[Justin Bower]

So I'm trying to figure out the best way to approach a mortgage. Let's say you are borrowing 300,000 at 4.5% interest, for a 30 year (fixec) time frame. If you then had an additional amount of money (let's say, 30,000), is it wiser to:I1) to pay down that loan (especially in the early years) to reduce the amount of time the balance is being paid, and therefore the interest it costs over the life of the loan (e.g. paying double the monthly payment of $1520.06 until the 30,000 is expended), or 2) pay the loan down normally, but invest that $30,000. My guess is that since the interest rate is so low, as long as you're making at least the interest rate in your scenario 2 investment, you'll come out ahead. I've been averaging ~10% on similar investments for the last few years, so let's assume 5% to be conservative. Is there anything I'm missing? Does one need to factor in the tax savings of the extra interest paid in the second scenario?I started on a spreadsheet but something went awry...any ideas?(please, if you can, indicate the reasoning behind your answer so I can understand the advantages/disadvantages.)

[cat lover]

You can do yourself considerable advantage by simply paying the current mortgage and the next months principle each month. It doesn't add much money, and it becomes optional so you don't commit yourself to doing it every month. You simply need to print out an amortization schedule.You can also take a chunk of the money and pay it towards principle.In doing either of the above actions, that is a guaranteed result. An investment, even in the stock market, is still a risk. A 10% return over the past several years can easily turn into a 10% loss, and you may be frozen in place as you watch the value decline, thinking it will reverse.Rather then worrying about the tax advantages, consider your risk tolerance. If you really in a high tax bracket where that becomes a factor, you are probably not posting on Y/A for advice from strangers.

[Insurance Pickle.com]

It's purely a function of interest rates and tax rates. Taking taxes out of the equation (not taking into account paying taxes on the interest earned and/or the tax deduction of the interest on the mortgage) if you earned exactly 4.5% investing the money, then there would be ABSOLUTELY no difference. So, the investment would equal the value of the mortgage in the future at the same exact spot that the mortgage would be paid off if you applied it to the mortgage.So, you need to factor in the taxes and determine whether you'd rather have a guaranteed 4.5% rate of return by applying it to the mortgage or not.