Modeling the early payoff of a mortgage. 

A. Assume you have the cash in regular assets to pay off the mortgage

  1. Create an Alternative Profile called “payoff mortgage.”
  2. In that Alt Profile modify the housing and use the Additional Monthly payment field to pay off the balance. For example, if your mortgage balance was $75,123. You can make an additional monthly payment of 76,000 (it's fine to go over the amount you owe; the program will ignore that excess) and set the year you want to pay off the mortgage. This will make a payment starting January in the year you chose.
  3. Run the comparison and you'll see in the Alt profile the house is paid off in 2020 (or the year you chose), and the comparison of discretionary spending will show you the annual difference this change makes.

B. Assume you don't have enough regular assets to payoff the mortgage. Say you only have 15,000 in reg assets and the mortgage balance is 75,123.

  1. Create an Alternative Profile called “payoff mortgage.”
  2. Create a “special withdraw”* of some adequate amount, say for this example, $75,000 from your IRA or 401(k). This $75,000 needs to be in addition to any smooth withdraws that are already being withdrawn if you have started smooth withdraws.
  3. In that Alt Profile modify the housing and use the Additional Monthly payment field to pay off the balance. So say your mortgage balance was $75,123. You can make an additional monthly payment of 76,000 (it's fine to go over the amount you owe; the program will ignore that excess) and set the year of the payoff which should be the same year as the IRA withdraw. Because you made that special withdraw from the IRA, you will have the cash available to pay off the mortgage.
  4. Run the comparison and you'll see in the Alt profile the house is paid off in 2020 (or the year you chose), and the comparison of discretionary spending will show you the annual difference this change makes.

* To create the "Special Withdrawal" select Retirement Accounts, and choose a Roth or non-Roth account that will be the source of funds.  Edit or "Modify" that account and scroll to "Special Withdrawal," and click on "Add Special Withdrawal," and then provide the required information. 

C. Assume you want to make extra payments each month. 

  1. Use the extra payment field to enter the amount of extra payment you want to make each month. The assumption made here is that you will continue these extra payments for the life of the loan.