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JustaTexan
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Okay I've designated 2009 as my "pay off all debt except for mortgage" year. In 2010 though, I want to start saving or knocking down my mortgage. Beginning in 2010, I should have around $400 or more to put back each month. (Hopefully more but I'm trying to be conservative)

My question is should I put that towards my mortage payment, (existing payment is $638 so I would pay $1038 a month), or should I add that into a CD that will be opened for me sometime this year? The opening value of the CD is 15k. My ultimate goal is to pay off my home or save enough up to pay it off when I purchase a new one in 4-5 years.

Although I've seen one before, I'm having trouble finding an online CD calculator that will let me figure in additional deposits.

Thank in advance guys!

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Hmmm, I'm kind of disappointed in the online calculators that I found.

However, this is kind of the reverse of what you were looking for. It allows you to enter a goal amount and then enter other information. Then it tells you at what interest rate and what you need to deposit every month, day or week.

Maybe by seeing what you can save every month then you can see what you'll have left after a set amount of time.

http://www.bankrate.com/brm/calc/savecalc.asp

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Deanna,

It really becomes a math and a liquidity issue. If you think you'll "need" the money, then don't pay off the mortgage. Also, if you have a mortgage rate that is very favorable, then invest it elsewhere.

Depending on income, I'd say that I'd probably max a Roth before paying down a mortgage below 6%. Or max your 401k / IRA if you have a higher income. Especially with current equity prices. But if its strictly between a CD and paying down a mortgage, then pay the thing down. Paying down a 6% mortgage nets you 4.5% return after tax, whereas a CD probably nets you less after tax considerations. Plus, if you don't need it and you KNOW you don't need it, then you are making an investment that can't really be tapped early unless you move. And as an added bonus, you are putting yourself into a position to have lots of equity so you can take advantage of favorable rates and reduce the possibility of being underwater.

You have to balance the need for liquidity with CD/mortgage rates and income info that you didn't post. But you can't lose one way or the other. Good luck.

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Deanna,

It really becomes a math and a liquidity issue. If you think you'll "need" the money, then don't pay off the mortgage. Also, if you have a mortgage rate that is very favorable, then invest it elsewhere.

Depending on income, I'd say that I'd probably max a Roth before paying down a mortgage below 6%. Or max your 401k / IRA if you have a higher income. Especially with current equity prices. But if its strictly between a CD and paying down a mortgage, then pay the thing down. Paying down a 6% mortgage nets you 4.5% return after tax, whereas a CD probably nets you less after tax considerations. Plus, if you don't need it and you KNOW you don't need it, then you are making an investment that can't really be tapped early unless you move. And as an added bonus, you are putting yourself into a position to have lots of equity so you can take advantage of favorable rates and reduce the possibility of being underwater.

You have to balance the need for liquidity with CD/mortgage rates and income info that you didn't post. But you can't lose one way or the other. Good luck.

Very good advice. Deanna, let us know what you end up doing. Either way, I think you're on the right track. :p

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Thanks to both of you for your great advice. I've decided to let the CD sit and beginning in 2010, I'm going to "attack" my mortgage. I could probably sell my home right now for about 79k and I owe 70k on it. But if I do some improvements, then in about 5 years it would probably go for around 100k. (Recently a house down the street that's basically the same as mine except for a closed in carport sold for around 100k) With a few improvements over the years and with my CD, plus extra savings, (if I can manage it and if my Chevy doesn't die on me), then in about 5 or 6 years I want to be able to put over 50% down on about a 250k house, (in my neck of the woods that will buy you a pretty nice house) and be comfortable. I don't ever see myself having a career where I make more than 40k so I want to be able to handle a 150k mortgage on my income.

Atleast that's my plan. :)

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Thanks to both of you for your great advice. I've decided to let the CD sit and beginning in 2010, I'm going to "attack" my mortgage. I could probably sell my home right now for about 79k and I owe 70k on it. But if I do some improvements, then in about 5 years it would probably go for around 100k. (Recently a house down the street that's basically the same as mine except for a closed in carport sold for around 100k) With a few improvements over the years and with my CD, plus extra savings, (if I can manage it and if my Chevy doesn't die on me), then in about 5 or 6 years I want to be able to put over 50% down on about a 250k house and be comfortable. I don't ever see myself having a career where I make more than 40k so I want to be able to handle a 150k mortgage on my income.

Atleast that's my plan. :)

Having the CD should give you some piece of mind. If something comes up then that is sort of your emergency fund. Sounds like a plan. :p

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JMHO, I have been debt free for a number of years..and the feeling of owning a home without monthly payments is priceless....

While paying off that mortgage, make sure you have an emergency fund.

Investing in yourself is a great idea, using a Roth IRA is great, and perhaps a 401K plan from work, you can have both.

CD's are good because you can get to your money if you have an emergency.

Good luck Girl...

BTW I like the new avatar:mrgreen:

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JMHO, I have been debt free for a number of years..and the feeling of owning a home without monthly payments is priceless....

While paying off that mortgage, make sure you have an emergency fund.

Investing in yourself is a great idea, using a Roth IRA is great, and perhaps a 401K plan from work, you can have both.

CD's are good because you can get to your money if you have an emergency.

Good luck Girl...

BTW I like the new avatar:mrgreen:

Thanks!!!!! xsqueezex

I really want to keep my house once I get it paid off but I just don't think that's going to happen. My home is already getting too small for me and my 2 kiddos. My boy is 20 months and my girl is 4½. I love love love my house but the reality is that at 1350 sq. ft, it's just too small. The rooms are incredibly small and there is only 1 bathroom. I'm already starting to feel competitive for bathroom time with my 4 year old....:lol:

I have a carport with an attached utility room so I'm wanting to close that in in a few years and make the utility room another small bathroom. That would help us out a little bit with space and bathroom issues until I am ready to sell and get something larger for us. My goal is to have my house paid off in 3-4 years, (I know it sounds crazy but I have a plan!!!), and then sell and move in 5-6 years. This year I am paying off all my other non-mortgage debt which accounts to about $350-$450 a month :shock:. Once I get done paying off all non-mortgage debt, I am attacking the mortgage with the old debt payments, tax refunds, job bonuses, anything I come up with, etc. When the little man starts kindergarten in 3½ years that is an additional $425 a month that I was paying in childcare.

Sorry to keep writing a book about my plan guys but I am just excited to be beginning this! I am ready to get rid of my debt!

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No need to apologize...I cannot WAIT to be in your shoes soon :)! Keep it up!!
Nothing to be sorry about. It is pretty exciting!

Thanks ya'll! I'm pretty excited to be doing some building instead of fighting, (well except for AT&T), but that's a whole different story and thread.

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Hi DEANNATX,

Perhaps your back has a financial analyst that can crunch these numbers for you? That way you can look at the amount save by early payoff, in a property that appreciates, vs a CD etc that will be taxed and possibly penalized for early withdraw etc.

My intuition is that you will make more by the savings of early payoff on the house, plus the property appreciation.

You gonna sell at the end of 2012?

:ROFLMAO2::ROFLMAO2::ROFLMAO2:

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Its not that hard of a calculation. When comparing mortgage payoff and non-deferred taxable investment income, marginal rate does not matter. The tax effects balance each other out ( ex: In a 30% marginal rate, paying a 10% mortgage off means you net a 7% after tax return because you lose the 30% deduction, whereas holding a 10% CD gives you a net a 7% after tax return). They are entirely equivalent- no matter what tax rate you are in.

It only matters if you have the opportunity to accumulate TAX DEFERRED investments (if that 10% CD was held in an IRA, then your 10% annual gain is realized but not recognized). Eventually you'll recognize these gains, but in the OPs case, not before 40 years of compounding- now the marginal rate you are in matters- to compare against your mortgage rate and/or to determine if Roth or Traditional are the way to go.

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Not necessarily. There are tax benefits for carrying a mortgage as well. It's not really a straightforward question to answer. There are a lot of variables involved.

True but I don't think I receive any of those benefits. I've completed my taxes online already but am waiting for the W2 so I can finalize my #'s and file. The standard deduction is more than my itemized deduction. Am I using the right terminology guys? For example my deductions this year are totaling $6,554, with around 5k being mortgage interest.

I actually really enjoy doing my taxes every year. Not because I get a refund, but because I just like doing it. I'm such a dork. :lol:

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The standard deduction is more than my itemized deduction. Am I using the right terminology guys? For example my deductions this year are totaling $6,554, with around 5k being mortgage interest.
Yes, right terminology. And this tips the balance in favor of paying off the mortgage. You're not receiving any tax benefit from it- meaning that your gross interest rate paid is your net after-tax amount paid (ie no tax-deduction leading to a refund).

My wife and I are in a very similar situation. The interest on our house is quite modest- our standard deductions are very close to the mortgage interest. A little annoying I guess but its really a good thing!

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  • 2 weeks later...

Deanna,

You may already know this, but when you send in your check to the mtg company, any amount over and above what your normal monthly payment is, will go towards interest UNLESS you specifically write it on your coupon that you want XX of $$ to go toward the principal. If you don't do this, they will automatically assume to make it a payment towards the interest.

Just a little something I learned when I went to a homeowners course for newbies four years ago.

Writing two separate checks doesn't work unless you specify that the second check is to go towards the principal only, as well. Just an afterthought for ya.

Good luck on this journey! I wish I could do what you're doing :-)

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