Is $100 better off paying a 5% home loan or better off putting in a bank with 5% interest rate?

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It depends on the type of home loan... So, the way home loans work is that there are generally a few types depending on a combination of options: Option 1: 1) fixed (interest is the same over the life of your mortgage) 2) adjustable (interest varies over the life of the mortgage with market fluctuations) Option 2: 1) Principle & Interest (You pay a set payment for the life of your mortgage) 2) Interest Only (you pay only the interest and when the loan comes due you pay it off) So, the most common type is 1,1, that is a regualr fixed rate mortgae generally of 30 yr length. That means every month for 30 years you pay the same payment. If you decide to pay more than the payment all it does is take the amount off your LAST PAYMENT.

You still pay the same amount every month until you get to the point where you already put in the $100. Thus, you get $100 back in 30 yrs or so. That is the worst investment OF ALL TIME.

In 30 yrs, with inflation $100 is probably going to be worth like $20 if you’re lucky. Put it in the bank. Now if you have the Interest Only option, any extra payment you make shrinks the amount you pay each month.

Thus, it would be returning the same as a bank account. You get a tax break on the interest you pay on your mortgage and you have to pay tax on interest income from the bank. So these are equivalent investments.

If you have an Adjustable Interest Only mortgage that could go up, it probably would be a better investment to put the money in the home loan because if interest rates go up to 1980s levels, you will be paying a lot more than 5%. Generally, however mortgage rates are much higher than bank interest so if you have an interest only mortgage, it is generally good to pay it off asap. One other thing to think about is the tax breaks.

If you have a 5% mortgage and you are in the top income tax level bracket of 33%, that mortgage is actually about 3.33%. That’s about the cheapest money you can get. If you find some tax sheltered investment like dividend paying stocks, you can get a lot more than 3.33% for that money.

Sources: Personal Experience, Former Investment Banker .

Put it in the bank, unless... Since interest payments on home loans are (usually) tax deductible, a 5% interest payment saved is actually worth less in real terms than 5% interest gained by putting it in the bank. The caveats are: 1. If you're not allowed to deduct your interest payment (e.g. Under AMT) then it doesn't make any difference.

2. If your loan has a variable APR and you expect your loan interest rate to go up significantly higher than your savings rate, paying down the loan now may make sense.

It depends on the situation and the borrower's discipline. The problem with putting $100 in the bank account is that you always have the power to withdraw it. If your goal is to pay off your mortgage, just pay it off.

Wait until your bank pays 5 1/2 % to put it there.

By the numbers they are basically equal. You save the exact same amount in interest payments on your home loan that you would earn from the bank. To make the math easy, lets say your mortgage only has one year left on it.

If you put it into your home load, at the end of the year you will have paid 5 dollars less to the bank (and still paid of the mortgage in full) than you would have if you hadn't put the extra $100 in now. Or if you put it into the bank, you'll have 5 dollars in interest that they've paid you (for those who are keeping score, I'm assuming 5% APY instead of APR just to make the math easy, but it works out the same) However, if you don't only care about the total lifetime cost of your loan, the decision becomes a little bit more complex. If you put the money in the bank, you have access to it anytime you might need it.

If you put it into your home, you don't have access to the money, but your loan will be paid off sooner. It depends a lot on which you prefer. When you start to consider tax implications, the picture gets a little less clear.

By putting it into your home, you reduce the amount of interest you pay to the bank, and since iterest is tax deductible, you'll have less of a deduction on your income taxes. But if you put it in the bank, you'll have to pay taxes on the interest that they pay you. I haven't worked through the numbers on that, but it's probably a wash too.

Personally, I like paying off my debts quickly, so I'd recommend the home loan. But you shouldn't do that to the exclusion of saving money in regular, liquid accounts.

Bank. It gives you more flexibility. If the interest rates are the same, there is no long-term financial difference.

However, if you need the money later for some unforseen circumstance, it is far easier to get your money out of the bank than out of your home equity.

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Will a bank loan money for a home higher then the appraisal.

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