Quote:
Originally Posted by OldDutch
We talked about this, and you provided very good advice. I think for my situation we want to pay down debt quickly on our house right now. I am not sure it is because we are not financially savvy, but part of a plan based on risk.
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Your was a different situation though, and you guys are far from financially illiterate. Your situation was different because it made sense to get your cash flow working for you to drive down that debt, and it aligned with your goals. Your interest savings will most likely exceed what your returns would be in investing.
The method I would recommend for those that maybe aren't as financially disciplined would be to consolidate debts into a traditional mortgage (fixed or variable). I would never recommend the type of product you are in for those that aren't very disciplined.
EDIT: I realize there may have been some poor verbiage in there that carried some unintended negative connotations. What I was trying to say is that financial planning needs to be adjusted to the individual, and comes down to personal preference. There have actually been studies, to which I can't find the article right now, where it shows some people get better results by paying down lower interest debts because they see a tangible difference made very quickly. And like you said, paying down principal while interest rates are low hedges against having to pay it down when interest rates are much higher.