• 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5

Another Do I pay off my [low interest] mortgage question

I am approaching retirement somewhere in my late 50s (anywhere from 6 months to 4 years from now for me, 2 to 6 years for my wife) and would like to not worry about  generating income to cover a mortgage once I'm there.  I'd be fine having an account sitting there generating guaranteed income to pay for the mortgage if I continued to profit from it.
My mortgage stats:
Owe:                  $157,000
Final payment:  10/2027
Interest rate:     2.75%
Monthly P&I:      $1662
2018 tax brackets:
Federal:        32%
State:            6.37%
Combined:    38.37%
Future bracket after retirement would be pure speculation.  I may be in another state by then.  I'll probably be delaying social security and living off taxable investments for a while after my wife retires, but not sure how much will be taxable.  I'll also have a modest corporate pension of $1800-$3000/month (depends on how long I delay it and if I take a lump sum payment for a portion of it)
I am currently sitting on $160,000 cash (earning 1.45%, temporarily in a savings account) that I can use to pay off the mortgage.  The money was previously in bond funds which I don't want to hold in a rising interest environment, so this was part of my [relatively] "safe" money.
So here's my question:  Should I pay off the mortgage or not?  Given current CD rates, I can put the cash away in a CD ladder and anything over 3 years from now will be paying more than the cost of the mortgage.  I expect that under the new tax laws however, I will be taking a standard deduction, so  the 10 year 3.45% taxable CD will only yield (after 38% tax) about 2.14% income given my 2018 tax bracket.  I am guessing I will be taking the standard deduction with the new tax structure and if I do, there would be no tax benefit to the mortgage interest.
Since I don't want to think about how to cover the mortgage payments, if I don't pay off immediately, I would like keep the money in something guaranteed.  Fidelity's CD rates are listed below.

The bottom line is that this is a really good problem to have - should I use cash to pay off my mortgage since I plan to retire before 60....I'm just not sure how the math would work out best for me.

Thanks in advance for any thoughts / advice!
Nine years left. The majority of the payment is principal. I would invest the cash. If you choose to use the return to help fund the payment fine but you could reinvest those dollars so that after the nine years the investment continues to provide return. I am set for payoff 1.2028 with 2.37% and was in same boat and came to the conclusion that it is better to invest the cash.
I was forced to retire at age 59. The best thing I had going for me was no mortgage, no car payments, and no credit card debt more than 1-2 months old. Even a small additional principal payment each month can save a lot of interest going forward. Just my personal thoughts.
 I ran your numbers through http://www.amortization-schedule.info/calculator

For 115 months at 2.75%, your monthly payment would be $1,554.56. You are paying $107.44 dollars per month more than that.


If that is going into a property tax escrow, great. If it is going for mortgage insurance, get them to drop that if you can.

If it is something else, at least adjust your calculations.

https://financial-calculators.com/amortization-schedule - 115 payments of $1662 for 157000 principal, it computes an interest rate of 4.2173%.  Did I get the 115 right?

If you pay off the mortgage, get the mortgage payoff document recorded with the county recorder that recorded the mortgage. Check that it refers back to the recording of the mortgage. Don't procrastinate on that.

Forum Jump:

Users browsing this thread: 1 Guest(s)