Author Topic: Second thoughts on paying off special assessments early  (Read 2740 times)

mom22boys

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Second thoughts on paying off special assessments early
« on: August 07, 2015, 12:29:42 PM »
I'm been really thinking the last two weeks about whether to focus on paying down the special assessment on my home.  Here's some of my information:

Income: $120,000 plus bonus and stock awards, which can run anywhere from $20K to $35K
Home: $350,000 value with a mortgage of $157,000 (I'm 6 months into a 30 yr mortgage @ 4.125)
Savings: 401K at $230,000, for this year I will soon be maxed out at $38,000 (18K plus 20K mega backdoor, which I'll convert to Roth soon)
HSA: $17,500 in total from last 3 years, I max this out every year
Roth IRS: Since my income is too high, I just put $5,500 into TIRA, and then rolled it over to the Roth IRA right away (at Vanguard)
Individual brokerage: $10,500 (at Vanguard)
Expenses:  They are higher than most since my kids still require some daycare, I have them in private school, plus I always tithe 10%.  I don't want to breakdown all my expenses, but my average in YNAB is about $5500/month. 

My specials remaining on my house are:

23,000 at 6%, currently 7 years paid out of the 20 years
7,000 at 4.5%, new assessment so 20 years remaining

I hate debt and originally planned to pay off the special assessment early, at least the 23K portion, but I'm slowly convincing myself to not even do that.  Originally I thought of this like a mortgage, but it's really not since it stays with the house if I would sell.  My plan is to stay here until after both my boys graduate, which will be in 11 years. I can also deduce the interest on taxes, which is great with my income being higher. If I don't use my extra cash to pay the specials, I would invest this in my brokerage account. I originally thought about throwing the extra cash against my mortgage, but I've read enough threads on here to convince me to invest instead.

Am I missing anything? Anything else I should consider?

Edit:  One other thing I should add is that my realtor says that most buyers don't consider the special assessments when purchasing a house (at least in this area). Just incase I would need to sell earlier.
« Last Edit: August 07, 2015, 12:34:09 PM by mom22boys »

cheddarpie

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Re: Second thoughts on paying off special assessments early
« Reply #1 on: August 07, 2015, 12:49:50 PM »
I don't know much about special assessments -- are they amortized like a mortgage where you're paying most of the interest up front?

Either way, I would be inclined to pay everything off sooner rather than later. I am super debt-averse, but 6% in particular seems pretty high. If the assessments go with the property when you sell, presumably the sales price of the property will be reduced accordingly so it may be in your benefit to get rid of that stigma. It also sounds like you don't intend to sell very soon, so if you ended up staying in the property for a longer term (20 years), you'd be paying it all anyway.

Personally, I prefer the certainty of knowing I'm not paying x amount of interest to the possibility that I might earn y amount on investments ... once the debt is gone, then I'll be happy to take more risks!

mom22boys

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Re: Second thoughts on paying off special assessments early
« Reply #2 on: August 08, 2015, 12:56:19 PM »
Thanks Cheddar. Yes, specials are similar to a mortgage amortization, so most of the interest is up front. Today I'm leaning toward paying off the 23k ASAP, but leaving the 7k, since the interest is lower. But tomorrow I might change my mind again. I have to remember that either way I'm coming out ahead, especially compared to most other people.

cheddarpie

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Re: Second thoughts on paying off special assessments early
« Reply #3 on: August 08, 2015, 03:18:18 PM »
That's a great attitude. I can get really anxious about these types of financial questions, and that's when I really need a kick in the gratitude pants! I'm guessing that any of us in a position to be commenting on these boards is already in a pretty good place, world-wise. :)