Biggest Mistake or Wisest decision of my life .....???

[cypresschick]

I have 150k mortgage and our home cost $200k, I have over $200k in savings which I have invested in CD's paying interest of 3.25% for a 60 month period.

My monthly mortgage payment is $1100 @ 5.5% interest and about $850 is interest only on my mortgage.

I am considering the idea of paying of my mortage vs having money in the CD which pays less than my cost of borrowing and additionally I need to pay tax on that earnings.

I plan to stay in this home for another 2 years, I also have another 100k in savings which are not locked in in any kind of investment. We also have good stable jobs (Or atleast we like to think)

Do u think it makes financial sense to pay off my mortgage.... simple math makes sense to me, but I'm not sure if I'm overlooking any major considerations ...Please advice, before I make a blunder or the best decision of my life !

[LivingAlmostLarge]

Is there a penalty for cashing out the CDs? Why did you invest in CDs versus the market? What is the point of the money? Did you save it or inherit it? What are your plans for the future with the money?

Money isn't about math, it's about emotions as well. Do you want to be debt free or do you want to be wealthy? Did you inherit it and not save it, thus not touching it would be a better idea so you can keep on building your "own" savings?

[buildmybudget]

What kind of neighborhood is the home in and does that area seem to hold its value well? I'm just thinking that if it's in a stellar area that will retain its value, it may be a wise decision to pay off the mortgage and avoid paying all that unnecessary interest. I'm sure better advice will follow, good luck~!

[EconoMutt]

Do you have at least 6 months savings for your emergency fund?
If so, why not just cash in one CD and leave the other?

[skydivingchic]

How old are you? How much do you have in retirement savings? How much of your pay goes toward retirement savings? If those CDs represent retirement savings, I would not recommend paying off the mortgage with them. If you are also saving a decent amount toward retirement and this represents savings outside of retirement, then paying the mortgage might make sense. Also, as Economutt noted, you should still have an emergency fund intact after the pay off.

[disneysteve]

If you only plan to be in the house for 2 more years, why would you want to pay it off?

[EconoMutt]

If you only plan to be in the house for 2 more years, why would you want to pay it off?

Good point.

[ActYourWage]

Agreed. Don't sell if you plan on only being there 2 more years. Sell in two years and have 500K in cash. 200k for the house, 200k in savings, and the other 100k you mentioned. Plus the housing market should be up quite a bit in 2 years.

[KTP]

Agreed. Don't sell if you plan on only being there 2 more years. Sell in two years and have 500K in cash. 200k for the house, 200k in savings, and the other 100k you mentioned. Plus the housing market should be up quite a bit in 2 years.

MATH ALERT!

50k for house, 200k in savings and the other 100k = 350k not 500k

but there will be a slight paydown of the house over 2 years and the small cd interest, so maybe $375k

[ActYourWage]

MATH ALERT!

50k for house, 200k in savings and the other 100k = 350k not 500k

but there will be a slight paydown of the house over 2 years and the small cd interest, so maybe $375k

Thanks.

[cs1992]

I am in a similar situation however we plan to stay in our house a long time. I have mulled it over and feel that paying off the mortgage make more sense (at least emotionally). I detest the thought of tying up my money in CDs nowadays because of the minuscule returns and am not willing to risk it in the market. However, paying off my mortgage means one less concern and is a much more efficient use of our money.

[lovcom]

Rent the house out (keep as an investment), and buy another house you can stay in for a very long time 100% CASH.

There is something nice about having a free and clear roof over one's head....

You have a great predicament ;-) Life should be grand for you....

[EEinNJ]

In my view, whether you plan to stay in the house for only 2 years is irrelevant- you still owe the money, and when you sell, you have to pay it all back anyway.

So if the pay off is 150K, and you're paying about 850/month in interest, in 2 years that's about 20K you'd save. Even after losing the tax deduction, it's still 15K, so you'd get a 10% return over 2 years, 100% safe. Go for it, you can't miss!