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I am wondering what is the best way to utilize my monthly savings. I have a large home loan at a 3.25% interest rate.

Should I take my savings and pay off the home loan or invest it elsewhere like Vanguard ETFs or stocks?

  • 1
    The title question asks about 401(k). Are you currently depositing to that account? Is there a company match, and if so, do you deposit to get the full match? The current accepted answer is fine, but the question can use more detail. Jun 29 '20 at 13:03

Since 3.25% is a quite low borrowing rate, you are likely to do better over the long term by investing your savings. If your additional 401k contributions would receive a match, that makes it a no-brainer (but I'd guess you're already contributing enough to max out the match). Even without a match, or even without a tax-advantaged savings vehicle, you can likely earn more than 3.25% by taking some modest investment risk.


The critical issue is, does your home loan still have the scam PMI attached?

That typically overwhelms all other factors.

If you are still under PMI, put everything in to reducing your mortgage until that is eliminated, forget everything else.

  • What is PMI? How do I find out if I am still under PMI?
    – user855
    Jun 29 '20 at 2:12
  • @user855 PMI is private mortgage insurance. You have this if your down payment was below 20%. PMI is not fire insurance, it is to protect the lender if you default, Jun 29 '20 at 3:42
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    Should they make a different choice if they are paying for non-scam PMI on their loan, as opposed to scam PMI?
    – yoozer8
    Jun 29 '20 at 12:50
  • 2
    @Fattie while PMI is definitely something you should avoid if at all possible, it's certainly not a scam.
    – yoozer8
    Jun 29 '20 at 16:16
  • 1
    @Fattie Because I was trying to keep your answer to factual claims and by cutting out the personal opinion on PMI from the answer. It is definitely not a scam, even if it is something you want to avoid paying. You get exactly what you pay for, there is no deception involved.
    – JohnFx
    Jun 29 '20 at 23:27

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