One of our mortgages is in striking distance of being paid off. Exciting times but what to do?
Debt reduction is a long road to get back to zero.
Mortgage debt reduction is a really long road to get back to really owning your house. When you can see the end, it's a great feeling.
There's pretty much something to celebrate with every mortgage payment. Even if the principal balance isn't into the next $10,000, it's at least lower than it was the previous month.
At the rate we're paying down the mortgage on our investment property (our previous residence), by next fall it will be paid off.
We have fewer than twenty payments left.
Looking back it's a bit hard to believe that we're that close. (Trivia fun fact: I signed my loan papers for that house on 9/11. Yes, that 9/11.)
Do some reallocation?
In fact, we're close enough that we could pay off the whole thing this month if we wanted to, if we sold some stock. (This was an option even back in 2013 when we owed twice as much on the house as we do now.)
Here are some things that are worth considering:
- Will selling the stock throw your allocation out of whack? If the answer is yes, then it may pay to look at rebalancing your portfolio at the next opportunity.
- Will selling the stock cause a lot of taxes that will have to be paid with other funds? If the stock has appreciated, then there will be either short- or long-term capital gains tax to pay. If the stock is down, then it's a tax break to the extent it can be deducted.
- Will selling the stock be chopping a winner off at the knees? This is the main reason why I hesitated selling (and continue to hesitate). Our particular stock has been doing very well and pays regular and increasing dividends. It's a good asset and aside from the fact that we'd be paying off the mortgage, there's no good reason to sell it.
- Will selling the stock be throwing off retirement plans? Stocks are often long-term investments. Selling has consequences for portfolio growth. Not that it's bad to pay off a debt, of course! But there are trade-offs on return that should be considered.
Mortgages are always good when they're gone
Just be mindful how you gone them!