draconisskye - Your comments have reinforced my opinion that reducing our mortgage load ASAP really is in our best interests. Given your situation, I think you are very right. 110k first mortgage @ 6.00% fixed (25 years remaining) 17k second mortgage @ 7.85% fixed (9 years remaining) ...We bought the house 4 years ago for 156k and currently owe 137k. You know something? You may be able to get out of that 2nd mortgage quicker than you think. If you paid $156K for the house and values in your area have gone up, then you could very well be beyond the ratio for requiring PMI, which is why you took out the 80/20 (I presume). It may be in your best interest to get the house appraised to see how much it has grown. Right now with both your mortgages, you are at 13% of the original value. With a higher appraisal, it could very well take you over 20% and then allow you to refi into one single mortgage. You could also pay down the amount that will take you down to 20% without tapping too much into your savings. You would still owe $137K, but it would be in one mortgage, lower interest rate and smaller overall payments, thus saving thousands and thousands in interest. Crunching the numbers, all you would need is an appraisal of $165K (approx). Alternatively, you could pay down your 2nd by $7K to take your total amount owing to 130K and with the amount you paid ($156K), you would be under 80% - enough to qualify for no PMI and a single mortgage refinance. If the value has increased, you would need less than $7K to do it. However, there are closing costs associated with that, but there are lenders offering no closing costs right now. Without paying it off entirely, you do have some alternatives to get out from under this. Your situation is one that is a very good example of why taking an 80/20 to avoid PMI can bite you in the bum in the future. It costs so much more in interest than it's really worth. People don't know that they can pay the PMI outright in full at closing. That saves thousands in interest over the life of the loan. So, first step - get an appraisal. Then crunch the numbers. By law, the lender must remove PMI when you owe less than 80% of the VALUE of the home, not what you paid. And like someone mentioned upthread, your 2nd may not be as high as 17K, so you could be close to the needed ratio already without even knowing it, so get the payoff numbers too. HTH!

Hi glavinsolo, When you buy your home, do you plan to cash in your MFs in order to achieve a down payment? You don't say what kind they are, but with expected rate of return of 8% I assume that they're equity-based. The expense rate of 0.5% makes me wonder about that, though, as few charge that low. If you plan to liquidate within a couple of years, if the markets go down, you may be an unhappy camper when it comes time to reclaim the investment. On the other hand, if you have the certificates issued, you can take them to a financial institution to use them as collateral for a loan ... ... which will work if your growth rate on the investment is greater than the rate you pay on your mortgage, after allowing for income tax cost and deductibility in each case. That way, you convert that investment from being a short-term one into a longer-term one, which reduces your short-term risk. Be aware, though, that a financial institution will be unwilling to loan you more than 50% (or at most 60%) of the value of the asset. But you carry some risk if you draw near the limit of what they'll allow, for if the value of the asset goes down and slips below double the value of the loan, the lender will want either some cash to reduce the amount of the loan, or some other assets to underwrite the support for the loan. And they'll want it today ... tomorrow at the latest. With regard to the cost of homes, I'm not familiar with the U.S. markets in general, let alone the ones in your area. But some calculate that the tough times in the housing markets are far from over. I think that it would be well for you to carry on some study of what house prices are doing in the area where you prefer to buy. If you buy early, and house prices continue to reduce, you'll be an unhappy camper, then, as well. Mortgage lenders get quite unhappy if the valuation of the house comes rather close to the amount of the mortgage still owing. If the value goes too low, they'll require that you sell it ... at a loss, of course ... ... or they may choose to foreclose, in which case there'd almost surely be more costs if they sell it than if you do. Which could well mean that they'd be notifying you that you owed them the difference between what you owed on the mortgage, plus costs of repossession and sale, less the amount that they sold it for. Not a pleasant scenario. But one that many who accepted those low-rate mortgages a few years ago will be facing. My feeling is that if I wanted to buy a home in the U.S. these days, I'd be keeping my money in my genes (sorry, "jeans") for a while. There are those who claim that I have some frugal chromosomes in my genes, as a matter of fact. As a matter of fact, my daughter is considering buying accomodation in Arizona, these days. Good wishes as you make your plans. ole joyful

Great post! Wish I had met you years ago!....but luckily I ended up just fine (secure and comfortable), and retiring early (48) anyway.....could have been earlier, more secure, and more comfortable I guess. Now if I could just retire from this little bit of housework I quit putting off, I'd really have it made. Sue...who would rather play on the computer than 'work'

We are in the same boat and will work with a financial planner for the short term. The only difference is our house is already paid off and to me tha's a huge priority. Because you can lose money investments no matter how safe you think they are. Many thought Worldcom and Enron were safe companies, afterall, what can be safer than a communications and utility company, haha. Even steady companies like Lucent and Sun are at a small fraction of where they were. With a paid off house you'll always have a place to live, you'll always have the peace of mind that it's yours forever. Just remember, financial planners are great a history but can predict the future no better than you or your monkey (although it's been proven that monkeys are better at figuring which stocks to buy). Personally, I'm thinking of tax free bonds, a steady percentage that I'm not taxed at is huge for us as we have high taxable income. Also anything tax deffered is great for when we are pulling money out we can pay the lower rate (which is also not guaranteed, just the current law, just like SS payments are the current law).