Tuesday, February 17, 2009

No More Negotiations

Here is a summary of some salient points from our recent "negotiation" regarding fast mortgage repayment vs. savings.

D's points are as follows:
  • It is an issue of personal responsibility. He is able to and wants to do his part in a fair manner
  • Our current net worth is being built more from debt repayment vs. actual savings. We need to do more actual savings. Net worth would be the same but we would have more liquidity.
  • Our mortgages are 2.10% and 2.25% respectively with a 9 year or so end date. They are at great rates so we can afford to take more of an investing frame of mind and buy low.
  • He did a spreed sheet projection showing what the difference would be if we paid off the mortgages in 5 years vs. investing the amounts for 9 years at very safe 3%, 4%, 5% rates of return. We do come out slightly ahead with investing.
  • Should either one of us lose our jobs, it would be nice to have more money in the bank.
  • Worse case, take the savings out in a few years and pay out the mortgage if for some reason things don't go well.

The project amount of pure savings (0% growth) over 9 years is $292400.

All in all, some convincing arguments, I must admit.

We are going to give savings a go for the rest of year and re-evaluate for 2010. That will give me a chance to see how difficult it may be for me to stare at a slowly declining debt amount. D feels seeing savings grow will offset that.


  1. You two had a nice romantic Vanentines weekend togther then, with your calculators!!!


  2. Lizzie's comment made me laugh! It does help to be like-minded as a couple though. Congratulations on resolving the issue and seeing how things go after one year. The nice thing about accumulating savings is that if you change your mind one year later, you could instantly pay down the mortgage in a lump sum, whereas if you paid down the mortgage and changed your mind and wanted savings, there's no option of instantly upping your savings.

  3. He's a keeper! I love that he worked through all the arguments, ran the scenarios and came ready to prove his point. Keeping the cash won't hurt, like daphne said you can always change your mind. On the other hand once you've paid out the money to the bank, you can't easily ask for that money back.

  4. Hi Lizzie!

    We got everything discussed last Thursday night so that we could have a decent weekend without watches or calculors!

    You are right -- it wouldn't have been very romantic otherwise!

    Hi Daphne and Miss M!

    Not having the option of instantly upping savings was one of the strong points that stood out for me.

    Not having a lot of savings at the core, assumes that pay and work will be consistent. It may or may not be the case in the coming years.