Figuring out whether to invest or to pay down debts is tricky. A mortgage calculator can show you how much your monthly payments would change if you replaced several debts with either a home equity loan or a new mortgage. If you have a large amount of debt, then refinancing to get control of debt should probably be your first move.
If the interest rate on any loan is over 20%,
then for most of us it is better to pay it off than to invest the same amount of money. A mortgage calculator can tell you how long it will take to pay this debt off. High interest rates bog you down paying more interest than principal. Use a mortgage calculator to figure out how long it would take you to pay your loan off at 11%. Then go get a better loan.
If the interest rate on a loan is less than 6%,
consider paying the minimum on that loan, leaving it until last. Because with some savvy investing, you can make more money investing than paying off the loan. A mortgage calculator can actually be used to determine how long it would take to pay off the debt over a long period.
If your mortgage loan is above 8%,
you need to address why. Is your credit bad? Did your mortgage broker give you a bad loan? Use a mortgage calculator to play around with different interest rates to find a target one. Then go find a loan company that will give you that rate. Don't give up hope, but don't settle. If you are stuck with a high interest rate mortgage, work on your credit rating and throw everything you have into paying extra on it.
If you have a long mortgage,
30 to 40 years, consider refinancing to a shorter one. The rate at which equity accumulates on a 15 year mortgage is over three times faster than on a 30 year note. Use the mortgage calculator to figure out the shortest loan period that you can afford. Print out and keep the results of the mortgage calculator in front of you when you are talking to a mortgage company. They have a mortgage calculator, too, and when you sound knowledgeable, you can get a better loan.
If you have an adjustable rate mortgage,
refinance now. Not tomorrow. Interest rates are rising, and you are risking foreclosure. A 40 year fixed rate mortgage is better than a 15 year ARM. If you doubt, try asking the mortgage calculator how much your payments would rise if your interest rate increased to 15%. It has happened before. Refinance now. Use the mortgage calculator to figure out exactly what you can afford, and then take the results to a mortgage broker. It's their job to find you a good loan. If you have both an ARM and high rate loans, take care of your home first.
When you have a list of loans with medium interest rates and low to moderate debt, whether to pay down or invest becomes a trickier game. Look at investments that have high returns. If your house is shabby for your neighborhood, then that will probably be your best investment. If it is better than the houses around it, look into other investments. If the investment has a higher rate than your debts, invest. If not, work on being debt-free. And debt-free is nice.