Paying off my home early isn't a priority anymore even though it used to be my top financial priority. A lot of experts warn people not to pay down a mortgage before getting their financial ducks in a row. A recent article by MSN Money points out that the math favors being debt-free in retirement while there are some advantages to having a mortgage while still working. In my case, the urgency to pay down my mortgage debt had more to do with low mortgage rates and the fact that we were underwater on our mortgage. Once we refinanced, it no longer made sense to keep killing ourselves to eliminate the sweetest loan we will ever have in our lifetime.
Locking in at a low rate
I wanted to pay down my mortgage as much as I could before refinancing to a lower interest rate. I knew that I would never refinance my home again since I locked in at 2.75 percent. By having a lower mortgage balance, I was able to lower my monthly payment. We went from paying about $1,200 a month to just $900. If I had paid only the minimum owed on my mortgage, I would have had a much higher monthly payment when I refinanced. I also had to get the balance down to avoid paying private mortgage insurance.
Switching to a 15-year loan
Another reason I am not in a hurry to pay down my mortgage debt is that we switched to a 15-year-fixed rate mortgage. We can pay the minimum on our mortgage and still be mortgage free by the time I turn 55. I don't want to have to worry about making a mortgage payment or paying rent in retirement. Since I'm only 40, I am not in as much of a rush to be free of a mortgage.
Staying settled for the long term
If I had plans to move in the future, I might be interested in building up more equity in my home by using it as a forced savings account. However, I don't plan to move. I am turning my current home into my future retirement home by renovating it with the future in mind. After my older son moved out, I didn't think about downsizing to a smaller home. I redecorated his old room for a home office.
Saving for retirement
Instead of applying the extra $300 to $500 a month toward our mortgage as I did in the past, I now put the money into a Roth IRA. I wasn't able to max out my Roth IRA contributions in the past because paying down my mortgage was my No. 1 financial priority. With all the hits my retirement accounts took during the Great Recession and the various "corrections" in the financial markets, I need to play catch-up with my retirement savings.
Although I don't make a habit of making extra payments toward my mortgage anymore, I do occasionally throw extra money at my mortgage. If I find myself making completely frivolous purchases or overspending, I "punish" myself by making a payment to the mortgage company. The truth is I'm not really sure if it's really a punishment or a reward since I'll be free of my mortgage sooner. Whether I pay extra on my mortgage or not, I'm in a no-lose situation.
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