Question by gipovka: How can I reduce my monthly mortgage by investing more $ $ without refinancing and keeping 30 years fixed rate?
Answer by Carolinahomerates.com
you can pay bi-weekly to cut the 30yr term to maybe 23years…..or pay 1extra payment per year.
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You probably can’t. Paying extra would cut the time down and pay it off early, but wouldn’t reduce the amount of the monthly payment.
don’t pay off a 30 year mortgage early if you pay income taxes. The interest on your mortgage is tax deductable, making your “hurdle” rate for alternatives for that extra money, just your mortgage interest rate times 1- your marginal tax rate. Your marginal tax rate is the rate at which the next dollar you earn will be taxed. So lets assume you pay 35% combined state and federal income tax on the next dollar earned.
If your home mortgage rate is 6%, you can invest the money you would have used to pay your mortgage off early at any investment that will yield at least 6 (1-.35) or 3.9% and be ahead of the game.
Now, this only works if you are disciplined, and actually invest the money every month, and if you leave it in a good long term investment with low fees and commissions. But a good index fund tied to the S&P 500 will do very nicely on this as long as you don’t plan to retire in the next 10 years or less.
Unless you have an Option Arm or some other mortgage that allows for payment options, you have no way to reduce your monthly obligation. You can shorten the term without refinancing though. Have you ever heard of a Money Merge Account? Check this link out. It shaved 16 years off my mortgage without changing my quality of life…meaning I paid no more out each month. No refinancing required.
another option, depending on your mortgage agreement, is to make a lump sum payment and then re-amortizes the loan. Lenders generally have a min/max requirement, i.e. no less than a $ 10,000 payment and no more than $ 25,000 for one time. My lender stipulates no less than $ 15,000 and can only be done once every 10 years from last deposit.