September 28, 2021

MP Now News

Mortgage News

My wife and I have $1.8M saved and earn $400K. I want to pay off our 20-year mortgage before we retire. She says no

Dear Quentin,

My wife and I have done very well in healthcare for the past 25 years. We have always maxed out 401 (k) and 403 (b) and have additional savings in an IRA and almost no revolving credit debt. We currently have $ 1.8 million in these savings accounts.

At 52, however, we decided to move to Florida – now that our children are both grown and alone – instead of waiting until retirement. We both still work together and together make over $ 400,000 a year. We plan to work until at least 65 and have never had any serious health problems.

Controversial Point: We bought a home at the top of our range of dreams and have a 20 year mortgage (2.5% interest) with over $ 4,100 monthly payment. We always paid extra on our mortgages, and my goal was to do the same with this house so that it would be paid off by the time we retired at 65.

However, my wife says that once we reach retirement age, we will have plenty of cash to keep paying home for the first five to six years of retirement and that now that we have time to travel, we shouldn’t have “big budgets” before we withdraw completely.

I understand we are blessed to have such a lovely nest egg, but I worry that extending that house payment to our first five years of retirement will eat up a large chunk of retirement funds that could jeopardize longer-term planning. We also plan for this home to be the bulk of the “inheritance” for our two children, so don’t plan to sell and move when we finally retire.

Are you thinking about how to address this mortgage problem?

Two pharmacists in Florida

You can email The Moneyist at [email protected] with any financial and ethical issues related to coronavirus and follow Quentin Fottrell on Tweet.

Dear pharmacists,

This is a win-win situation. You are enchanted when you do and you are enchanted when you don’t.

This column often leaves readers stunned. “I can’t believe this crazy situation!” say the readers when they try to come to terms with the misdeeds of some letter writers or the family gimmicks. “Who would do that?” It is a pleasure to read a letter in which people have actually done so much right. You are in a financially secure position and in the worst case scenario you can always downsize your current home.

The answer to your dilemma is an extremely subjective one. It must be argued that we do not know if any of us will be here when our mortgages are paid off. So why not fulfill our obligations and enjoy all that life has to offer?

Given the interest you are sure to save by repaying your mortgage early, even at 2.5% interest, I agree with you. Overpay if you can, especially at the beginning of the loan term when the interest payments are higher.

Depending on the terms of your mortgage, the amount of overpayments you can afford may be limited (10% in some cases) and as frustrating and annoying as it may seem, there may also be an overpayment penalty.

However, that might strike a happy balance for you and your wife.

By emailing your questions, you consent to their being posted anonymously on MarketWatch. By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you agree that we may use your story or versions of it in all media and platforms, including through third parties.

Check out the Money is private Facebook FB Group in which we look for answers to life’s thorniest questions of money. Readers write to me with all sorts of dilemmas. Ask your questions, tell me what you want to know more about, or take part in the latest Moneyist columns.

More from Quentin Fottrell: