Personal Finance (Not Investing) • Mortgage Recast/Payoff/Invest

Just be aware that by prepaying that large an amount on your mortgage, you are also going to be eliminating the tax benefit of mortgage interest deduction (since SALT + mortgage interest on the remainder will be less than standard deduction).

Keeping some remainder balance on the mortgage (and recasting for the next 29 years) essentially means you need to earn 6.875% AFTER TAXES just to break even. $105k as a single puts you in the 22% tax bracket, or just to break even you need to find something that would yield 6.875% / (1 - 22%) = 8.8%.

I don't see anyone offering a 9% CD for the next 30 years. Or even for half the length, 15 years. Heck, it gets very close to the expected stock market returns over long term.

Therefore it would be a better financial move to simply pay off the entire mortgage from your Bank + Vanguard brokerage accounts. That combined balance exceeds your mortgage balance by $30k, but presumably you will need to pay capital gains taxes on the Vanguard brokerage balance, and perhaps $30k would cover it.

Thanks. Completely paying off the house is something I have considered as well. I have the cash to do so and the interest/returns will not be wild on the brokerage account, so I don’t expect a crazy amount of capital gains. The 315,000.00 could technically be the basis in my EF/sinking/vacation fund plus the equalization payment. I also do not see making 9% in a CD or in the brokerage account. If I pay off the house, I’d then re-establish devoting as much money to my 403B and building back up my EF/slush funds.

The SALT/tax benefits of the mortgage interest, closing costs, and the house tax—even if I hold off until Dec, might be something to consider.

I really do not want to charge blindly into this huge decision.

Thank you.

Statistics: Posted by Admiral — Sun Jul 21, 2024 11:45 am — Replies 10 — Views 1129