To Pay, or not to Pay

As always, there has been a lot of debate about whether or not it is wise to pay off your mortgage early.

JD’s post on Get Rich Slowly yesterday, and the comments on it inspired this post.

Last summer I started sending an additional $25/week towards the principle on my mortgage. Then, at the tail end of December, I picked up the pace, increasing my weekly principle payments to $125/week. So far, so good.

I haven’t “missed” any of that money (yet), and it’s put my mortgage on schedule to be payed off in June of 2017. That’s exciting.

But then you read about how stupid some think it is to pre-pay a mortgage… Invest the difference instead… One comment, from Kaleb, on the original post struck a chord:

I just got out of credit card debt this month ($11,000 or so paid off in 6 months). Now, like J.D. I have tons of extra money each month. If I prepaid my mortgage $2,000/mo, I’d have it paid off in less than 5 years. But if I saved $2,000/mo and got 6%, I’d have enough CASH to pay my mortgage off in 5 years, and that’s not counting the tax deduction! It’s the same thing, but with more security! It’s the smart thing to do!

I think I’m disciplined enough to take this route instead of what I’ve been doing. But… not this year.

You see, I’m still paying PMI on my mortgage — and that has got to stop. The sooner, the better.

So, for the remainder of the year, I’m going to keep on sending in that $125/week until I hit the mark where I can drop the PMI (currently costing me around $85/month). Right now, that should happen in October or November.

Once I’m there, Kaleb’s plan will go into effect in an ING account or something. Not earning the 6% he mentions, but something that I’d have access to if things got tight.