Author Topic: Mortgage or invest  (Read 2711 times)

gillstone

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Mortgage or invest
« on: May 29, 2013, 09:28:28 PM »
I've seen a few articles on this, but the timelines of payoff are further out than ours and the comparison on investments tends to run a little high at 10%/year over 30 years rather than the historic S&P 500 return of roughly 8%.

In about a year our kids will start aging out of daycare and will free up a good knot of cash in the process.  Right now we have a 30 year 176,000 mortgage with a 3.5% APR which we closed on in July of 2012.  Our interest rate is so low that even though 2012 included buying a home, having a child, and some dental work which was more expensive than the child, we still didn't have enough deductions to claim to do better than a general deduction. 

Our only other debt is 12k in student loans at 2.75% for a whopping $112/mo in payments until 2024. 

Right now we are saving about 9.5% of income for retirement with an annualized 3-year return of about 15%. 

Our goal isn't to see how many millions we can rack up. Its to get to a point where we have enough that a 3% rate of withdrawal will cover living expenses without touching the principal.

Assuming we add our pay raises to the principal as well as daycare savings, PMI and etc... we can pay off the mortgage by Spring of 2020.  At which point we can roll roughly 42k/yr to investing.

So my question is which one? Roll the money out into the market and let the house ride or payoff the house in roughly 7 years and then hit the markets


Joel

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Re: Mortgage or invest
« Reply #1 on: May 29, 2013, 09:35:48 PM »
I would pay enough on the house to eliminate pmi. That tacks on an additional 5% or so that is being wasted.

icefr

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Re: Mortgage or invest
« Reply #2 on: May 29, 2013, 11:35:12 PM »
With the numbers you've given, I would pay down the mortgage to eliminate PMI - look into how you do that. You may need to refinance to do that. And then invest. 9.5% of income for retirement isn't much at all.

2020 is 7 years from now. Having money in the markets in the meantime is a really good option.

 

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