IRA verses Principle on Mortgage

[FrugalFish]

If you max your Roth IRA, you can still use the extra $$ to prepay your mortgage. You're almost low enough to avoid PMI now. Even if you start maxing an IRA you'll still have 80% equity before too much longer.

There's another thing to keep in mind- with an FHA loan, MIP has to be paid a minimum of 60 months, no matter when you hit 78% of the loan value. If it is unlikely that you will refinance the loan, you still have to wait for the 5 year mark to remove it, so don't kill yourself trying to prepay 22% too early.

[anonymous_saver]

I would absolutely keep on prepaying your mortgage until you have your 20% equity. Then I would make sure that your PMI is cancelled, and then I would absolutely say max your Roth IRA at that time.

How close are you to reaching 20% equity? How long do you think it would take you? If you got the home re-assessed, do you think that would increase your equity as well??

How old are you? Do you have anything saved towards retirement?

The only other option I see is agressively paying off the house until the 20%equity mark and putting maybe $100/month or something towards your Roth IRA. This would at least be a start towards retirement.

[LivingAlmostLarge]

Max out IRA. Get it checked out if you haven't already hit 20% equity. Also you cannot go back in time and refund your IRA just because you no longer have a mortgage payment.

I agree with TBH. You also need an Emergency Fund.

[myrdale]

Thank you all for taking the time to respond. The option of the IRA is starting to make more and more sense to me.

To answer answer anonymos_saver's questions:
Right now, I owe $88.9k on the mortgage. So roughly $3k to go before I hit 20%. That would put me around March or April at the latest at my current rate.

I am 26 years old. As of now, I have no retirement savings. I agree with everyone though on the principle the sooner I get started, the better.

I really liked TBH's break down. I believe that sounds like a very doable plan. I already have the emergency fund built up. That said, I would like to increase it.

Currently I have two checking accounts. One that I keep a balance of about $2k in just for living expenses, the second is what the bank refers to as a money market account. Basically a checking account with several limits, but this is where I am currently saving my income. Also I use this account for paying my mortgage so as I gain a small amount of interest on my money though out the month.

I will do a few searches for IRA's to see what additional details I can find. If anyone has any links they could suggest, they would be greatly appreciated!!

Thankyou all again.

[anonymous_saver]

I would caution you against using the money market account through your bank. What is the interest rate? For the most part, those type of accounts do not have a great interest rate (although I hope yours does!). If it is not at least in the 4%+ range, I would get an online savings account such as EmigrantDirect instead. You can transfer money back into your checking account within 1 business day if you needed it.