Here's my situation:
Mortgage balance is $74,000. Home value is about $265,000. Monthly payment is $1450 for principal + interest. Loan is a 15-year @ 3.25%, with about 5.5 years left if we just make the minimum payments.
Our emergency fund is currently at about $75000 (14 months expenses including the mortgage payment).
We also have $52,000 in a taxable account. If I liquidate the entire taxable account, we will pay no federal taxes since we have about $10k gains in the 0% LTCG bracket. State tax would be 6%.
I've been pondering liquidating the $52k in taxable to lock in the gains at record high values, and taking another $20k out of the emergency fund to pay off the mortgage. That would still leave at least 12 months expenses since we don't need to cover a mortgage anymore.
The reason why I am thinking about this is:
- Stocks are at all time highs. I'd be selling at a high with little taxes.
- The $75k emergency fund cash is earning basically nothing right now. Paying off the mortgage saves $6k in interest over the 5.5 years remaining on the loan. We'd be able to reduce this to $50k and then replenish the taxable account with the money used for our mortgage. Yes, it sucks to pay some taxes but at the same time, this should reduce taxes in the future as the basis will be higher.
- We've decided that we'll probably be staying in this house for at least 3-5 more years.
Anyone have any thoughts or reasons why I'd be making a huge mistake? Thanks!
Mortgage balance is $74,000. Home value is about $265,000. Monthly payment is $1450 for principal + interest. Loan is a 15-year @ 3.25%, with about 5.5 years left if we just make the minimum payments.
Our emergency fund is currently at about $75000 (14 months expenses including the mortgage payment).
We also have $52,000 in a taxable account. If I liquidate the entire taxable account, we will pay no federal taxes since we have about $10k gains in the 0% LTCG bracket. State tax would be 6%.
I've been pondering liquidating the $52k in taxable to lock in the gains at record high values, and taking another $20k out of the emergency fund to pay off the mortgage. That would still leave at least 12 months expenses since we don't need to cover a mortgage anymore.
The reason why I am thinking about this is:
- Stocks are at all time highs. I'd be selling at a high with little taxes.
- The $75k emergency fund cash is earning basically nothing right now. Paying off the mortgage saves $6k in interest over the 5.5 years remaining on the loan. We'd be able to reduce this to $50k and then replenish the taxable account with the money used for our mortgage. Yes, it sucks to pay some taxes but at the same time, this should reduce taxes in the future as the basis will be higher.
- We've decided that we'll probably be staying in this house for at least 3-5 more years.
Anyone have any thoughts or reasons why I'd be making a huge mistake? Thanks!
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