Do you have a mortgage? If so, today's message is for you.
There are 2 mistakes many people make, that you may also be making as you pay down your mortgage which are costing you more money than they should. Or put another way, if these 2 common mistakes were corrected, you could be saving more money and building more assets.
Here are the 2 mistakes you may be making and how to correct them:
1) Paying for mortgage life insurance.
Every mortgage lender will offer you mortgage life insurance and almost everyone purchases it. Purchasing mortgage life insurance is better than having no life insurance at all, but it's definitely costing you more than it needs to.
A personal life insurance policy will help your loved ones pay off the house, just like mortgage life insurance will, but a personal life insurance policy offers you a better policy at a better price.
Owning your own personal life insurance policy should pay your loved ones more money, give you more control to whom the death benefit will pay, and cost you less than any mortgage life insurance policy will.
If you have mortgage life insurance, I encourage you to purchase a personal life insurance policy instead. Once approved, cancel your mortgage life insurance and save.
2) Accelerating your mortgage
Accelerating your mortgage is not wrong, but again, it's usually not your best option and is likely costing you. You will almost certainly be further ahead financially if you invested that money instead.
Let's say you have been using an extra $300 a month to accelerate your mortgage with a 4% interest rate. Over a 25 period, you would save nearly $47,000 in interest cost. That may seem like a lot of money, but if instead, you took that $300 a month and invested it and earned 6% a year, you would earn roughly $114,000 in interest over that same 25-year period. $114,000 earned - $47,000 you could have saved = $67,000 profit.
If that $300 a month was earning 8% a year, your interest earnings would increase to over $184,000 over that same 25-year period, and your total profit would be $117,000.
If your mortgage interest rate is lower than 4%, your profits will be even higher.
If you are accelerating your mortgage, I encourage you to calculate the investment earnings you may be missing out on by using that money on your mortgage.
If you decide that investing is the better option, I'd be happy to show you some great investment options.