I realize I’m beating a dead horse talking about paying off a mortgage early vs investing, but I’ve been paralyzed by my indecision and need fellow forum readers help! On my personal investor statement I have a goal of paying off my mortgage in 10 years. This will get me FIREd up! One way or another, I must do this. It is important to me. I’m just not sure what the best way to do it is, and hence I need YOUR help.
I am 20 months into a 15 year mortgage fixed at 3%. I owe 408K (at least So Cal has great beaches and year round sunshine). I need to shave off 40 months to meet my goal. In Feb 2028 I will have 117K left on the mortagage if I continue paying the $3100 I am currently paying. By then I would hope I could lump sum pay it. Yet here are the 2 options I’m considering:
#1. Increase my monthly payment by $850 and mortagage will be gone in 10 years. I will save ~20K in interest. I realize this is probably not the wisest financial move, BUT...it is a guarantee that my mortagage will be gone.
#2. Open a new Vanguard taxable account dedicated ONLY to my mortgage and put $850/ month into this account. No other contributions here, only the $850 (I will continue my other taxable acct investments per my investor statement...this would be extra). Allow it to compound and in 10 years take it out of the account and pay off the mortgage in a lump sum. Assuming I can make a mere 3% I’d have the 117K. If I could make 6-7% I’d have >130K.
-Questions on option #2:
a. How should I invest the $850/month? All stock? 80/20? Something safer? I’d come out ahead so long as I could get over 3% interest rate so I don’t need it to be terribly risky. I’d like for it to make at least 3% and would be sad if it were worth less than that in 10 years. So how aggressive does it need to be?
b. Would I incur a tax hit to take a lump sum of 117K out of the account to pay off my mortgage or are there other hidden fees I’m not thinking of if I were to go with option #2?
I’m thinking option #2 could be a fun 10 year experiment, And if the money grew more than I anticipated I could pay off my mortgage even sooner!!
So, please vote on option #1 or #2 OR pick your own option #3! (FYI I already max all retirement vehicles, HSA, back door Roth, and I have a taxable I put into every month).
Thanks for reading this far if you made it to the end! Excited to get your votes so I can finally take action! I’m so tired of being indecisive.
I am 20 months into a 15 year mortgage fixed at 3%. I owe 408K (at least So Cal has great beaches and year round sunshine). I need to shave off 40 months to meet my goal. In Feb 2028 I will have 117K left on the mortagage if I continue paying the $3100 I am currently paying. By then I would hope I could lump sum pay it. Yet here are the 2 options I’m considering:
#1. Increase my monthly payment by $850 and mortagage will be gone in 10 years. I will save ~20K in interest. I realize this is probably not the wisest financial move, BUT...it is a guarantee that my mortagage will be gone.
#2. Open a new Vanguard taxable account dedicated ONLY to my mortgage and put $850/ month into this account. No other contributions here, only the $850 (I will continue my other taxable acct investments per my investor statement...this would be extra). Allow it to compound and in 10 years take it out of the account and pay off the mortgage in a lump sum. Assuming I can make a mere 3% I’d have the 117K. If I could make 6-7% I’d have >130K.
-Questions on option #2:
a. How should I invest the $850/month? All stock? 80/20? Something safer? I’d come out ahead so long as I could get over 3% interest rate so I don’t need it to be terribly risky. I’d like for it to make at least 3% and would be sad if it were worth less than that in 10 years. So how aggressive does it need to be?
b. Would I incur a tax hit to take a lump sum of 117K out of the account to pay off my mortgage or are there other hidden fees I’m not thinking of if I were to go with option #2?
I’m thinking option #2 could be a fun 10 year experiment, And if the money grew more than I anticipated I could pay off my mortgage even sooner!!
So, please vote on option #1 or #2 OR pick your own option #3! (FYI I already max all retirement vehicles, HSA, back door Roth, and I have a taxable I put into every month).
Thanks for reading this far if you made it to the end! Excited to get your votes so I can finally take action! I’m so tired of being indecisive.
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