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Mortgage Pre-payment

January 28, 2016

Much delayed, I’m now sending a chunk of our 2015 cash savings to the mortgage prepayment.

My original goal/plan was $25k in 2015.  I got cold feet when my job started getting crazy.  Right now, I’m “only” sending $8,000, because that is an amount we can send without thinking about it.  That is an amount we’re comfortable parting with, without thinking about it in any more detail.  Once I do some scrutiny of our reserves and finish our taxes, I have little doubt we’ll be able to meet that $25k goal.  But I’m impatient, and don’t want to wait for more analysis to take action.  Most importantly, I need to walk T through our accounts status, and he needs to agree that we can part with another $17k of cash.

According to some calculator on the internet, this prepayment will save us about $10k in interest and shorten the mortgage by about 5 months.  Yay!  If we follow up with $13k in a couple of months, we’ll shorten it by another 10 months and about $17k in interest savings.  We can also reap the benefits earlier if we want and improve our cashflow – our loan can be re-amortized for free once per a year.

Odds are that mortgage prepayment is not mathematically the most optimal thing to do with our money, but it buys down the risks of living in a high cost area.

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3 Comments leave one →
  1. January 28, 2016 11:06 am

    Woo! Those early mortgage pre-payments really do take a big chunk out of future payments.

  2. January 28, 2016 8:32 pm

    Yay! I…am not prepared to part with any of my 2015 cash savings and I want to increase my cash standing even more this year. I’ve definitely saved myself a ton of interest from all of my early pre-payments though – somewhere north of $200,000!

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