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Learn whether it’s better to pay down a mortgage or buy a new car.
Before we get started, I wanted to let you know about another awesome podcast called Profit Boss Radio. Profit Boss Radio, hosted by MBA and Certified Financial Planner Hilary Hendershott, highlights inspiring women who have created success in their financial and professional life. Each week you can tune in and hear how women have paved the road to sustained success with both beliefs and actions. Check it out at www.profitbossradio.com.
It’s listener question day. Here’s today’s question:
Linda,
We have a 3rd baby on the way and want to know, should we pay down our mortgage or buy a new van?
I’m 35 and my wife is 33. We have $25k in a lump sum to either pay down the mortgage (3.5% interest and 17 years left) or buy a new van for $35k at 2% interest?
With the interest rates so close, I wasn’t sure what would be the better deal. Please let us know what you think. We love your podcast!
David
I have 3 suggestions for you:
1). Paying down a mortgage with a lump sum is overrated. You can do it by making a 1/12th extra payment. I recommend everyone do this.
2). A new van is going to cost you depreciation (loss) right off the bat. Better to buy a highly rated used one with low miles and pay cash.
3). As usual, I’m not hearing any rush to start a retirement fund! The real difference in your wealth building will come from investing, so get started!
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