Question:

What is the yield of early mortgage payoff?

Answer:

Well, yes, a mortgage can be viewed as a financial tool, much like stocks and bonds. The yield on early mortgage payoff is the interest rate of the mortgage. If you have a 6.25% mortgage, than this is your mortgage yield of return in case of no prepayment penalty and if you make additional principal payments.

If I have free cash, do I make early mortgage payoff or invest elsewhere?

Roughly, it depends on the yield of return of your other investment. If your bank pays 4.5% on savings accounts and you have no home loan prepayment penalties, clearly early mortgage repayment for the mortgage rate described above is the better investment.

How do taxes affect early home loan pay off?

It depends on whether your other investment is tax-exempt. If it is, compare the mortgage after-tax yield of return with this other bond's rate of return. If your bond is not tax-exempt, rate comparison will be enough to see which investment has the higher return.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
Was this Mortgage QnA helpful?
Not at all
  • Currently 2.9/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
Definitely
Add to this Answer

Mortgage QnA is not a common forum. We have special rules:

  • Post no questions here. To ask a question, click the Ask a Question link
  • We will not publish answers that include any form of advertising
  • Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
If you have trouble reading the code, click on the code itself to generate a new random code. Verification Code Above:
Bookmark and share this QnA: