I need help from the finance math nerds. I'm kind of agonizing on this and I'm hoping someone smarter than me has some insight.
Background:
I own a house in Portland, OR and I want to maximize my financial benefits with it. My planned FIRE date is Sept 2020, but would love to retire earlier if I can swing it.
I also own a house and some land with a partner in Montana. We will call it The Farm. This I want to keep and live on until I don’t love it anymore.
Home worth: ~$365,000 once I do the planned renovations which I predict will cost about $25- 30,000.
Current:
HELOC @ 4.5%: $7,800
Home Mortgage @ 3.25% $136,500; currently 11 years remaining on loan
Farm Mortgage @ 3.875% $125,100; currently 29 years remaining on loan
Spending not including mortgages & HELOC payments: $1,415 per mo (~17,000/year)
Monthly Home mortgage:
Principle: $920
Interest $380
Tax & Ins $ 300
Total: $1600 ($19,200/year)
Monthly Farm mortgage
Principle: $200
Interest: $200
Tax & Ins: $185
PMI: $200 (will be gone next year)
Total: $785 ($9,420/year)
HELOC: $7,800
Payment $200/month ($2,400/year)
Value of investment accounts: $115,000
At FIRE (Sept 2020)
I predict that I’ll have about $350,000 at retirement in my investment accounts at the age of 40 (fingers crossed).
Home mortgage: $95,200 @ 3.25% with 8 years remaining
Farm mortgage: $115,675 @ 3.875% with 26 years remaining
Assume HELOC will be maxed due to remodel: $23,000
Scenario 1:
Don’t do anything until 2020, at which time I retire and remodel the house. Sell it for $365,000, pay off the HELOC and Farm, and invest the rest.
Leftover after house sale, other mortgage payoffs, realtor fees, & misc sale stuff: $127,000
Total investment accounts after sale: $517,000
4% SWD: $20,680
Predicted spending: $17,000
Scenario 2:
Don’t do anything until 2020, at which time I retire and renovate the house. Rent it out, let renters pay off my remaining 8 years of mortgage, and then have passive income of around $1,050 indefinitely.
Home mortgage: $95,200 @ 3.25% with 8 years remaining
Rental income for first 8 years: $0
Rental income after 2028: ~$1,050 ($1,800 minus taxes, insurance, HELOC, and maintenance costs)
Total investment accounts at FI: $350,000
4% SWD: $14,000
Spending: $17,000
Farm mortgage: $7,020
Total: $24,020
I played around with refinancing to a 30 year home mortgage, but the numbers didn't seem to work out in my favor due to the higher interest rates. I could be way wrong with this, though. Maybe it's best in the long term? I welcome any suggestions!