Hello! New member, first post! Hey guys, with regards to money, retirement, and specifically prepaying your home or jumping from a 30 year to a 15 year, there is a really good podcast from a skeptical financial advisor, Phil Ferguson. In episode 199 of his podcast, he covers whether or not you should prepay your home mortgage and the details about that process. Here's a link to his website that links to his podcast. http://polarisfinancialplanning.com/2017/01/25/199-mr-deity-should-you-prepay-your-home-loan/
And an interview with the Deity! Nice.
We refinanced a few times over the 20 years that we have owned our home. The last was 5 years ago. We got a 5-year fixed rate at 3%/25-year ARM. We only had like $70k or so to pay off so we planned to have the mortgage paid off by the time the rates became adjustable by paying a considerable amount over the schedule. And we did it, right on the nose, our last payment was September. On the bright side, we no longer have that monthly nut. It feels nice to be free of that. On the downside, we don't have that mortgage interest to deduct from our taxes, but the deduction wasn't that much anyway.
We still have a home equity line that we use on occasion. It basically gives us $150k of liquidity without having to tie up our own money. And any interest incurred if we do use it is still deductible. We even use it to help fund our IRAs come tax time. While we do have regular 401k contributions at work, since we're over 50 (I think), we can make additional catch up contributions to IRAs. And up until the last few years, we were also contributing to Roth plans (we're no longer eligible). We always plan to make monthly contributions, but we never seem to get around to it and end up having to come up with the entire amount in April (as Cara mentioned too). So we try and scrape together what we can and then tap into the HELOC to take us to the limit. Of course, now we're paying a bit of interest until we pay it off but the IRAs are hopefully going to appreciate for years and any amount we don't take advantage of is a lost opportunity.
I wish we had started our Roths earlier. We started when we were in our mid-30s. For those of you not in the US or who don't know what that is, a Roth IRA uses taxed income contributions. The distributions will not be taxed. I recommend to everyone to look into getting a Roth or something comparable in your country.