Hoping for some advice on whether my plan makes sense, or what the downsides may be that I haven't thought of.
For starters: we are maxing tax-advantaged savings, and have a fully-funded emergency fund (1 year expenses) + a HELOC with $40k available to draw and nothing currently drawn. We have a reasonably high monthly mortgage payment (P&I) that is exacerbated by fairly expensive (and rising) local taxes ($750/mo+) and insurance ($150/mo). We are looking to minimize our monthly expenses in hopes of achieving FIRE, or at least semi-FIRE (wherein we can scale back at work, go part time, start our own business, etc. -- and save less, without actually dipping into savings) in the near future. We have a low, <4% interest rate on our mortgage.
If we prepay 20% of our mortgage balance, our mortgage company will let us reamortize the mortgage. In other words, for a $200-300 fee, they will recalculate our monthly payments to get us back on a 30 year pay off schedule (from the original mortgage date -- not a refi where the life of the loan is extended), effectively lowering our monthly mortgage bill. Based on our original balance, prepaying 20% would mean close to $80,000. My calculations suggest that if we prepaid that much today in a lump sum, our monthly bill would go down by about $500/month. By my math, we'd need $150,000 in the market to yield $500/month in perpetuity (though admittedly we don't need it in perpetuity -- just for the next 25 years).
My question: Is it irrational to put that $80,000 into my mortgage rather than the market? Assume I would not have to sell anything to get that $80k and so wouldn't take a big tax hit -- for example, if I could save it, or get it as a bonus, etc. My logic says that $80k should net $3200/year in the market, so if I can reduce my monthly P&I payments by at least $300/month, then this is a logical decision. Am I overlooking something?
