Senator
Thinks s/he gets paid by the post
I am going to pay off one of my mortgages this week on my rentals in additional preparation for FIRE. It is non-owner occupied, so a refinance would only drop the interest a little bit.
Current Balance: 188K, Current Interest: 5.5%, P&I Payment: $1,145.51, remaining years ~26.
This would add an extra $13,746 to my gross income , rather than paying the interest. Some of that amount is principal reduction. After taxes, it may only be another $11,000 or so to my passive income stream which is almost another $1,000 per month. This is because I will not be able to deduct the interest that I am not paying.
I am going to use some investment account money that is earning .01%, some cash earning 0%, some HELOC money that is on a promotion at 1.9% for about another 5 months or so, and then the HELOC adjusts to prime, which is 3.25%.
So I look at it as buying an annuity, immediate payout, at 5.5%. With 100% of principal returned after 26 years. Guaranteed by Real Estate. And I have the option to cash out (by selling) at any time, without penalty. It should decrease the financial risk of retirement, just a bit. Sort of like putting money in a bond fund.
It would deplete my cash balance just a bit, and I would have the HELOC paid off by the time I retired. It would save 3.6% over 5 months (~$2800), and then save ~$4,200 per year. The savings would go down as the loan balance dropped.
That would also give me 12 units that I have paid off, plus my residence. FIRE is looking quite a bit better as I near retirement date and analyze the numbers. Lately, I just do not have the ambition or desire to put up with the Megacorp BS. It’s not that bad, I am just finding that I do not have the time to do it.
The downside is I will have less cash , but still well over two years of cash reserves. I can generate a bit of cash even quicker. I will lose my ‘millionaire’ in investable assets status for a bit . I find that I have too much just sitting at .01%, so I may as well put it to use. Interest rates should also be low for a few more years, certainly below 5.5%.
Two years below 5.5%, and two years above will be a wash. Of course it depends on principal balances and the exact interest rate, but in a linear world it’s close.
Any downsides that anyone can see?
Current Balance: 188K, Current Interest: 5.5%, P&I Payment: $1,145.51, remaining years ~26.
This would add an extra $13,746 to my gross income , rather than paying the interest. Some of that amount is principal reduction. After taxes, it may only be another $11,000 or so to my passive income stream which is almost another $1,000 per month. This is because I will not be able to deduct the interest that I am not paying.
I am going to use some investment account money that is earning .01%, some cash earning 0%, some HELOC money that is on a promotion at 1.9% for about another 5 months or so, and then the HELOC adjusts to prime, which is 3.25%.
So I look at it as buying an annuity, immediate payout, at 5.5%. With 100% of principal returned after 26 years. Guaranteed by Real Estate. And I have the option to cash out (by selling) at any time, without penalty. It should decrease the financial risk of retirement, just a bit. Sort of like putting money in a bond fund.
It would deplete my cash balance just a bit, and I would have the HELOC paid off by the time I retired. It would save 3.6% over 5 months (~$2800), and then save ~$4,200 per year. The savings would go down as the loan balance dropped.
That would also give me 12 units that I have paid off, plus my residence. FIRE is looking quite a bit better as I near retirement date and analyze the numbers. Lately, I just do not have the ambition or desire to put up with the Megacorp BS. It’s not that bad, I am just finding that I do not have the time to do it.
The downside is I will have less cash , but still well over two years of cash reserves. I can generate a bit of cash even quicker. I will lose my ‘millionaire’ in investable assets status for a bit . I find that I have too much just sitting at .01%, so I may as well put it to use. Interest rates should also be low for a few more years, certainly below 5.5%.
Two years below 5.5%, and two years above will be a wash. Of course it depends on principal balances and the exact interest rate, but in a linear world it’s close.
Any downsides that anyone can see?