--------------Thanks for your question, Matt. And, thanks for being a regular listener to the podcast. If you haven’t checked out our private group on FaceBook, The RePeters, look us up and join (this goes for the rest of you, too). I think you might enjoy it!Let me congratulate you on the work you’ve done saving for your future. You will, without a doubt, be better off for your efforts when the time comes to upgrade to a bigger house. The question you raise, however, is a good one. If I’m being honest, these types of questions are some of my favorites to answer.Currently, you’ve got your savings set aside in an online saving account earning a robust (comparatively speaking) 2%. The interest you’re paying on your home is near twice that, but still very reasonable at 3.85%. Should you risk tying up too much money by using your funds to pay down the house in order to save a little bit of cash? If I was in your shoes, this is the approach I’d consider taking:Start determining the price range of the next home you want to purchase. How much should that be? We suggest keeping your housing expenses right around 25% of your take-home pay each month (unless you live on a coast where housing costs are considerably greater). You’ll probably have to do some calculating as to how a monthly payment translates to the purchase price of the home, but there are a number of online calculators that can help you do this pretty easily. By the way, don’t be swayed when a bank or other lender tells you that you qualify for a way bigger mortgage than what we recommend. The focus of banks (especially large national ones) has largely turned to encouraging you to spend money instead of saving it. Banks want to make money and that often means offering people loans that they can’t reasonably afford. Don’t fall for it.With that PSA out of the way, here’s where you start to make money moves.Once you determine the price you want to pay for the future house, calculate what 20% of that number is in order to come up with your target down payment. Does your current future home savings account cover that amount of money? If so, great! We’ll move on to step two shortly. If it doesn’t, keep plugging away. When you get there, move on to the next step.In this step, you will subtract the calculated down payment from the balance of your savings account and then apply the difference to your current mortgage. This will accomplish two things for you.
With this approach, you’ll be able to be prepared for the future while making a dent in your current mortgage, as well. That’s killing two birds with one stone (sorry about the birds).Finally, once you’ve bought a new house and sold your current home, you’ll be able to take the equity you had in your current home and put it towards the new mortgage, address any remodeling/upgrades/repairs, give a boost to college savings for your kids, a combination of any of these, or something entirely different. Regardless, you’ll be in great shape to make a number of positive financial moves.