Would you deplete your 3-year old's & 5-year old's savings accounts to pay down your mortgage?

Discussion in 'Hot Entrepreneurs: Build Wealth & Share Links' started by disabledvetswife, Jul 17, 2013.

  1. disabledvetswife

    disabledvetswife Mod of the Month June 2012 Trader Group

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    Mortgage balance, $40,495 @ 4.875%, 3.5 years left on a 15-year mortgage
    Child savings #1 around $12K earning about .25%
    Child savings #2 around $6K earning about .25%
    Our savings around $4K earning about .25%

    Would you deplete the 2 child's savings accounts to pay down mortgage faster & pay back the kids once the mortgage is paid in full?

    ETA: College is already taken care of in full.

    We have no other debt.
     
  2. Merczilla

    Merczilla Well-Known Member Trader Group

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    If it were me, no I wouldn't. While sort of tempting, it wouldn't pay off the balance in full. It's hard to save that much and if something "catastrophic" occurs, your savings would be gone. I'd just continue to plod along for now. I don't have a mortgage, so don't know if that would make any difference in the amount of interest you pay on it or not, if you pay "early". Or if you have just X amount of interst already figured in and you pay that whether or not you pay it early. It seems like it would only knock a year to 1 1/2 years off the 3 1/2, so I'd wait till I wa maybe closer to actually paying it off before raiding any savings. That's hard to come by. I like having a nest egg.
     
  3. greenfrog57

    greenfrog57 Mod Of The Month July 2011 Staff Member Administrator Super Mod Trader Group

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    No. Plain and simple. It isn't yours to borrow even if it belongs to your minor kids. DH's mom took his "college fund" to buy a real estate land investment and DH didn't have $$ when he needed for living expenses during college. Even after she sold the land, she never paid him back. He had to use credit cards which he paid off with his first years in the work force. He still hasn't forgiven her.
     
  4. motherofmolly

    motherofmolly The Mushroom MoM-ma Trader Group

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    no. you are doing fine without it (not like you are loosing the house or anything). and really eventhough they are too young to "own" it, it is theirs that you saved for. i would leave it be and let it keep accruing interest or even move it into a CD and let it get more interest.

    they will have a nice account for a car or living expense so they can concentrate on school.
     
  5. joshmamabear

    joshmamabear Member Of The Month Nov. 2011 Trader Group

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    DH and I were put in a similar situation when DS was born 10 yrs ago. We had 2 vehicles that we were paying notes with interest rates like 6.x at the time. We made an inventory of our liquid assets and cash on hand. Our cash in the bank were earning way less than interests we were paying for those vehicles; we both decided to use our funds to pay off and get hold of the titles. It was difficult at first to have no savings at all, not even an emergency fund. But we also decided to live off on just one income and the other, we saved all of it. Soon as we were debt-free, it wasn't hard to build up our savings.

    If I were in your situation with savings earning less than 1%, I'd use the $22K to shave off over half of mortgage balance provided company will reassess my loan to make sure all the $22K is applied to the principal. Then I will ask for the new computation on my loan and see how much will save me vis a vis if I keep my funds sitting in the bank, earning way less interest.
     
  6. momee2twins+one

    momee2twins+one Member Trader Group

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    Is the "college is taken care of in full" from a fully funded 329 plan? A state run program for instate students? American Indian Tribal Payment? If you're counting on college being taken care of by a state run program, don't. You have a LOT of years before a 3 and 5 year old go to college. You could be forced to move to another state or they may have talents/interests that lead them out of state. And those programs have been known to get cut as well. Tribal payments are more likely to still be in place since it is a much smaller government system than most states. 329 plans are awesome, but expenses are growing. The big question is where did the kids' money come from? You? Grandparents? If not you, how will the donors/gifters feel about you using the funds?
     
  7. Dengineer

    Dengineer Well-Known Member Trader Group

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    I would NEVER touch my kids money unless the only other option was homelessness. That money belongs to the child. (Although in my case, most of my kid's savings accounts came from birthday gifts and money that they have saved themselves.
     
  8. disabledvetswife

    disabledvetswife Mod of the Month June 2012 Trader Group

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    The children's money came (mainly) from hubby's SS disability. Most people use this money like child-support, we decided to put it aside.

    The "college is taken care of" means they have federal CH. 31 (I think it's 31) federal benefits and state benefits because hubby is a disabled veteran.
     
  9. joshmamabear

    joshmamabear Member Of The Month Nov. 2011 Trader Group

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    depending on your monthly cash flow, how long do you think can you pay off the remaining balance of $18K should you re-structure your mortgage loan? if you can pay it off in 2 yrs or less, weigh carefully if that'll put you in a better situation. with no other debts to worry about, you'll be debt-free in no time. I wouldn't worry about the dismal interest rates banks are giving right now, IF it was me.

    whatever you decide, GOOD LUCK!
     
  10. disabledvetswife

    disabledvetswife Mod of the Month June 2012 Trader Group

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    There would be no doubt that we could pay it off in less than 2-years. Then, being totally debt free, we could pay back all 3 savings accounts in no-time. Just using the mortgage payment we pay right now, I could have all 3 savings accounts paid back in full in 16 months. That's not including the extra money we get that could be put towards. The reason why we only owe 3.5 years now is because we have been putting an extra $1,000 per month towards it (I paid an extra $2K last month). With 0 mortgage payment, plus an extra $1-2K per month - it would be no time flat.

    Interest rates are so incredibly crappy right now, it's not even funny. I remember putting my money in a cd earning almost 7%. Haven't seen that in YEARS. Even locking up for 7-years is a crap rate right now.

    Hence why we were debating on doing what I proposed. Some people I've talked to couldn't understand why were putting the SS money away in the first place. Technically, with SSD, we aren't supposed to be "saving it". I erroneously reported that on the annual report one year, and a lady from SS called me and said "did you mean to put that you spent it all for housing, clothing and food"? I read between those lines, lol.

    I just can't get over my own head about spending it. We have no issues on paying it back - at all. With the only debt being the mortgage, we are financially fine ;-) Our "intent" was to always save it so it could be used to get (for them) a car, pay for a wedding, down payment on a house, etc.
     
  11. disabledvetswife

    disabledvetswife Mod of the Month June 2012 Trader Group

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    I forgot to mention, this is just liquid money. This isn't counting the Savings Bonds, CDs we already have - this is just straight savings accounts.
     
  12. joshmamabear

    joshmamabear Member Of The Month Nov. 2011 Trader Group

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    I understand; it was also difficult for me to let go of our savings when the van we just bought was not even a year old. When I computed the interest alone we've paid for less than a year, I knew I'd just pay it off. DH and I weighed it carefully and agreed that we didn't like to pay higher interest rates when the amount we had on hand was enough to pay off our debt. The smaller interest on our CD was the deciding factor and we never looked back from then.

    We have been debt-free for many years now and I can honestly tell you that savings can also stack up as quickly as debt. As long as you keep track of your incoming and outgoing money, you'll have nothing to worry about.
     
  13. 3timesoccermom

    3timesoccermom The Original "Viral" Foodie

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    No, I wouldn't use it. We all have good intentions but if something happened and you couldn't/didn't pay it back you'd feel guilty the rest of your life.

    I can't believe how low mortgage rates are now. When we bought our house we were paying more than 10% and a few years later refinanced to 6% and were ecstatic to get that. Still paid it off in 18 years total on 1 income.
     
  14. disabledvetswife

    disabledvetswife Mod of the Month June 2012 Trader Group

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    Yes, yes I would!
     
  15. joshmamabear

    joshmamabear Member Of The Month Nov. 2011 Trader Group

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    btw, if you don't touch that savings and decide to continue what you're doing now, how many more years are you looking at?

    compare that with the less than 2 yrs you'll have to pay should you use that savings.

    overall, what's important is that you and your DH come up with a decision that both of you can live with. then, there will be no "I told you so" that will drive a wedge between you. whatever you decide, good luck!
     
  16. jaws1

    jaws1 New Member

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    I don't have kids, but I'd offer a different suggestion: whatever amount you're putting in these accounts currently, what if you put that towards the monthly mortgage? It wouldn't be an immediate paydown, but it'd go with that $1k or so additional you're able to put in now.
    I hesitate to touch the kids' $ and savings because, God forbid, if something happened and your dh was no longer here receiving the benefits, I'm not sure how much the children would continue to get...or you. I understand you have the other monies, but with no income, that can go fast just paying monthly things, illnesses, etc.
    The decision isn't mine, and I wouldn't think badly either way you decide. I don't think anyone here would. In the end, I suggest going with your gut.
     
  17. Fillies Fan

    Fillies Fan International Man of Mystery! Trader Group

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    I would do the following:

    1. Take the money in the children's savings account to pay off as much of your mortgage as possible, thus reducing your net interest payments sharply.

    2. Purchase reducing term life insurance for the amount in the savings account. This is just about the cheapest form of insurance you can buy. It starts at the full amount and reduces gradually to nothing by the end of the policy (which is whatever length you want it to be). This protects the children's interests in the case of either you or your husband dying.

    3. Each month, put into the children's savings the amount which you would otherwise pay towards your mortgage (including interest). In the end, they will come out ahead.
     
  18. disabledvetswife

    disabledvetswife Mod of the Month June 2012 Trader Group

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    If we did nothing other than doing what we're doing now, it's 3.5 years left. That's not counting the extra I put to it. I don't count that just in case something does happen and we don't have it/can't do it.

    I want to see instant gratification, lol. I want to see that number drop. If something happened to him, his VA $ drops in half and I have no clue what SS does. Very good point!

    1. Would our net interest drop sharply since we are on the very end of the amortization schedule? (3.5 years left on a 15-year note)

    2. Neither of us can get life insurance (he's 100% disabled and I have genetic issues that preclude me from individual life insurance).

    3. That's what I planned on doing IF we borrowed their money.
     
  19. lin-duh

    lin-duh New Member

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    I'd do it. The VA will take care of your kids and college, even if you don't repay the money. They're tiny, and you have plenty of time. Why PAY extra money in interest when you could be EARNING money in interest by paying off the house and putting that money into their accounts instead??
     
  20. momee2twins+one

    momee2twins+one Member Trader Group

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    Never depend on someone else to take care of your responsibilties.
     

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