Re: Interesting Offer From Mortgage Company

"Dave" <noway@xxxxxxxxx> writes:
Option 2, Collect all money owed sooner. Meaning, the sooner they can
under-write a mortgage for someone else, or simply invest the money. Either
way, the money starts working for them sooner. (they already have your
interest, now they want someone else's)

How do they already have your interest? They haven't collected it
yet. And if you pay off sooner or with a lower interest rate, then
they collect less of it.

This ignores the fact that if you HAVE the extra money, you should invest it
so that it works FOR YOU instead of the mortgage company. So not only is
option 2 a good one for the mortgage company, but it is a BAD ONE for you,
even if you think you can afford it. (you can't) -Dave

That's true only if you can invest it at a higher net rate of return
than your mortgage rate, taking into account the fact that you'll have
to pay taxes on your gains and the mortgage interest is tax-deductible.

In the long term, it's usually straightforward to outperform a decent
mortgage rate on the stock market (e.g., just investing in an index
fund will probably accomplish that) but depending on how the market
turns, "long term" can mean ten or twenty years, which may be more time
than is left on someone's mortgage.

In any case, note that the "Option 1" you trashed as "gobs more
interest collected" is not that at all if the OP chooses to take that
option but then continue to make the same monthly payments as he was
making before, thus sigificantly REDUCING the total amount of interest
paid.

And even if he chooses to make the new lower payments, you seem to be
saying that he can take the difference and put the money to work for
him, if indeed he has a way of investing at a better rate of return.

In short, contrary to what you wrote, the bank's offer can certainly be
made to wholly benefit the consumer, if the consumer is responsible
about how he responds to it.

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