Should I stop paying my mortgage to save for retirement? A reader in southwestern Ontario asks this question and welcomes your thoughts. Heres his story: I have been agonizing lately over retirement and trying to figure out how to save more money. Today, I came up with the idea of not paying off any more of my mortgage. My wife and I have been very good with our finances and carry no debt other than our mortgage (we are 2 weeks away from having no car payments!!!). We are 40 years old, currently have a total net worth of about $800,000 (including home equity) and our annual family income is about $200,000/yr. Heres my thinking...We live in a southwestern Ontario community where the average house price is about $190,000. Our home is worth just north of $620,000 and the balance on our mortgage is $220,000. We bought a large 2500 sq. ft. home 6 years ago but our life plan has changed now and the house is too much space. It is a nice home on a lake, so Id like to keep it for now but I figure in our retirement we will move to a smaller, less expensive house. In our city, even in 10 years (unless the real estate market goes crazy), we should be able to get a very nice house for the $400,000 in equity we have in our home. So, in reality, we have all the home equity we need. That means we could put the rest of the mortgage on a HELOC (3.5%) which would cost us about $642 / mo. and use the balance of our current monthly mortgage payment($1,798) of $1,156 to invest for retirement. Even if the HELOC rate goes up a couple % over the next 5 years we will still have much more money to invest by not paying more of the mortgage off. Comments?
Posted on: Mon, 20 Jan 2014 13:15:24 +0000
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