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Around the Internet => Mustachianism Around the Web => Topic started by: thorto0803 on February 14, 2020, 10:09:12 AM

Title: 33 year old Cashes out Brokerage Account to pay off Mortgage.
Post by: thorto0803 on February 14, 2020, 10:09:12 AM
https://www.cnbc.com/2020/02/13/why-this-33-year-old-paid-off-his-home-in-3-months.html

Not an attempt at debating paying down a mortgage vs. investing returns. This guy obviously has a FIRE mindset.

"Peace of mind isnít the only benefit to paying off his mortgage so quickly. It also gives him the freedom to pursue a secondary long-term financial goal: Leaving the workplace at 40."
Title: Re: 33 year old Cashes out Brokerage Account to pay off Mortgage.
Post by: dandarc on February 14, 2020, 10:46:43 AM
Why would you take out a mortgage in the first place in this situation? Had the money, don't want to be in debt and yet chose to sign up for a mortgage, which typically makes it a more difficult and expensive transaction?

Unless he got a discount on the house to take a loan out, like sometimes happens at car dealerships, I don't see how this makes sense.
Title: Re: 33 year old Cashes out Brokerage Account to pay off Mortgage.
Post by: ducky19 on February 14, 2020, 12:54:09 PM
I wondered about this myself - I don't know what the closing costs are on a $225,000 loan, but it can't be free. I most certainly wouldn't call him mustachian (Boglehead, maybe?) - he likes to fly planes in his spare time, and I know that's not cheap. Also, he lists out his monthly housing costs without a mortgage at $1,695. That includes the following breakdown:

Property taxes: $500 ($6,000 paid annually)
Homeowners Association (HOA) fee: $160
Utilities: $485 ($65 home warranty, $200 cable, $80 gas, $80 water, $60 alarm)
Homeowners insurance: $400
Repairs: $150

Then later in the article, he states "I always wanted to have that stability ... As long as we can scrape up $6,000 per year for property taxes, weíre fine." Um... not really. You've introduced a lot of costs that are difficult (if not impossible) to pare down. 'Itís mine," he says. "You canít take it away." Until you can't scrape up that $6,000...

I mean, overall, kudos to him for saving up that much coin and buying his house outright. It just seems to me there is a LOT of wasted opportunity in this story. It's almost like a contest to see which author can come up with the most outrageous sounding title. If that's the case, the writer on this one wins.
Title: Re: 33 year old Cashes out Brokerage Account to pay off Mortgage.
Post by: bacchi on February 14, 2020, 08:34:35 PM
Also, he lists out his monthly housing costs without a mortgage at $1,695. That includes the following breakdown:

Property taxes: $500 ($6,000 paid annually)
Homeowners Association (HOA) fee: $160
Utilities: $485 ($65 home warranty, $200 cable, $80 gas, $80 water, $60 alarm)
Homeowners insurance: $400
Repairs: $150

Something must be off. $400 a month for insurance? Is his home in a flood plain?

And $160/month for HOA fees? $200 a month for cable?
Title: Re: 33 year old Cashes out Brokerage Account to pay off Mortgage.
Post by: Aunt Petunia on February 15, 2020, 08:05:06 AM
Why would you take out a mortgage in the first place in this situation? Had the money, don't want to be in debt and yet chose to sign up for a mortgage, which typically makes it a more difficult and expensive transaction?

Unless he got a discount on the house to take a loan out, like sometimes happens at car dealerships, I don't see how this makes sense.

I am trying to puzzle this out too. I can think of three reasons:
1 he didn't quite have the money to pay cash for the house but then his stocks went up enough in three months to do so.
2. A friend/ family member convinced him to get the mortgage and invest the money but then he simply changed his mind.
3. He just didn't know that you can pay cash for a house.

Either way that $200 for cable is making my eyes bleed, but he is still doing way better than most people.
Title: Re: 33 year old Cashes out Brokerage Account to pay off Mortgage.
Post by: fredbear on February 19, 2020, 04:16:50 PM
Doesn't make a lot of sense to me, either, but there is something to be said for having your credit reports reflect a relatively large loan paid off.
Title: Re: 33 year old Cashes out Brokerage Account to pay off Mortgage.
Post by: TVRodriguez on February 19, 2020, 05:11:19 PM
Also, he lists out his monthly housing costs without a mortgage at $1,695. That includes the following breakdown:

Property taxes: $500 ($6,000 paid annually)
Homeowners Association (HOA) fee: $160
Utilities: $485 ($65 home warranty, $200 cable, $80 gas, $80 water, $60 alarm)
Homeowners insurance: $400
Repairs: $150

Something must be off. $400 a month for insurance? Is his home in a flood plain?


I didn't read the article, but $4800/year for HOI is what we pay in Florida.
Title: Re: 33 year old Cashes out Brokerage Account to pay off Mortgage.
Post by: mm1970 on February 19, 2020, 06:38:17 PM
So even *I*, who understand the value of pre-paying a mortgage (from a mental standpoint) think it's crazy to take money out of a brokerage account to do so.  I mean, really?
Title: Re: 33 year old Cashes out Brokerage Account to pay off Mortgage.
Post by: bacchi on February 20, 2020, 10:12:46 AM
Also, he lists out his monthly housing costs without a mortgage at $1,695. That includes the following breakdown:

Property taxes: $500 ($6,000 paid annually)
Homeowners Association (HOA) fee: $160
Utilities: $485 ($65 home warranty, $200 cable, $80 gas, $80 water, $60 alarm)
Homeowners insurance: $400
Repairs: $150

Something must be off. $400 a month for insurance? Is his home in a flood plain?


I didn't read the article, but $4800/year for HOI is what we pay in Florida.

That makes sense but this person's house is in a suburb of Dallas, which is far from hurricanes and other natural disasters.

I'll chalk it up to a reporting mistake. (But a home warranty? Total waste of money.)
Title: Re: 33 year old Cashes out Brokerage Account to pay off Mortgage.
Post by: mm1970 on February 20, 2020, 01:58:40 PM
Also, he lists out his monthly housing costs without a mortgage at $1,695. That includes the following breakdown:

Property taxes: $500 ($6,000 paid annually)
Homeowners Association (HOA) fee: $160
Utilities: $485 ($65 home warranty, $200 cable, $80 gas, $80 water, $60 alarm)
Homeowners insurance: $400
Repairs: $150

Something must be off. $400 a month for insurance? Is his home in a flood plain?


I didn't read the article, but $4800/year for HOI is what we pay in Florida.

That makes sense but this person's house is in a suburb of Dallas, which is far from hurricanes and other natural disasters.

I'll chalk it up to a reporting mistake. (But a home warranty? Total waste of money.)
tornados?
Title: Re: 33 year old Cashes out Brokerage Account to pay off Mortgage.
Post by: DeepEllumStache on February 20, 2020, 02:44:34 PM
Also, he lists out his monthly housing costs without a mortgage at $1,695. That includes the following breakdown:

Property taxes: $500 ($6,000 paid annually)
Homeowners Association (HOA) fee: $160
Utilities: $485 ($65 home warranty, $200 cable, $80 gas, $80 water, $60 alarm)
Homeowners insurance: $400
Repairs: $150

Something must be off. $400 a month for insurance? Is his home in a flood plain?


I didn't read the article, but $4800/year for HOI is what we pay in Florida.

That makes sense but this person's house is in a suburb of Dallas, which is far from hurricanes and other natural disasters.

I'll chalk it up to a reporting mistake. (But a home warranty? Total waste of money.)
tornados?

I have DFW friends whose mortgages required flood insurance due to being in 100 year flood plains, but itís not extremely common. Our homeowners insurance runs $1600/year but with a high deductible. Itís more likely a reporting mistake or an indicator that he needs to shop around/reconsider his deductibles.

Hail is a big driver of home insurance cost in the area since most roofs get hail damaged before the end of their useful life. Typically tornadoes are greater in individual damage but their paths tend to be more limited versus hail storms that impact a larger area. Though we had an October storm spawn several wide tornadoes and one of those tornadoes slowly demolished one of the most expensive areas of the city. Apparently DFW had two of the 14 $1B+ US climate disasters last year. (https://www.dallasnews.com/news/weather/2020/01/08/us-climate-disasters-severe-storms-cost-45-billion-in-2019-report-finds/) The October storm took the top spot.
Title: Re: 33 year old Cashes out Brokerage Account to pay off Mortgage.
Post by: Telecaster on February 20, 2020, 02:50:46 PM

I didn't read the article, but $4800/year for HOI is what we pay in Florida.

I pay a grand a month for our place in Hawaii. 
Title: Re: 33 year old Cashes out Brokerage Account to pay off Mortgage.
Post by: dandarc on February 21, 2020, 09:17:07 AM

I didn't read the article, but $4800/year for HOI is what we pay in Florida.

I pay a grand a month for our place in Hawaii.
I pay $800 / year for our place in Florida. Am I doing this right?