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Have my closing interview with Accenture next week. So far the Director and MD I have met with have both liked me and the recruiter has said that they have both given me a thumbs up and that the upcoming closing interview with the MD is just a conversation. From my research I’ve also read that it’s just a sanity check to make sure I’m not a nutcase. Of course anything can happen, but I’m expecting an offer. (Cont)
Advice on taking and passing the SPHR exam?
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Mentor
No. You will pull that money out of the market where it’s likely to earn more than 6.35%. Additionally if you leave your job you will have to pay that loan back immediately.
You are going to take out a loan at, say 9% interest, from your 401 (k) to pay off a loan costing 6.35%… that makes zero sense
Well, you are paying back the interest to your 401K account. But yes, interest payment back to your 401K is not tax deductible.
Are you nuts? No, not a good move. Sit down with your financial planner and understand the numbers. I’m truly glad you posted and asked the question - sometimes we can be a little rough, but everyone means well
If you plan on being a corporate slave rest of your career then don’t touch your 401k. If you have plans to become financially independent then yes pull out the 401k it’s just holding you back. Money you can’t touch and by the time you can they just tax you anyway. Far better investment vehicles out there that’ll keep your money more liquid and set you up for ‘retirement’
Same to you
What is the reason that paying off your mortgage is your goal?
How does this goal rank with other financial goals you have?
Mentor
Your interests and the banks don’t have to be at odds.
If your monthly payment is manageable for you and your family, you could put the money you have left over into other investments. For example, the stock markets in so low cost index funds. Historically you’re looking at 7-10% a year so that money would be beating your mortgage interest rate. So yes, over the 30 years of your mortgage you would be paying a lot of interest to your bank, but that extra money invested would also make you a ton of money.
Additionally, 401k loan rates, I check last week, were around 9%. So you’re borrowing money from yourself at a higher interest rate than you are paying the bank, so basically losing even more money in opportunity cost.
Just a note - I would use the after tax interest rate (estimate of it) for your mortgage. Get the 6.35% out of your head as you should be comparing it post tax deduction to other loan rates / after tax returns on investments. Obv requires some estimation on tax benefit. I am generally not a fan of targeting quick mortgage paydowns (recognize no one asked for that opinion), and if you do, I'd try to open a HELOC so you have access to the capital in your home if / when you need it.
Save as much as you can. Try chipping away from your regular paycheck $1500-2000 each month and lump sum payments that you can afford. You should be able to pay off in less than 5 years if your mortgage is around 400k. Don't touch your 401k
If you can afford the payments then it doesn’t make sense
How much principal do you have in the mortgage. With that rate I’m sure you have a lot more to go even if you pay 50k on it. If not don’t pay it
Not sure what was your original principal amount was. If only $40K are left, you already paid majority of interest. Now you are paying down principal. If you leave your 50 K in 401(k) you get 10% return, you are way ahead of the game. Instead, if you can, just pay extra towards your principal with disposable income.