Our
original plan was to pay off our mortgage when we retired in order to have
zero debt. However, shortly after taking early retirement, I convinced my spouse to
keep our 5.375% 30 year fixed mortgage, instead of paying it off. I thought that having the funds invested in the stock market was a better option than paying off the house. As it turns out, choosing to keep the mortgage was
a poor investment decision, given the decline of the stock market.
In the last couple weeks, we've reconsidered the decision to keep the mortgage. Now, we're going to follow the original plan and
pay off the mortgage. Here are our main reasons for doing so:
Currently, we are targeting to pay off the mortgage by the end of May, 2009. If all goes as expected, we will have
paid off a 30 year mortgage in 6 years.
Update: We
paid off our mortgage on May 20, 2009.
For more on
Strategies and Plans, check back every Monday for a new segment.
This is not financial advice. Please consult a professional advisor.Copyright © 2009 Achievement Catalyst, LLC
Subscribe to My Wealth Builder
3 comments:
Good choice, if you plan to stay in the house forver, get rid of the mortage debt- consider you have all other factors in place
I don't disagree that paying off your mortgage is a good thing, it is. However, I would say that right now is the worst time to make such a choice. The stock market has most likely already taken most of the plunge. I am assuming that like most people, most of your investments have been hit hard by the downturn. If this is the case, you would be selling at lows, and really at this point, the stock market should see some gains over the next few years. Also, mortgage rates are at their lowest, so there is no real incentive to pay them off right now, when higher gains should be attainable in the stock market. In your case, your mortgage rate is fairly high at 5.375%, so I would be looking at ways out of that mortgage, and in to something cheaper with todays great rates you should be well below 4%. I think a long term mortgage like you have is the worst thing anyone can do, as you always pay a hefty premium for that safety. Over the last 10 years if you had gone shorter term, or even variable you would never have come close to 5.375% on average.
When you are investing your own money in the stock market then the risk to reward ratio makes sense. If you still have your mortgage then you have more risk and less reward all of a sudden it doesn't seem to make sense.
Glad you are back on track.
Post a Comment