Author Topic: Mortgage or..?  (Read 2367 times)

Mama Minou

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Mortgage or..?
« on: March 17, 2013, 04:41:48 PM »
Hi Mustachians,

I could use some advice. Mama of two teens, married, living simply, contibuting max to 401 (k) and Roth IRA. After all bills are paid (we could pare down more, but at this point) I thankfully have between $300-$400 per month to do something more with (this is a new situation for us). My husband is debt-averse, like me, but also fairly averse to investing in the market. Because of this, plus first son off to college in a little over two years, I've been putting all the extra I can toward morgage principal (we still owe $61,000 at 4.25% on a 30-yr fixed).

Is this a silly strategy? It seemed safe and solid, plus won't affect sons' ability to get loans/scholarships for school, more comfortable to my husband than index funds. Yet we're also locking all that money up, no liquidity, and return could be much greater elsewhere. I'd also like to buy a rental property, but prices are quite high in our area.

Ideas?

gooki

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Re: Mortgage or..?
« Reply #1 on: March 18, 2013, 01:07:32 AM »
It's not silly.

Self-employed-swami

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Re: Mortgage or..?
« Reply #2 on: March 18, 2013, 06:27:53 AM »
Nope, not silly at all.  You are effectively getting a 4.25% - nominal inflation return on that investment.

As long as you are saving it somewhere, and not spending it, that is never silly.

Good work!

Mama Minou

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Re: Mortgage or..?
« Reply #3 on: March 19, 2013, 08:52:09 PM »
Thanks for the replies!
I would be saving it somewhere, no matter what. But it seems intuitively to be a good strategy to save in a way that will not count against financial aid applications for college. And it would be great to have the house all paid off by the time my boys are out of college, if not sooner, of course!

clutchy

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Re: Mortgage or..?
« Reply #4 on: March 20, 2013, 07:23:02 PM »
not a silly idea, but irrational fear of the market is silly.

keep up what you're doing if you're comfortable with it but maybe try out like $5000 in an index fund and see how it goes.  You're already in the market with the other funds so yeah.. maybe just keep doing what you're doing.

will you finish the mortgage by the 2nd year?  No mortgage is a great addition to cashflow.