Re: Best Amortization Strategy - Posted by Sailor
Posted by Sailor on May 26, 2005 at 22:02:11:
Your best strategy depends a lot on your age & stage in life. If you are young & poor, sometimes you do what you have to in order to secure the property (you can later restructure the finances when your circumstances change). However, to me, paying interest is like tearing up $1000 bills & tossing the pieces into the wind. If you are over 35 & established in your career, it is usually better to bite the small monthly bullet & save the 50%, knowing that you are more rapidly building equity. As you get even older, it is time to again reasses strategy.
My own methods have changed w/age (though I planned the changes several decades in advance). When I was young, the most important factor was leverage so I could gain appreciation on the entire property, even if most of it was mortgaged. In my 40’s I started putting in more equity up front. Now long since retired, the peace of mind that comes from not having to generate a high income to make mortgage payments is a major motivation for me. That’s why I retired my last mortgage years ago & now only buy for cash. I do fewer deals, but I pay 0% interest & it makes life a lot easier. I not only don’t have to work so hard for my $$$, but I make more this way.
Low interest loans have made some folks careless about mortgages, but remember that nothing is as cheap as cash. Building equity every month is a great insurance policy against market turndowns. Those who find themselves upside down because they have depended on appreciation-only to accumulate equity are the ones who won’t survive the next market correction.