Dividends to pay mortgage

[Rockatansky]

Ok, I'm normally mustachian, but we're getting a little more comfortable and not as frugal. We bought a bigger house in a better area, with better schools and here are the details and we're also getting an inheritance in the mix.

Some details-
Net home proceeds: $350k
Inheritance: ~$90k
New home cost after down payment: $450k
Salary $110k + 13% potential bonus, wife makes about $20k under the table
Currently max 401k, 2 Roths and a HSA, so with company match we're adding about $50k into our retirement fund per year
No car payments or any other debt

So you see we could virtually pay off the mortgage immediately, but it seems like a waste to me because we are at a 3.25% rate, plus our bank offers cash back on all of our accounts (I can't remember the calc, but it'd drop the interest rate even further). Now I don't want to put this money into the new house and was looking at getting a couple rentals, but I am also not a big fan of having a $2k monthly payment on the house due to the loan itself. Has anyone used their investments to offset the mortgage payment at all? I'm not sure I could float the full $2k without things feeling a little tight because both our kids are in expensive club sports. This probably wouldn't be a long term solution until we'd be getting some passive income from the rentals, but that takes a bit to get those up and running.

[JJ-]

You're overthinking this. You're using the house as leverage to invest funds for a higher return long term. Whether you use dividends (which you pay taxes on) or your paycheck (which you pay taxes on), is entirely up to you.

The real question though is are your non mortgage expenses consuming your take home cash flow which prompts your post. Probably, with expensive club sports. This means longer work time and more money to retire.

[Rockatansky]

You're overthinking this. You're using the house as leverage to invest funds for a higher return long term. Whether you use dividends (which you pay taxes on) or your paycheck (which you pay taxes on), is entirely up to you.

The real question though is are your non mortgage expenses consuming your take home cash flow which prompts your post. Probably, with expensive club sports. This means longer work time and more money to retire.

I suppose you're right. I'm just paranoid about having a mortgage again, it's been a while since I've had to worry about paying one.

[SweatingInAR]

I'm in a relatable situation, where my expenses are higher than my paycheck.

I can squarely place the "blame" of this on my mid-year job change. Before, I only had access to a 401k with the traditional/roth limit of $19,500. In my new job, I can access a Mega Backdoor Roth with a combined limit of $58k! After employer matching, this means I can invest an additional ~$30k of my post-tax income in this account. Condensing those contributions into a partial year is a strain! My "paycheck" is small, but my investing is all happening in tax-advantaged accounts instead of my taxable brokerage account.

I am pulling from my cash reserves to fund my living expenses so that I can max out the mega backdoor roth. Money is fungible, so you can rationalize this in numerous ways. Though some would say that I am "living beyond my means" because I am dipping into savings to cover every-day expenses, I choose to view it as an opportunity to invest my cash reserves into a Roth 401k!

At the end of the day, look at your income, expenses, and investing. Make sure that you are spending money on your priorities, and that you are meeting your savings goals. If you are interested in diving into the deep end and overthinking this some more, check out this blog post: https://earlyretirementnow.com/2017/04/05/savings-rate/