Should I pay off my mortgage?

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Topic Author
Donkey Hote
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Should I pay off my mortgage?

Post by Donkey Hote » Fri Jul 26, 2019 11:06 am

Background
38 years old, wife is 35 years old. 3 kids (7/5/1).

Financials
Roth IRAs: $170K
TSP: $430K
Non-retirement: $120K

About 60% stocks/40% bonds. Stock allocations are index funds.

Current salary: $155K
Wife does not work.
Current annual spending: Do not track particularly closely anymore, but probably in the neighborhood of $80K.

I am also a Federal employee, and under my FERS retirement I will receive an annuity for my high-3 salary * years of service/100. Right now I have about 12 years of service with a high-3 of $145Kish.

Our house is worth approximately $480K, with a mortgage balance of approximately $260K. My 5-year ARM is about to reset from 2.625% to 4.625%. I have a quote for a refinance to 3.125% (15 year fixed), with $2,500 up front costs (including state and local taxes, and excluding any pre-payment costs). About $700 of this consists of an appraisal and title insurance, and I’m hoping to eliminate one or both of these. But as it stands today, they’re in there.

The mortgage is our only debt.

What I’m considering
I could pull a lot of rip cords and simply pay off the mortgage. This would go roughly as:
$50K – TSP loan
$60K – borrow from non-retirement margin account @ 3.8%
$150K – withdraw Roth IRA contributions (to the extent possible)

The above would get me to the $260K balance. If it turns out I don’t have $150K in contributions, I could pay the mortgage down except for the last say $20K and then pay it off over the next several months.

Why I’m considering it
Primarily, it’s to avoid the $2.5K in transactions costs associated with the refi. In general, I think $150K of Roth IRA tax-advantaged space is worth more than $2,500. However, I may have gone a little heavy on the retirement savings up until now, to the extent that I’m considering stopping my Roth IRA contributions for both me and my wife. Given this, withdrawing Roth IRA contributions doesn’t really “lose” me the tax-advantaged space, since if I were to withdraw the $150K, I would replenish it at $11K/year (again, as opposed to contributing nothing each year moving forward if I don’t touch my Roth balances).

Downsides I see
Apart from the loss in Roth IRA space, which I can’t undo if I find it to be a mistake later, I would also subject myself to a margin call if the market were to tank before I can pay down the $60K I borrowed from my brokerage account. Emergency cash flows from savings depleted in the near-term.


What do the Bogleheads think? I feel like it’s a bit too extreme of a measure simply to avoid about $2,500 in costs. But then again, $2,500 is nothing to sneeze at.

Thanks in advance for your advice!

02nz
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Re: Should I pay off my mortgage?

Post by 02nz » Fri Jul 26, 2019 11:13 am

I wouldn't go through all that to avoid $2500 in costs. To me that would be a textbook example of penny-wise and pound-foolish. The Roth space is far too valuable. The balance of the TSP loan would be invested in the G fund, which can screw up your allocation (it is possible to work around this, but not if your desired allocation is very aggressive.) And you'd have to repay the TSP loan fairly quickly if you left federal service. That's leaving aside the margin stuff, about which I know nothing.

Do the refinance. A 3.125% mortgage is nearly free - subtract out inflation and it's more like 0.5 to 0.7% real.

Here's another thought though - shop for a loan with a no-cost refinance, meaning a loan with a lender credit that will cover the cost (this is different from just wrapping in the cost into principal). Basically negative points. You'll pay a slightly higher interest rate, but the next time the rate drops, just refinance again. (See my post here for a longer explanation: viewtopic.php?f=2&t=286277&p=4658295#p4658295).

Also, yes you're well ahead of the vast majority in retirement savings, and that's even before accounting for the FERS pension. But I would never give up Roth space in your situation. Think of the Roth IRA as a secondary emergency fund (https://www.bogleheads.org/wiki/Roth_IR ... gency_fund) and keep a little less in your actual emergency fund if you want to redirect money elsewhere, but don't stop contributing. Roth space is especially valuable for those whose retirement incomes puts them in the same or higher tax bracket in retirement as they do now, which may apply to you.
Last edited by 02nz on Fri Jul 26, 2019 11:20 am, edited 1 time in total.

evilityb
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Re: Should I pay off my mortgage?

Post by evilityb » Fri Jul 26, 2019 11:18 am

Hey, fellow Fed here (on a Boglehead lunch break).

You don't want to take a personal or TSP loan or withdraw from your IRA simply because the growth those of funds will be greater than the interest you pay on your mortgage. I'm assuming you can write off your mortgage interest? If so, your effective rate is probably about 1/3 less than the rates you stated. Personally, I would refi to the 15-year fixed and continue to write off the interest. If you want to be mortgage-debt free, consider recasting your mortgage every few years until it's paid down.
She/her/hers | Make sure the fortune that you seek is the fortune that you need - Ben Harper

02nz
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Re: Should I pay off my mortgage?

Post by 02nz » Fri Jul 26, 2019 11:22 am

evilityb wrote:
Fri Jul 26, 2019 11:18 am
Hey, fellow Fed here (on a Boglehead lunch break).

You don't want to take a personal or TSP loan or withdraw from your IRA simply because the growth those of funds will be greater than the interest you pay on your mortgage. I'm assuming you can write off your mortgage interest? If so, your effective rate is probably about 1/3 less than the rates you stated. Personally, I would refi to the 15-year fixed and continue to write off the interest. If you want to be mortgage-debt free, consider recasting your mortgage every few years until it's paid down.
With the tax law changes that came into effect last year, far fewer people are able to take advantage of the mortgage interest deduction, and even for those that do it's often just a small benefit relative to the standard deduction. Still, I recommend refinancing, as noted above.

Topic Author
Donkey Hote
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Re: Should I pay off my mortgage?

Post by Donkey Hote » Fri Jul 26, 2019 11:49 am

02nz wrote:
Fri Jul 26, 2019 11:13 am
I wouldn't go through all that to avoid $2500 in costs. To me that would be a textbook example of penny-wise and pound-foolish. The Roth space is far too valuable. The balance of the TSP loan would be invested in the G fund, which can screw up your allocation (it is possible to work around this, but not if your desired allocation is very aggressive.) And you'd have to repay the TSP loan fairly quickly if you left federal service. That's leaving aside the margin stuff, about which I know nothing.

Do the refinance. A 3.125% mortgage is nearly free - subtract out inflation and it's more like 0.5 to 0.7% real.

Here's another thought though - shop for a loan with a no-cost refinance, meaning a loan with a lender credit that will cover the cost (this is different from just wrapping in the cost into principal). Basically negative points. You'll pay a slightly higher interest rate, but the next time the rate drops, just refinance again. (See my post here for a longer explanation: viewtopic.php?f=2&t=286277&p=4658295#p4658295).

Also, yes you're well ahead of the vast majority in retirement savings, and that's even before accounting for the FERS pension. But I would never give up Roth space in your situation. Think of the Roth IRA as a secondary emergency fund (https://www.bogleheads.org/wiki/Roth_IR ... gency_fund) and keep a little less in your actual emergency fund if you want to redirect money elsewhere, but don't stop contributing. Roth space is especially valuable for those whose retirement incomes puts them in the same or higher tax bracket in retirement as they do now, which may apply to you.
Thank you, upon reflection I believe I agree with everything you wrote.

Just to touch on a few things you said - my G fund balance is >$50K, so I could (and would) adjust my allocations to ensure there was no unintended effect on my portfolio stock/bond ratio.

And I have to this point very consciously considered my "excess" Roth balances as a sort of quasi-emergency fund. That being said, we already have $120K in non-retirement savings, and we can borrow against this at fairly low rates. This serves as a substantial emergency fund in and of itself (and use it as such - we have no savings account), and I'm not sure how much this aspect of the Roth is really worth. But essentially, every year I decide that since I can always withdraw contributions later, but can never make up for lost space, I may as well contribute another $11K.

About the 3.125% being essentially free - I was more comfortable with this notion under the old tax laws, an aspect you mention in a different post. I foresee myself taking the standard deduction indefinitely, unless and until tax laws change again. I think that even at 3.125%, I will prioritize paying down the mortgage ahead of non-retirement savings (but still below maxing out tax-advantaged space).

I am going to put a little more thought into a no-cost refi. If I can pay off a substantial portion of my balance in the next 2-3 years, this may make a lot of sense for me.

Thank you again for your thoughtful comments.
Last edited by Donkey Hote on Fri Jul 26, 2019 11:51 am, edited 1 time in total.

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galawdawg
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Re: Should I pay off my mortgage?

Post by galawdawg » Fri Jul 26, 2019 11:51 am

Since you don't actually have the cash to pay the balance of your mortgage, It would seem to me that the real question isn't "should I pay off my mortgage" but "how should I borrow to finance my house".

Regarding cobbling together loans from your TSP account and your margin account and withdrawing from your Roth IRA to come up with the funds, you said "I feel like it’s a bit too extreme of a measure simply to avoid about $2,500 in costs." I agree.

I'd stick with the fifteen year fixed. You can take a look at some online calculators (https://www.bankrate.com/calculators/in ... ators.aspx) to see whether it is better for your situation to pay closing costs, roll them into the loan balance, or get a zero closing cost loan with a slightly higher rate. If you keep the house and mortgage for the full fifteen (15) years, you will come out ahead financially by getting the lowest rate and paying the closing costs.

evilityb
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Re: Should I pay off my mortgage?

Post by evilityb » Fri Jul 26, 2019 11:53 am

02nz wrote:
Fri Jul 26, 2019 11:22 am
evilityb wrote:
Fri Jul 26, 2019 11:18 am
Hey, fellow Fed here (on a Boglehead lunch break).

You don't want to take a personal or TSP loan or withdraw from your IRA simply because the growth those of funds will be greater than the interest you pay on your mortgage. I'm assuming you can write off your mortgage interest? If so, your effective rate is probably about 1/3 less than the rates you stated. Personally, I would refi to the 15-year fixed and continue to write off the interest. If you want to be mortgage-debt free, consider recasting your mortgage every few years until it's paid down.
With the tax law changes that came into effect last year, far fewer people are able to take advantage of the mortgage interest deduction, and even for those that do it's often just a small benefit relative to the standard deduction. Still, I recommend refinancing, as noted above.
Agreed.

Another note: Keep shopping for mortgages. Rates are dirt cheap again and I think you can do better than the one you found in terms of closing costs and restrictions on early repayment.
Last edited by evilityb on Fri Jul 26, 2019 11:55 am, edited 1 time in total.
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abuss368
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Re: Should I pay off my mortgage?

Post by abuss368 » Fri Jul 26, 2019 11:54 am

Seems a bit to much to pull together especially to avoid $2,500 in fees.

I would continue to pay down and revisit in the future.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

Topic Author
Donkey Hote
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Re: Should I pay off my mortgage?

Post by Donkey Hote » Fri Jul 26, 2019 11:57 am

evilityb wrote:
Fri Jul 26, 2019 11:18 am
Hey, fellow Fed here (on a Boglehead lunch break).

You don't want to take a personal or TSP loan or withdraw from your IRA simply because the growth those of funds will be greater than the interest you pay on your mortgage. I'm assuming you can write off your mortgage interest? If so, your effective rate is probably about 1/3 less than the rates you stated. Personally, I would refi to the 15-year fixed and continue to write off the interest. If you want to be mortgage-debt free, consider recasting your mortgage every few years until it's paid down.
Actually, I do not write off my mortgage under current tax laws. This change has actually been why I have shifted my financial priorities to paying down my mortgage.

I'm not sure whether that changes your thoughts, but I do believe you are correct that the refi is the most sensible path forward.

Thanks!

CurlyDave
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Re: Should I pay off my mortgage?

Post by CurlyDave » Fri Jul 26, 2019 12:05 pm

I would refinance into a 30 year fixed, and put the difference between 30 year payments and 15 year payments into your taxable portfolio.

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Re: Should I pay off my mortgage?

Post by Jack FFR1846 » Fri Jul 26, 2019 12:11 pm

What I would do:

Pay down out of cash on hand.
Stop anything beyond matched tax deferred (if any).
Use that money to pay bigger payments at the 4+% rate.
Pay no fee for some refi.
When the mortgage is paid off, begin retirement funding.
Bogle: Smart Beta is stupid

miket29
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Re: Should I pay off my mortgage?

Post by miket29 » Fri Jul 26, 2019 12:13 pm

The $150K money in the Roth is likely (but not guaranteed) to grow at faster than 3.125% annualized over the next 15 years. So even if writing the $2,500 check pains you, the loss in foregone appreciation if you cash out the Roth to pay off the mortgage may be much, much more.
However, I may have gone a little heavy on the retirement savings up until now, to the extent that I’m considering stopping my Roth IRA contributions for both me and my wife.
The earlier you start contributing and the more you contribute, the better. You can find demos online that show how a relatively low rate of savings started earlier grows to the same amount as a much larger percentage if started later in life.

Also you should check to make sure contributing to a Roth IRA makes sense. If you expect to be in a lower tax bracket after retirement then a regular IRA would be more beneficial.
Last edited by miket29 on Fri Jul 26, 2019 12:19 pm, edited 2 times in total.

vtjon
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Re: Should I pay off my mortgage?

Post by vtjon » Fri Jul 26, 2019 12:18 pm

Is your ARM a Penfed 5/5 ARM? It seems like it is based on the rate. I have a Penfed 5/5 ARM that is due to reset on Sept 1. In early July, I got an email about a rate reset offer. These were common in previous years but apparently Penfed had stopped offering them due to the volatility of rates. Anyway, the offer I got was their retail 5/5 ARM rate - 1/16%. For a $250 charge, I ended up locking my next 5 yr period in for $250 at 3.3125% I did happen to catch it on a day where they lowered their 5/5 by 0.25% then it bounced the next day. I'd check your online account if this applies to you.

ETA: Also, if it's a 5/5 ARM from Penfed, your new rate should be 2% plus the 5yr Treasury. As of today, the 5 yr is 1.82% so I assume the adjustment would be to 3.82% based on today's numbers.

Momus
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Re: Should I pay off my mortgage?

Post by Momus » Fri Jul 26, 2019 12:22 pm

I just think you need to save more, 155k income after tax is about 100k. With non working spouse, 3 kids and a mortgage, probably 110k net. You are spending 80k! Dang, I'd live like a king spending that much...

furnace
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Re: Should I pay off my mortgage?

Post by furnace » Fri Jul 26, 2019 12:25 pm

No need to pay off the mortgage. Let your investments compound at a higher rate of return.

Maybe wait another 6 months to refinance. You might be able to get a 15-yr for the same rate as your current ARM.

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Re: Should I pay off my mortgage?

Post by whodidntante » Fri Jul 26, 2019 12:27 pm

I could see taking a TSP loan to prepay a portion of the loan.
I could see taking a margin loan to prepay a much higher rate mortgage.
But I think withdrawing Roth contributions to prepay a mortgage would be a gigantic mistake. Unless you and your family and three sick cats are about to be thrown out on the street, and then I would still ask if there is another way out.

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Donkey Hote
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Re: Should I pay off my mortgage?

Post by Donkey Hote » Fri Jul 26, 2019 12:56 pm

vtjon wrote:
Fri Jul 26, 2019 12:18 pm
Is your ARM a Penfed 5/5 ARM? It seems like it is based on the rate. I have a Penfed 5/5 ARM that is due to reset on Sept 1. In early July, I got an email about a rate reset offer. These were common in previous years but apparently Penfed had stopped offering them due to the volatility of rates. Anyway, the offer I got was their retail 5/5 ARM rate - 1/16%. For a $250 charge, I ended up locking my next 5 yr period in for $250 at 3.3125% I did happen to catch it on a day where they lowered their 5/5 by 0.25% then it bounced the next day. I'd check your online account if this applies to you.

ETA: Also, if it's a 5/5 ARM from Penfed, your new rate should be 2% plus the 5yr Treasury. As of today, the 5 yr is 1.82% so I assume the adjustment would be to 3.82% based on today's numbers.
It is not from Penfed, but I will look into this. Thanks for the suggestion!

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Donkey Hote
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Re: Should I pay off my mortgage?

Post by Donkey Hote » Fri Jul 26, 2019 1:09 pm

Momus wrote:
Fri Jul 26, 2019 12:22 pm
I just think you need to save more, 155k income after tax is about 100k. With non working spouse, 3 kids and a mortgage, probably 110k net. You are spending 80k! Dang, I'd live like a king spending that much...
Spoken like a true Boglehead, haha!

I don't think spending is my problem, though. I live in a high-cost area, and high housing costs unfortunately come with the territory. I should also note that I include in "spending" the $12K ($4k * 3 kids) I put into 529s each year. Could I reduce spending? Absolutely. But I still manage to max out TSP and 2 Roth IRAs, fund 529 plans, and still contribute probably $20K-$30K/year to "other stuff." And as the kids grow up, spending will absolutely go down. Little buggers' activities are so expensive...

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Re: Should I pay off my mortgage?

Post by Iorek » Fri Jul 26, 2019 1:11 pm

Seeing if your current lender will reset the rate is a good idea, but if they won't I'd consider the $2,500 against whatever you saved by having a 5/1 ARM. Draining all your liquid assets so you don't have to pay $2,500 for a refi seems ill-advised.

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Donkey Hote
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Re: Should I pay off my mortgage?

Post by Donkey Hote » Fri Jul 26, 2019 1:13 pm

Thank you to everybody who provided comments.

The consensus seems to be to refi, and this indeed lines up with my feeling too. Just wanted to run it by the Boglehead community.

There seems to be a split on whether I should pay down the mortgage, or to divert funds elsewhere. My plan is to continue maxing out tax-advantaged space, and then pay down the mortgage with additional funds. However, I will continue to think about all the advice I've gotten that pushes for a little more aggressive approach.

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Re: Should I pay off my mortgage?

Post by abuss368 » Fri Jul 26, 2019 1:41 pm

Let your investments keep compounding. The opportunity cost would be to high.
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Re: Should I pay off my mortgage?

Post by evilityb » Fri Jul 26, 2019 1:52 pm

Donkey Hote wrote:
Fri Jul 26, 2019 1:13 pm
Thank you to everybody who provided comments.

The consensus seems to be to refi, and this indeed lines up with my feeling too. Just wanted to run it by the Boglehead community.

There seems to be a split on whether I should pay down the mortgage, or to divert funds elsewhere. My plan is to continue maxing out tax-advantaged space, and then pay down the mortgage with additional funds. However, I will continue to think about all the advice I've gotten that pushes for a little more aggressive approach.
1) Yeah, the decision to refi is easy because it's based on a simple cost-benefit analysis. Which nets you the lower cost, including opportunity cost? Refi, most likely.

2) Filling tax advantaged space first almost always makes sense for tax minimization in the present, tax diversity at the time of withdrawal, and protection from bankruptcy/being sued.

3) With an interest rate as low as 3.xx percent, you're likely to have higher returns in the long run if you divert extra income to a taxable account before paying down the mortgage. However, a lot of people love to get rid of that pesky mortgage and increase cash flow. The emotional benefit that brings to you and your spouse, I believe, should be factored in to the benefits when you're doing the cost-benefit analysis of mortgage pay down vs. taxable (or other investment).
She/her/hers | Make sure the fortune that you seek is the fortune that you need - Ben Harper

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Donkey Hote
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Re: Should I pay off my mortgage?

Post by Donkey Hote » Fri Jul 26, 2019 2:21 pm

evilityb wrote:
Fri Jul 26, 2019 1:52 pm
3) With an interest rate as low as 3.xx percent, you're likely to have higher returns in the long run if you divert extra income to a taxable account before paying down the mortgage.
I agree, but also at the cost of a non-negligible increase in risk. Given that I no longer deduct my mortgage interest, that's approximately 3.xx/(1 - marg tax rate) pre-tax. Given that I currently have non-zero G fund securities in my TSP earning <3%, it seems inefficient to simultaneously be holding G fund securities and a mortgage balance.

This is why I'm hesitant to follow the advice to not pay down the mortgage. Paying down my mortgage while reducing G fund allocation would achieve the same thing as using the additional funds to purchase additional equities, but in a more efficient manner.

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Re: Should I pay off my mortgage?

Post by Grt2bOutdoors » Fri Jul 26, 2019 2:32 pm

Donkey Hote wrote:
Fri Jul 26, 2019 11:57 am
evilityb wrote:
Fri Jul 26, 2019 11:18 am
Hey, fellow Fed here (on a Boglehead lunch break).

You don't want to take a personal or TSP loan or withdraw from your IRA simply because the growth those of funds will be greater than the interest you pay on your mortgage. I'm assuming you can write off your mortgage interest? If so, your effective rate is probably about 1/3 less than the rates you stated. Personally, I would refi to the 15-year fixed and continue to write off the interest. If you want to be mortgage-debt free, consider recasting your mortgage every few years until it's paid down.
Actually, I do not write off my mortgage under current tax laws. This change has actually been why I have shifted my financial priorities to paying down my mortgage.

I'm not sure whether that changes your thoughts, but I do believe you are correct that the refi is the most sensible path forward.

Thanks!
I agree with the others, it would be a BIG mistake on your part to take a loan from you TSP - that is money you want growing for you, if you take the loan, those monies will not be invested and you'll be paying interest on top of it. A 6% annual gain is $3,000 to you, each year it stays invested. I don't see how saving $2,500 upfront is a benefit compared to 30 years of compounding on $50,000. Do you?

Paying off a mortgage works if you have other liquid assets - you don't. I don't recommend you cash out your ROTH IRA either. That is tax free compounding lost forever, for what? To save $2,500? I would touch the ROTH last for any reason.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Should I pay off my mortgage?

Post by Jack FFR1846 » Fri Jul 26, 2019 2:41 pm

Donkey Hote wrote:
Fri Jul 26, 2019 1:09 pm
And as the kids grow up, spending will absolutely go down. Little buggers' activities are so expensive...
This has me laughing......

Looking back, now that my boys are 18 and 23........they were sooooo cheap when all we were paying for was activities and bikes and skateboards and Howard Skateboard camp and scouts and t ball and indoor soccer and lacrosse and....... They're WAY more expensive now.
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rascott
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Re: Should I pay off my mortgage?

Post by rascott » Fri Jul 26, 2019 2:50 pm

Are you sure your 5/5 ARM is resetting to 4.625%

That's the cap it could go to, but no way should that be the actual rate right now.


I think your general plan is terrible, and would be a huge mistake.

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Donkey Hote
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Re: Should I pay off my mortgage?

Post by Donkey Hote » Fri Jul 26, 2019 4:00 pm

rascott wrote:
Fri Jul 26, 2019 2:50 pm
Are you sure your 5/5 ARM is resetting to 4.625%

That's the cap it could go to, but no way should that be the actual rate right now.


I think your general plan is terrible, and would be a huge mistake.
4.625% is from several months ago. Just checked again, it would be 4.375% as of today's LIBOR.

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Donkey Hote
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Re: Should I pay off my mortgage?

Post by Donkey Hote » Fri Jul 26, 2019 4:19 pm

Grt2bOutdoors wrote:
Fri Jul 26, 2019 2:32 pm
I agree with the others, it would be a BIG mistake on your part to take a loan from you TSP - that is money you want growing for you, if you take the loan, those monies will not be invested and you'll be paying interest on top of it. A 6% annual gain is $3,000 to you, each year it stays invested. I don't see how saving $2,500 upfront is a benefit compared to 30 years of compounding on $50,000. Do you?
Thanks for the input.

Right now I have more than $50,000 currently invested in the G fund, and when I take out a TSP loan, I will reduce my G fund allocation by exactly $50,000, so as to leave my stock holdings unchanged. In this manner, I can "earn" my mortgage interest rate on these funds while only "paying" the lower, G-fund rate on the loan. Not arbitrage, but in that spirit.

I agree if I had a more aggressive portfolio, things would become muddier, and perhaps the "compounding" effect would take over.

grettman
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Re: Should I pay off my mortgage?

Post by grettman » Fri Jul 26, 2019 6:24 pm

I don’t have any advice to offer other than to say you are doing great financially given your age. You are winning!

I am biased on the question of paying off the mortgage since I am doing that too and I took out a TSP loan many years ago to buy my first house. I don’t regret borrowing but I regret not having paid it offer sooner.

mortfree
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Re: Should I pay off my mortgage?

Post by mortfree » Fri Jul 26, 2019 6:50 pm

I would love to know how you can payoff a 260k mortgage with only 120k in taxable. :mrgreen:

Seriously though can you afford to lock up another 260k (480k Total) in your house?

JBTX
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Re: Should I pay off my mortgage?

Post by JBTX » Fri Jul 26, 2019 9:50 pm

Do the refi. The fees are rolled into the loan. At your age and with 3 kids I'd prefer the liquidity and ability to optimize retirement savings space.

MJS
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Re: Should I pay off my mortgage?

Post by MJS » Fri Jul 26, 2019 10:11 pm

One point in favor of the 15 year fixed mortgage is that it provides some protection against 1970's style mega-inflation. While the Fed has made considerable efforts to control inflation, predicting the future is chancy. You could think of your $2500 as purchasing 15 years of inflation insurance...

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welderwannabe
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Re: Should I pay off my mortgage?

Post by welderwannabe » Sat Jul 27, 2019 10:49 am

Im a big fan of paying off the mortgage, but I would not do it in the way you suggested. The opportunity costs are too high.

I would refinance to the 15-yr and eat the $2,500 and then work to aggressively pay the house off over the next few years. Every dime you can squeeze above your retirement contributions go at the house.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

dharrythomas
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Re: Should I pay off my mortgage?

Post by dharrythomas » Sat Jul 27, 2019 11:28 am

I love prepaying a mortgage, but would not do it under these circumstances. I’d refi and grow ( throw) any extra money into prepayments.
Last edited by dharrythomas on Sat Jul 27, 2019 12:04 pm, edited 2 times in total.

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abuss368
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Re: Should I pay off my mortgage?

Post by abuss368 » Sat Jul 27, 2019 11:31 am

dharrythomas wrote:
Sat Jul 27, 2019 11:28 am
I love prepaying a mortgage, but would not do it under these circumstances. I’d refi and grow any extra money into prepayments.
Agreed and well said.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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