Now this is a hard question that will rely 100% on your point of view and preference. Do you want to own the real estate property and/or house in a shorter period and pay less interest or in a longer and instead invest extra money into the stock market to gain compounded 7%-12% gains or more. Lets test some theories.

Fixed-Rate Mortgage Term Viewpoints

• Shorter Term is Key – You will have higher monthly payments but equity will grow faster. You will actually own the home faster and would have had paid much less in interest.
• Longer Term for Well Rounded Benefits – With a longer term you pay way more accumulated interest and equity builds slowly. You also have cheaper monthly payments money left over for other things.Prepaying a mortgage versus investing money in the stock market. You can invest the additional money that you save per month into the stock market by investing in Exchange Traded Funds (ETFs). You will gain around 7%-12% compounded annually and this will dwarf the 5%-7% interest rate that you are willing to knock down. In 10 years you would have accumulated far more money in return on investment (ROI).Another factor is that paying interest is a huge tax reducer that many individuals use. Even though you can pay off in full for your house, don’t, you will give up this huge tax reducer if you do.
• Flexibility – As long as you don’t have any prepayment penalties, you can pay off you mortgage loan in much less time. If you get a 30 year, pay 10% of your monthly mortgage payment in principal and reduce your mortgage significantly. You can knock down a 30 year or 40 year down to 20 years or 15 years without problems.My Money Blog has a great post about choosing a fixed rate mortgage term. They even show the difference that extra payments towards principal will make.

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A house or real estate property is by far the best investment to make if you can afford to right now.

Benefits of Owning a House or Real Estate Property

1. Forces you to put away money in the form of mortgage payments.
2. Houses generally and mostly do not go up and down as the stock market does.
3. Most of the time a house always continues to build up equity.
4. If you live in the house, you get the added benefit of enjoying it as well.
5. Later on you can sell it and cash in or turn it into a revenue generating cash box.

If you cannot afford one right now, you should save as much as you can on a weekly basis or a paycheck basis. Save like 20%-5% into a secret account in which you pretend to forget about then throw that money into the stock market and the bonds market.

Simply invest 40% into iShares Lehman US Aggregate Bond Fund (AGG) and put the other 60% into SPDR Trust, Series 1 (SPY).

Keep saving and compounding and you will get there.

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The best way to acquire wealth is to purchase a home. But when you do actually get the house you must use a mortgage lender in order to finance the purchase. They love to lend you money because they gain up to 3x times the amount back on the interest that they originally helped finance. The goal is to pay back this money with the least amount of interest payments that you can. You can win the lotto but for the realistic this is not an option. There are some strategies that you can incorporate to cut your loan term down by as much as 2/3 of the time thus paying back less interests.

The 10% Principal Rule

This is one of the simplest ways to cut the term by as much as 66% less and save you a bunch in interests costs. Simply every month that you pay your mortgage, add 10% – 20% extra and add it to the principle. Lets say that you have a mortgage of $2000.00; add $200.00 and make it an additional payment towards your principle.

Another slower way is that you can do this once a year like around the time that get your tax return back. So lets say that you still have a $2000.00 mortgage, at the end/beginning of the year send a one time payment to go towards principle only for $2400.00.

Advantages

1. You are in control.
2. Limited possibilities for late payment.
3. You decide how much or when to pay extras.

Disadvantages

1. Not automatic, all responsibility is left on you and your discretion.

This is the absolute simplest and safest way to reduce your mortgage term. I used this method on a property and sometimes I put the extra towards principle every month but I also put extra in bulk one time a year. The property is a little over a year old and I reduced my years by 3 1/2. My monthly interests deductions from my mortgage payments has reduced and my regular monthly principle monthly has increased.

Bi-Weekly Factor

This is a method that makes it automatic but some lenders charge hidden fees for this so be careful. All you have to do is set it up with your mortgage lender that you want to pay basically twice a month. This will hit your cash flow a little hard and it will become mandatory to pay this at said times.

Advantages

1. All automatic.

Disadvantages

1. You are not in control.
2. Increased possibilities for late payments.
3. Everything is fixed.

I love looking at my monthly statement and realizing that I am cutting down my mortgage on a monthly basis. I personally use the 10% Principle Rule combined with an extra month worth of mortgage paid directly toward principle. Use these steps and pay off for your home in no time so that you can start on your new home/property purchase.

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