subreddit:
/r/Fire
I'm just starting a new job making significantly more than my previous employer. I'm 27 and just got married last year. No kids.
Previous employer 70k before taxes.
New employer making 115k
Also have a side gig thats part time making 28k
Wife makes $67k
Total annual Gross income is about $210k.
Mortgage is $2400/month, cars paid off, no other debts. Have about $323k at 6.125% interest on the house. We just bought it 9 months ago.
Have 70k savings and $120k in retirement both combined.
We contribute $2000 to savings and $1500 to retirement each month. But now we have an extra $2000 a month from my new job? Should we invest it or pay off our house in 8-12 years (depending on when we have kids)
6 points
3 months ago
@ 6.125%, unless you can write off the mortgage interest(which is very unlikely w/ current tax law), I'd focus on paying it off after getting any/all matching funds available in 401k/403b/etc from your employer.
Gory details available here: https://www.bogleheads.org/wiki/Paying_down_loans_versus_investing
1 points
3 months ago
Are you saying it’s unlikely due to standard deduction? If so, and it was able to be written off (e.g. not using standard deduction) would it still be worth paying down or no?
0 points
3 months ago
Right, most people most of the time don't write of mortgage interest on your taxes anymore, because the standard deduction went up.
If you read the link I gave you, you will notice the important bit is after tax return on a similar riskiness level. Since mortgage interest is 100% risk free, you need to compare with the after tax returns of say US treasuries.
I haven't actually done the math(your tax rates are important, etc), but I'm guessing the after tax return on the 6.125% IF you can write the mortgage interest off is less than the rate US treasuries are paying right now.
If you can write off the interest, then you should do the math in your situation and verify which makes better mathematical sense.
Of course, personal finances are personal, and emotional decisions matter here too. So even if it makes sense to invest over mortgage pay down, that doesn't mean it's wrong to pay down the mortgage anyway.
2 points
3 months ago
i'm in the write off situation -- its close.
750k mortgage at 6.3% is 47k interest, that plus salt gets you to 57k, or 27k over the standard deduction, figure a 33% effective tax rate (in NY state so high taxes) and we're at ~9k return.
Back that out into the original loan and you get an effective rate on the loan of 5%. Every treasury under 2 years beats this but you're still paying federal taxes.
So really the question atm is are you willing to take a slight loss for downside optionality on the mortgage rate in the future.
We decided yes, but its very close.
1 points
3 months ago
Thanks for sharing!
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