Sorry. I hit delete instead of spell check for this blurb. Apologies for sending it in two posts.
I forgot to add that there are tax implications by NOT investing in a retirement savings shelter. Rushing to pay off a low interest loan instead of adequately contributing to tax shelters can cost you in the long run. You can sometimes earn 10 or more percent by maximized contributions to retirement plans or tax sheltered savings ( equity returns PLUS tax refunds).
here is a case example from my own family. We are in Canada. My wife pays
38% income tax, I pay 31%. Both of us contribute to separate RRSP accounts, which are tax shelter retirement investment schemes. We currently pay a $1500 a month mortgage, which is 2.9% interest, variable. Currently about $950 of the mortgage is applied to principal and the remaining $550 is interest. If the rate goes up or down, and it can at any time, interest is more or less. We are in year 2 of a 25 year amortization.
my wife pays $10 000 a year mandatory contributions to her pension plan which gets about $3800 tax refund and contributes $5000 to RRSp which gets $1900. Her total refund will be $ 5700. I will receive a $1400 refund for $5000 in contributions to my RRSP. So our total tax refund will be $7100. of that $7100 refund, $3300 is from the voluntary contributions of $10 000.
Do you follow the math or am I too confusing?
My wife's retirement investments averages about 6.5 % return a year. My investments average about 7.5% a year. We are in our early 30's.
Now we happen to spend our tax refund on home improvements, paying down car loans,a nd paying down my wife's university debts. But really smart people could put that tax refund on their mortgage principal one figures
If we had applied the voluntary contributions to our retirement investments to our mortgage principal as a lump sump instead( lump sum being $10 000), how could we benefit. That $10 000 is not $20 000 like the OP's is but it's in the same realm.
Keep in mind that we are not in the United States where I guess they get some sort of tax break for paying their mortgage interest.