I close on my first home October 21. I've locked in a 4.330% APR on a 30-year fixed conventional mortgage and my payment will be ~$800/month. I've put the required 20% down to avoid paying PMI.
However, the $800/m isn't even 25% of my take-home income and it will be < 20% starting January 1st. This is skewed even more by the fact that I'm taking on extra contracting work that will net me an additional $1600/month before taxes.
I'm curious whether or not I should put that extra money into the principal of the home or if I would be better served putting it into a mutual fund. I've noticed quite a few mutual funds have historically had > 4.330% annual return on investment and if I was paying linear interest on the loan it would be no-brainer.
However, since I'll be putting in a small amount of money to the principle of the home at the beginning I'm wondering if I would be in a better position if I funneled that extra cash (We'll say $2000/m) toward the loan instead of investing it.
Is this a good idea?
Edit: Contextual Information
- I'm 23 years old.
- My company does not offer matching, but instead deposits 8% of my salary + cafeteria funds into my 401k at the end of the year regardless of what I do.
- I have virtually no other debt to speak of (I just paid off my car and I keep my CC balance around $1,000 at any given time).
- I'm not bound to this location - my reasoning for buying a house is funneling my living expenses into principal instead of having it evaporate at the end of each month.
- I'm not particularly worried about being unemployed -- My house payment is low enough to where my unemployment check would more than pay for it and I'm in software, which means I can find a job on a whim if I needed to.