If you have had your mortgage for a while and now realize you could afford more on a house, you have a few options!
Pay off mortgage early, Upgrade, or Invest?
Your first option is to make extra payments on your mortgage and save some serious money on interest. “A penny saved is a penny earned”. On a $100,000 loan you probably pay a little over $500/month (with 4.5% Interest Rate – not including taxes & insurance). If you just added $100 and paid $600 a month, you would pay off your loan 8.5 years sooner. That is a savings of $26,377 in interest. Plus, the security you’ll have knowing your home is 100% yours is priceless.
Secondly, it might be time to upgrade! If you can afford more and would like to spread out a little, you could add on to your home or upgrade to a bigger one. However, if you don’t need the space, upgrading to a bigger house isn’t beneficial– there will be more floors to clean, and more property taxes to pay.
Your third option is that you could invest the money where you would find a higher return than you pay in interest. This can be tricky though. Interest savings is guaranteed whereas nothing else really is. This is something you will have to look into for yourself, and if you decide to go this route, really look deep into the numbers. If you find a 6% annual return, don’t forget your earnings could be considered income, you will have to pay income tax on. Depending on your tax bracket, you could end up breaking even– but still having the risk.