Author Topic: To pay off or to keep our current plan...  (Read 1674 times)

StubbleinOhio

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To pay off or to keep our current plan...
« on: August 14, 2014, 07:36:16 AM »
I need the opinion of the group.

Current situation:
$10,000 cash
$19,400 car loan at 2.9%
$287,000 mortgage on house worth ~$365,000 at 5%
$45,500 invested in non-retirement
$60,200 in retirement

Currently we're throwing an extra $1000 at the car loan per month and on track to pay it off in a year. We feel that we crossed the line from frugal to cheap with our current plan (that we've been working for 6 months now) and we need a reset. We're tossing around the idea of paying off the car note today and then using the $1450 a month to open some breathing room and paying more on the mortgage and/or investing.

Before we pull from our investments to do that, what are your thoughts on that plan? We'd like a few more opinions than just our two.

Thanks in advance.

bo_knows

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Re: To pay off or to keep our current plan...
« Reply #1 on: August 14, 2014, 07:41:11 AM »
Personally, I think your biggest bang-for-your-buck is to look into refinancing your mortgage.  There are still mortgage rates close to 4% around, and that is a large long-term expense for you.  You can even, depending on the banks in your area, get a refi for zero closing costs.

Secondly, with a debt that has an interest rate of 2.9%, you're going to see differing opinions.  Some folks just don't like the idea of debt in general, and will tell you to pay it off ASAP.  Some will say that you can get more than 2.9% on investments, so you should pay the minimum on the loans and invest the rest.  It's a personal decision that you need to think about.

Gone Fishing

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Re: To pay off or to keep our current plan...
« Reply #2 on: August 14, 2014, 08:27:47 AM »
Yep-go after the mortgage.  Your break even point for the refi is probably around a year...be sure to check and see if you qualify for any of the programs like HARP...

icek05

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Re: To pay off or to keep our current plan...
« Reply #3 on: August 14, 2014, 08:47:26 AM »
I feel obligated here to put in the simplest and most Mustachian solution of NOT owning a $19,000 car regardless of whether it is financed.  Otherwise, I agree with the others of looking at a refi and would be hesitant to sell of investments, if anything I'd probably get rid of the cash you have on hand.  It sounds like you have enough income to be able to build up pretty quickly once the car is paid off and if there was truly an emergency you still have the stocks you could sell.

Cheddar Stacker

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Re: To pay off or to keep our current plan...
« Reply #4 on: August 14, 2014, 08:55:46 AM »
I would leave the investments alone, refi the mortgage (particularly if you are also paying PMI*), consider selling the car and getting a cheaper one, and make some use of that cash via the mortgage or investments.

Due to the HUGE $365K principal balance on the mortgage, this should be your main focus right now as it will easily have the biggest impact.

* If you have PMI your best use of the $10K cash, and your investments if necessary, would be to refi to a lower mortgage balance ($345K for instance) to eliminate PMI while simultaneously lowering the interest rate.