The paying off your mortgage early vs. investing that money debate has been done to death. Everyone has heard the higher return on investment from the market generally outperforms a standard loan interest of around 3% argument. On the other side, everyone can sympathise with the idea of being completely debt free and having your own home. No mortgage sounds like the best thing since sliced almonds. (that’s the expression right?)
Like a lot of other posts and the general theme of this blog, I can only tell you my own personal experience and what my path is.
I set a goal to have my house paid off by the time our son, Mini Donut, is 16 AND have enough stashed away for a retirement by 45.
I always try to be balanced when I do anything and to not over do something to become one-sided.
Our current savings rate into retirement accounts is ~10% with plans to increase it to 15%+ by the end of the year. We currently have our mortgage being overpaid by $110 a month. Each year when merit increases come out I will bump my 401k contributions by 2%+. Depending on how much is left over we will then increase mortgage overpayment. Since it is always important to have a plan, any bonus or extra income will go to maxing out our Roths. We are combating life style inflation by having a plan and being determined.
After Mini Donut moves out of daycare and into kindergarten we plan to have a much bigger surplus. (MN has very high daycare costs) After that point the overpayment will be capped at $360. That should easily get us to paying off the house in 15 years (don’t worry I have an active Google Sheet that let’s me recalculate any overpayment scheme I can come up with). So with the overpayments capped we will start ramping up savings at an alarming rate.
What would have taken us 30 years only will take 18. That is a savings of $44,194.28! Money that will then go into retirement and into college savings.
What is even better is knowing because we created this plan we will owe $100k less on that payoff date. *warm fuzzies*
I generally like to have my cake and eat it too. I get the comfort of having a house paid off faster in addition to retiring early.
How about you? What does your path to early retirement look like? If you are a homeowner, do you plan on paying off early?