Thinking about whether to invest money or pay off loans
Comments
Mortgage interest is only tax deductible in the USA where housing bubbles are adored.
Sorry Mr Khan but with respect you are wrong. Paying off 4% off of a $200,000 mortgage is much more benificial as morgages are over a longer term usually 25 year you have not taken into account compound interest and what you would save on $10,000 at 4% over 25 years (or whatever the term of the mortgage) Unless it was on equal terms with the car loan that is which is unlikely as having a $200,000 mortgage over one year is heavy going on monthly payments!
What about inflation? The longer those loans run, the less the outstanding balance is worth, at about 5 to 10% per year (soon to be much worse). Theoretically, the investment could be in some inflation-resistant medium.
Soon, that $10K car loan may be covered by the cost of a loaf of bread -- whereas the investment would ideally retain its worth in inflation-adjusted terms.
$15 bonus! WOOHOO!
Reducing your principle by the 10K does not affect your amortization schedule. So paying down your mortgage alters your interest payments from the end of the loan cycle, when you hardly pay interest on the loan. Remember loan amortization begins heavily weighted toward interest with minimal principle reduction and ends with mostly principle and very little interest. This example totally depends on where you are in your amortization schedule.
The US tax-deductibility on mortgage interest is great. I wish we could do that in Canada.
see, don't invest in the stock market
There's a psychological element to all this.
The less debt you believe you have, the more you're willing to go out and blow cash. If you invest half your money and pay off debts with the other, in the long haul you will have a fatter wallet because of your reluctance to so easily blow your money on big purchases you don't need. This element is often ignored by the "analysts"
@chiyerano yeah - but just because it was 10k ^^
@69iron69 Excellent comment. I'm up over 100% on my precious metals investment in just the last six months alone. Even after a 28% "collectibles" tax rate, I'm way ahead of a 6% gain/savings illustrated in this video.
The dollar is tanking due to the malfeasance in the District of Criminals. Dump your dollars now while they're still worth something. Silver is the way to go folks...
you reduced the interest on mortgage to 4%. that works only if you have a huge amount in itemized deduction. if your itemized deduction isn't much higher than your standard deduction you wouldn't benefit much at all from the interest deduction.
That's what I thought, pay off the car loan.
@Chnamanjx hahahahahhaha
why is he buying cars on credit when he has a job that gives him 15k bonuses? take his 10k and tell him he just got cheap financial advice to pay cash for vehicles and to not play the market until he can make his own khan academy videos
Tell your family member to go to Vegas and put $10k on black.
@XTeejeX Haaaaahahahahahahhaha
Should'nt he have bought precious metals instead, considering the US dollar depreciation?