As of last month, my only remaining debts are for my student loans and my mortgage. I’ve written before about how I’ve decided to put the student loans on the backburner – paying only the minimum payment each month. They’re set to be forgiven through PSLF in approximately 2 more years. That brings us to the mortgage…
Current Mortgage Status
When my husband and I bought our home together in 2020, one of our goals was to have it paid off by the time my husband retires. He’s set to retire in under 9 years. We have a current loan balance in the mid-$200s. Since we bought it, we’ve made a double-payment twice each year and every month we round up our payment, so an extra $105 goes to principal each month (on top of the portion allocated toward principal from the mortgage payment, itself). We locked in an unbelievable interest rate – a fixed 2.625%, and our payment is reasonable for our budget, $1695/month.
At our current rate of payment, we will not have the home paid off by the time my husband retires, but our plan was to ramp up payments as incomes increase (with raises) and debts decrease (paying off my car and when my student loans are forgiven). I know it will take some making up on the back-end, but the goal has remained constant: to have the house paid in full by retirement time.
As an aside just for context – my husband will retire in 9 years from his current position, but he will only be 50 years old at that time. He fully intends to find another job and continue working, but my hope is it could be a more flexible, maybe part-time or a remote position. His income will definitely decrease in retirement, but it won’t be zero. He has a pension and healthy retirement account, plus the plans for continued work on some level.
Mortgage Repayment Options
Recently, a neighbor who works in real estate was chatting with my husband and I about his plans for investing and building long-term income. He mentioned how one of his big financial mistakes with his wife was sinking alllll their money into their first home together. They’d put 35% down to get a low mortgage payment, but then the 2012 recession hit. Although their family was fine, he regretted putting all his money into his home. He wished he’d had liquid assets available to purchase a second property that could be used to generate rental revenue. The best time to buy, of course, is when prices bottom out!
The conversation got me thinking – is it really wise to put allllll this money into our home? What if, instead, we put those extra payments into a savings with the goal to use it to buy a second property at some point that could be used to generate rental income? I think we all feel like the housing market is extra inflated right now. Although I hope the U.S. finances strengthen (I’d never hope for a recession!), another housing market bubble pop feels inevitable at some point.
Return on Investment
Paying off our house early would be great since it would be lovely to have no mortgage payment! But with our super low interest rate, it doesn’t save us as much money as we could potentially stand to earn by putting that same money into another investment vehicle (property or stock market, etc.). All that said, my husband and I are both pretty financially conservative. And the thought of having a paid-off home just feels nice. Having a second property certainly comes with some risk – having two mortgages to cover, requisite repairs to be done, etc. etc. But property also tends to be a great investment. Please chime in if you’re an expert in this area, but I believe that over my lifetime the ROI for property has been higher than what the stock market has produced. At least in my areas.
I’m soliciting advice! What are your thoughts or opinions on paying off one’s home versus putting that money elsewhere? Would you suggest investing in real estate versus investing in the stock market (or something else entirely)? What would you do if you were in my position?
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