Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (14) | Ignore Thread Prev | Next
Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5069  
Subject: Re: Update and next step(s) Date: 1/18/2004 11:01 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
BUT -- and yes, that's supposed to be a big but -- a new wrinkle has surfaced. I was just doodling on a website and playing with a mortgage prepayment calculator. We were paying off our debt to the tune of $3K/month. If I were to apply that amount to our mortgage, we would be clear of that debt in just under 3 years. 3 years! Wow! I ran a variation of that scenario paying $2K/month and we could have it paid in just under 4 years. Still wow! This idea is blowing my mind. That's WAY more achievable than I would ever have imagined -- of course, all things remaining the same

It's a matter of exactly what different things you want to achieve and exactly when you want to achieve them.

In terms of wealth and flexibility, and assuming you have at least 5 years to expected retirement date, the best approach would probably be to:

(1) Refinance your existing mortgage to as low a fixed rate as you can get (assuming that this will get you a lower-than-current rate, under 6.5%, and save you money month-to-month - or that it will get you a lower rate and you can take cash out without raising your payments, which would be even better), then make only the payments required on it.

(2) Increase your investing by the full extra $3K you have now, plus the decrease in your mortgage payment.

(3) When you retire, take a quick look and see if your balance is less than 25 times your annual payments. If it is, take money from your investments and pay off the mortgage in one huge lump. If the balance is higher than that, continue making monthly payments until it's lower and then pay it off.

This maximizes your expected wealth, and also builds up a large amount of relatively-liquid assets in case of emergency. You can sell stocks for cash in a few days and you don't have to move. House sales typically don't close nearly that fast and you usually have to move when you sell your home.

However, it does NOT give the emotional satisfaction of knowing that your home is paid for.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (14) | Ignore Thread Prev | Next

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Berkshire Hathaway

IBM: Is Buffett Wrong, or Brilliant?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement