I am 35 and currently save the maximum allowed by the Government in my 401K and Roth's (married). I am funding 529 accounts for my two children (age 9 & 5). I also will have a Pension that starts at age 55.
I am facing the decision on whether excess funds should go toward paying down my mortgage, funding a taxable account, or a combination of both.
I am currently in a 3 year ARM with a 4.25% rate. I chose the ARM because of the significant possiblity of relocating (I have moved several times with my employer). The only problem is that my family is now becoming more comfortable living in my current area. I have the option of staying here permanently (corporate headquarters located here).
I face the reality that rates are going to go up. If I focused my attention on reducing principal, the reduction in principal would offset any increases in the rate. This would keep my payment about the same if I refinance at the end of the 3 years.
Principal Balance of mortgage = $231,000, Home Value = $290,000. I am in an area in which homes have appreciated at a steady pace (5-6% a year). Only 1 down year in real estate in the last 55 years.
A lot of authors list several reasons to save vs. prepaying the mortgage. I would not be able to pay off the mortgage before ER if I go the savings route. However, I am currently leaning towards paying more toward the mortgage which would allows me to own my home free and clear for ER (target date is 50). It would also keep my required mortgage payment low which would allow me to divert some $ toward taxable accounts in the future.
I have ran the numbers both ways and it appears that ER at 50 is possible with either choice. However, the investment route projections show my net worth to be slightly more than the pre-payment route.
I would appreciate any thoughts that you may have.
I am facing the decision on whether excess funds should go toward paying down my mortgage, funding a taxable account, or a combination of both.
I am currently in a 3 year ARM with a 4.25% rate. I chose the ARM because of the significant possiblity of relocating (I have moved several times with my employer). The only problem is that my family is now becoming more comfortable living in my current area. I have the option of staying here permanently (corporate headquarters located here).
I face the reality that rates are going to go up. If I focused my attention on reducing principal, the reduction in principal would offset any increases in the rate. This would keep my payment about the same if I refinance at the end of the 3 years.
Principal Balance of mortgage = $231,000, Home Value = $290,000. I am in an area in which homes have appreciated at a steady pace (5-6% a year). Only 1 down year in real estate in the last 55 years.
A lot of authors list several reasons to save vs. prepaying the mortgage. I would not be able to pay off the mortgage before ER if I go the savings route. However, I am currently leaning towards paying more toward the mortgage which would allows me to own my home free and clear for ER (target date is 50). It would also keep my required mortgage payment low which would allow me to divert some $ toward taxable accounts in the future.
I have ran the numbers both ways and it appears that ER at 50 is possible with either choice. However, the investment route projections show my net worth to be slightly more than the pre-payment route.
I would appreciate any thoughts that you may have.