I deposit $500 month in, then in September-December use the money for
xmas gifts.

When the Roth limit increases, I'll spend $1000 less on xmas (two more
months of deposits).

Elle wrote:
- quote -

Unfortunately, I have no employer matching fund.

- quote -

30 year, about 180k left (I've only been in the house 3 years), 5.5%
since inception I have put an extra $50 toward the principal.


- quote -


- quote -

Saving for any enhancements to my house, or other luxury items.


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for a few lines to add context, the previous post is deleted.

<jjj_soper[at]hotmail.com> wrote
- quote -

All you say is true and certainly worthy of this thread, but it wasn't my
point. Bread is correct (not that you're saying otherwise, jjj_soper). One
is simply choosing whether to put one's extra money into a vehicle (a home
mortgage) returning say 5% for the next 30 years, or a vehicle expected to
return 7% (say a buncha blue chip stocks). A person will own the house in
either scenario and so capture the appreciation or depreciation in either.
My comment was a post-o.

jjj_soper[at]hotmail.com wrote:
- quote -


In that case, he just walks away from the house and the *bank* has a
problem. Actually, he'll probably negotiate an amicable foreclosure
(Deed In Leau).

Bob

jjj_soper[at]hotmail.com writes:
- quote -

Whether he has equity or not, if the house goes down in
value by 6%, he's lost 6% of the value of the house. It
has nothing whatsoever to do with how much equity he has
or how many prepayment he's made. It does affect his
personal liquidity, but the if the choice is between
mortgage prepayment versus investing the money elsewise,
then even liquidity is not the issue since if the house
goes underwater (his loan balance is bigger than the
value of the house) and he needs to sell, he pays the
difference out of wherever he put that money.

Regardless, if the house goes down in value by 6% -
no matter how much he's already paid or not - he's
lost 6% of the value of the house.


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Andy wrote:
- quote -

figure things out myself. It's a sliding target: if you have 29 years
left on a mortgage and you add a dollar of extra principal, then you
saved interest (6 cents a year pre-tax) but tied up a dollar you would
not have had to pay until 29 years.

But the tricky part of fixed rate mortgages is that interest savings
are converted to principal repayment, a mandatory compounding. If you
add a large amount to your mortgage payment (more than $1, grin), then
you might have 27 years left for example. At that point paying an
extra dollar ties that dollar up for 27 years. The terms of your
theoretical CDs keep shrinking.

With one year left on the mortgage, paying an extra dollar saves you
interest for a year, but after that doesn't matter because you would
have had to pay it anyway.
I'll stop now, my head hurts.
John

Bread wrote:
- quote -

a guy only has 4% equity in a home that has declined 10% since he
bought it. If he gets a great job offer in another state he must
produce a check for the 6% difference when selling the house (plus
realtor fees).

He may not be able to do this if say, he put his money into stocks that
tanked. His hope for a greater return from the market would effectively
imprison him in his own house.

This may have been your point also, apologies if I'm belaboring obvious
concepts.

jjj_soper[at]hotmail.com wrote:
- quote -

I don't agree with your reasoning. Every extra payment you make on
your mortgage shortens the length of your mortgage, so by definition if
you are really making substantial extra payments you will not be
waiting 29 years to see the payoff.

In any event, no matter how you slice it, one day your net worth will
be greater if you pay down your mortgage than if you put it in a lower
paying CD. Unless you are pretty confident that you will die in the
next five years, your future self will be grateful that you made
choices that maximized his net worth.

Case in point: My wife and I started paying extra on our mortgage 5
years ago, and we finished paying it off 2 years ago, and we have been
seeing extra disposable income of $850 every month every month because
we don't have a mortgage payment.

Andy

Bread wrote:
- quote -

I agree. 10K in a checking account is a crime against nature. You could
set up an EmigrantDirect account and put most of your cash in there
earning 4.25% and leave just enought to cover monthly bills and
expenses. Shifting money back from EmigrantDirect to your checking
account just takes a few click on their website and the money shows up
the next day.

Andy

zxcvbob <zxcvbob[at]charter.net> writes:

- quote -

D'oh. Of course. Stoopid 16-month years messing up my brain.


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jjj_soper[at]hotmail.com wrote:
- quote -

Some mortgages allow you to suspend payments for a while if you have
made prepayments, in which case the prepayments are like a short term
loan.

--
Ron

Bread wrote:
- quote -


Nope. It takes $333.33 to max out an IRA until you're old enough to
"catch up". I have mine set up to automatically deduct $335 per month
from my checking account, with one payment of $315 in December so I
don't go $20 over the limit.

Bob

On 2006-02-15 14:53:13 -0500, "Elle" <honda.lioness[at]nospam.earthlink.net> said:

- quote -

You capture that appreciation or depreciation whether you prepay
your mortgage or not.

What is affected by prepaying or not is your overall leverage as
well as your overall asset allocation and diversification.


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<jjj_soper[at]hotmail.com> wrote
snip--please look back
- quote -

Yes, it is. I don't dispute any of your points. I think I'd also personally
factor in some reasonable amount of appreciation (or depreciation, for
bubbly areas!) on the home, and so whatever equity one has in it, too. Then
one can reason (rationalize?) that paying off one's home does compete better
with, say, CDs for the long run.

Ron Peterson wrote:
- quote -

two years but have mixed feelings about it. The downside is that it
ties money up for so long. Let's say you have 29 years left on a 6%
loan. Paying $1k extra is like buying a 29 year CD for $1k that earns
6% compounded monthly (most CDs compound annually).

But the only way to see the return from that hypothetical CD is to wait
29 years, sell the house, or use the home equity for a loan. Actual 5
year CDs might be higher than your loan rate in the future. My first
thought (and maybe your's too) was "I don't want to tie my money up for
5 years", but paying down the mortgage ties it up even longer.

The upside is that it's easy and has no transaction fee. And once the
home is payed off, you can brag, worry less about job loss, and keep a
smaller emergency fund.

It's a tricky decision though.

On 2006-02-15 10:01:22 -0500, "Larry Bud" <larrybud2002[at]yahoo.com> said:
- quote -

If your income is below the threshold such that you can open up a Roth,
I'd probably put that extra in there. If you need some cash to meet
a minimum requirement to open the Roth account, you might use the money
which is in your checking account now and then use the $250/mo to replenish
what you've taken from there.

You might also move your emergency fund cash into a high-yield savings
account like ING Direct. $10k in a non-interest-bearing checking account
amounts to leaving cash on the table. You should certainly have at least
enough in the checking account to cover, say, a month's worth of expenses,
but the rest of your cash doesn't really need to be there if it's easily
accessible.

$250/mo is exactly what it takes to max out a Roth, by the way. Unless
you are old enough to do "catch up" provisions (you aren't), the annual
max right now is $4k.



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"Larry Bud" <larrybud2002[at]yahoo.com> wrote
- quote -

Do you qualify for Roth contributions? If so, strongly consider:
1. Contributing to the 401(k) only up to the employer's match, to get that
full 100% return right now. Best deal in town.
2. Paying down your mortgage. Whether to do so or not depends on your
mortgage rate and type of mortgage (what are they?) and your desire to own
your home outright.
3. Next contributing to your Roth, to get the tax advantage in retirement
/and/ the flexibility explained below.
4. Lastly, if any money is left over, resume contributions to the 401(k), to
get the tax break.

Contributions to a Roth (but not earnings on the principal) may be withdrawn
at any time without penalty.

Emergency funds should be around a year of living expenses, adjusted
according to your confidence in your current salary continuing. You say you
want easy access to this $250/month income stream. Are you trying to boost
your emergency fund? Saving for another house? What?

Elle wrote:
- quote -

Elle wrote:
- quote -

I'm maxed on my 401K, I don't have a Roth, My "emergency fund" consist
of my checking accout with approx 10K, I only have a mortage payment,
no car payments.

I'll also point out that Fidelity (and so I bet other brokers, too)
lets you buy Treasuries at auction commission-free and concession-free
if you place the order online.

You'd still have to pay a commission if you want to sell prior to
maturity, but I bet it'll be less than what TreasuryDirect charges.

So given that (at least one) broker(s) will give you commission-free
access to Treasuries auctions, I don't see the point of using
TreasuryDirect at the current time.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us