{ "media_type": "text", "post_content": "Have $200k remaining mortgage at 2.99%. Usually pay an additional $500 per month to principal. \n\nBetter to pay this off faster or use that money elsewhere?\n\nI just hate debt lol but understand homes are different.", "post_id": "625ae7c62ee6a80026765b22", "reply_count": 16, "vote_count": 1, "bowl_id": "552d1d24dc1c586b09d2d051", "bowl_name": "Consulting", "feed_type": "crowd" }
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Have $200k remaining mortgage at 2.99%. Usually pay an additional $500 per month to principal.

Better to pay this off faster or use that money elsewhere?

I just hate debt lol but understand homes are different.

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Use else where. Invest it. Compounding interest - do the math

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Strictly based off numbers - invest it elsewhere.

To limit downside - pay it off.

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I’m the same. I have 3.25 interest. I know the financial thing to do would be to let it ride at that interest rate. But I’ve been paying extra each month for 10 years just to get the freedom of no mortgage.

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Series I bonds from the government. Up to $15k at ~9% with money locked for one year.

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So I did the napkin math since I have a similar situation with my 300k mortgage.

The 10k invested in I bonds at 9.6% yields a real return of 6.26% or $626.59 when you adjust for semi-annual compound, 3 month early pull interest penalty, and taxes (15%).

If you took the 10k off your 200k mortgage you'd save $299 over the year time span.

Meaning it's 327.59 in favor of I bonds. Do the I bonds unless you have another risk free investment that yields > 6.26%.

Simple maths, invest elsewhere...

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Depends on your view of the market. Allocating capital towards paying down that loan saves you 2.99% vs other investments that could return more (eg a historical S&P investment via IRA)

Depends on risk tolerance. Paying it off early is guaranteed 3% return but you could potentially earn better ROI elsewhere. Could also lose money, especially with the recent inflation numbers and volatility.

If you aren’t already maxing various retirement vehicles, then you should do that first (401k, IRAs, HSA, maybe even 529 if you plan on / have kids). If you are already making significant savings in those areas, I think it’s ok to push to pay off your mortgage rather than additional brokerage. Mathematically, you are better off investing it elsewhere and leveraging your mortgage (especially at your interest rate). However, if you already save $50k per year toward retirement, than hedging a little to pay off your house is smart.

I pay an extra 500 a month on my mortgage as well. Mainly so that I can be mortgage free at around age 55 or 60 when I want to retire. I still have around 590k left to pay on the mortgage.

I put 12% of my TC in 401k and backdoor roth and I invest decent amounts of money in other non tax advantaged vehicles as well.

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