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Due to family reasons, if things work out, I am planning/thinking/hoping to relocate in a year or two. That would mean I would possibly sell my home. I have remaining home mortgage of about $160K.
Also financially I think my wife and I will do good in next year or two and will have the possibility to pay out my remaining $160K home mortgage within 2 years. My mortgage has 4.125% fixed interest rate
Would it make sense to pay out in full the mortgage? I am thinking even if I relocate and if I have the paid in full mortgage, I can use the money I get by selling the house (say $250K) as a downpayment/equity for buying a home in the place I will relocate to.
Please advise if I should go ahead and pay in full my mortgage or save the extra cash?
Since you are talking about a short time period before you sell I would pay off the mortgage and after you settle into your new home I would probably get as large a mortgage as I can and invest the remaining (including the 160,000).
I would invest as inflation should make a loan a good deal.
it doesn’t seem like the timing really makes sense.
You might have the means to pay it off within the next two years and might move in a year or two needing the sales proceeds as a down payment?
Thanks for the reply.
It looks like you mean that you are suggesting to save the cash and use it for the down payment for new home (if I end up relocating) rather than getting tied up with that money in the sales proceeds.
Since you are talking about a short time period before you sell I would pay off the mortgage and after you settle into your new home I would probably get as large a mortgage as I can and invest the remaining (including the 160,000).
I would invest as inflation should make a loan a good deal.
Thanks for the reply. I am sorry I dont get what you mean by "I would invest as inflation should make a loan a good deal"
What advantage would you gain by paying down the loan? You may as well wait 2 years until you sell and settle things at closing. Even if you had $160k sitting in a bank account I would not suggest this. Even Dave Ramsey most likely would not suggest this.
I think what the previous poster meant is that due to inflation, money becomes worth less and less over time due to inflation. This is the argument against prepaying a loan. By prepaying early, you are using more expensive dollars than if you pay later. Whatever interest you save is offset by inflation. If inflation is 3% and your interest rate is 4%, you are only saving 1% in real terms. And we all know inflation is much higher than the government’s projections.
If you had a higher interest rate above 5% my position would be different.
Is your mortgage interest getting you a break on your income tax (by increasing your deductions over the standard deduction)? If so, that's a bit of money staying in your pocket. Keep the mortgage and sell the house when you move.
What advantage would you gain by paying down the loan? You may as well wait 2 years until you sell and settle things at closing. Even if you had $160k sitting in a bank account I would not suggest this. Even Dave Ramsey most likely would not suggest this.
.
Thanks for the reply.
LOL... I have been hearing Dave Ramsey's radio shows regularly lately and that's how I got inspired/getting motivated to pay off the loan.
Is your mortgage interest getting you a break on your income tax (by increasing your deductions over the standard deduction)? If so, that's a bit of money staying in your pocket. Keep the mortgage and sell the house when you move.
Thanks for the reply. My mortgage interest is not getting me a break on my income tax (by increasing my deductions over the standard deduction)?
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