Thursday, September 17, 2009

Pondering My Next Extra Mortgage Payment

My renters showed up with half of the rent today and promises of the other half next Thursday plus the late fee. I have been itching to make another extra mortgage payment so I was thinking about making the payment now instead of waiting until next week. But when I checked my spreadsheet I saw that if I made my payment of $1,136 I would have a mortgage balance of $40,202. My tenants owe me $300 which would have pushed me under the $40k mark. I can only make one extra principle payment online although I can go in to a bank and make another payment if I want, but I prefer online.

So I decided to wait...but then I kept thinking. Part of my emergency fund will hatch out of it's CD tomorrow along with $65 in interest that it has accrued. I can use that money to help pay for a share of my neighbor's well that they will be drilling, or I can put it in another 12 month CD at 2%, or I can use it to pay down my mortgage.

I have already planned to use it for the mortgage later on, maybe when I am 2 or 3 months from paying it off. But now I am feeling a little more secure about my finances and willing to take some small risks. My 401k is on the mend and I know that if I lost my job I could cash out enough money to pay off my mortgage. I suppose I am using my 401k as my back-up emergency fund.

Although the well share sounds good, I would rather use the money for my mortgage right now. Buying drinking water only costs me $1 or $2 a week so it is hard to justify spending $10k for a well share right now. Plus I only have $5k not $10k so I don't know where the other money would come from.

The interest I would receive on a $5k, 12 month CD at 2% would be $100 minus taxes. The interest I would save by putting $5k towards the mortgage would be $264, no taxes taken. So I would gain more than $164 but lose a little security by not having so much cash in reserve. I do still have my 3 month emergency fund tucked away though.

I'll keep thinking about it for a few days but I think I like the idea of using it for the mortgage now instead of later.


Over the Cubicle Wall said...

The mortgage paydown sounds exciting even if it is a little risky. A trip to Hawaii sounds nice too :)

Daizy said...

When the mortgage is gone then I can go to Hawaii all I want.