Personal Finance (Not Investing) • Re: Prepaying a mortgage for a year (not principal reductions)

Simplified version of my question: I have a lump sum of money saved up for a future purchase one year from now. Right now it's sitting in a savings account. Here is my question. Would it be possible to basically make the monthly payments on my mortgage a year in advance, not make a mortgage payment for a year, put the payment I would be making in a savings account, and at the end of the year come out ahead (assuming I don't deduct mortgage interest). I am just not sure how doing something like this would impact the amortization schedule.

Wait, am I reading this right? You seem to be trying to make mortgage payments now on a mortgage that you won't have until a year from now. I don't think they will let you make payments until you actually take out the mortgage. I also don't think they'd let you stop paying for a year either.

If you want to reduce the amount you pay in mortgage interest, you can do any of the following:

• Put more money down up front
• Shop around for the best rate
• Refinance when interest rates drop
• Get a shorter mortgage term
• Pay higher than the minimum monthly payment

Alternatively, if you want to maximize total returns of all assets, you can take out a mortgage with the longest possible term, put down the minimum to avoid PMI, pay the minimum each month, and invest the rest of your money. That only comes out ahead if the after-tax return of your investments exceeds what you end up paying in mortgage interest, so rates and returns matter.

I recommend playing with the numbers for various strategies to see what would work well for you. There's all sorts of mortgage calculators out there, or you could make spreadsheet.

Statistics: Posted by blortchplop — Wed Sep 18, 2024 10:47 pm

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