3 responses to “Is it better to pay more towards a mortage or invest additional in 401K plan?”

• 

  stlouiscurt January 8th, 2011 at 11:26

  Steve

  That depends on the interest rates of the two. If you feel that your 401(k) would gain at a rate higher than the 5.25% of your loan then you would come out better in the long run to invest the money in the 401(k). If the 401(k) interest rate is lower than pay off the loan.

• 

  paul w January 11th, 2011 at 03:23

  Debbie

  you pay your money on this one and take your choice, but the extra money toward the mortgage isn’t going to mean that much in reduced interest payments by the time the arm adjusts, while the extra money you put in the 401(k) earns tax-deferred interest. also, most 401(k) plans have a loan provision, so if you change your mind, you can borrow the extra from yourself, but once you pay money on the mortgage you can’t get it back (at least without refinancing.

  by the way, if you can afford to make extra payments, why not refinance now to a 15 year fixed. no one knows where interest rates will be in 2010 but current 15 year fixed rates aren’t that much higher than 5.25% so you don’t have much upside in waiting until 2010 to move, and you have a lot of downside if interest rates keep climbing.

  good luck!

• 

  purduejb January 14th, 2011 at 06:21

  Ruben

  First off, I would definately invest as much as possible in the 401k that the employer matches, that is an automatic 100% return. As far as the mortgage, if you are planning on living in the home longer than 2010, you should put the most possible toward the mortgage after the 401k match or consider switching to a fixed mortgage before the adjustable rate gets very high.