Andre1969
Thinks s/he gets paid by the post
Hey guys and gals,
Today I made an extra big payment on my mortgage, which seems like the right thing to do, but now I'm beginning to second guess it.
Here's a little background. Initially, this mortgage was an HELOC. In early 2015, the draw period ended, and it converted to a 10 year fixed mortgage, at 4.99%. Not the best in the world. The initial balance was around $174,000. This is the only mortgage debt I have.
The monthly payment is $1847, which I've been rounding up to $2000. And, the first month in, I paid $3000. The payment is kind of high, but manageable. And I figured it would be a good test run to see if I would be comfortable with a bigger mortgage, which is bound to happen down the road, considering some of the houses I've been looking at.
Anyway, a month or so ago, I got tired of paying it, and figured I'd try refinancing, to free up some cash flow, and use that money to invest further. Initially, I got qualified for a $154,000 mortgage at 3.625%, for 30 years, which would drop the payment to about $700 per month. But then they dropped a bit of a bombshell on me. They won't approve the mortgage unless I get a roofing inspector to come in, and fix whatever he says needs fixing.
The problem here is that I intend to sell in around 4-5 years, and the house is essentially a tear-down...100 years old, small, outdated, too close to the road, etc, and on 4.28 acres of good, subdividable land in a fairly sought-after area. I'm sure an inspector could find a good $15-20,000 easy, in repairs. But it just doesn't make sense, in my opinion, to throw $15-20K, or more, into a house that'll just get torn down in the near future. When it comes time to sell, it's not going to increase the value any.
If this was a much larger mortgage, and/or if I was going to stay here longer, it might make sense. But, it was down to $150,400 before I made this big payment (The $154K loan included some closing costs and a higher loan balance at the time).
So, I decided to just forget about refinancing, and get a bit more aggressive about paying it down. With the $10K I just threw at it, it's now down to around $141,000. It feels good, to see the balance drop that much, but at the same time, it makes me feel a bit broke. It's also starting to make me question, when the time does come to retire, how hard is it going to be for me to make the switch from saving to spending?
I ran a few numbers. If I had just paid $1847 this month, the loan would have been paid in full in November 2024, with total interest payments of $45,787. Making this $10K payment moves it up a bit to May of 2024, with total interest of $41,801. So, it does save almost $4,000 over the life of the loan, but once you bring in tax writeoffs, time value of money, etc, it does muddle things up.
I have thought of a new game plan for attacking this mortgage. It might sound a bit convoluted, but here goes... Every month I hit a new $10K threshold in investable assets, I'm thinking about making a $10K payment. And for every month that my investable assets is better than the month before, I'll make a $3K payment. And if it's a down month, I'll still make a $2K payment.
I figure this way, it'll get paid off more quickly, but I won't strain myself financially in doing so. I had actually been planning for awhile to make a $10K payment, if my investable assets broke the $1.11M barrier. Just sort of an arbitrary figure...I wanted to hit at least $1.1M, and then go a bit beyond. Well, I broke that (barely) in July, and hit $1.125M earlier in the month. I held off initially, because of the refinancing process, but once that fell through I decided to go ahead and pay it down.
So now, my plan for the September payment is that if I'm up for the month, versus August 31, I'll pay $3K. If I manage to pop the $1.13M barrier, I'll pay $10K.
Anyway, I know this has gotten kinda long, so if any of you all read through it all, thanks!
And if anybody has any thoughts or ideas, let me know!
Today I made an extra big payment on my mortgage, which seems like the right thing to do, but now I'm beginning to second guess it.
Here's a little background. Initially, this mortgage was an HELOC. In early 2015, the draw period ended, and it converted to a 10 year fixed mortgage, at 4.99%. Not the best in the world. The initial balance was around $174,000. This is the only mortgage debt I have.
The monthly payment is $1847, which I've been rounding up to $2000. And, the first month in, I paid $3000. The payment is kind of high, but manageable. And I figured it would be a good test run to see if I would be comfortable with a bigger mortgage, which is bound to happen down the road, considering some of the houses I've been looking at.
Anyway, a month or so ago, I got tired of paying it, and figured I'd try refinancing, to free up some cash flow, and use that money to invest further. Initially, I got qualified for a $154,000 mortgage at 3.625%, for 30 years, which would drop the payment to about $700 per month. But then they dropped a bit of a bombshell on me. They won't approve the mortgage unless I get a roofing inspector to come in, and fix whatever he says needs fixing.
The problem here is that I intend to sell in around 4-5 years, and the house is essentially a tear-down...100 years old, small, outdated, too close to the road, etc, and on 4.28 acres of good, subdividable land in a fairly sought-after area. I'm sure an inspector could find a good $15-20,000 easy, in repairs. But it just doesn't make sense, in my opinion, to throw $15-20K, or more, into a house that'll just get torn down in the near future. When it comes time to sell, it's not going to increase the value any.
If this was a much larger mortgage, and/or if I was going to stay here longer, it might make sense. But, it was down to $150,400 before I made this big payment (The $154K loan included some closing costs and a higher loan balance at the time).
So, I decided to just forget about refinancing, and get a bit more aggressive about paying it down. With the $10K I just threw at it, it's now down to around $141,000. It feels good, to see the balance drop that much, but at the same time, it makes me feel a bit broke. It's also starting to make me question, when the time does come to retire, how hard is it going to be for me to make the switch from saving to spending?
I ran a few numbers. If I had just paid $1847 this month, the loan would have been paid in full in November 2024, with total interest payments of $45,787. Making this $10K payment moves it up a bit to May of 2024, with total interest of $41,801. So, it does save almost $4,000 over the life of the loan, but once you bring in tax writeoffs, time value of money, etc, it does muddle things up.
I have thought of a new game plan for attacking this mortgage. It might sound a bit convoluted, but here goes... Every month I hit a new $10K threshold in investable assets, I'm thinking about making a $10K payment. And for every month that my investable assets is better than the month before, I'll make a $3K payment. And if it's a down month, I'll still make a $2K payment.
I figure this way, it'll get paid off more quickly, but I won't strain myself financially in doing so. I had actually been planning for awhile to make a $10K payment, if my investable assets broke the $1.11M barrier. Just sort of an arbitrary figure...I wanted to hit at least $1.1M, and then go a bit beyond. Well, I broke that (barely) in July, and hit $1.125M earlier in the month. I held off initially, because of the refinancing process, but once that fell through I decided to go ahead and pay it down.
So now, my plan for the September payment is that if I'm up for the month, versus August 31, I'll pay $3K. If I manage to pop the $1.13M barrier, I'll pay $10K.
Anyway, I know this has gotten kinda long, so if any of you all read through it all, thanks!
And if anybody has any thoughts or ideas, let me know!
