|
Advantage of Paying Down Mortgage
with
the
Home Ownership Accelerator
vs.
Keeping Savings Account Balance
|
On a pre-tax and post-tax basis it makes sense to pay
down your loan balance with the Home Ownership
Accelerator. Only when your investments generate a
guaranteed yield that is higher than your home loan’s
interest rate does it make sense to not pay down your
home loan. The example below assumes a solid 3.5% APY on
a savings account. Remember, achieving a completely
risk-free return over 4% is difficult. |
| |
Accelerator |
Mortgage
+
Savings Acct |
| Loan Balance |
$400,000 |
$400,000 |
| Savings Account |
$0 |
$80,000 |
| Loan Pay down |
$80,000 |
$0 |
| Net Loan Balance |
$320,000 |
$400,000 |
| |
|
|
| Loan Interest Rate/year |
6% |
6% |
| Loan Interest paid/year |
$(19,200) |
$(24,000) |
| Income tax rate |
30% |
30% |
| Tax Benefit of Interest Paid |
$5,760 |
$7,200 |
| |
|
|
| Loan Interest: (Net Cost) |
$(13,440) |
$(16,800) |
| |
|
|
| Savings Account Int. Rate/yr |
|
3.50% |
| Savings Interest/year |
|
$2,800 |
| Income tax rate |
|
30% |
| Tax on Interest Income |
|
$(840) |
| |
|
|
| Savings Account: Net Gain |
|
$1,960 |
| |
|
|
| Grand total (Net Cost) |
$(13,440) |
$(14,840) |
Assumptions of 6% APR (loan), 3.5% APY (savings account) and 30% tax
bracket reflect one possible scenario for rates over the life
of the loan and are for illustration only. Programs and terms
subject to change without notice. Payments, draws, and variable
interest
rate will affect total interest and loan payoff timing. Loan balance
may increase if withdrawals exceed deposits.
Contact a representative today at 858-222-7534
Full Application
Quick App
Credit Resolution/Repair Form
Pre Qualification Form -
No Credit Check Required
Loan Modification - Confidential
Resolution Form
Program Ref
#
17659rnb31p657 |
