First off, I'm so grateful for any criticism to our plan. We're early into this so it's still possible to game change.
Ok. My husband is a professor, and every seven years he gets a sabbatical to work on research and whatever else. His college gives him two options: 1) take one semester off and receive half of his regular salary; or 2) take the full academic year off and receive 1/2 salary. We were fortunate that for his first sabbatical (which just started), he received a grant to take the entire year at full salary, but we're looking toward the one 7 years from now. Basically, we want for him to take the full-year-at-half-salary option even if he doesn't get a grant.
Because we don't have enough liquid income to invest and have the earnings make up the other half of his salary in seven years, we were planning to pay off the house in 5 years, freeing up the $937 per month in current mortgage payments. In order to pull that off, we need to pay $500/month extra on the mortgage, though I toss in more when I can't resist.
Paying off the house early would give us 16 months to pocket that cash (nearly $16k), plus the sabbatical year of pocketing those payments. That $16k of savings, plus his 1/2 salary (we're estimating his full salary to be a minimum of $70k by that time), would give us about $51k that year to meet our annual expenses. This is more than enough to meet our $27k annual non-mortgage expenses (this includes maxing out my Roth, but not his).
Two flaws in our plan: 1) our mortgage interest rate is a mere 3.25%, so our dollars could be working much harder for us for 7 years in the stock market. 2) Not maxing out husband's Roth while we may be able to get a saver's credit (we squeaked under last year!) kinda hurts my saving sensibilities. Plus, I'm lamenting the 7 years of growth he'll be missing by diverting that money to the house. Arrgh! I want it all!
To give you a more rounded view, I'm a stay-at-home-mom for two more years, then my eventual income can go wherever needed. We'll be in this house 20 years or longer. Our retirement projections are cooking along nicely.
I think that's all you need. I can add numbers if required.
I'm just curious if we're going about this in the right way. If we didn't pay off the house early we wouldn't have that extra $16k of savings and our expenses in that year would include our mortgage payment and therefore would be $38.3k. So, clearly paying off the house early works, but is there something else we could do with that $500-$600/month that would be wiser than paying off the house?
Alternatively, I could put my Roth money toward the house too and shave another year and 4 months off the mortgage, but, but...not my Roth!
After a while I feel like these numbers are just swimming around and around. Straighten me out, folks!