Frugal Village Forums banner

1 - 8 of 8 Posts

·
Registered
Joined
·
1,480 Posts
Discussion Starter #1
I have about $100K left on my 15 year mortgage at 5.75%. Monthly payment is $1193 and I have just been paying a round $1200 each month. I have 9 years left on mortgage and was wondering should I pay more a month to shorten the length of mortgage payments, or leave it for tax write offs?

Also, would it be of interest for me to refinance with lower rate, and do they have lower amount of years on this like 10 year? I would LOVE to get this paid off ASAP, and after I pay my 2 credit cards, I can start plugging away at this, or should I just be saving the money and paying regular on my mortgage?

Thanks for any advice.
 

·
Super Moderator
Joined
·
19,540 Posts
Keeping on paying interest so you have a tax write-off makes no financial sense. If you pay a dollar in interest, it's 100% gone. Doesn't matter if the bank gets it or the government, you lose all of it. Paying taxes of 30% on a dollar still leaves you with seventy cents. I'll take 70% over losing 100% any day of the week.

If your payment includes insurance and taxes in the payment you mention, then you will not lose that entire payment when the house is paid off, because those expenses will be ongoing as long as you own the house.
 

·
Registered
Joined
·
1,480 Posts
Discussion Starter #3
I pay taxes and insurance separate. I am not sure where or when I heard that I should keep a mortgage payment for tax time. I work from home so use t/s%. Not sure if that matters at all. Thanks for your input.
 

·
Registered
Joined
·
460 Posts
In order to make good decisions, you need to analyze all of the information. You cannot just make a mortgage decision without considering everything else in your financial budget. Do you have auto loans? If so, what is the interest rate? Do you invest? If so, how much are you earning? Retirement? Do you have an emergency fund? It makes no sense to pay more on your mortgage if a small emergency will wipe you out. Once you pay extra on your mortgage, you cannot access that money. Mortgage interest is deductible so it does lessen the overall expense of that borrowing compared to other debt.

If you want to lay out your finances, lots of smart people are here and can help you.
 

·
Registered
Joined
·
1,480 Posts
Discussion Starter #5
No auto loans, car is paid off. Retirement I have a Roth IRA set up and have the max going in it a year. That is about $40K. I have an emergency fund of $18K right now ( I put $500 a month in there automatically) , that I do not touch for anything except an emergency ( shopping is not an emergency! ) I do have student loan debt of $23K and just started paying on that last year ( interest for those loans is 3%) . I have two credit cards one is 0% until March of 2015 of $9600. I also have another cc that is $7000 at 25%, but lowering that interest rate today. Those two cards should be paid off within next 6 months.

So mortgage and student loan will be only "debt" after those two cards are paid off. Just not sure what I should tackle first.
 

·
Registered
Joined
·
125 Posts
Depending upon your marginal tax rate, you're only going to get getting tax relief on the interest - a wild guess is you're paying something like $6 - 7k in interest, which might result in about $1750 tax refund. I might be way off, I don't know your income or other deductibles.

Assuming you have excellent credit, you could re-finance. If you borrow $100k iver 9 years and get 3.5% rate (conservative for a 15 year mortgage), your payments would be $1080 a month. If you kept paying at your current rate, you'd be paid off by 2021, or a year earlier. Obviously a year of not paying $14,000 a year is a lot more than the $1500 tax rebate you'd get.

In short, refinancing might save you a lot of money - even with the refinancing costs, you'll more than make it up paying your mortgage a year earlier. Anything additional will be gravy.

**edited this as I did not see you only had 9 years left on your current loan. I previously assumed 15.

One thing you could do is take out a 5 year ARM - borrowing $100k over five years a $2.75% would cost $1700 per year - the majority principle. If you could afford it, you'd pay it off 4 years earlier, saving around $28k in the process. You'd just have to be 100% sure you could pay it back in 5 years, otherwise the rates could shoot up.
 

·
Registered
Joined
·
49 Posts
I would personally get rid of all my other debt - student loans and credit card. Regardless of interest rate, I'd still become 100% debt free other than the mortgage and then I would take all the extra money left over from paying off the debt and put it towards the mortgage. I am a Dave Ramsey follower so I would take the emergency fund and use $16K or $17K of it to pay off the debt and stop investing in retirement until I was debt free. Good luck, it sounds like you are on the right track!
 
1 - 8 of 8 Posts
Top