Quote:
Originally Posted by bjl584
Yes, I realize that I would be starting over the mortgage. My plan was to invest the "extra" money. My goal really wasn't to increase my disposable income, rather to boost my savings.
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What year are you on the mortgage?
My guess, just based on running the numbers for me, if that if I could pay off mortgage in less than 10 years, there is higher return paying off the mortgage, then investing the whole mortgage payment.
You need to look at 3 sides:
1) invest $150/month now for 15*12 months=$21600 invested*y
y is the compounding factor of deposits.
2) pay off mortgage, then invest $668 for x years*12 months= $8016x*z
(you need to fill in x for it to equal date in 1, z is the cmpounding factor for the deposits)
3) the interest cost of 1) and the interest cost of 2), plus closing costs of 1) as well
I think 2) wins out, as 15 years might let some of the early years double twice, but unless you are only 3-4 years into current 15 year mortgage, my suggestion is to pay off the mortgage on normal schedule, then invest the full mortgage payment.
The over under is usually 11 years in my calculation for me (meaning if I can invest money for 11 years or more, the compounding of lower deposits beats the higher deposits later for a given risk level)
2) clearly has less risk
time will make investing less risky, so one reason 11 years on over under looks good is it's possible money doubles twice in 11 years if there is a good bull market. That is probably not true for 9 and 10 year periods, if numbers on paper look good.
One other issue for me- I plan on taking my 2k+ mortgage payment and creating a dividend stream from it. It makes sense when doing this to delay taxes on the dividends now, and just invest a lot into dividend paying taxable investments for 2-5 years prior to retirement. I would then have 2-5 years of taxable dividends while accumulating, then those dividends become part of my income stream for retirement.