[USER]

At what point should we be putting more money down on our mortgage? Now or continue investing vs working to pay off mortgage sooner?

36 years old
Retirement accounts: $1,225,000
HSA: $35k

Brokerage: $320k
Cash: $70k
Rate: 4.875%

Amount left: $480k
Time left: 27 years

[Bunny]

We are similarly situated. We pay extra principle to make our 30 year mortgage a 15 year, so it is paid off in retirement.

[Norma]

As an amateur I wonder the same. I stopped extra payments, opened a brokerage account and put extra money there.

Now need to decide if I really want to pull out from double digit earnings to pay 3.7% mortgage with only 8 yrs to go?

[Amy]

I would suggest not paying any extra until you have enough to completely pay off the mortgage. Paying a mortgage down without completely paying it off doesn’t reduce your risk of foreclosure and it locks up your capital in an illiquid asset.

If something catastrophic happens, having the liquid capital will be more useful than having a house that you owe less on.

Once you get enough liquid capital to actually pay off the house, you can make the decision on whether or not to do so.

With a 4.875% mortgage, you can earn more on your capital than by locking it up in your house.

I’m retired and still have a mortgage. It fits in my budget and I have more in liquid accounts than I would if I had paid the mortgage off.

[Rick]

Three things to consider
Mortgage “return” from paying it down is non compounding. So, a 4.875% annual return on an etf will give you more money at the end than paying off the same rate mortgage.

Unleveraged real estate is historically a poor returning asset. Now it can be a nice to have expense reduction. But those are very different things.

Liquidity is often king. Or said better by a member here – you cannot grind down your granite countertops to make flour when needed.

Illiquidity of a partially paid off house is really a bad asset.

[Cody]

Objectively: Probably never (based on that interest rate)
Subjectively: Whenever you want to

Personally, I’d focus on building up additional taxable brokerage investments (after maxing out retirement accounts and HSA), invested for tax-efficient long-term growth.

The current 30-year “risk-free” rate of Treasury bonds is close to your interest rate.

Your fixed-rate mortgage payment is also a hedge against inflation.

[Margaret]

I have been paying a little extra each month – maybe a bit over $100 – guess I need to stop that…..

[Jin]

I’m paying enough extra so that it is paid off shortly before we plan to FIRE

[Author]

Posts