Author Topic: Mortgage or 401K  (Read 2859 times)

nsusa

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Mortgage or 401K
« on: June 05, 2013, 01:07:46 PM »
I am far away from calling myself a mustachian just yet, but hopefully get there sooner than later. My question today is about the money I am putting into a 401K. Currently I am paying (pre-tax) $10K into my 401K. I am getting a 4% employer match.

I have $202,000 left on my mortgage and pay an interest rate of 4.62% (fixed 30 year mortgage / 26 years left to pay).

I am not at the point to sell the house or to rent it out just yet, but I am wondering if I should reduce my 401K contribution down to 4% (to get the employer match) and to re-direct the remaining $6K into the mortgage to speed up the time to pay it off?

What's your take on this? Thanks.

Chris

Johnny Aloha

  • Bristles
  • ***
  • Posts: 315
Re: Mortgage or 401K
« Reply #1 on: June 05, 2013, 05:37:50 PM »
What tax bracket are you in? 

And can you refinance the mortgage?  Rates jumped in the past week though, so might not be as beneficial.  Still worth checking.

tomsang

  • Handlebar Stache
  • *****
  • Posts: 1085
Re: Mortgage or 401K
« Reply #2 on: June 05, 2013, 07:24:57 PM »
Refinance!!!!

If you believe that your portfolio will perform better than your mortgage rate you will be better off investing. You can see this topic on the pros and cons.

http://www.mrmoneymustache.com/forum/investor-alley/paying-off-mortgage-early-how-bad-is-it-for-your-fi-date/

nsusa

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Mortgage or 401K
« Reply #3 on: June 06, 2013, 07:16:07 AM »
Refinance!!!!

If you believe that your portfolio will perform better than your mortgage rate you will be better off investing. You can see this topic on the pros and cons.

http://www.mrmoneymustache.com/forum/investor-alley/paying-off-mortgage-early-how-bad-is-it-for-your-fi-date/

I am in the 28% bracket. Tried to refinance to a 15 year mortgage, but it pushes my monthly payment up quite a bit ($320). While I have the money I do not want to stretch myself too thin just yet. I am working on freeing up some money from other expenses first. My mortgage guy also expects the rates to slightly drop again over the next few weeks or months and I am going to take the risk and wait a bit more.

Also went to what Tom posted. So, it seems to make more sense to keep the mortgage and rather invest the money. But now is it better to stick to the 401K or use the $6K per year and put it into other type of investments like Lending Club or prosper or to save the money for a down payment for a second house or condo?

I am also thinking of buying an existing business (nothing lined up yet). I sometimes see businesses for sale with an absentee owner. My idea is to buy something I can afford (loan + my own down payment) and use the entire cash-flow to pay off the loan as fast as possible.

matchewed

  • Magnum Stache
  • ******
  • Posts: 4319
  • Location: CT
Re: Mortgage or 401K
« Reply #4 on: June 06, 2013, 07:26:31 AM »
That all depends on how much you think you can make from a second property but common advice is to max out your 401k first.