The savings account obviously pays quite less and the money can rather be used to pay off part of the mortgage loan (principal). Is this the right way to go? Any other view/suggestions??
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Paying off a mortgage is the equivalent of “investing” at your mortgage interest rate, so it will save you money in the long run and is generally a good idea if you have no other use for the money (such as paying off credit card debt or expenses).
If you need to access the money you paid in, you can generally get a home equity line of credit (HELOC) on your home for free. You can then reborrow the money you put into your house at that interest rate (which normally fluctuates). You can check out current rates at http://www.bankrate.com.
Well, the difference might be that money in the bank is a liquid asset — you can get it out and use it when you need it ….. almost immediately.
One could say that one should pay off the higher interest Credit Cards with the moneys in savings account, but, gee! it’s does feel good to have money in a bank, doesn’t it.
It’s better to be in the savings acc for a long period of time, save that money, after several years you can rifinance your house and then use all that money that you saved and pay some the amount that you just refinanced, that will lower your monthly payments and you will be able to save even more money for improving the house and make it more valuable.