M and I have owned our home for 3 years this month. We started out in December 2011 with a 30 year, 4.25% fixed rate mortgage. At the time we were absolutely delighted with our rate and our monthly payment. But as we continued into 2012 and rates continued to drop and our home’s value began to slowly rise, we decided to try to refinance into a 15 year loan if we could get a better rate with an affordable payment. After some research, multiple conversations with various mortgage brokers, and finally going committing to the application process, we were approved for a 15 year loan at a 2.75% rate. Our mortgage guy was not local and had some reservations about the appraisal, but we were confident it would come back at higher than our purchase price and LTV rate would be at least 75% (it ended up being closer to 70%). After rolling closing costs into the loan we began anew with a $223,000 mortgage.

Fast forward to now, 24 regular payments with extra principal payments thrown into the mix. Our outstanding mortgage is now $191,500. I’m toying with goals for 2015 and making extra principal payments is on my list of possibilities. But with a 15 year mortgage, a very attractive interest rate, and no other debt, it seems almost ridiculous to pursue paying off the mortgage. While it makes less sense financially, emotionally we want it gone sooner than 2027, when I will be 66 and M will be 70.

On the other hand, maybe we will not stay in this house, in this ridiculous state, into our twilight years. While we love our home, its location, and the many attractive features around us, we wonder if a 2000 sf house and an in-ground pool is absolutely necessary when we’re doddering senior citizens. Which is another reason not to be in a hair-on-fire hurry to pay off our mortgage.

We are not especially frugal people and the term “minimalist” in M’s mind seems to apply to a specific type of running shoes. But with the deaths of our last parental units, especially my mother in 2012, we are very cognizant of the amount of CRAP we own that the kids will have to cope with when we leave this life … hopefully after a very long and active many years from now. That said, we do save a larger than average percentage of our income. Having no debt other than the mortgage, we max out the retirement vehicles available to us each year as well as contribute to taxable investment accounts. It feels as if we got a late start, but our life and leisure pursuits are relatively simple and modest. My biggest financial worry in retirement is healthcare expenses.

I go back and forth on the mortgage payment. I look forward to the freedom of that monthly obligation, but at the same time the accountant in me finds it kind of silly to pay off a relatively inexpensive loan when there are other areas where we would like to invest our money. Like a new kitchen, major concrete and front landscape remodel. We are unlikely to refinance again and have promised ourselves that an HELOC is not ever in our future, and thus far we have been very good about saving cash for our big-ticket projects. Still, the kitchen remodel is going to turn into a bathroom makeover and ripping out and replacing tile throughout the house, which is not going to be cheap. We are saving for it and any extra money I would toss at the mortgage should be going to that instead. But there is something about that instant gratification of seeing the mortgage balance drop when the kitchen or front landscape remodel are 3 to 5 years into the future.

I go back and forth, then forth and back about this. M is very “whatever you want, honey” on the subject as long as it means not acquiring new debt or increasing our mortgage somehow. With my recent gift buying spending spree I think I am feeling the spend-spend-spend! hangover and want to keep my buzz going in some productive manner. This is always the issue I come back to, and as usual I come away no closer to clear answers. We do have a good solid roof over our heads, emergency funds available, and savings for our older and grayer days ahead. For right now, it’s a good place to be, with lots of future possibilities to ponder at my leisure.

The most constructive way to figure out our priorities would be start the estimates on just how much that kitchen and front landscape remodel are really going to cost. It may well be a lot farther into the future than I realize.

2 thoughts on “Finance Ponderings – Paying off the mortgage

  1. The way I figure it if wherever you have parked the $ that could pay off the mortgage is making more than the interest you are paying on the loan, leave it alone.
    If the savings interest rate is less than what the loan is costing you to carry, pay it off.

    People always use the argument that if you pay off a mortgage you lose that tax deduction on your income taxes.
    The way I see it is I’d rather lose a bit of tax deduction to Uncle Sam than pay out MORE each year in interest on that mortgage to a banker. 😎

    1. Totally agree, which is why I have money in our investment account rather than a completely paid off home. Still, the yearning for that paid-off home is pretty fierce. One way or another we will be living in a home, somewhere, rent and mortgage free by the time I stop my paid working hours.

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