Extra Mortgage Payments: Do They Save You Money?

In 2004 we purchased a home for $304,000, zero percent down on a 4% APR 30 year mortgage.  This means the mortgage payments for this home were $1,451.34 as you can see from this calculator:  dollartimes.com/loans/mortgage-rate.php?length=30&amount=304000

Today, 16 years later the value this home is $434,453 according to: https://www.in2013dollars.com/Housing/price-inflation/2004-to-2020?amount=304000

Of course we had to insure the home and the insurance cost annually were around $2,000 which is average as you can see by checking this here: https://www.bankrate.com/insurance/homeowners-insurance/homeowners-insurance-cost/

No home can go without good maintenance.  Our home was no different and in fact we upgraded bathrooms, kitchen, carpet, paint (both inside and out), vinyl, patios, sidewalks, out buildings, landscaping and much more during the years we lived in that home.  The national average spent on maintenance and upgrades for a home is around $9,081 annually according to the following website: https://www.google.com/search?q=cost+of+maintaince+on+home+in+us&oq=cost+of+maintaince+on+home+in+us&aqs=chrome..69i57.12956j0j4&sourceid=chrome&ie=UTF-8

This home was located in Salem, Oregon where property taxes are $16.70 per $1,000 of assessed value:  https://www.google.com/search?q=average+property+taxes+in+salem+oregon&oq=average+property+taxes+in+salem+oregon&aqs=chrome..69i57j0.11623j0j7&sourceid=chrome&ie=UTF-8

Which means we paid $4,175 every year in property taxes on this home.

If we still owned this home now, 16 years later, we would think with the increase in property values we would have been sitting on a nice bit of equity. After all $434,453 – $304,000 = $130,453.   Yet doing the math over the past 16 years this is what would have happened.

  • $434,453 today’s property value
  • -$278,657 in total mortgage payments
  • -$32,000 in total insurance payments
  • -$145,296 in total maintenance costs
  • -$66,848 in total property taxes
  • Equals a loss of $88,348 not a gain of $130,453

So what would have happened had we been able to make that same $1,451 payment into participating whole life insurance over these past 16 years?

  • There would have been $322,742 of guaranteed cash value, and
  • $1,713,239 of guaranteed death benefit
  • And absolutely NO other costs

We all have to live somewhere and purchasing a home is often better than renting.  This personal example is relayed here merely to highlight the fact that the value of your home is not something you can control. At the same time all the expenses of owning a home will come out of your pocket and can completely absorb whatever value your home is worth.

Knowing this fact, using extra money to purchase participating whole life insurance instead of rushing to pay off your home is not only financially sound money management  it also provides you with a guarantee that at some point in time you will have more money available for you to access from the life insurance policy than what you paid for it.  This is something which owning your home can never guarantee, especially when you take into consideration all the expenses which come with owning your own home.

At Life Benefits we believe you deserve to keep more of the money you make so that you can have financial peace of mind.  Knowing the facts instead of listening to the propaganda used by the “experts in finance” today can save you a lot of money and that money saved can mean the difference between you living out your retirement with all the money you need or running out of money before you die.

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