The Motley Fool Discussion Boards
Personal Finances / Credit Cards and Consumer Debt
|Subject: Why is Mortgage Debt "Different"||Date: 3/4/2014 2:04 PM|
|Author: yddeyma||Number: 307984 of 308881|
I have recently hit a point where I am investigating strategies to free up cashflow so I can work fewer hours. I'd REALLY like to pay off my mortgage because that is my largest monthly expense. I've worked out a payment plan and based on our current cashflow I can pay off the mortgage in about 7 years. However, if I could put a huge chunk of cash towards the principal right now (say about $50k or so), I could shave almost 2 years off the paydown plan.
I've noticed that most "experts" recommend paying down all non-mortgage debt and then saving or investing in lieu of paying off the mortgage. They especially recommend this when it comes to e-funds.
So here's my question. Right now I have about $50k in efund money, just sitting there in cash earning a piddly 1%. I could use that cash to pay down my mortgage and get a HELOC in case of emergencies.
The only arguments against it I've seen is that I may be "tempted" to spend the money on the HELOC. But wouldn't the same logic apply to the huge hunk of cash I have now? It's easier to spend the cash. With the HELOC it would very obvious I was going into debt for whatever I spent it on.
Plus, logic says that by keeping that cash around I am essentially in debt right now (via my mortgage) to fund my emergencies (via the efund). With the HELOC strategy, I wouldn't be in debt for emergencies until I actually had an emergency. That is, I'd borrow more against my house via the HELOC when an emergency actually came up.
On a side note, my mortgage is at 3%, my priority is to loosen up cashflow and I have no credit card debt. I've also got significant chunks in retirement accounts and am on track with those.
|Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us|