Pay extra on mortgage or ???
Pay extra on mortgage or ???
First time writing
here is my question
Married couple retired both in late 50’s
Mortgage @2.35% for 15 years in April 2021 $201,000
home value $350,000 mortgage balance $197,000
Pension income for both $6500 a month
Both have small part time jobs total income from both $1000 a month
No credit card debt
Car payment $360 for 24 more months
No saving to speak of like $5,000
Should we pay a extra $1000 a month on mortgage and cut the 15 years in half or do something else with that money
here is my question
Married couple retired both in late 50’s
Mortgage @2.35% for 15 years in April 2021 $201,000
home value $350,000 mortgage balance $197,000
Pension income for both $6500 a month
Both have small part time jobs total income from both $1000 a month
No credit card debt
Car payment $360 for 24 more months
No saving to speak of like $5,000
Should we pay a extra $1000 a month on mortgage and cut the 15 years in half or do something else with that money
Re: Pay extra on mortgage or ???
It is kind of a lifestyle choice.
Do you have a bunch of bonds earning 1%? 2.35% is a good rate but it is more than 0%.
Are you OK with the mortgage or do you want it gone?
You have nice pensions and the payment is not straining, so it is really what you want to do. Do you envision having no mortgage at some point?
I'm not helping, but likely either decision is just fine.
Do you have a bunch of bonds earning 1%? 2.35% is a good rate but it is more than 0%.
Are you OK with the mortgage or do you want it gone?
You have nice pensions and the payment is not straining, so it is really what you want to do. Do you envision having no mortgage at some point?
I'm not helping, but likely either decision is just fine.
Re: Pay extra on mortgage or ???
What’s the rate on the car loan? If it’s not 0% I’d pay that off first.
-
- Posts: 3369
- Joined: Mon Apr 16, 2012 10:48 pm
- Location: Denver area. Former Texan.
Re: Pay extra on mortgage or ???
No savings or investments at all besides the $5,000?
I think I would beef up that to have more of an emergency fund. I’d probably pay the car off before paying down the mortgage. Then I would either invest in Roth or taxable or pay off the mortgage.
I think I would beef up that to have more of an emergency fund. I’d probably pay the car off before paying down the mortgage. Then I would either invest in Roth or taxable or pay off the mortgage.
Re: Pay extra on mortgage or ???
Based on the term of the mortgage you might be better to pay extra on it than the car.lazynovice wrote: ↑Tue May 04, 2021 8:09 pm No savings or investments at all besides the $5,000?
I think I would beef up that to have more of an emergency fund. I’d probably pay the car off before paying down the mortgage. Then I would either invest in Roth or taxable or pay off the mortgage.
With no savings and plenty of access to Roth IRAs at low income tax rate I'd save in Roths.
I'm a big fan of paying extra on a mortgage, but you're already doing that with a 15 year and you're doing no investing.
-
- Posts: 184
- Joined: Tue Jun 04, 2019 9:01 pm
Re: Pay extra on mortgage or ???
Your mortgage rate is low, and lower still after taxes.
What would you earn (after taxes) if you invested the extra money? 6%?
Do some spreadsheet work to estimate what will be your net worth in 5 years if you:
1) stay the course (i wonder where the $1k is going now)
2) add the extra into the mortgage
3) pay off the car loan first and then invest in a low cost total stock market ETF or something that fits your risk appetite.
If you want to get rid of something, pay off the car loan first, unless it has an even lower after-tax rate.
Think about what you would need an emergency fund for and set a target. What happens to cash flow if one of you dies?
What would you earn (after taxes) if you invested the extra money? 6%?
Do some spreadsheet work to estimate what will be your net worth in 5 years if you:
1) stay the course (i wonder where the $1k is going now)
2) add the extra into the mortgage
3) pay off the car loan first and then invest in a low cost total stock market ETF or something that fits your risk appetite.
If you want to get rid of something, pay off the car loan first, unless it has an even lower after-tax rate.
Think about what you would need an emergency fund for and set a target. What happens to cash flow if one of you dies?
Normal is an illusion. What is normal for the spider is chaos for the fly. --Charles Addams. #613 in 2022 BH prediction contest. #42 in 2023. Not that I am keeping track.
-
- Posts: 980
- Joined: Wed Nov 20, 2019 11:03 pm
Re: Pay extra on mortgage or ???
If you were asking what to do with 200k, invest or payoff mortgage I’d always pay it off. Considering you have no savings, a car payment and are retired I’d say that’s a definite no.Kurvertp wrote: ↑Tue May 04, 2021 4:52 pm First time writing
here is my question
Married couple retired both in late 50’s
Mortgage @2.35% for 15 years in April 2021 $201,000
home value $350,000 mortgage balance $197,000
Pension income for both $6500 a month
Both have small part time jobs total income from both $1000 a month
No credit card debt
Car payment $360 for 24 more months
No saving to speak of like $5,000
Should we pay a extra $1000 a month on mortgage and cut the 15 years in half or do something else with that money
-
- Posts: 2006
- Joined: Mon Mar 02, 2020 4:33 pm
Re: Pay extra on mortgage or ???
I am questioning should I save the extra $1000 in cash fund? Invest in Roth? Or pay off mortgage?
- Brianmcg321
- Posts: 1875
- Joined: Mon Jul 15, 2019 8:23 am
Re: Pay extra on mortgage or ???
I would put an extra $1,000 in VTSAX every month. Then when you have more money than your mortgage is worth just pay it off. It will happen quicker than you think.
Rules to investing: |
1. Don't lose money. |
2. Don't forget rule number 1.
- RickBoglehead
- Posts: 7877
- Joined: Wed Feb 14, 2018 8:10 am
- Location: In a house
Re: Pay extra on mortgage or ???
Investing in a "cash fund" is not investing.
Have you read the Wiki?
You have very low savings. You should have at least 6 months of emergency funds, i.e. the ability to pay every bill you have if you both lost your jobs and things were tough.
You should NOT pay off a 2.35% mortgage, because you are likely paying more than that on the car, AND you COULD earn a lot more than that in the market.
However, given that you have no savings, and very little income, I wouldn't be taking much risk with the little you can save.
If you decide to invest, Roth IRAs are your best choice - because it has very beneficial rules:
- You can always withdraw contributions penalty-free
- At age 59 1/2, you can also withdraw earnings penalty free, provided the Roth has been open for at least 5 tax years.
- Before 59 1/2, you can withdraw earnings penalty free under certain conditions.
https://www.schwab.com/ira/roth-ira/withdrawal-rules
Avid user of forums on variety of interests-financial, home brewing, F-150, EV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
Re: Pay extra on mortgage or ???
Usually I'd tend to be a 'pay off the mortgage' type -- and with a steady pension covering your regular expenses, I'm not sure you need a full 6 month emergency fund in cash, but. . .
In your place, I'd use the extra funds over the next, say 12 months, to pay off the car loan and build up the liquid savings account. Savings accounts (Ally, CapOne, Marcus, etc.) don't pay a lot today but just take what you can get on your liquid savings. Consider expected 'lumpy' expenses over the next couple of years (need a new HVAC or roof, etc.) and plan to budget these in cash. You can probably double your savings and pay off the car in a year.
At that point, revisit and holistically consider your position to see if paying down the mortgage makes sense.
Best wishes in your retirement!
In your place, I'd use the extra funds over the next, say 12 months, to pay off the car loan and build up the liquid savings account. Savings accounts (Ally, CapOne, Marcus, etc.) don't pay a lot today but just take what you can get on your liquid savings. Consider expected 'lumpy' expenses over the next couple of years (need a new HVAC or roof, etc.) and plan to budget these in cash. You can probably double your savings and pay off the car in a year.
At that point, revisit and holistically consider your position to see if paying down the mortgage makes sense.
Best wishes in your retirement!