Withdraw from mutual fund for martage payment... Question...

[NJ11]

DS, thanks for the analysis

The problem with your basic calculation NJ11 is that the principal falls each month, so the interest is calculated on fewer dollars each month. So for the month with a balance of $7688.98, the interest paid that month would be $44.85. The rest of the payment ($620.45) goes to principal, so the next month you pay interest on only $7068.53. That month you pay $41.23 of interest and $624.07 of principal. Each month you pay interest on less principal.

Yes. I do aware of this part though.

[mrpaseo]

It would be nice to payoff a house. But, equity does not earn interest. If you feel secure with your income and do not believe the stock market will have decent gains in the future, paying down is not all bad.

If I remmember right, you are in the military and have a stable income. And by history, the market will usually go up from this point.

I personally would ride the mutual funds and wait to use them for payoff later. Just my opinion.

I have decided to wait until April 2010 for right now. At that time I will re-asses.

Get this.... I almost sold my Microsoft stock the day before they released the new OS.... My boss freaked out when I told him I had a sell order in... He then explained about the OS being released and I stopped the order in time.

Sadly I sold Apple for 185, Friday it was what 205?

I still made profit so no worries.

[Like2Plan]

Sadly I sold Apple for 185, Friday it was what 205?

I still made profit so no worries.

Did you sell before or after Apple reported record breaking profits? I don't think Apple is done in the latest upswing. Apple got a cheapskate like me to buy two iPhones and I know a lot of people who are waiting to buy once their current contract expires....

Market timing is very difficult--My philosophy is if you sold for your target price and you made a profit you are happy with, then you are doing quite well

I also agree with MonkeyMama on paying down your mortgage. It seems your goal is to pay your house off in 20months as part of your retirement plan. The market has gone up lately and everyone is feeling good about it. But, I would not be shocked to see a market correction. Your time horizon for when you need the funds is relatively short. How much would your mutual funds have to go up in value in order to "earn" the 7% you are currently paying in interest to keep you on par?

[LuxLiving]

What other retirement assets do you have?

[mrpaseo]

UPDATE:

First, I had a computer breakdown and I lost this website... (The reason I have not been around).

Second, I sold the mutual funds and ended up with $12,000 (Two mutual funds and a few stocks). I about broke even on all of them and frankly I am satisfied with the sale.

Third, reading through the posts I realized that it is assumed that I am at the end of a 30 year loan when in fact, on my currently progress I will be paying the house off in 11 years.

Forth, edited to add, these mutual funds were started with the intention to sell and pay off the home, I do have additional retirement accounts.

Thank you all for your input,
Ray

[mrpaseo]

Sorry, to hard to post

[mrpaseo]

Here is the excel tracker I am using to pay off the mortgage.

[Johngate2100]

If your investment is in the stock fund then its better for you take off your funds other wise income funds or low risk funds are much better than the mortgages.

[Hector]

1. Why do you want to do this?
2. Why do you have a 7% mortgage?
3. The actual rate isn't 7% because of the tax deduction. Real rate is more like 5.25%.
4. I don't know about you, but my mutual funds have been going wild this year. My best fund is up just over 73%. I have a couple up over 30% and others up 10-20%. I wouldn't sell them (and pay taxes on the money) to pay off a relatively low interest loan.

You said, his actual rate is 5.25% because of tax deduction. I don't get it!
His remaining mortgage is 59,000. I wonder whatever interest (roughly 4,100) is he paying towards it is even enough to bring his deduction to itemized deduction!

[Like2Plan]

Ray,
Well done.
Where are you in on the mortgage pay off? (is the dark green section--future payments?)

[mrpaseo]

Ray,
Well done.
Where are you in on the mortgage pay off? (is the dark green section--future payments?)

Yes, the light green is payments already made, the column on the right identifies how much we paid on the house since 1 OCT 2009 (monthly added up). The dark green and white identify future payments, the yellow is our goal pay off months (Actual last payment will be for 1 JAN 2011 but will be paid a few days before due to the holiday and early pay income, ultimately the payment will be made this year, but it might not take effect until next year... were okay with this). The red block was our original pay off goal, which is now our absolute worst case scenario.

Edit number 3: There are additional columns on the worksheet that I hid so this tracker would fit on this page. Here is what the original tracker has:

YEAR: Identifies my retirment dates.
DATE: Monthly
MONTHS OWE MONEY: A number 1 to use in the calculations
Beginning Balance: How much I owe at the beginning of that month.
Interest Rate: 7% in all rows for the calculations
Payment Due: The total monthly payment due monthly.
Annual INT: Amount due X 7% (Identifies the total annal interest due as of this month)
Interest per month: Interest due this month
Escrow Ray Payment: I make the base payment, this identifies how much of my monthly payment goes to escrow.
Extra Payment: This is the large dollar amount that we come up with to pay extra.
Additional Payment: Usually less than 50 dollars to round out the amount due (No particular reason).
Actual Payment: This is the amount I send in to cover all... escrow, regular payment and extra payments
Remaining balance: This is the amount I will owe after the payment hits.
MO REM: Identifies how many months still have payments (A column made when I originally developed this tracker to pay off the mortgage the month I retired... we have since changed our payoff date to the left at first one year, now 16 months...)
MONTHS LEFT UNTIL 20 YR: Itentifies how many months left until I hit 20 years of service.
AS OF: This totals how much we have paid on the balance since 1 OCT 2010 (When I made this tracker origninally... I think).




Thanks,
Ray

[disneysteve]

You said, his actual rate is 5.25% because of tax deduction. I don't get it!

Mortgage interest is tax deductible. If you have a loan rate of 7% but are in the 25% tax bracket, you save $0.25 on your taxes for every $1.00 you pay in interest. That makes a 7% rate the equivalent of an after-tax rate of 25% less or 5.25%

[mrpaseo]

One more note, this does not reflect an undetermined amount of monies earned from the sale of a few items. We intend to start selling in Oct and through Nov for the final payment in Dec.

[mrpaseo]

Mortgage interest is tax deductible. If you have a loan rate of 7% but are in the 25% tax bracket, you save $0.25 on your taxes for every $1.00 you pay in interest. That makes a 7% rate the equivalent of an after-tax rate of 25% less or 5.25%

I have never had the opportunity to itemize... The standard deduction has always turned out better for my pocket.

[disneysteve]

I have never had the opportunity to itemize... The standard deduction has always turned out better for my pocket.

If you don't itemize, then my info wouldn't apply since you aren't claiming that interest.