Last weekend, I decided to take a step towards paying off our mortgage early. I struggled with how much to make a payment for. In the past year, we’ve saved up a 6 months emergency fund if both my husband and I lose our jobs. Now that the money is just sitting there, it feels weird because its not doing anything for us other than standing ready in case we need it.
In the meantime, our new mortgage has an interest rate of 4.25%. After playing around with Bankrate mortgage calculator, I discovered that we could save about $64K in interest if we put dedicate my paychecks solely to mortgage repayment. We will also pay it off in 6 1/2 years! However in doing so, we would have to sacrifice two things. The first one was a family vacation this summer to California. This was an easy one to give up since we just went last year.
I am not even sure I am making the right decision for the second one. We would have to reduce our 6 months savings from covering us if my husband and I both lost our jobs to only covering us if my husband lost his job. I’ve gone back and forth with this one. \I’ve read a ton of articles and honestly, I still am not sure about this. Despite my hesitation, I went ahead and made a principle only payment equaling one month of my paychecks. We can abort this plan at any moment and refocus on building savings. I am curious what your opinion of this plan is.