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Trying to Pay My Mortgage Off Within 5 Years

February 17th, 2008 at 03:37 pm

Paying off your mortgage is not always a wise financial move. For example, if your investments are currently earning more than what you are paying in mortgage interest, you would be better suited putting your money in said investment's since paying off your mortgage is really doing nothing more than giving the mortgage holder a boost in cash.

That said, I have maxed out my two major investments, my Roth IRA (still qualify since I am under 166K in income) and my companies SIMPLE IRA. My rental property is currently paid via tenants and my cash reserves total about 75K (held in a Money Market Account).

I have an interest in establishing a Stock Portfolio but have yet to find a broker that I feel comfortable with (will take any suggestions).

Thus, I have begun a crusade in paying off my mortgage. To date, I have been able to put about 35K against it, leaving me with a balance of about 117K. The interst rate is 5.5% and I have 12.5 years left on the 15 year term.

Putting large chuncks of money against it occurs about two or three times per year. This is not soothing the payoff best within me. I have begun a mortgage payoff piggy bank. Nickles, dimes and dollar bills will count. I opened a "Mortgage Payoff Money Market Account" whereby all I can scrounge and save will be deposited.

I will keep you updated as to how its going and I wish you all the very best in financial stability. God Bless.

Posted in Mortgage Payoff Challenge | 11 Comments »

11 Responses to “Trying to Pay My Mortgage Off Within 5 Years”

  1. Diane Says:
    February 17th, 2008 at 04:06 pm

    Many people will tell you that mortgage prepayment is not the "smart" thing to do. However, I picked that route too. Like you, my emergency cash and tax-favored investments were fully funded. Also, I live in a state with no income tax, and so the tax advantages of my mortgage interest were very small. So my after-tax guaranteed investment return from mortgage prepayment was pretty decent.

    My mortgage has been paid off now for 4 years. Once the mortgage is paid, it's amazing how much saving you can do. Plus, you've gotten in the habit of committing chunks of cash to a cause. Your cause just becomes the investment accounts instead of the mortgage.

    As for your stock portfolio, check out Scott Burns' columns on the Couch Potato Portfolio. You can get decent returns with a 1/3 allocation to US stock index, 1/3 international stock index, and 1/3 bonds (I use inflation-protected). He suggests Vanguard funds, but you could also use ETF (exchange-traded funds)indexes.

  2. Holly Says:
    February 17th, 2008 at 04:57 pm

    I too am considering an agressive attempt to pay off my mortgage early. I have a plan this year to pay off my school loans ($6,400 remain); a stupid credit card I have ($4,000). I have also increased my contributions to my Simple IRA. I am not maxed out yet. I recently received a 10% pay increase and took on a weekend job which brings in a good extra amount each month, and I get a year end profit share bonus of relatively good size in comparison to my salary.

    My thoughts are to pay off the debts (stated above) a.s.a.p. with all extra money and then leaving me at the end of the year with just the mortgage debt.

    With this I am looking for thoughts/advice regarding my year end bonus. It should be a good chunk. It will come a long with my pay check (taxed). I would like to put that too my mortgage. With my other debts gone, I would like to put the extra money towards my mortgage. If I max out my retirement contributions, and can still afford to pay double my mortgage each month, is this smart?
    If I haven't maxed out my retirement contributions this year, is there a way to use the bonus towards that pre-tax, or is it smart to go ahead and use the bonus towards the mortgage and when all other debt (excluding mortgage) is paid off, put all that extra into the retirement?
    I want to have zero debt. That is my major goal right now. But, I want to be smart and prepare for retirement too. I am 30 years old.

  3. Nancy Says:
    February 17th, 2008 at 05:29 pm

    I don't care what people say -- a paid off mortgage is a beautiful thing. Paying off your mortgage is a much better return than saving in an account or investing in a mutual fund, I think, because those instruments can vary wildly and quickly; I paid off my mortgage early and saved thousands of dollars in interest. But the main reason I paid it off is because it gave me security and peace of mind.

  4. Mooshocker Says:
    February 17th, 2008 at 05:37 pm

    The suggestions and comments are great!!!! Thank you all so much. They truly inspire me. Keep them coming.

    One more thing Holly, I would suggest maxing out your SIMPLE IRA first (since I would assume you are earning the max 3% of your gross salary as an employer match), then focus your efforts on paying off the CC, student loan and any other debt you may have. Bust your hump on that weekend job and sink every nickle into the debt. This way, when your end of year bonus comes in, you can slam your mortgage with it.

  5. scfr Says:
    February 17th, 2008 at 05:54 pm

    We're like you ... After building up a comfy cash cushion and maxing out our tax-deferred savings we attacked the mortgage. We have never regretted our decision, not for one second! You will find naysayers when it comes to paying off the mortgage early, but I'm not one of them!

    Good luck and looking forward to reading the updates!

  6. luxlivingfrugalis Says:
    February 17th, 2008 at 07:19 pm

    I have that debt-mortification beast within me as well. I hate owing money and am working on paying off our 15 year mortgage early too! Peace of mind means a lot to me.

  7. Ima saver Says:
    February 18th, 2008 at 05:56 am

    I have been mortgage free since i was 32 years old. Each new house we build, has been built with cash. It is a great feeling!

  8. Mooshocker Says:
    February 18th, 2008 at 06:44 am

    Thank you all so much. The reason for the "piggy bank" approach is to help my 11, 7 and 5 year old daughters understand and appreicate what Mommy and I are trying to do.

    Just another way to share the stable financial lifestyle we are trying to live with our kids.

  9. Nancy Says:
    February 18th, 2008 at 09:56 am

    I look at it this way: if something catastrophic happens to me, all bets are off and who knows what will happen. BUT if something mid-level catastrophic occurs, such as a year or two of illness, my home is paid off and I have my day to day expenses covered in my bank account and any long term disability payments I might receive. I am a simple person and dumping 120K in a mutual fund while paying off a mortgage over 20 years hurts my brain.

  10. Holly Says:
    February 22nd, 2008 at 12:12 pm

    So ... Fantastic news. I believe my pay off goals may have been given a jump start. Apparently I WAY over paid in taxes this year. The refund I am to receive is more than my credit card debt! So, I have that taken care of for sure and can spend the extra a month I budgeted to pay that off aggressively towards my school loans!

    I also figured out how much I needed to invest each month to max out my retirement contributions, and am now trying to see if I can live within that. I really think I can, but don't want to leave myself short-changed each month.

    Thanks for chatting on this subject here. It's encouraging to know that someone read what I put into writing, thus making me feel like I can't let people down. It would be very easy to use the tax return for new carpet or washer & dryer. This is helping me stick to my plan! Thank you. I'm so excited.

  11. luxlivingfrugalis Says:
    February 22nd, 2008 at 02:21 pm

    Holly, can you adjust your withholdings so you get more in each check and loan Uncle Sammie less each month???

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