I am assuming this is going to be pretty obvious to most. I am a teacher, and our household income isn't much compared to many here. I am trying to do my best with what we got.
- My highest tax bracket is 15%
- I have maxed out my Traditional IRA for 2017.
- My current 403b is returning a rate of around 3%.
- My mortgage is 3.25% + MI of 0.89% (FHA), so call it 4.14%
- I have very little equity in the house (~5.25%)
- I do not have enough deductions to itemize and include the mortgage interest/insurance
I know the FHA loan is a bad decision. I could explain why we got in this spot, but I'm not sure it is relevant. The long-and-short of it is that it came down to financing only on my income while still holding on to a previous property (now sold), which made my debt-to-income ratio too high for other options.
I am assuming it's best to up my contribution to the 403b (currently only $2,640/year) over accelerating the mortgage pay-down. Although, I am considering splitting the extra money between each. My current budget has about $700 extra (post-tax) to work with. That's about $823 pre-tax, right? So, even though the rate is lower in the 403b, it is better because I get a 15% increase by putting it in pre-tax. That's probably the wise choice.
My only reason for wanting to hit the mortgage, is that I would like to get to 20% equity as soon as possible and refinance into a 15 year conventional loan. The risk there is that rates could be up, by the time I have the equity, and it will no longer make sense. There's no point in refinancing to a higher rate, even if it does get the mortgage insurance off.
I am thinking of adding an extra $400 to my 403b a month, and then putting the rest (~$360 after taxes) toward the mortgage. Giving me a little bit of each. That's $7,440/year to the 403b and $5,500 towards the IRA. Not much for most, but it's a start.