Anonymous
Post 04/11/2023 13:35     Subject: Re:200k - mortgage or market
Anonymous wrote:Surprised, but don’t disagree, that people seem more inclined to pay down the mortgage than dump it into stocks. Things have changed from a couple years ago!


Well the mortgage is 4.5% -- and the OP is older with a very recent mortgage it seems (if there's 28 years on it) and a high income tax bracket. It's more "if-y" ground than a 2.5% mortgage with 15 years left on it and a lower tax bracket. I usually advise invest rather than pay off mortgage, but this is a bit more gray.

Personally I would do some in the market and some in the mortgage and not recast. I think if you recast you will feel more flush with cash than you actually are. I think your retirement savings are low for your income/age (Fidelity benchmark is 3x your income at 40, 6x by 50, so you should be closer to 2 million to be on track to retire at 67). Your DH is on track with his income, but yours is low for your income.
Anonymous
Post 04/11/2023 13:25     Subject: 200k - mortgage or market
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:If you want to stay in your house at retirement and you cannot afford to pay the current mortgage amount once you retire, it seems like recasting the 200 is a good idea to lower the payment right? I’m not sure why people aren’t seeing it that way. Welcome someone clarifying.


I guess if they can’t afford bit could afford the new payment that would make sense, but it won’t shorten the loan period. They’d probably be better off putting it towards principal and being done with the loan sooner.



They could always recast and continue paying extra each month.


I am the recast poster. In their situation I would not do a lump sum. They don't have enough college or regular savings as they over spent on their house.


Their mortgage is roughly twice their HHI. I don’t think that is overspending in this area.


Given they have little savings at that income it’s very high.
Anonymous
Post 04/11/2023 13:24     Subject: Re:200k - mortgage or market
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:First of all, ignore the poster that said to put it in 529s. You already have 100k in each and need to think about your retirement first.

You left out some key details, such as how much you have remaining on your mortgage and the interest rate. If the 200k would pay off the mortgage or get you much closer to it such that it could be paid off in a few years, I would strongly consider sending it to the mortgage. If, however, the 200k would leave you with several hundred thousand left to pay off, especially if the interest rate was low, I would not send the money to the mortgage. Paying down a mortgage creates some liquidity risk (you still owe the bank the monthly payment every month for X decades) that is not present with paying off the mortgage in one fell swoop.


OP here. I included those items - it's 850k remaining balance, at 4.5%, with 28 years remaining. So putting 200k into it would knock it down almost by a quarter and lower our monthly payment by 1k and save us roughly 400k in interest over the life of the loan.


How is it going to knock 1000 off the payment? Are you planning to recast? Recasting will lower the monthly payment but not shorten the loan term.

If you recast, that helps with liquidity, in which case I think at 4.5%, sending it toward the mortgage is reasonable. A 4.5% AFTER TAX return in the max is not guaranteed and I think that is a lot of mortgage balance in your mid-40s.


Did everyone account for benefits of writing off interest on the mortgage/tax minimization effect of having the mortgage? It seems that stock market return would be better than prepaying the mortgage, as keeping mortgage allows for these write offs


The past few years we had no benefits from tax breaks between the low interest and principal amount. Now that it’s paid off we can comfortably save more and spend a bit more.
Anonymous
Post 04/11/2023 13:21     Subject: Re:200k - mortgage or market
Anonymous wrote:
Anonymous wrote:Is it all or nothing? All in market, or all in mortgage?


OP here. That would seem to have the most impact, but I'm coming here for advice on it.


Do you mean psychologically? Because numbers are numbers no matter how you spread them.
Anonymous
Post 04/11/2023 13:19     Subject: 200k - mortgage or market
Anonymous wrote:
Anonymous wrote:How is 100k per child for a child under 10 not enough? It will continue to grow! I’d bet they are way ahead of most families.


They need 350k for each child to attend private. For the 9 year old they only have 9 years to go, compound interest will only get them
1/2 to 2/3 of the way there


700k for 2 kids? Well that would be a colossal waste of money and bad financial planning
Anonymous
Post 04/11/2023 09:06     Subject: 200k - mortgage or market
Anonymous wrote:
Anonymous wrote:How is 100k per child for a child under 10 not enough? It will continue to grow! I’d bet they are way ahead of most families.


They need 350k for each child to attend private. For the 9 year old they only have 9 years to go, compound interest will only get them
1/2 to 2/3 of the way there


I think 200 K for two children’s college education while they are still under 10 is really good. 350 is certainly a noble goal but I think it’s rare that people can save that much. I think you’re forgetting this is not a dual high earning household, one is a fed. I think the fact they’ve been able to save 200 K for college and have another 200 K to play with is great given that.
Anonymous
Post 04/10/2023 18:05     Subject: 200k - mortgage or market
Anonymous wrote:How is 100k per child for a child under 10 not enough? It will continue to grow! I’d bet they are way ahead of most families.


They need 350k for each child to attend private. For the 9 year old they only have 9 years to go, compound interest will only get them
1/2 to 2/3 of the way there
Anonymous
Post 04/10/2023 17:31     Subject: Re:200k - mortgage or market
Surprised, but don’t disagree, that people seem more inclined to pay down the mortgage than dump it into stocks. Things have changed from a couple years ago!
Anonymous
Post 04/10/2023 15:28     Subject: 200k - mortgage or market
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:If you want to stay in your house at retirement and you cannot afford to pay the current mortgage amount once you retire, it seems like recasting the 200 is a good idea to lower the payment right? I’m not sure why people aren’t seeing it that way. Welcome someone clarifying.


I guess if they can’t afford bit could afford the new payment that would make sense, but it won’t shorten the loan period. They’d probably be better off putting it towards principal and being done with the loan sooner.



They could always recast and continue paying extra each month.


I am the recast poster. In their situation I would not do a lump sum. They don't have enough college or regular savings as they over spent on their house.


Their mortgage is roughly twice their HHI. I don’t think that is overspending in this area.
Anonymous
Post 04/10/2023 14:58     Subject: 200k - mortgage or market
I would put at least $20K in ibonds this month @6.89% its a better return than the mortgage, safe, and state tax free.
Anonymous
Post 04/10/2023 14:44     Subject: Re:200k - mortgage or market
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:First of all, ignore the poster that said to put it in 529s. You already have 100k in each and need to think about your retirement first.

You left out some key details, such as how much you have remaining on your mortgage and the interest rate. If the 200k would pay off the mortgage or get you much closer to it such that it could be paid off in a few years, I would strongly consider sending it to the mortgage. If, however, the 200k would leave you with several hundred thousand left to pay off, especially if the interest rate was low, I would not send the money to the mortgage. Paying down a mortgage creates some liquidity risk (you still owe the bank the monthly payment every month for X decades) that is not present with paying off the mortgage in one fell swoop.


OP here. I included those items - it's 850k remaining balance, at 4.5%, with 28 years remaining. So putting 200k into it would knock it down almost by a quarter and lower our monthly payment by 1k and save us roughly 400k in interest over the life of the loan.


How is it going to knock 1000 off the payment? Are you planning to recast? Recasting will lower the monthly payment but not shorten the loan term.

If you recast, that helps with liquidity, in which case I think at 4.5%, sending it toward the mortgage is reasonable. A 4.5% AFTER TAX return in the max is not guaranteed and I think that is a lot of mortgage balance in your mid-40s.


Did everyone account for benefits of writing off interest on the mortgage/tax minimization effect of having the mortgage? It seems that stock market return would be better than prepaying the mortgage, as keeping mortgage allows for these write offs
Anonymous
Post 04/10/2023 14:28     Subject: 200k - mortgage or market
How is 100k per child for a child under 10 not enough? It will continue to grow! I’d bet they are way ahead of most families.
Anonymous
Post 04/10/2023 14:13     Subject: 200k - mortgage or market
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:If you want to stay in your house at retirement and you cannot afford to pay the current mortgage amount once you retire, it seems like recasting the 200 is a good idea to lower the payment right? I’m not sure why people aren’t seeing it that way. Welcome someone clarifying.


I guess if they can’t afford bit could afford the new payment that would make sense, but it won’t shorten the loan period. They’d probably be better off putting it towards principal and being done with the loan sooner.



They could always recast and continue paying extra each month.


I am the recast poster. In their situation I would not do a lump sum. They don't have enough college or regular savings as they over spent on their house.
Anonymous
Post 04/10/2023 14:13     Subject: 200k - mortgage or market
Anonymous wrote:
Anonymous wrote:College and regular savings


How much into each? Why not the mortgage?


We just paid off our mortgage, however we didn't overspend on a house like you did and were at the end of it. You cannot afford to pay down your mortgage as you don't have a lot of savings or college fund. I'd do $50K for each child and save the rest.
Anonymous
Post 04/10/2023 14:11     Subject: 200k - mortgage or market
Anonymous wrote:
Anonymous wrote:If you want to stay in your house at retirement and you cannot afford to pay the current mortgage amount once you retire, it seems like recasting the 200 is a good idea to lower the payment right? I’m not sure why people aren’t seeing it that way. Welcome someone clarifying.


I guess if they can’t afford bit could afford the new payment that would make sense, but it won’t shorten the loan period. They’d probably be better off putting it towards principal and being done with the loan sooner.



They could always recast and continue paying extra each month.