[lostlogin]

You would have to have some pretty awesomely low interest loan rates or severe inflation for early payments on a mortgage not to be a net win. A loan we had recently for a house (loan taken out at financial crisis loan rates) worked out at such that an early payment of $1 saved a payment of $7 at the end ($6 being interest). That was enough to motivate us to stick every spare dollar on that loan.

[rayiner]

Not particularly. Say you have a mortgage at 4.5% (which is doable these days with great credit). If inflation is 4% (the average rate of inflation from 1980 to 2000), then anything with a real rate of return of more than 0.5% is a better place to put your money than paying down your mortgage.

[lostlogin]

Yes. It was over 10% when we got our mortgage, and although we negotiated down to 9.89%, its still pretty steep. When wages are so low and houses so expensive here (470k American dollars is average Auckland house price, arrange wage is 42k ish). I am slightly old fashioned and, well, wrong I suppose, in my aversion to debt. Right now out rates are a a bit of a low, but we are paying off debt when saving would actually be more profitable.

[rayiner]

It's not wrong. It's just a matter of your personal projections. The only thing wrong is taking action at odds with what you think will happen. E.g. if you're ranting about impending hyperinflation thanks to QE3, you should be taking out massive amounts of dollar-denominated loans and use them to buy property whose value will keep up with inflation.

[stevesaldana]

Sure, no doubt in many cases the interest savings would be worth it. The real benefit of looking at the timing of savings is apparent when comparing multiple loans with different contract terms, and trying to figure out which you should be paying off quickly. All else being equal, two fixed-payment loans - one with 120 months remaining and the other with 360 months remaining - each have different "savings profiles". That is, they have different points in the future when the savings are actually going to recognized as well as different interest savings amounts. It can get kinda difficult trying to figure out if saving $1000 in 10 years is better than saving $1500 in 30 years, for example.

[lostlogin]

Yes - my choice as always been to go for more later - even when its far from clear that more is actually more. What is clear to me is that less debt is less debt, and that's a gain right now.

[Retric]

The only savings is interest. Also your talking about a 5% rate for 40 years ignoring the tax deduction and inflation.