal.

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