I had an unusually profitable year at work and have enough in the business operating account so that after taxes are paid and SepIRA funded to pay off the Mortgage on our primary residence. We are 48 and 50 and this is our only debt (we pay cash for cars, kids' college funds fully funded, etc.). We have around 7 years left on a 15 year mortgage at 3.125%.
If I don't use the money to pay off the mortgage, the money will likely be invested in an after tax account or set aside for an eventual investment property.
We have over $1M in tax sheltered retirement accounts; building up savings in our after-tax investment accounts; plus enough cash in our 12 month emergency fund, plus some.
I asked my accountant, who I trust and who is a friend outside of our professional relationship. He didn't see any reason to pay off the mtg, but I attribute that more to a philosophical difference in how we approach these things than any economic reason (why pay the bank $5,709.24 to save $2,283.70 (assuming 40% tax rate on $5,709.24 if I itemize).
On the other side of the equation, I suspect there might be a psychological benefit to being 100% debt free. This will free up $2,337.82 per month to help build up savings in our after-tax investment accounts. The monthly mortgage payment is $3,133.22, but $795.40 of that goes to Property Taxes and Insurance so we will still be on the hook for that amount, or still on the hook for $9,544.90 per year.
We pay $5,709.24 for Interest per year, which means a savings of around $40,000 in remaining life of the loan interest payments (7 years x $5,709.24) if we pay the mortgage off this year.
What sayest the collective wisdom of the FIRE group? Keep cheap interest rate mortgage and invest the money, or pay off the mortgage and build up our savings in our after-tax investment accounts with the freed up $2,337.82 per month?
Thanks in advance for your advice.
If I don't use the money to pay off the mortgage, the money will likely be invested in an after tax account or set aside for an eventual investment property.
We have over $1M in tax sheltered retirement accounts; building up savings in our after-tax investment accounts; plus enough cash in our 12 month emergency fund, plus some.
I asked my accountant, who I trust and who is a friend outside of our professional relationship. He didn't see any reason to pay off the mtg, but I attribute that more to a philosophical difference in how we approach these things than any economic reason (why pay the bank $5,709.24 to save $2,283.70 (assuming 40% tax rate on $5,709.24 if I itemize).
On the other side of the equation, I suspect there might be a psychological benefit to being 100% debt free. This will free up $2,337.82 per month to help build up savings in our after-tax investment accounts. The monthly mortgage payment is $3,133.22, but $795.40 of that goes to Property Taxes and Insurance so we will still be on the hook for that amount, or still on the hook for $9,544.90 per year.
We pay $5,709.24 for Interest per year, which means a savings of around $40,000 in remaining life of the loan interest payments (7 years x $5,709.24) if we pay the mortgage off this year.
What sayest the collective wisdom of the FIRE group? Keep cheap interest rate mortgage and invest the money, or pay off the mortgage and build up our savings in our after-tax investment accounts with the freed up $2,337.82 per month?
Thanks in advance for your advice.