Q: I had written to you a few months ago and never thought I would get a response. To my amazement I was reading your column in Sunday’s paper and my letter was answered by you. I want to thank you from the bottom of my heart for responding.
I’m the 75 year old widow, still working part time, who just bought a house with a 30-year mortgage at 4 percent. My question was whether I should prepay my mortgage to save interest or possibly pay it off.
Since I wrote you, I was able to sell my mobile home and now have $50,000 in savings plus a 401(k) with $30,000 in it. I also have my emergency fund in place. My mortgage is approximately $600 a month with taxes.
If I make an extra principal payment with each payment I could pay this off in 15 years or sooner if I continue to work. Is this a smart move? I’m saving a big portion of my pay each month, but I don’t know long I can continue to work.
A: I’m sure you would like to be able to pay off your mortgage. It would add to your free cash flow, and would probably allow you to think about retiring sooner.
Unfortunately, since you don’t have enough cash to pay off the home in full, and can only do so by working and saving so much of your monthly income, paying off your mortgage doesn’t seem like a reasonable goal.
While I’m a big fan of paying off your home loan, in your case, I don’t think you should worry about it. You’re 75. You should continue to conserve your cash and build your emergency fund. You may need that money or want it to do something special.