Should I pay up Mortgage ?

POSTED BY Vijay Sethi ON September 14, 2012 6:52 am COMMENTS (4)

Dear Members,

I am retired and presently living with my son in USA for 6-7 months the balance I spend in Gurgaon,India to try and sell property and sort some pension matters.

My querry is long hence I shall state in simple terms.

I have an investment of $26600.00 ( Invested 30000.00 in 2007 dec in an income fund which gived $130.00 per month but otherwise loosing value).

I have about $15000.00 in checking account.

I get a rent of $1100.0/month from a condo.

My inescapable liabilitiesare as follows:

a. Condo Mortgage                       680.00        Balance left $33000 ( 15 years @ 4.375%)

b Condo Fee                                250.00

c.Condo Maint fee                          60.00       Hired a company to help with repairs

d. Two car Insurance                    150.00

e.Student Loan Plus                      150.00       co-signed for my son, ($14000 left)

f.Medicare                                   100.00

g.Medicine                                   100.00

h. Vonage                                      50.00      For calls to India and UK

Total                                          $ 1540.00

The above list not include car gas, food, clothes and entertainment as all that is taken care by my son.

My problem is that against an income (rent+ income fund of $1100+130) I am spending an extra $280.00 from my reserves.

The investment of $30000.00 is reduced to $26600.00 although I have earned  $7150.00 over the past 55 months.

I am keen to pay off my mortgage of 33000.00 with funds from Income fund and bank account (26600+6400).

This will release $680.00 to me for day to day pocket expanses in addition to $280.00. 

Kindly advise if I should pay off mortgage  or not .My social security will start from Dec onwards for $1100.00.

Thanks in advance.

4 replies on this article “Should I pay up Mortgage ?”

  1. Gaurav says:

    Your monthly income fund is giving you a better rate than your mortgage. Keep it. Plus it is good to have a fall back if needed in an emergency. Hang on till December when your SS kicks in and helps cover the deficit.

    1. vijay says:

      Hi Gaurav,
      Thanks for your input.
      You are right that income from investment (even though the original value is down) is proving to be slightly more then my mortgage. Great point there. BUT.
      I am heading for India towards the end of Nov and need to redeem the investment so that the burden of paying our inescapables don’t fall on my spouse. My social security starts in Dec in case there is a problem, I don’t want to falter on the bills. Neither do I want to bother my kids (who are both Doctors and would gladly take on the responsibility). I am old school and would like like to take care of my bills by self.

      Finally, I am going to redeem the investment at $ 25977.00 as of today.
      Thank you all for your helpful advise.

  2. vijay says:

    BanyanFA,
    Thanks a lot for your input. I am personally leaning towards the paying off my Mortgage. I had gone to do just that when the Investment banker got hold of me and started selling the concept that if I change my portfolio from income to growth I shall be able to get returns from 15-25% immediately after the elections in USA. Although the current scenario supports that analogy in USA, however I find hard to wait for the next three years to see good results while depleting my reserves completely.
    I also had the opportunity to appreciate your article on ULIP. I have suffered a set back primarily due to not checking facts before investing in India.
    More on that later.
    Thanks for your input, appreciate it.

  3. BanyanFA says:

    Vijay,
    I understand your issues – and I am assuming that you would not want to put your investments in India where you could have got better returns on Fixed income products (unlike US).

    Within these limitations, I acknowledge that you would want to kill your liabilities (biggest one being your mortgage). I don’t see where you could earn a risk free income in US which would give you over 4.75% return. In that situation, the best position for you is to pay off your mortgage in US.

    Regards
    Banyan Financial Advisors

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