Aldeer.com Forums Alabama Deer Talk Aldeer General Forum Paying Mortgage Off

I'd stay out of the 401k , unless I was about to lose the house. The 401k should be making way more than your interest rate and it's building $ tax free.

If I was you I’d do what Dave Ramsey advises.

This ^^^^

3rd

If you can earn more interest on the money than the rate on your mortgage, don't pay it off. If you have extra cash from time to time, throw it at your mortgage balance.

Honestly, with your mortgage rate… I personally would put money into investments that would you would use the pay house off quicker. The return in the market on average is higher than your interest rate. I know you wanna pay it off the quicker the better but there is also a lot of long-term benefit in paying minimum and investing the rest versus maximizing your payment. Build up your 401(k) as this will help your taxes and also look into Roth vs traditional Ira. Also, the payments will help your credit score. I used to be in the motto and that audit is bad, but I have used good debt to generate significantly more net worth that I would had. I just paid everything off quick.

Avoid tapping the 401k and still push hard to pay off the house early. Paying off your house and not owing money gives a great sense of freedom. I sold my house that I had remodeled and used that profit to pay cash for a smaller house about 6 years ago. I’m looking at building a barn in the next 6 months but planning to cash flow it. Once you have no debt, it makes you want to avoid it as much as possible. I’m 43 with a daughter in college and a son still in high school. If you ask my kids I try to teach them too much about money and work, lol. My parents didn’t tell me much. I saw two extremes at home, one that spent money like crazy and another that saved every dime he made.

Do you have a loan option on your 401k? Mine did and I took out 2 different loans over my career. Paid myself back at 7% interest and avoided the 10% penalty. Might be another option worth checking in to.

As others have said, don’t touch the 401K and double up on payments. Keep a safe amount of money in savings (the 6 months expenses rule is a good one). I’d divert some of your savings (not all but some) to an IRA or brokerage account. I understand the feeling that the market is going to crash. It will inevitably hit a recession before you hit retirement age. That’s just the natural market cycle. But you aren’t so close to retirement you can’t recover from it. You have a historical low mortgage interest rate. I’d focus on building more wealth for retirement and work towards paying your house off over a 5 year period. That timeframe should allow you to get it knocked out without having to pull from your nest egg. The line of work you are in can take a toll on the body. There’s no telling when you might be forced to medically retire (hope it doesn’t happen to ya but I know a number of folks in the trades it has happened to). It might be a good idea to try and have enough wealth built up to float you until you can draw social security and from your 401K without penalty should that happen.

Interest rates like yours (and mine too) will never come back around again. I’d keep the mortgage, put enough of your cash aside to live through the winter, and invest the rest. Anytime you have to pull from that stash, I’d replenish it asap, then back to investing. Look into opening a Roth in addition to your 401k and you can dump any leftover paycheck money into that. Lots of good answers here, but this is the approach I’d take.

You have done a really great job so far. Congratulations on being debt free except the house. Please don't cash out the 401k, the opportunity cost is to great. Work the Dave Ramsey plan. Keep 6 months of experience in the emergency fund. Then if you want put the rest on the house. Work on paying the house off from there.

add as much as u can to the monthly payments in a separate check/payment and make sure to put principal only on the check /payment memo.

plenty of formulas you can input your loan, rate and monthly payments into and see the timeline on the loan. amazing what an additional $100-300/m will shorten payments

Good point and advice CD, that low rate on the mortgage is an asset.

Heck if you pay every 2 weeks it will pay off on long run. Meaning payment is 1200 a month. Set it up to pay 600 every 2 weeks

The day I paid off my house was one of the best days of my life but the scenario you describe Id think you would be money ahead to keep that mortgage. They money you use to make that payment 10 years from now is likely to be worth half what money you’re paying with today effectively cutting your payment in half.

Invest it all in an ETF and you’ll get 10% per year on average. No one can predict a market crash so do not overthink that.

Real estate has a traditional appreciation rate of around 7% in the long run. That's twice his interest rate so he's already making money on the house.

Absolutely do not hit the 401K. The term opportunity cost was used above and it definitely applies in this case. This is High School economics and I don't need Dave Ramsey to tell me that.

Build savings for a rainy day and pay extra principal on the mortgage to pay it off sooner.

Pump as much as possible into the 401K. It will earn FAR more than the house.

Good suggestion. If you don't mind , I'll piggyback on it . If you add , say $100 to each $600 / two week payment , you can really whittle away at it.

Both of my houses are paid for, so I'm a BIG proponent of paying off your mortgage. That said...

1. DO NOT take any money out of your 401k at your age. The government will automatically take a 10% penalty and 20% withholding for taxes. So if you take out $45k, all you will get is $31,500, plus you are going to lose all that future interest.

2. $106k is a pretty small mortgage.

3. Having the $71k in savings is really good. Move that to an Ally Bank Money market fund. This is where we keep our savings. If you put that $71k in that Ally Money market fund it would immediately start earning you money. A principal of $71k in an account with a 3% annual interest rate earns approximately $177.50 per month before compounding. Take that extra money you are now making and pay the flood insurance and make an extra $100 principle payment on your mortgage.

4. This way you still have all your savings and investments. So if you get into financial trouble later, you have a safety net or you can still use it later to pay off your house when the payoff is smaller.

Man Kudos to you for being in the position to even think about doing it. I definitely wouldn’t take money out of my investments to do so though. The market has a long history of making folks who continually invest money. It isn’t going too crash, could be a rough year here and there but you will still earn more in there than the 3% your saving by paying your mortgage off. Make extra payments as others have posted when you can. If weather sucks and you have a down month then pay a single payment. Just my opinion.