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Re: Prepaying mortgage for cash component?
Posted: Sat Mar 12, 2011 1:28 pm
by 6 Iron
Just reread this thread, as I was wondering about a different take than the OP. Rather than considering your mortgage prepayment as a cash contribution in the permanent portfolio, or running a 33/33/33, what about prepaying down to the lower rebalancing band of the cash component and rebuilding from there with new contributions, interest and dividends?
I also hate debt with a white hot passion, and I am getting within spitting distance of owning my home outright, about 4 years to go assuming no additional prepayments, although would like to get it done in 2.
One downside I see to this is at present, I am buying the lagging asset, on sale, and I would for a while make that cash.
What say you?
Re: Prepaying mortgage for cash component?
Posted: Sun Mar 13, 2011 11:24 am
by MediumTex
6 Iron wrote:
I also hate debt with a white hot passion, and I am getting within spitting distance of owning my home outright, about 4 years to go assuming no additional prepayments, although would like to get it done in 2.
One downside I see to this is at present, I am buying the lagging asset, on sale, and I would for a while make that cash.
What say you?
Pay it off.
It will free up a nice chunk of cash every month and I am certain it will increase your peace of mind.
Paying off your home is, IMHO, a true milestone and cause for celebration.
Re: Prepaying mortgage for cash component?
Posted: Mon Mar 14, 2011 10:33 am
by fnord123
6 Iron wrote:Just reread this thread, as I was wondering about a different take than the OP. Rather than considering your mortgage prepayment as a cash contribution in the permanent portfolio, or running a 33/33/33, what about prepaying down to the lower rebalancing band of the cash component and rebuilding from there with new contributions, interest and dividends?
I also hate debt with a white hot passion, and I am getting within spitting distance of owning my home outright, about 4 years to go assuming no additional prepayments, although would like to get it done in 2.
What is the interest rate on the loan? If it is near or below 30 year treasury yields, then I would argue paying off the loan doesn't make economic sense. If it is significantly higher than that, then paying it off can be a moneymaker.
The emotional aspects of course are entirely personal - you have to weigh if the happiness from getting rid of the loan would outweigh the financial cost to paying it off early (assuming it does have a good interest rate).