Pay the house off early ???

smooper · #1 (**permalink**) 08-09-2006, 11:54 AM

We now owe 29,000 on our mortgage. We refinaced a few years ago and the amount was 42,400 @ 5.6% for 60Months,$815 mon. payment. For about the last 6MO. we have been paying 1005 (odd number, but thats what it is!). We have about 32 MO. left at this rate, crossing our fingers that we can accomplish our goal. Any tips??? We are really into it.!

Ima saver · #2 (**permalink**) 08-09-2006, 11:58 AM

Well I am kind of doing the same thing. I bought a piece of land and financed it for 12 years. The amount was $64000. I pay at least $1000 more on it each month and after 18 months, my balance is down to $25,000 plus change.
I joined the $20 challenge here. I take any extra money I can save and add it to my challenge money. I plan to pay the mortgage off within 2 years.
My challenge money will be used to pay this off. I already have over $10,000 in my challenge account from this forum. Join us!

Elgin526 · #3 (**permalink**) 08-09-2006, 12:12 PM

That's great!

Just curious, but are you saving for retirement and do you have a fully funded emergency fund in place (3 to 6 months living expenses)? Financial guru's recommend that you be on track with retirement and have a nice emergency fund in place before sending extra money to the mortgage company. If you don't have these two things taken care of, I'd cut back on the extra house payments and concentrate on those for a while. Heaven forbid but if you have a medical crisis or job layoff, you can't ask the mortgage company for your housepayments back, but you can dip into your emergency savings or retirement funds (retirement funds only as a last resort, or course!).

If you do have those taken care of, then you are in fantastic shape!

Ima saver · #4 (**permalink**) 08-09-2006, 12:26 PM

If you are talking to me, yes, plus my house is paid off. It has been for most of 30 years.

Snoopy2645 · #5 (**permalink**) 08-09-2006, 08:41 PM

Yes pay the house off earlY!!! I am doing the same thing we had a 30yr mortgage been here for almost 7 & its almost paid off cant wait then we will save entirely for retirment!!!

smooper · #6 (**permalink**) 08-10-2006, 05:02 AM

[/i][quote]Just curious, but are you saving for retirement and do you have a fully funded emergency fund in place (3 to 6 months living expenses)?

Saving for retirement,yes.
Fully funded emergancy fund, no.

We are aware that we are running pretty tight, but at age 37 and my wife at 35, we think we can gamble 32 months. We figure if something comes up, we can stop the extra principal payment for a bit to free up a little cash. We also mintain a little savings that dwindles down to about 1000 each April untill we get our income tax return to beef up the account. We go about it wrong- I claim 0 dependants all year, then claim wife and 3 kids at tax time. I know "the man" is using my money for intrest, but getting a return of 6-7K pay all the taxes and gives us an actual, if kind of temporary, emergancy fund untill about Octoberish when the final tax and heating oil bills are due. So, from Oct -April its a bit tight, but hopefully, in 32 months that scenario will be over and we can sock away a real, decent emergancy fund with the $ that won't be tied up in the mortgage.

Tree0164 · #7 (**permalink**) 08-10-2006, 03:14 PM

Establish an emergency fund first... and then try to pay off the mortgage. One you get a fully funded EF in place then be aggressive about paying off the mortgage.

Emergencies do happen, you should be preapared.

smooper · #8 (**permalink**) 08-11-2006, 11:02 AM

I will consider the EF when tax rebate time comes around. Untill then I'll continue with the status quo. I know too many older people that are just getting by, and I think getting past this mortgage can really set us up for success in the future. But yes, we should keep a few grand in savings; real savings. I won't have it till april, but I will prob. open a seperate sav. acct. just for that purpose. Great advice, I do nothing but learn here!

Ima saver · #9 (**permalink**) 08-11-2006, 11:11 AM

And you know you shouldn't give uncle sam a tax free loan. If you are getting back $6000 a year, that is $120 a week out of your pay. You could put that in an emergency fund every week and earn interest. $6000 will earn you $240 in interest at 4%.

smooper · #10 (**permalink**) 08-11-2006, 11:19 AM

I know, but having that chunk of $ really feels good! I think we are disiplinened enough not to touch the $ if we got it in our pay, but you never know. Then again, I we used a small portion of it to add to mortgage payment every month...now I'm thinking!

Ima saver · #11 (**permalink**) 08-11-2006, 11:37 AM

I use to think the same way when I was young! Uncle sam loves it!

greedy4chips · #12 (**permalink**) 08-12-2006, 12:36 AM

Quote:

Originally Posted by smooper

I know, but having that chunk of $ really feels good! I think we are disiplinened enough not to touch the $ if we got it in our pay, but you never know. Then again, I we used a small portion of it to add to mortgage payment every month...now I'm thinking!

Have your employer direct deposit that money into a no touch savings acct. You won't earn much interest, but emergency funds are for money needed today. As an alternative to leaving it in a no interest acct you could ladder 3 month CDs and earn almost 5%, just keep adding to the 3 month CDs when they mature. Eventually you can begin to ladder 6 month CDs.

The interest isn't flashy but it is something. Just be sure that each CD has a minimum $2500 which should cover many emergencies. You can always cash in other CDs if that does not cover the emergency.

That $6000 ImaSaver spoke of would be an excellent start! Get yourself 1 $2500 3 month CD when you get your refund in early FEB. (get your refund as early as possible) and then sit down with your HR dept at work and fill out your W4 to give you the extra $120 per week. That is $500 extra per month to feed the CD monster!

The $3500 left over after Feb's initial CD becomes $4000 in March and a new $2500 CD leaving you with $1500. In April that becomes $2000 and a brand new 3 month CD. Now in May add the $500 to the Feb CD which is now mature and do this until you have $5k in the CD. It takes 15 months to do and then you can continue or split the 5k into 6 month CDs for a better rate of return.

This is not a retirement plan but an emergency fund/ savings acct. Only 1 time per month can you touch the money and as it begins to grow you will not want to touch it. Soon your stash grows to near $10k then $20k and if you are even close to me the goals start to mean more than spending it wastefully.

The 32 months will go by and the house will be paid for and then you can stuff another $1000 per month into the CDs or 401k.

3 kids and that money should go into iSeries Bonds for the kids college...no taxes on the interest if the money goes to tuition when you sell the bonds and they are paying 6.73% currently!

smooper · #13 (**permalink**) 08-23-2006, 04:55 AM

Honestly, I could not have come up with a better plan! I am quite impressed with the detail and possible results. That plan actually is quite do-able. Once I either construct a brick chimney, or install a pre-built metal one, I should be able to save colse to 1K on my heating bills by using a wood/coal stove; allowing me to be much more flexible with that big refund check. This might be the beginning of the end for the big refund, the system you have outlined is quite exciting!

LuxLiving · #14 (**permalink**) 08-23-2006, 05:52 AM

Quote:

Just curious, but are you saving for retirement and do you have a fully funded emergency fund in place (3 to 6 months living expenses)?

Saving for retirement,yes.
Fully funded emergancy fund, no.

We are aware that we are running pretty tight, but at age 37 and my wife at 35, we think we can gamble 32 months. We figure if something comes up, we can stop the extra principal payment for a bit to free up a little cash. We also mintain a little savings that dwindles down to about 1000 each April untill we get our income tax return to beef up the account. We go about it wrong- I claim 0 dependants all year, then claim wife and 3 kids at tax time. I know "the man" is using my money for intrest, but getting a return of 6-7K pay all the taxes and gives us an actual, if kind of temporary, emergancy fund untill about Octoberish when the final tax and heating oil bills are due. So, from Oct -April its a bit tight, but hopefully, in 32 months that scenario will be over and we can sock away a real, decent emergancy fund with the $ that won't be tied up in the mortgage.

Smooper - have you put a calculator to what you could do w/that extra that UncSammie is using for free if put into your 401-K (providing you or wife have one?). I'd take my money home and start a Tax Fund and a Heating Oil Fund somewhere like ING that was earning YOU interest. Time to get rid of that freeloading relative called the government!!

Ooops I should have read the entire thread before replying!! But good advice here from some seasoned pros!!

My husband thought exactly the same way you did, but we have finally got him convinced otherwise now. We save our money - yes you have to be disciplined - and already have the money put back for those big expenses, and have money put back in CDs and have 401-K monies AND are still able to pay down extra on our last remaining debt being our 6.75% mortgage! You can do this!!

Take your last years refund down to your human resources office and get them to help you find the right number of exemptions for your particular tax bite.

My husband kept saying "But I don't want us to have to pay taxes if we've underestimated." I finally convinced him that we are in a very low tax bracket to begin with and if it did cost us the first year if all else failed we could put it on a CC - no way would we need to do that as there is already a years worth of income in the MM!! The tax bite certainly isn't going to be more than what you earn in a year before taxes is it?? LOL!!! When put that way he finally saw the light of his rationale fade. People say that 'pay extra in taxes' like it's some huge scary monster - but if you stop and look at the actual numbers you can pretty much tell how much you're going to owe if you are a salaried person like he is!

funnyvalentine · #15 (**permalink**) 08-23-2006, 08:20 AM

My mortgage is at 5.25 and my student loan at 2.7. At those rates, they are the cheapest money I have, and there is no reason to pay them off before minimal credit cards and investing at more than 5%.

smooper · #16 (**permalink**) 08-23-2006, 08:30 AM

That is true. I would think as long as there are no other higher rated debts in the way, its OK to keep that low rate. Our big thing is that we just want that piece of mind of not having a mortgage, no matter how small it may be; hanging. The freedom it will create is gonna be awesome! I'm positive I can invest better than my 5.6 mortgage, just knowing that in a few short years i will have that mortgage payment to invest is what drives our decision to just be done with it.

smooper · #17 (**permalink**) 08-24-2006, 09:31 AM

31 months, just pluncked down another 1005! I am re-thinking the whole income tax return idea, now I'm wondrering if i should not invest so much in CDs and add more to the dwindeling mortgage-- we are so close, I really want too make sure we follow through.

smooper · #18 (**permalink**) 12-14-2006, 08:00 AM

a little update- now holding a balance of 26,400, still only 1k in savings, failed to mention we have 4.5k in stocks (this is seperate from our 401k) that is somewhat readily available if a crisis comes up. I don't deal with that account much, thats why i sort of forgot about it. Its through Computershare and is a combo of Coca-Cola and Ball Corporation stocks. With this $ I feel as if the emergancy fund is covered. In addition, since CD's locally are well over 4%, A good chunk of our tax return will go that direction.

Aleta · #19 (**permalink**) 12-14-2006, 08:16 AM

Sometimes people are wary of investing so much into CD's. A friend of mine taught me a neat trick, if you're afraid of tying up too much money. If she has $5.000. to invest and the minimum is $1000., she'll get (5) $1000.00 CD's. That's especially if it's a 12 month or longer CD. That way, if you had to bread one, you'd only be forfeiting your interest on let's say $1,000.

smooper · #20 (**permalink**) 12-14-2006, 08:35 AM

Thats what we will prob. do. Also stagger cds every 3mo. We never bought one before, but an organization i belong to has, and they are very time concious about cashing/rolling them. I hope to be able to set up a good managable schedule too. Its so nice to not really have to make a mortgage payment untill may of 07. Thats how far ahead we are right now, but we still pay evey month anyway. Wish us luck as we push forward!