Aggressive Mortgage Payments, or Cash Stache

[buccaneer]

I have been reading this blog for a while now and love this forum. I have made a few badass changes since reading this blog for the first time.  The best change... going down to one car and biking to work!
I’m sure there are some threads regarding my topic that I could be redirected to, but here is my scenario.

We finally have zero consumer debt! and we want to figure out the best path to financial freedom given our current situation.  Here are our stats.

Age: 30 (both of us)

Combined HouseHold Income (with predicted annual increase of 3%.yr - government employees) :$170,000

Home Value: $660.000
Mortgage Balance: $485,000

Equity: $175,000
Savings: Retirement Pension plans totaling $90,000 (locked in government pension though)

Our home is definitely our biggest expense.  My question is do we aggressively pay off the mortgage (double down mortgage payments) or start stashing cash?

If we double down our current payment we would be mortgage free in 10 years. We currently have 4 years left on 3% term.

We already have locked in defined contributions to our pension plans....

Trying to decide which step would make the biggest impact on the road to financial independence, any help or thoughts would be greatly appreciated.

This community is great.

Thanks,
Buccaneer

[plainjane]

Home Value: $660.000
Mortgage Balance: $485,000

[...] My question is do we aggressively pay off the mortgage (double down mortgage payments) or start stashing cash?

If we double down our current payment we would be mortgage free in 10 years. We currently have 4 years left on 3% term.

Historically & on average, investing in the market will give you a better return than paying down 3%.  From a personal comfort level, you may not care what the math says.  There are many threads on this topic, but that is what it comes down to.

I hedged my bets and did half and half. 

[daverobev]

Can you sell the house and rent? Sounds like a hell of a lot of money for a house. Eg, if you can rent comething comparable for less than your mortgage payments... or even better, something smaller and cheaper...

Otherwise, I agree with plainjane. It's stats vs cashflow. Personally I would not be comfortable carrying that much debt.

[Another Reader]

Looks like you have a 5 year ARM.  That's bad news, as rates will likely be a lot higher when the rate resets.  You have too much house (really too much loan) for your income, especially figuring the rate will reset over time.

However, you have no savings.  That's really bad news.

In your shoes, I would come up with a budget and an overall plan to get you where you want to go.  Are you federal, state or local agency employees?  What are the pensions like?  Do you have access to other workplace retirement accounts - is that what the locked in defined contributions are?  What will you need to spend money on over the next few years?  Are kids going to be part of the picture?  Lots of questions, the answers will point you in the right direction.

[buccaneer]

Thanks for the advice.  My wife is a federal government employee and I am provincial.  Our pensions are very solid, but the idea is to retire early anyway, so maybe I shouldn't be so focused on the pension contribution.   

We do live in Canada, an hour from Toronto which explains the home value somewhat.  It is a 3200 sq foot home (not including unfinished basement), which we do not need at the moment, however kids are in the future plans at some point.
We did not purchase the home for $660,000.  That is it's appraised value.  We purchased for $540,000.  I understand zero savings is not ideal, however we did pay off considerable school debts, and saved a good stache for the down payment of our house.

I also agree that it is a lot of debt to carry.  Selling the house and purchasing a smaller home could be a good option.  Also there is a realistic chance my wife will be transferred to a new city in the next 5 years, in which case work would pay all relocation costs and closing costs on the sale of our property..which could add up to a lot of money in our case. 

Again, thanks for the advice!