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Author: kahunacfa Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308445  
Subject: Re: Why is Mortgage Debt "Different" Date: 3/8/2014 2:09 PM
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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. ...
- yddeyma | Date: 3/4/2014 2:04:09 PM | Number: 308024

It is DUMB and even perhaps STUPID to try to accelerate the paydown of a Pre-tax 3% interest rate mortgage. Instead of paying down fifty thousand on the three percent pre-tax mortgage debt, buy any number of high-quality, bluechip stocks that have dividend yields exceeding 3%. The maximum tax-rate on dividends received is 15% in the highest income tax bracket.

Kahuna, CFA
Investment Professional
1974 - Present
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