patrick.net

Pay it off and get an equity line for emergencies.
That way you don't waste on paying interest, and you still have access to dip into your equity should the need arise.

It's having your cake and eating it.

You didn't say what state you live in. With a $70-75K income and married filing jointly, you are in the 15% bracket. Even in a high tax state like California, it sounds like you wouldn't be itemizing deductions with those numbers. Even if we assumed all $70K was at 9.3% (a little over $6K), your mortgage interest for this year is barely over $2K, so you probably get no tax benefit from having a mortgage because the standard deduction is $12,400 for MFJ (unless you have massive charitable contributions or something). Even if you were to itemize, your mortgage only saves you $300 in tax per year.

Maybe you could do something part-way, like refi into a 15-year mortgage. This is probably still within your budget, and then you'd pay off the loan faster and be annoyed for less time. However, note that inflation makes your mortgage payments feel smaller -- your mortgage payment will probably be lower than cable + internet bills in 7-10 years if those stay on their trend.

Probably makes sense to use Roth accounts with only a 15% marginal tax rate -- your effective tax rate is probably considerably lower than that. There are techniques available to put more money in Roth accounts too.

"Every moth I get my loan statement and it annoys me that I am paying about $200/month in interest (not enough to even help my taxes, I take the standard deduction) at 3.75% and I have the savings to pay it off that is only earning me 0.95%. "

Unless you have plans for the 60K in the short term, the next best thing is to earn 3.75% (standard deduction = 0 tax benefit) instead of .75% net of income tax. (subject to federal and state income tax).

Once you are loan free, you can build up savings quickly. Investments I presume means CD's bonds, stocks are really just cash as well.

Never touch your Roth IRA for anything except a dire emergency.

I would have invested the money you have in a money market account, but I'm different from other people.

I'd rather have Vanguard Dividend Growth or some other account rather than let a bank use my money for free.

Thanks for the responses so far! Yep, I am in good old California (7th generation northern Californian).

And I am currently in a 15 year mortgage at 750 per month including tax and insurance. I have been paying off an additional 250 on the principal each month and if I continue doing that it will be paid off in April 2021.

Billy,

Very good suggestions above. Pay off your loan. Then go get a HELOC. It's free. Once your mortgage is paid off, you can save much quicker. Your mortgage interest deduction is worthless at the current loan balance. Congrats on timing your purchase perfectly.

I'm in a similar position (3.25%, 30 year loan), but not enough savings to pay it off tomorrow. I have a bit different take on the situation - the interest rate is so low, I'd like to hang on to it and do other things with my money. I don't think having a HELOC you can tap into is quite the same -- the interest rate isn't fixed.

I guess if you think you are likely to need the capital in the short- to mid-term, and/or you think interest rates are likely to go up, I'd consider hanging on to the cash. Maybe I'm not thinking about it right, but the flexibility of the cash on hand, and the hedge against rising rates might outweigh the interest expense...