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    Should I pay off mortgage

    I am so excited this morning I can't stand myself. The bonus was very good this year and I have an opportunity to do something I never thought was possible: pay off my mortgage. But it isn't clean cut.

    I would have to use my taxable investment account and college account to do it. But it frees up enough monthly income to cash flow the college and the mortgage money would have the taxable account back up to snuff in 2.5 years.

    I know I shouldn't do it because my after tax interest rate is only 2.2%. But man, how good would it feel to be able to say I am debt FREEEEEEEE!!!!!!!

    The wonderful thing would be that without the mortgage, we could live off my pension if we had to. I would still have $80k in Roth's that I could access in case of emergency.

    I am so tempted to just do this. You folks know where we came from and to find ourselves completely debt free would be a seminal moment in our lives.

    The other piece of the pie is that I may get promoted this year and have a shot at a 7 figure income. So I could build wealth even more quickly.

    Just wanted to share.

    #2
    What a great position to find yourself in, especially knowing where you were not all that long ago.

    Should you pay off the mortgage? As you already know, it's probably not the best use of your money mathematically speaking, but there's always more to personal finance than math.

    As with most decisions, there are also more than 2 choices, even though that's how questions here typically get presented: should I do A or B? If you like the idea of getting rid of the mortgage but the logic side of your brain knows that prepaying a 2% loan isn't really the best idea, do a little of both. Start making substantial extra payments on the mortgage. Rather than paying it off tomorrow, maybe work out a schedule to pay it off over the next 12 months. And use the other money for a higher-yielding investment.

    If you are like me, however, when the balance hits a certain level, you're going to end up just writing a check and finishing it even if the plan was 12 months.

    No matter what you do, celebrate the fact that you have the money on hand to even entertain the question. That's the real success story here.
    Steve

    * Despite the high cost of living, it remains very popular.
    * Why should I pay for my daughter's education when she already knows everything?
    * There are no shortcuts to anywhere worth going.

    Comment


      #3
      I'm guilty of paying off our mortgage early. I even led it a little bit in the last year by opening a 0% CC--put all household expenses on the new CC and put all cash towards the mortgage payment. Then, I had 12 months to pay off CC (0% interest). It was too easy.

      Maybe it is not the best investment decision, but if you were going to reward yourself for all the hard work you have done--paying off the mortgage on the house seems like a pretty nice gift. (And, who knows--maybe we are up for a market correction you will look like a financial genius? )

      Comment


        #4
        Originally posted by Like2Plan View Post
        (And, who knows--maybe we are up for a market correction you will look like a financial genius? )
        I thought of that, too. We all agree not to try and time the market but if you want to drop a lump sum somewhere right now, the mortgage certainly isn't a bad place.

        I have made extra payments on our mortgage pretty much every month for years. We've got about 36K left and I suspect that once we are done with college bills next year, that will be the next target that gets attacked.
        Steve

        * Despite the high cost of living, it remains very popular.
        * Why should I pay for my daughter's education when she already knows everything?
        * There are no shortcuts to anywhere worth going.

        Comment


          #5
          In my opinion, No.

          I would not take money from the taxable account & college account to pay it off. If it was a matter of your bonus covering the balance, then I would say sure why not. But you put that money into those accounts for a reason.

          Much congratulations on your success

          Comment


            #6
            But I'd be FREEEEEE!!!!!!

            Between my pension and savings leftover, I could stop working and be just fine. But the calculator shows I would have $56k of tax free income at a 3% SWR, which should last forever.

            $45k COLA pension
            Free health care
            $450k retirement savings

            With the mortgage, I can't make it. Without it, we could live quite comfortably.

            Comment


              #7
              Personally, I'd pay it off. Congrats!

              Our own aversion to debt has very little to do with math or the usual reasons that people presume. Most of it is not dealing with the complication and red tape. That's really it. & I also agree with the market comments.

              A good compromise might to be everything off but the college amount. & that's only if you couldn't cover the college costs if you retired tomorrow. I might be a little cautious with that part.

              Comment


                #8
                Originally posted by MonkeyMama View Post
                Personally, I'd pay it off. Congrats!

                Our own aversion to debt has very little to do with math or the usual reasons that people presume. Most of it is not dealing with the complication and red tape. That's really it. & I also agree with the market comments.

                A good compromise might to be everything off but the college amount. & that's only if you couldn't cover the college costs if you retired tomorrow. I might be a little cautious with that part.
                Good point about college and retirement. I could not cover college with my retirement income. Hmmmm...

                Comment


                  #9
                  Given how much excitement and relief/happiness this prospect is clearly giving you, I would strongly consider going for it just for those reasons.

                  However, to echo MonkeyMama -- I'd recommend that you leave kiddie's college fund alone. Feel free to pillage your taxable investment account to knock it down to almost nothing, then over the next few months, finish it off. Alternately reverse it (pay it down over the next few months until it's low enough for your investments to cover the remainder).

                  As has been stated, there's alot more to personal finance than numbers alone -- that's why it's personal! Being debt free is good for you financially, but it's also good for you mentally/emotionally, and this is obviously evoking a strong emotional response for you. So even though it's not the BEST thing for you to do financially, it's still a GOOD financial move. Follow your heart, Tom.

                  I vote that you pay it off (while leaving the college savings intact).
                  "Praestantia per minutus" ... "Acta non verba"

                  Comment


                    #10
                    Originally posted by tomhole View Post
                    With the mortgage, I can't make it. Without it, we could live quite comfortably.
                    I have to point out that this statement doesn't make any sense.

                    If you have the money right now to pay off the mortgage and you park it in savings and use it to make your payments, you will be just as fine as if you spend that money now to pay off the loan. There's no real difference except for the interest which is probably not that significant in the big picture.

                    If you can afford to pay it off, you can also afford not to pay it off. Does that make sense?

                    All of that said, if it will bring you really tremendous joy and satisfaction, go for it. I have no doubt that you will be just fine if you do.
                    Steve

                    * Despite the high cost of living, it remains very popular.
                    * Why should I pay for my daughter's education when she already knows everything?
                    * There are no shortcuts to anywhere worth going.

                    Comment


                      #11
                      Thanks everyone. I have been thinking about this all morning and I think it comes down to managing risk. The risk is losing my job. Currently, that risk is very low, and I have great prospects.

                      The practical side says wait and pay it off next year as I won't have to raid anything to do it.

                      The emotional side says bury all the money in the house and then live on my cashflow. This has the benefit of not tempting me to use it for stupid things (I'm a recovering spendaholic after all) and we will have to be very careful to not spend more than I make.

                      This is all emotional. But the cool thing is that instead of making an emotional decision to buy a boat when I am $150k in debt is just stupid on all accounts. This emotional decision is in the gray areas.

                      I'll talk to my wife this weekend and see what she thinks. She is much less emotional about finances.

                      Comment


                        #12
                        I suppose I would also consider how attached you are to your house and what the long term plan is with that? Are you significantly attached and would never sell? Or would you be willing to sell and downsize in an unexpected financial situation? In the latter, I'd probably just pay it off because you would be left with options.

                        Comment


                          #13
                          Originally posted by disneysteve View Post
                          I have to point out that this statement doesn't make any sense.

                          If you have the money right now to pay off the mortgage and you park it in savings and use it to make your payments, you will be just as fine as if you spend that money now to pay off the loan. There's no real difference except for the interest which is probably not that significant in the big picture.

                          If you can afford to pay it off, you can also afford not to pay it off. Does that make sense?

                          All of that said, if it will bring you really tremendous joy and satisfaction, go for it. I have no doubt that you will be just fine if you do.
                          That does make sense. Hadn't thought of it that way.

                          Originally posted by MonkeyMama View Post
                          I suppose I would also consider how attached you are to your house and what the long term plan is with that? Are you significantly attached and would never sell? Or would you be willing to sell and downsize in an unexpected financial situation? In the latter, I'd probably just pay it off because you would be left with options.
                          Not attached at all and we were thinking about downsizing anyway.

                          I guess I'm afraid that if I have all the money laying around that I might do something stupid with it vs. if it's in the house, I won't touch it. Irrational, but reality.

                          Comment


                            #14
                            If you pay it off, will you blow the money you would have used to pay your mortgage on silly things? You could just set up automatic transfers to your savings account, but that doesn't always stop a person. I know!

                            If it was me, I would pay it off. Being mortgage-free is a big goal for me. But then I would have to transfer a big chunk of our paycheck into retirement and college accounts before I could get my hands on it. I don't want a lot of stuff, but the stuff I want is expensive.

                            Comment


                              #15
                              I just ran the math for if I wait until next year's bonus in March. If I wait, I can pay it off then without raiding anything.

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