Hello All,

Many people look at me like I'm crazy when I say this. But why pay off your house note and earn no interest, when you can use the same money you would have paid your house note with and invest it in your 401K or Roth IRA?
You would get to do this every month!


You might answer, "Because I want the security of knowing I have a place to live Kevin." But what if you were hurt, could not work, and you had to pay your house note but did not have any assets to fall back on? You would look to family or friends, and if they could not help, you would lose your home, your "good credit", and your American Dream.


What I"m suggesting is that you look at a 5-7 year ARM (adjustable rate mortgage) with the understanding that your goal is to save money every month, invest in your retirement, or prepare for a rainy day. You can put that money in a Money Market Account, CD, or Mutual Fund Account.


Let's say you currently have a mortgage of $180,000 @ 6.875% with a program of a 30-year fixed loan. Your payment would be $1,182.47 not including your taxes and insurance. Whereas an Interest-Only loan would be $1,031.25 a month. $1,182.47 - $1031.25 = 151.22. $151.22 x 12 = $1,814.64 a year that you would invest. Instead of having $151.00 go towards your principal every month earning no interest, and paying a mortgage company $1,500.00 to get that money out of your home, you would put the money towards your 401K and earn 6-14% a year!


Let's say the $1,814.64 earned 9% a year which is $163.00 gained per year in interest. 4 yearsof this earned interest = $653.00 + any compound interest that I have not included within this calculation. Hopfully you can see the benefit in not paying off your house note and utilizing the interest only option versus a standard 30-year fixed mortgage.


Feel free to contact me at with your questions or concerns.


Kevin Brown
Mortgage Banker
248-388-0366
kevinbrown@quickenloans.com