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Paying off a mortgage... WWYD?
Old 07-22-2013, 12:19 PM   #1
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Paying off a mortgage... WWYD?

My wife and I are THIS ...... CLOSE to paying off the mortgage.

We owe 23500 and have 18,000 in the payoff account...

I have a car fund with $2600 in it that we could re-purpose and some extra monies to pay off the house in the next 3 weeks. NICE!!!

But, our desire to pay off the house would deplete our savings and leave us with virtually $0. .... However, by the next pay period (2 weeks later) we could quickly get our emergency fund, funded again with around $3000 and then at least $4000/mo there after...

In August, our daughter will get dental work to the tune of $2700 and about $900 in insurances are due in September. I think we could still fund these expenses and be 100% debt free, but we would be cutting it close with the emergency fund situation and having next to nothing at our disposal...

My thinking is that we should get $1000 in an emergency fund and then GO FOR IT... after August we could quickly build it back up at a $4000/mo clip and re-fund the car replacement account.

There will be a little bit of a "what if" feeling without having the financial resources of a few thousand bucks, but we could quickly or soon have this money replaced.

My question is, given yourself in this situation, would you go for it or delay the pay off a month or two until there was more in the bank?

at 45 and 46 y/o, We've worked so hard to pay off our mortgage (thanks to Dave Ramsey) that now that it's in sight, it's all I can do GET IT DONE.

thanks in advance...
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Old 07-22-2013, 12:24 PM   #2
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Since you know you have these expenses coming up, why not wait til the payoff fund is 100 percent of what remains on the mortgage?

Being debtfree is awesome but why worry for the next three months or so that some big expense will come up before you get the emergency fund stocked up again?
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Old 07-22-2013, 12:24 PM   #3
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I'd be inclined to wait until November or December for two reasons:
1. Build up more of an emergency fund cushion and
2. Maximize the tax saving by itemizing a whole year of interest payments.

#2 will depend on your specific situation. I decided to pay off my mortgage early when I realized that I was no longer getting any income tax benefit from having a mortgage. My total itemized deductions (including mortgage interest) was less than my standard deduction such that the mortgage interest was 100% my expense, no tax benefit. #2 would not be a reason to wait if it is no longer advantageous to itemize on your tax return.
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Old 07-22-2013, 12:24 PM   #4
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I can almost hear your excitement, but I would still wait a month or two until after the Dental bills.

Patience is a virtue in the world of retirement planning!

fd
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Old 07-22-2013, 12:32 PM   #5
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great advice, folks.. thank you!
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Old 07-22-2013, 12:33 PM   #6
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What is the interest rate?
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Old 07-22-2013, 12:37 PM   #7
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What is the interest rate?
We paid off our traditional mortgage at 5.5% with a home equity loan at another bank, our current HELOC is 2.5%.

interest isn't enough to sneeze at.
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Old 07-22-2013, 12:48 PM   #8
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Quote:
Originally Posted by Freeead View Post
We paid off our traditional mortgage at 5.5% with a home equity loan at another bank, our current HELOC is 2.5%.

interest isn't enough to sneeze at.
Given that, I would pay it off sometime before the end of the year whenever it is comfortable for you and you still have sufficient emergency fund money. At 2.5% I wouldn't be in any hurry.
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Old 07-22-2013, 12:51 PM   #9
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At 2.5% I wouldn't be in too much hurry to pay it off. It's a nice feeling to be done with it, but it's not worth shorting yourself and potentially having to go into debt at a higher rate. About half here would say to just invest and do better than 2.5%, but it sounds like it would mean a lot for you to be debt tree.
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Old 07-22-2013, 01:35 PM   #10
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I agree with the others...at 2.5%, I wouldn't be in a hurry to pay it off. If you have the balance down to $23.5K, the interest on that is only around $48-49 per month.

With other bills coming up, I'd focus on those first, and see where you stand when the dust clears.
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Old 07-22-2013, 01:57 PM   #11
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+1

Be patient. At 2.5%, waiting a few months will add very little to the amount of interest you pay. If you spend your emergency fund, you face months of anxiety until you can build a cushion again. Based on the information you provided, you should be able to pay off the mortgage by the end of the year and keep your emergency fund. Then you can celebrate!
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Old 07-22-2013, 05:12 PM   #12
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I'd refinance while the interest rates are still low. Lock in at ~3.5% for 30 years. Even if interest rates don't skyrocket, that will be practically free money in 10 years or so.

Just representing the arb'ing the mortgage side of the argument.
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Old 07-22-2013, 06:41 PM   #13
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Originally Posted by RunningBum View Post
At 2.5% I wouldn't be in too much hurry to pay it off. It's a nice feeling to be done with it, but it's not worth shorting yourself and potentially having to go into debt at a higher rate. About half here would say to just invest and do better than 2.5%, but it sounds like it would mean a lot for you to be debt tree.
+1

I'm in that camp too. At 2.5% the interest you're paying is as low as it's going to get and you have some other potentially large bills looming. We like to have a lot of financial wiggle room since "stuff happens" and never at a convenient time.

But we know what it's like to be at Zero Debt and it is a good place to be. Patience, Grasshopper. All things will come in due time.
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