Author Topic: Kill my mortgage now OR do it over 9 Months?  (Read 6138 times)

frugaliknowit

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Kill my mortgage now OR do it over 9 Months?
« on: September 21, 2016, 02:48:28 PM »
This is driving me kind of batty.  One minute, I say to myself, "stay the course" (outlined below), the other minute, I say to myself, "be bloody done with it...!".  I am down to $22,900 ish heading into Oct 1 ( I have $24,500 ish in cash earning 2.5%, 1.7% after tax, mortgage is NOT deductible), 4.0%, kicking in an extra $1070 per month per below:

Month  Loan Bal (P)   Int Paid (P)

1     21,169.82     76.30   
2     19,442.91     70.57   
3     17,710.24     64.81   
4     15,971.79     59.03   
5     14,227.55     53.24   
6     12,477.50     47.43   
7     10,721.61     41.59   
8       8,959.87     35.74   
9       7,192.25     29.87   
10       5,418.75     23.97   
11       3,639.33     18.06   
12       1,853.98     12.13   
13           62.68       6.18   

I COULD write a check tomorrow, leaving almost no cash, with:

1)  A new HELOC line of $50K (prime +0.5%, currently 4.0%)
2)  A portion of my roth in a C/D ($25K).
3)  Easily build a new cash reserve at the rate of $1800 per month.
4)  No other debt.

What say you, Mustachians?




waltworks

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #1 on: September 21, 2016, 03:08:11 PM »
Using your entire savings to pay off debt at 4%? Murphy's law says stay the course.

Congrats on being 9 months from a paid off house!

-W

Reynolds531

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #2 on: September 21, 2016, 03:39:23 PM »
I would make it slow and painful. And every time I slapped an extra hundred bucks down I would talk to my mortgage"how do like this you SOB".

Huh, maybe I need to chill. Lol

Choices

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #3 on: September 21, 2016, 03:41:44 PM »
You're so close! Congrats!

Would you consider bringing your emergency fund down to 2-3 months or $5K-$10K? You could still pay off your mortgage in half the time, and with your extra $1070 plus the amount that used to be your payment, you can build it back up in no time.

slugline

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #4 on: September 21, 2016, 03:43:30 PM »
Well, this would have been a significant decision years and years ago.  At this point you just have to ask yourself whether you want the extra liquidity over the coming year, or an extra five hundred bucks a year from now.  Either way, I bet you're going to be fine.

nereo

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #5 on: September 21, 2016, 04:09:02 PM »
I agree with Walt - stay the course.  Don't tempt fate by exhausting your all available cash for your mortgage.  You'll be done with it soon enough.

To be fair, if it were me I'd refinance and pull out equity wih today's rates, but that's me...

frugaliknowit

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #6 on: September 21, 2016, 06:37:39 PM »
Using your entire savings to pay off debt at 4%? Murphy's law says stay the course.

Congrats on being 9 months from a paid off house!

-W

Hmmm, thanks.

Plus if Murphy shows up, it would kinda suck to be tapping a heloc...

TexasRunner

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #7 on: September 21, 2016, 06:47:55 PM »
Ask this again in seven months with your current plan and I figure the advice will change to "blast that lousy, blood-sucking, interest guzzling humbugh out of the water!"

I somehow missed talk like a pirate day... :'(

Stay the course.  Don't let murphy show up.  When you get so close that you can't stand it, fire away.  To be honest though, you would only save 538.92$ in interest and actually lose on opportunity costs (when comparing to the average market) so no real reason to jeopardize yourself.

Congrats on being so close!!!  Nice job in that department.

SwordGuy

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #8 on: September 21, 2016, 07:56:38 PM »
I'm with not extending an invitation to Murphy either.  :)

Congrats on the successful and hard work to get to this point!

marty998

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #9 on: September 22, 2016, 03:31:40 AM »
I would pay it off now.

As you say, you can build up your cash reserves with your next pay, using the $1800 you are no longer having to throw at the mortgage.

(I mean really, be honest with yourself, are you really likely to have a $25,000 emergency?)

And you even point out you've got access to a HELOC to use in that event anyway.

The psyche boost from knowing you no longer are chained to a monthly payment to the bank is quite an incredible feeling too.

frugaliknowit

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #10 on: September 22, 2016, 04:26:02 AM »
You're so close! Congrats!

Would you consider bringing your emergency fund down to 2-3 months or $5K-$10K? You could still pay off your mortgage in half the time, and with your extra $1070 plus the amount that used to be your payment, you can build it back up in no time.

Thanks, Yes, I AM considering this...I am also keeping in mind that I prefer to make my roth contribution on Jan 1 as a bullet ($6500, maybe it goes to $7k this year for us old folks...) which would bring the balance down.

dess1313

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #11 on: September 22, 2016, 05:38:40 AM »
its a fantastic feeling to know your mortgage is toast, but don't run your self too short on cash.  you'd hate to have to just re accumulate it in the HELOC
7 months isn't that long.  2 or 3 months would be easier to say kill the sob.  The interest payments are minimal.  Sit back on auto pilot and maybe make a extra payment or two if you're really eager

chasesfish

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #12 on: September 22, 2016, 05:54:18 AM »
I'd pay it off

PharmaStache

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #13 on: September 22, 2016, 06:47:51 AM »
I'd split the difference- leave around 10k in the emergency fund and throw the rest at the mortgage.

dcozad999

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #14 on: September 22, 2016, 07:02:39 AM »
Pay it off.

You have the HELOC to fall back on.

TexasRunner

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #15 on: September 22, 2016, 07:59:17 AM »
For those who are recommending a HELOC fallback...  Doesn't it come with origination fees?  He might spend more in fees to open (and then close) a HELOC than in the current interest payments.

Plus, as a mustachian, you want to get a HELOC at the best possible rate and liquidily invest the funds, right?  Not possible when you have a cash-flow shortage...

frugaliknowit

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #16 on: September 22, 2016, 08:02:24 AM »
its a fantastic feeling to know your mortgage is toast, but don't run your self too short on cash.  you'd hate to have to just re accumulate it in the HELOC
7 months isn't that long.  2 or 3 months would be easier to say kill the sob.  The interest payments are minimal.  Sit back on auto pilot and maybe make a extra payment or two if you're really eager

Oh man, I can't wait!  Yep, using the Heloc for a job loss would suck emotionally!

FIPurpose

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #17 on: September 22, 2016, 09:01:00 AM »
I would pay it off. The principal is so small, it's not worth fussing over the invest v payoff math. Depending on where you are financially, you probably have investable assets that you could sell to avoid a heloc. I'm guessing 20k represents less than 10% of your net worth anyways. Do it. Buy a steak and celebrate. :)

frugaliknowit

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #18 on: September 22, 2016, 10:38:09 AM »
For those who are recommending a HELOC fallback...  Doesn't it come with origination fees?  He might spend more in fees to open (and then close) a HELOC than in the current interest payments.

Plus, as a mustachian, you want to get a HELOC at the best possible rate and liquidily invest the funds, right?  Not possible when you have a cash-flow shortage...

Already have it in place.  No fees upfront, $50 per year, must keep open for 2 years (otherwise pay a $350 fee), rate is prime plus 0.5% (currently 4%).

TexasRunner

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #19 on: September 22, 2016, 12:33:28 PM »
For those who are recommending a HELOC fallback...  Doesn't it come with origination fees?  He might spend more in fees to open (and then close) a HELOC than in the current interest payments.

Plus, as a mustachian, you want to get a HELOC at the best possible rate and liquidily invest the funds, right?  Not possible when you have a cash-flow shortage...

Already have it in place.  No fees upfront, $50 per year, must keep open for 2 years (otherwise pay a $350 fee), rate is prime plus 0.5% (currently 4%).

Well if the HELOC line is already open, paid for and available...  I don't see any reason not to just pay off the house.  Changing my opinion with that info.  Murphy isn't being tested since you have untapped (i assume) assets there.

Congrats!

frugaliknowit

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #20 on: September 22, 2016, 02:23:24 PM »
Ask this again in seven months with your current plan and I figure the advice will change to "blast that lousy, blood-sucking, interest guzzling humbugh out of the water!"

I somehow missed talk like a pirate day... :'(

Stay the course.  Don't let murphy show up.  When you get so close that you can't stand it, fire away.  To be honest though, you would only save 538.92$ in interest and actually lose on opportunity costs (when comparing to the average market) so no real reason to jeopardize yourself.

Congrats on being so close!!!  Nice job in that department.

Thanks.  Excellent point about lost opportunity costs!

frugaliknowit

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #21 on: September 22, 2016, 06:31:36 PM »
Thanks for all of your inputs!!

So far it's pretty well split:  6 no's, 4 yes, several in between...kind of the way I feel:)

dess1313

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #22 on: September 22, 2016, 11:09:34 PM »
my biggest thing in doing this would be to not exhaust my entire emergency fund.  depending on your costs, if using half of it still meant you had at least 2 or 3 months of expenses covered you could take the excess and pay off a small chunk.  it wouldn't be the entire balance but it would end up knocking off anywhere from 2 to 5 months.  I've just had murphy's law bite me a few too many times to deplete my reserves in the way you are thinking of

frugaliknowit

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #23 on: September 23, 2016, 04:26:22 AM »
my biggest thing in doing this would be to not exhaust my entire emergency fund.  depending on your costs, if using half of it still meant you had at least 2 or 3 months of expenses covered you could take the excess and pay off a small chunk.  it wouldn't be the entire balance but it would end up knocking off anywhere from 2 to 5 months.  I've just had murphy's law bite me a few too many times to deplete my reserves in the way you are thinking of

Yes, I am kind of superstitious about Murphy showing up and sucking on my Heloc.  Plus, I prefer to "bullet" my IRA contribution on Jan 1 (of the new year) instead of making bi-weekly or monthly contributions.

BlueHouse

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #24 on: September 23, 2016, 04:56:33 AM »
Is there any fee for close out paperwork if you pay in one lump sum?


frugaliknowit

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #25 on: September 23, 2016, 06:50:17 AM »
Is there any fee for close out paperwork if you pay in one lump sum?

No.  Just get a payoff quote (they need to calculate exact interest), then cut a check.

jamesbond007

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #26 on: September 23, 2016, 10:26:34 AM »
I have a feeling that by the time you consider all the opinions and read all the comments, it'l be 9 months and you'd be done. :)

frugaliknowit

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #27 on: September 23, 2016, 02:15:55 PM »
I have a feeling that by the time you consider all the opinions and read all the comments, it'l be 9 months and you'd be done. :)

Yeah, I SHOULD just CHILL, it'll be here before I know it:)

couponvan

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #28 on: September 23, 2016, 04:00:51 PM »
I was in almost exactly your situation last year with our FIRE house....finish the basement, or pay off the house...We chose to pay off the house and cash flow the basement over time.  Except we've been busy and haven't gotten around to finishing the basement!

Mentally, having a house no one can take from me is way more worth it than the interest/opportunity cost. (OK - I get there are taxes...but I could afford the taxes on unemployment.)

Personally, I'd pay off the sucker now and tell everyone you're broke from house payments at Christmas. It will be a good excuse not to waste money at that time of the year. In 3 months, your reasonable emergency fund will be built up again.

nottoolatetostart

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #29 on: September 24, 2016, 12:34:51 AM »
I'd save a couple extra thousand and then be done with it. If you want to save the money on interest, you could make a principal only payment of $19,000 while you save that little extra bit of money. As someone else said, how likely are you to have a 25,000 emergency?

So envious!

obstinate

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #30 on: September 24, 2016, 12:42:50 AM »
Don't even think about it. This is a bad idea. Stay the course.

frugaliknowit

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #31 on: September 24, 2016, 06:44:35 AM »
I'd save a couple extra thousand and then be done with it. If you want to save the money on interest, you could make a principal only payment of $19,000 while you save that little extra bit of money. As someone else said, how likely are you to have a 25,000 emergency?

So envious!


Good point, thanks!

Net/Net the interest is costing me 4% (mort int rate) - 1.7% (2.5% taxable on high yield checking) =~2.3%

frugaliknowit

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Re: Kill my mortgage now OR do it over 9 Months?
« Reply #32 on: September 26, 2016, 09:02:11 AM »
I was in almost exactly your situation last year with our FIRE house....finish the basement, or pay off the house...We chose to pay off the house and cash flow the basement over time.  Except we've been busy and haven't gotten around to finishing the basement!

Mentally, having a house no one can take from me is way more worth it than the interest/opportunity cost. (OK - I get there are taxes...but I could afford the taxes on unemployment.)

Personally, I'd pay off the sucker now and tell everyone you're broke from house payments at Christmas. It will be a good excuse not to waste money at that time of the year. In 3 months, your reasonable emergency fund will be built up again.

I LOVE the idea of telling everyong I'm broke from house payments at Christmas...LOL!