Should i pay off my mortgage with lump sum payments?

[Blunderbuss]

So as you all are aware, interest rates are fucked right now. They may start to lower a bit in the near future, but who knows by what amount or when.

So my mortgage right now is down to only $122k. Not too bad, payments are only $254 a week including the property tax. We've managed to set aside about $135k in disposable savings. We just had a baby girl and really wanted to make sure we would be set. So now baby is 2 months old, things are going great and we are still accumulating wealth, so my question is: do I start just paying down my mortgage? I can pay up to $28k a year in lump sums, so with my regular payments, I could have it paid off in 4 years. Of course disaster could strike at any time, I could lose my job, car could break, house could flood (it flooded a couple years ago after all). I've been grappling with this for a few months, and my wife keeps asking me what I'm thinking about it. Should I just stay the course for the remaining 13 years of my mortgage? Make smaller lump sums but keep enough just in case? Burn the house down and start a new life?

 

[Blunderbuss]

I meant to clarify that my mortgage interest rate is only 1.7% until April 2026, so my payments will go up significantly from there

 

[HeffDoesWant]

In Australia most mortgages have an offset account so you can put extra in and thereby reduce the amount you pay interest on. But you can take it out whenever, no asking for a redraw or anything. See if you can get something like that.

That said, till August 2026 ypu can probably get a savings account which pays more than 1.7%. You'd have to consider tax implications (interest earned being taxable most likely). In Australia you can 4 or 5%. In short earn 4% while paying 1.7%.

You possibly can't get an offset while your interest is fixed. But after the fixed term expires it could be possible.


That said I don't know your situation so maybe this would work for you, maybe not.

 

[subtlySteve]

I would consult with a financial advisor instead of taking advice from a bunch of knuckleheads on an MMA forum.

 

[Blunderbuss]

I would consult with a financial advisor instead of taking advice from a bunch of knuckleheads on an MMA forum.

Hahaha, ah I was bored at work and thinking about it so i figured why not see what people thought. I keep our financial situation pretty close to the vest so I couldn't really get advice from any friends of mine. I just find sitting down with a financial advisor so incredibly uncomfortable. But you're right though

 

[BreatheSherBro]

I hate having debt, so I will pay my mortage off very early if possible. My goal is to be debt free again in two years. When I recently bought my house, I put 80 percent down (I live in a relatively affordable, very rural area.)

My previous house was paid off, but I moved to a new more exspensive area when I took a better paying job.

I know there are a lot of people that recommend not paying off your mortage early so that you will have money to invest. I just personally hate debt and interest rates on mortages are high still. There is a peace of mind that comes with being debt free. I still intend to invest in the realtively near future.

 

[Goon Dog]

That's such a low rate, you may be better off taking the money you plan to pay extra and invest it. When the balloon comes due you'll have a bit more to pay it down with.

 

[kimocomplex]

I would say yes, make those lump payments, but not at the expense that you are vulnerable if anything happens

 

[PG29 red0 Jr]

I hate having debt, so I will pay my mortage off very early if possible. My goal is to be debt free again in two years. When I recently bought my house, I put 80 percent down (I live in a relatively affordable, very rural area.)

My previous house was paid off, but I moved to a new more exspensive area when I took a better paying job.

I know there are a lot of people that recommend not paying off your mortage early so that you will have money to invest. I just personally hate debt and interest rates on mortages are high still. There is a peace of mind that comes with being debt free. I still intend to invest in the realtively near future.

Nothing wrong with debt.

I refinanced a couple years ago and my interest rate is around 3% iirc. That is less than the rate of inflation.

 

[DC23]

Jesus wept, starts off by moaning about interest rates and then goes on to say he’s got 120k saved with a 1.7 interest rate until 2026.

Cry me a fucking river.

 

[chardog]

because you have a balloon loan, it sounds like junk, and you're not refinancing anytime soon. Go to the bank, get the payoff amount, get a money order and pay off the mortgage.

my only hesitation would be if you need to run a lot of capital through business ventures, because...... that's what it takes to save that much?

my guess is that you can make that amount again.

pay it off, enjoy the stress free lifestyle. After you pay the house, you can adjust your insurance, you do not need to insure as much, you can do some additional penny pinching here rather than give the money to vampires.

 

[Oblivian]

What is your rate?

 

[aerius]

I meant to clarify that my mortgage interest rate is only 1.7% until April 2026, so my payments will go up significantly from there

Pay it down as much as you can while you have nice low interest rates, otherwise your monthly payment will go up several times once the mortgage resets to a higher rate. When we look at overall economic trends such as total loans outstanding along with the start of real estate troubles in the commercial sector, mortgages & other loans are going to become significantly more expensive and harder to get in the foreseeable future. We're on the way back to historic average interest rates which are in the 7-8% range, and if geopolitical events heat up and go the wrong way you could easily be looking at double digit rates.

 

[Quadtavius Tuck]

Debt is a good think and only chumps pay it off willingly, leaving tons of investment gains on the table

Put it into crypto instead

 

[RoastBeast]

You can get a 1 year basic CD at 5% right now. Why would you skip 5% so you can pay off 1.7%?

 

[Rozko]

You can get a 1 year basic CD at 5% right now. Why would you skip 5% so you can pay off 1.7%?

Invest it, and pay it off before the bump in interest rate. You will make way more money in the long run that way.

 

[Your Account]

Given your current situation, it's understandable to consider paying down your mortgage faster, especially with the uncertainty surrounding interest rates. However, it's also crucial to maintain a healthy emergency fund for unexpected expenses or financial setbacks.

One approach could be to strike a balance between paying down your mortgage and maintaining your emergency savings. You could allocate a portion of your disposable savings towards making lump sum payments on your mortgage while keeping a comfortable buffer for emergencies.

Consider evaluating your risk tolerance, current financial goals, and any other financial obligations or priorities you may have before making a decision. Additionally, consulting with a financial advisor could provide valuable insight tailored to your specific circumstances and goals.

 

[Hellowhosthat]

If you can get a better investment rate than the interest rate you're paying you're better off doing that then paying the sum when it goes up or remortgage at that point.

 

[Oblivian]

There is no way in hell I'd be paying extra at 1.7% lol

 

[plataoplombo]

Maybe pay half and invest the other half. Basically have your payments low enough that you don't feel them anymore while trying to have the rest working for you.