Mortgage Quesiton

wbt5845

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12:25p, 9/13/22

AG

I am 60 and want to pay off my mortgage quicker. I refinanced into a 15 year a few years back at 2.25%.

I have been making two payment a month - one on mortgage and one against the principal. Would I be better served doing something else with that money? Not sure what it would be, but I'm questioning the usefulness of paying down a 2.25% loan.

Farmer @ Johnsongrass, TX

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In reply to wbt5845 • 12:40p, 9/13/22

wbt5845 said:
I am 60 and want to pay off my mortgage quicker. I refinanced into a 15 year a few years back at 2.25%.

I have been making two payment a month - one on mortgage and one against the principal. Would I be better served doing something else with that money? Not sure what it would be, but I'm questioning the usefulness of paying down a 2.25% loan.

If you are unable to earn more than 2.25% on your money, pay off the mortgage.

If you can earn more than 2.25% on your money, you do not pay off the mortgage.

In your case, paying off your mortgage is equivalent to earning 2.25% return on your money.

gig em 02

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In reply to wbt5845 • 1:11p, 9/13/22

wbt5845 said:
I am 60 and want to pay off my mortgage quicker. I refinanced into a 15 year a few years back at 2.25%.

I have been making two payment a month - one on mortgage and one against the principal. Would I be better served doing something else with that money? Not sure what it would be, but I'm questioning the usefulness of paying down a 2.25% loan.

Why do you want to pay it down earlier?

I'll give you 2.5%

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Troglodyte

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In reply to Farmer @ Johnsongrass, TX • 2:52p, 9/13/22

AG

Farmer @ Johnsongrass, TX said:
wbt5845 said:
I am 60 and want to pay off my mortgage quicker. I refinanced into a 15 year a few years back at 2.25%.

I have been making two payment a month - one on mortgage and one against the principal. Would I be better served doing something else with that money? Not sure what it would be, but I'm questioning the usefulness of paying down a 2.25% loan.
If you are unable to earn more than 2.25% on your money, pay off the mortgage.

If you can earn more than 2.25% on your money, you do not pay off the mortgage.

In your case, paying off your mortgage is equivalent to earning 2.25% return on your money.

There are tax consequences here too. You are taxed on your interest earned, but you may not be able to deduct your interest paid if you are taking the standard deduction.

It's hard to payoff 2.25% debt though. I would probably save the money see what happens in this crazy world.

ChoppinDs40

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7:13a, 9/16/22

AG

Pay the minimum on that 15 year loan.

You're likely only paying <2% after the tax deduction.

If you're 60, I assume you're somewhat close to retirement.

Invest the different in a cash flowing asset or max any other tax deferred accounts you have while you still can.

billikenag

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8:19a, 9/16/22

Outside of personal scenarios that you haven't disclosed, there is no reason that you should be paying any more than the minimum monthly payment on your mortgage when you mortgage interest rate is 2.25%, the current inflation rate is ~8%, and the 12 month treasury note yields 4.00%.

At the very least, I'd be buying 12 month treasury notes every month with that extra payment against the principal and creating a nice little bond ladder. Other options would be predicated on personal circumstances, cash flow needs, and ability to withstand volatility.

A noble spirit embiggens the smallest man.

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