I was looking at a post on lifeandmyfinances.com where they talk about paying off your mortgage early. They have some great tools posted there to help you get an idea of what how much money you will save. My wife and I have spent a lot of time discussing the benefits and costs of doing this. It’s a tough call.
We pay about 5% extra a month on our 30 year mortgage of which we are a few years into. We refinanced a 2 year old loan near the bottom of the rates market a few years ago and have a rate a bit below 3%. I hate the idea of money hanging over my head. I also hate the idea of losing out on earnings that could be had from investing money that would go to principle.
Homes are not cheap in the NY metro area, so we are not talking about a small sum even if we did pay 20% down. We have paid a few lump sums to the principle when we earn some extra money or have a windfall like a bonus from our jobs. It’s really a hard call.
Where do you draw the line? Do we save less, and pay down that mortgage. We could divert funds that are currently going to investments to pay the mortgage down more quickly.
What holds me back is knowing that our mortgage rate is near the average inflation rate for the US since 1920 is just over 3%. I found the raw data, monthly, here. So, if the mortgage is below inflation, then I think we should not pay it off early, in spite of how much I would prefer to do it.
We don’t carry credit card debt. We had to buy new windows this year as 4 of them in our home were rotting out with dry rot. The price of that work in my county is insane; there is a mark up because it’s one of the wealthier counties in the US. Keep in mind, the home next to mine is 3x the price of mine, and my house is not a dump. We just have a cheap small house in an expensive town with good schools.
Anyway, we can always change our minds later, but for now, the plan is to stay the course, and pay a little extra each month. That little extra will shave a few years off the loan, and more than $10,000 in interest payments.
I’m curious what you think?