So Matt and I have been thinking about starting to save more in cash, not only because of the point that Tom made in the last post about my job given the uncertain industry I work in, but also because if we do want to move in a few years, chances are home appreciation won’t be enough for a down payment on a new place.

But then I started thinking that if the primary point of the cash is for a down payment, then why wouldn’t I just double my mortgage payment, which in effect would mean we’d earn a nice 5.879 percent return on our money.

That’s BEFORE the tax break we get from deducting mortgage interest, however. Consider that savings and pre-paying our mortgage wouldn’t get us much further ahead than if we stuck the cash in our “high-yield” savings account at 3.5 percent.

According to this mortgage tax savings calculator, our after-tax rate is 4.057 percent.

And we’d have flexibility to use the money for other reasons if necessary.

Then again, I’ve been thinking lately that one sure-fire way of reaching a goal is no flexibility at all. My savings account balance ebbs and flows. My 401(k) balance rises, even when the market doesn’t, thanks to my regular contributions.

Also, the idea of paying off a mortgage is appealing to me. Call me old-fashioned, or crazy, but think about coming home to your house each day knowing you don’t owe a penny to the bank. Sounds nice, doesn’t it?

This entry was posted on Wednesday, September 10th, 2008 at 1:44 pm and is filed under housing. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.