Hey all,
My partner and I have been going back and forth on deciding whether or not to pay off our house vs keeping liquid cash/investing it.
The facts:
– $900k house bought 2 years ago (worth about $950-975k now)
– current mortgage is around $435k @ 6.625%
– mortgage payment is $3400 ($2400 interest, $400 principle, $600 escrow)
– we’ve been paying an extra $500-600 each paycheck but that’s not doing any real damage
Our financial situation:
– ~$550k across checking savings CDs (holding a ton of cash because this economy is nuts)
– ~ $1.2m in investments, 401k, IRA ($600k of that is in non-retirement accounts so easily accessible if needed)
– annual income around $550k, no kids, no other debt
My thesis is pay off the house, stop paying the ridiculous interest, and replenish the cash over the next 2-3 years while we see how everything in the stock market plays out. Investing the cash now may or may not play out but having house paid off would be such a piece of mind. And not like we can get a surefire 6.625% return.
But would be curious what a neutral 3rd party thinks. Any gotchas, considerations, if you’ve done something like this how did it play out, etc?
Advice on paying off house early
byu/Excellent-Wedding514 inpersonalfinance
Posted by Excellent-Wedding514
5 Comments
debt or invest: https://www.bogleheads.org/wiki/Paying_down_loans_versus_investing https://reddit.com/r/personalfinance/comments/16jcmnh/_/k0qox0x/?context=1 https://reddit.com/r/personalfinance/comments/zssug0/_/j1ddljd/?context=1
I personally would not want a 6.6% mortgage and since you have the liquidity I’d go for it
You’ll build up an emergency fund in no time. No need for 550k, that’s way too extreme. You’d be ok with 1/5 of that
You mention “$600k of that is in non-retirement accounts so easily accessible if needed” but if you have 550k in cash then why would you need to access that in the first place?
Ages?
That’s a lot of cash to be sitting on with such a high interest rate. You make 550k, you could aggressively pay this down from cash like holdings over the next year and still be sitting on a large chunk cash. And with no mortgage, you can invest even more aggressively in retirement vehicles and your 1.2 mill will grow so quickly
“mortgage payment is $3400 ($2400 interest, $400 principle, $600 escrow)”
That interest is brutal. Get out from under that as quick as you can
You’ve probably done so, but didn’t mention it.
Have you ensured that your extra payment is going towards the principal?