- Payoff size. Although our loan principal is about 45% of our home value, it would still require about 138 times our monthly payment to pay off the mortgage. In other words, we can pay our mortgage for 11.5 years with the money needed to payoff the loan. From a different perspective, the money required was 7.7% of our total savings. Overall, I thought it was less risky to continuing paying the mortgage than to reduce our savings by 7.7%
- Ability to use the deductions. Since our investments and converstions to Roth IRAs will create income, I can still use the mortgage deductions to reduce taxable income. If we didn't expect to have taxable income, the deductions would not be as useful.
- Low interest rate. We currently have a 5-3/8% fixed interest rate. By investing in the stock market, we hope to achieve 8-10% gains with the funds. Hopefully, the next couple years of stock market returns will be better than January, 2008:-)
Originally, we wanted to pay off our mortgage by retirement. Doing so would reduce our monthly expenses by 21%, which made the pay off option attractive. However, after doing the above analysis, we determined it would be advantageous to delay paying off the mortgage for at least a couple years. Keeping the mortgage will help us have more liquid savings, which can be a buffer against stock market fluctuations.
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This is not financial advice. Please consult a professional advisor.
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