You also have to factor in the value of the optionality of not paying down the mortgage. In other words, if everything is dead even, then you are strictly better off maintaining the liquidity.
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Your interest income from a HYSA is definitely ordinary income though unless you have some very creative accounting structure.
We are above the standard deduction so does the deduction of mortgage interest offset the taxable income on interest?
For sure. I’m saying because we have two incomes but only one is counted as ordinary income, we’re in a lower bracket than we would be if both of our incomes were W-2 incomes.
It depends. You are going to have to run the numbers.
Yes, if you are deducting mortgage interest then all the taxes are a wash. You may want to consider if a ‘liability matching’ approach is more suitable with a product like this:
https://www.ishares.com/us/products/328944/ishares-ibonds-dec-2032-term-treasury-etf
This guarantees you a 4.31% return to maturity and is not subject to state income taxation. Also avoids the $250k FDIC concern.
To me, this is the overwhelming factor for someone concerned about liquidity because of employment and income risk. Once you choose to pay off that mortage, the money is unavailable forever. (You can’t count on a HELOC in a world where you need money because of low income/job prospects).
Given the original question, I wouldn’t pay down the mortgage even if the rate was slightly higher.
Nothing to add other than get a HELOC now when you can easily get it. When actually need it you may not qualify.
https://www.wsj.com/lifestyle/applebees-restaurant-food-prices-inflation-date-night-d5be36c4
Emily Brooks and her husband had some of their first dates over chicken strips and fries at an Applebee’s in Grand Forks, N.D. This year they plan to have 52 more dinners at the chain.
A dinner date at Applebee’s is one of the hottest tickets in American dining, thanks to escalating food prices. A $200 Date Night Pass subscription worth $1,500 in weekly meals at Applebee’s sold out in less than a minute earlier this year, the company says, as couples like the Brookses look to spice up their relationships and save money.
…
Brooks, of Fargo, N.D., was among the few who snagged the first of Applebee’s subscription deals earlier this year. She and her husband plan to use it for weekly meals, so far ordering Three Cheese Chicken Penne and burgers several times at their local Applebee’s, and at more distant locations. This month, on a visit to New York City, they dined at the world’s largest Applebee’s.
“It was kind of like winning the Applebee’s lottery,” says Brooks, 43, an artist who helps run the family’s pinball machine business.
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A friend of mine was on House Hunters International (in Dubai). Did the usual search for three properties. Picked the one he’d already been living in for months.
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An acquaintance did one of these shows and all of the properties they looked at were ones that he and his wife flipped/owned. Suspend disbelief!
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This month, on a visit to New York City, they dined at the world’s largest Applebee’s.
They could have found one or two places in NYC that were better than Applebee’s if they tried hard.
A few lessons for anyone to become financially independent:
- Live with roommates
- Work part time while earning your PhD
- Find a partner with similar goals
- Invest
- Oh, also start at a salary north of a quarter mil that gets aggressively higher and spouse has similar income
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You forgot the easily attainable for every American: Finish your PhD in an actual scientific field at 24.
I’m not sure I can hate the subject of the article. How much more legitimately bootstrappy can you be than this?
I guess we can LOL the person who wrote the article and thought it was full of useful insights. Is that what we’re doing? If so, I’m in.
That’s generally my view on these. Kudos to the guy for his education and doing this, but LOL a an “here’s 5 things that make it possible” article when the one thing that made it possible was massive massive income.
Most of the ones that gain traction here involve a massive, massive inheritance instead (or in addition).