Author Topic: So close to stop pre-paying mortgage  (Read 2440 times)

doneby35

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So close to stop pre-paying mortgage
« on: December 13, 2016, 09:31:25 AM »
I've been reading a lot of the arguments on here on why it's better to not pre-pay the mortgage vs why it is and I think I am so close to calling the bank and cancelling the additional principal payments.
I thought about it for so long and I think I'm at a point where the emotional factor has been 90% eliminated. Hopefully I would be making the most optimal decision.

So what would be my next step, take the additional payments and invest in taxable VTSAX? I already max out 401k, IRA and HSA... isn't there a $10 transaction fee every time you buy taxable stocks, like Etrade? or do index funds not have the trade fee?

HoundDog

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Re: So close to stop pre-paying mortgage
« Reply #1 on: December 13, 2016, 09:36:19 AM »
Mr. Money Mustache says either way can be a good decision. But he paid off his own mortgages.

http://www.mrmoneymustache.com/2012/02/24/pay-down-the-mortgage-or-invest-more-a-winwin-question/

dcheesi

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Re: So close to stop pre-paying mortgage
« Reply #2 on: December 13, 2016, 09:59:23 AM »
I don't recall any transaction fee when buying Vanguard funds through Vanguard. If you buy their funds through some other site, then there might be additional fees.

I stopped paying extra principal after the first year, on the basis that I was relatively cash-poor and needed to build up my liquid savings in case of a later job loss or other life event. You can always revisit the early payoff question once you have enough saved/invested to do it all at once.

neo von retorch

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Re: So close to stop pre-paying mortgage
« Reply #3 on: December 13, 2016, 10:11:27 AM »
With Vanguard (and likely other institutions), if you buy a mutual index fund, you'll find there is a minimum initial investment ($1k, 3k, 5k, 10k, etc) that you have to put in, but if you do, you likely won't have to pay a fee. Sometimes you have to pay $20 that one time (I think this is if you buy Vanguard mutual funds from through a third party brokerage). But then there's no more fees to continue to add to it.

VTSAX specifically requires a $10k minimum, but VTSMX is basically the same with a slightly higher expense ratio but $3k minimum.
https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT
https://personal.vanguard.com/us/funds/snapshot?FundId=0085&FundIntExt=INT

If you're already in VTSAX, you're golden. If you're below $3k ready to invest, you can start with the ETF, but I don't know if you pay a fee to buy shares of that. (No mimimum.)
https://personal.vanguard.com/us/funds/snapshot?FundId=0970&FundIntExt=INT
« Last Edit: December 13, 2016, 12:32:51 PM by neo von retorch »

doneby35

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Re: So close to stop pre-paying mortgage
« Reply #4 on: December 13, 2016, 10:17:28 AM »
So it's different than buying individual shares? I was using optionshouse brokerage and tried my luck with a couple of stocks, and I was paying $5 to buy and $5 to sell.

neo von retorch

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Re: So close to stop pre-paying mortgage
« Reply #5 on: December 13, 2016, 10:28:31 AM »
Correct; if you buy an ETF, it's probably the same as buying individual shares, but if you buy into a mutual fund, you can contribute to it freely. You transfer money from your bank account to the brokerage account, and then just buy more of the mutual fund with no transaction fee.

doneby35

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Re: So close to stop pre-paying mortgage
« Reply #6 on: December 13, 2016, 10:33:02 AM »
Good info. Thanks guys.

NoStacheOhio

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Re: So close to stop pre-paying mortgage
« Reply #7 on: December 13, 2016, 10:58:01 AM »
Check what funds your broker offers for zero transaction fee.

For example, with Fidelity, I have access to a wide variety of index funds that are comparable to Vanguard (both mutual and ETF) without any transaction charges.

Tjat

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Re: So close to stop pre-paying mortgage
« Reply #8 on: December 13, 2016, 11:42:58 AM »
I am firmly in the camp of not prepaying, but if your alternative is dabbling in options or individual stocks, I'd put all extra money in your mortgage. As others have suggested, I'd recommend opening a Vanguard account (at Vanguard.com) and contributing to VTSAX. Your initial deposit is 3,000 or 10,000 (depending on share class) and all transactions are fee-free

doneby35

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Re: So close to stop pre-paying mortgage
« Reply #9 on: December 13, 2016, 12:18:51 PM »
I wasn't going to do individual stocks, i was just making sure that there are no trade fees when it comes to index funds like buying or selling individual stocks. Thanks.