Hi All,
I understand that this is an age old debate and everyone has their opinion, but I am just trying to wrap my head around what I should do.
We have a mortgage at about $330k at 3.25% 30 year fixed. Payments including taxes and insurance is roughly $2,100/mo or $25,200 /year. P&I only is about $17,800/year ($1488/mo). House is probably worth about $600k.
Work is good, but one never knows what may be lurking around the corner. We have about $30k saved for emergency fund.
We are starting to make some real money, but no plans to ever move. Maxing out 401k and Roth IRA at this point. After paying some car debt (1.4 %- $10k) old school debt (fixed 2.5% at about $30k) (both accrued before I found MMM), we will have cash flow to throw $50k / year extra at whatever we want.
I have been thinking about just putting it in a taxable investment account, maybe some in the 529 for kids college, or just throwing it at the mortgage.
The way I'm running the figures, I would probably be able to get rid of the mortgage by 2024 either by paying it down outright or by investing and then paying in full once enough is in the kiddy (assuming we have positive returns), which would free up an extra $17,800 /year in cash flow to invest even more!
The way I'm also running the figures, and depending on the market, I could put it in a taxable investment account (thinking Vanguard Balanced Fund) which will likely have higher returns, but not guaranteed and not tax free like paying down a mortgage. Market is a little heated lately too, although who am I to try to time the market.
The downside of paying down the mortgage is that you lose that money forever (unless you sell your house, which we don't want to do). That can really suck if you need it later especially considering that there is no way we will ever get a better rate than we have now. That and there is the tax deduction, etc., although we are pretty close to standard deduction in the interest we are paying.
The upside of paying it down is the peace of mind and that it frees up a ton of cash flow to invest further (see above). Tax free guaranteed returns as well. The way I see it, freeing up $17800 / year of cash is a big plus. That, and I just think it would be really awesome to not have a mortgage, although I would still be paying about $7400/year in taxes and insurance.
With all this in mind, I'm probably going to open a taxable investment account and aggressively save and then just pay off the mortgage balance when I am able to do that in full. That way, I have the liquid in the interim, and I reap the expected higher returns (or perhaps losses) as well. I really won't need the liquid so much without a mortgage to pay (I could quit my job and work minimum wage!). There may be a time where I may need it, though, between now and 2024.
O, and you should know that I am 35 and have a 2 year old and pregnant wife to support.
Would love to hear your thoughts. Thanks.