Paying off the mortgage.

[Anonymous]

So, the wife and I have been living well within our means.  She has decided to go back to work after staying at home with the baby for the last two years.  We have determined that we will be able to pay off our mortgage in approximately 3 years!  Once we do that, we will be 100% debt free.  It will have been 6 years since we took the 30 year mortgage out. 

This is really exciting.  I am just trying to imagine what we will do with all the extra money we have when we aren't giving any to the bank!

[Anonymous]

I think that's awesome.  As you begin to make these big extra payments, you may want to look carefully at the online interface for your loan (supplied by the bank).  You may find that there's a field called Date Next PayMent Is Due.  If so, watch to see what happens to it.  If you are lucky, it may get pushed out further and further in time, so that as the balance starts going way down, the due date has been pushed out 10 years or more.

If that happens, you should consider working with the bank to cancel your payments once you get the loan down to $200 or so.  Then keep the loan open by making a small payment every three months.  If you do that you can extend the life of the loan, having a a huge open loan for several years more that is almost entirely paid off.  FICO really likes that.

If not, just bear in mind that paying off the loan can cause your score to drop.  We may be able to suggest a way around that, but it's something you should plan for.

PS.  As far as retirement planning, will these extra payments restrict your contributions to your 401k or IRAs?  If so, the accelerated loan payoff may still make sense, but not necessarily, especially if you are losing any matching money offered by employers. 

[NC_Mtg_Loaner]

Congrats! 

I know that's an awesome feeling.... not much better than seeing the majority of your monthly mortgage payment being applied to principle on your loan.

Other than watching your retirement savings and/or stock market portfolio increase by double digits, so please don't neglect that.  While paying off your mortgage early may have saved you the interest you wouldn't pay to the bank, that rate of return may only have been 4%.

The opportunity cost of not investing in other asset classes should have cost you 20% or more in 2017 as most Money Market Mutual Fund classes earned >25% in that calendar year.