Author Topic: Mortgage War! (Getting So Close)  (Read 11463 times)

401Killer

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Mortgage War! (Getting So Close)
« on: May 04, 2015, 07:57:18 AM »
Over the years I've been slowly increasing the extra principle towards the house payment. In the last few I've gone from a few hundred a month to around $850 extra for an even payment of $2000. This last month I stepped it up once again and am now paying $2500/mo for a total of $1385.48 in principal alone. So with the principal of the loan plus this extra I'm putting down $1,961 a month towards my principal. This gives me a payoff date of March of 2017. What is most exciting is that I know once it gets down under $10,000 the emergency fund and other money will be diverted to finally kill this thing. I'll have it paid off by the end of next year and will be 38 years old.

This is all still happening with maxing out the 401k as well. I am as excited as you can be about this kind of thing. Having basically no debt and a very good paying job before 40 the possibilities are endless.

/hug MMM

« Last Edit: May 05, 2015, 02:46:28 PM by 401Killer »

Bob W

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Re: Mortgage War! (Getting So Close)
« Reply #1 on: May 04, 2015, 08:03:37 AM »
Good for you! 

   Love to hear about people saving and investing large amounts of their income.   

Mortgage pay downs can be a very motivating game for lots of readers here as it is such a measurable and nonfluctuating straight-line target.    It seems that it really motivates people to find every possible leakage of money and throw it at the mortgage.   Thus developing some serious frugality muscles. 

You're wise to keep the 401K up while doing so IMHO. 

You Go!

Franklin

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Re: Mortgage War! (Getting So Close)
« Reply #2 on: May 04, 2015, 08:27:09 AM »
Nice! Congrats.

Standby for the Mortgage Payoff Police.  Hands at 10 and 2.  Don't look'em in the eye.

Cheddar Stacker

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Re: Mortgage War! (Getting So Close)
« Reply #3 on: May 04, 2015, 08:34:54 AM »
Nice! Congrats.

Standby for the Mortgage Payoff Police.  Hands at 10 and 2.  Don't look'em in the eye.

Ha! I'm one of them, but I'll look the other way this time.

Congrats 401Killer!

nereo

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Re: Mortgage War! (Getting So Close)
« Reply #4 on: May 04, 2015, 08:44:43 AM »
ok, like Cheddar Stacker I guess you could also call me a member of the Mortgage Payoff Police (the MPP?).
... but what really concerns me is this statement:
Quote
What is most exciting is that I know once it gets down under $10,000 the emergency fund and other money will be diverted to finally kill this thing. I'll have it paid off by the end of next year and will be 39 years old.

If you think it is important to have an emergency fund, why are you going to deplete it to zero out your mortgage 5 months early?  What "other money" are you talking about that you can divert into your home?  What do you have that won't be tied to your home?

Either way, I still think having a paid off house is reason to celebrate.  Please post to the celebration thread when you finally make the final payment.

Franklin

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Re: Mortgage War! (Getting So Close)
« Reply #5 on: May 04, 2015, 08:56:29 AM »
Quote
If you think it is important to have an emergency fund, why are you going to deplete it to zero out your mortgage 5 months early?  What "other money" are you talking about that you can divert into your home?  What do you have that won't be tied to your home?

Agreed.  Technically it's not an emergency fund if that's what it is used for. 

acroy

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Re: Mortgage War! (Getting So Close)
« Reply #6 on: May 04, 2015, 09:10:20 AM »
good job!

I actually stopped trying to pay off my mortgage. paying 4% and in a highish tax bracket, so effective rate is around 3%.

My portfolio has averaged around 8% for 12yrs; so it makes more sense to keep the $$ in the mortgage. It's essentially margin investing.

Bob W

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Re: Mortgage War! (Getting So Close)
« Reply #7 on: May 04, 2015, 09:13:51 AM »
Emergency Fund police checking in -----  do not pass go and take 7 steps back. 

Simply rely on credit cards and HELOCs and his S and P funds as emergency backstops.    Why wait?   

Throw that emergency fund at the house payment now!

Do it  ---  You know you want to because you're already planning on doing it.     

dude

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Re: Mortgage War! (Getting So Close)
« Reply #8 on: May 04, 2015, 10:01:37 AM »
Totally badass. Congrats!

I've thought about doing the same, but have concluded that with a 3.5% rate (less than that after the tax deduction), I'm not in a terrible hurry.  Also not too concerned about carrying a mortgage into FIRE because (a) I can easily afford it currently and in FIRE, and (b) that fixed payment will only get cheaper and cheaper as time goes on since I'll get COLAs on my pension and be adjusting my 4% (or so) withdrawals for inflation.
« Last Edit: May 04, 2015, 10:07:36 AM by dude »

401Killer

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Re: Mortgage War! (Getting So Close)
« Reply #9 on: May 04, 2015, 10:48:58 AM »
ok, like Cheddar Stacker I guess you could also call me a member of the Mortgage Payoff Police (the MPP?).
... but what really concerns me is this statement:
Quote
What is most exciting is that I know once it gets down under $10,000 the emergency fund and other money will be diverted to finally kill this thing. I'll have it paid off by the end of next year and will be 39 years old.

If you think it is important to have an emergency fund, why are you going to deplete it to zero out your mortgage 5 months early?  What "other money" are you talking about that you can divert into your home?  What do you have that won't be tied to your home?

Either way, I still think having a paid off house is reason to celebrate.  Please post to the celebration thread when you finally make the final payment.

I'm aware of the financial differences between investing that extra money rather than paying the house off early. I'm one of the many that chooses to attack the house payment anyway as it has other non financial benefits that for me personally outweigh the interest that I could be gaining. Mortgage interest is 2.99% currently with $45k left to go.

As far as the emergency fund, I would not deplete it to zero but I have a much larger e-fund then what I really would ever need. I'm not sure why I keep it at around the $10k to $15k range but its very nice knowing its there. This is why there is no need to make it any higher. After bonus and taxes it would get too high and I would make a $5k single house payment to keep it under control.
« Last Edit: May 04, 2015, 10:51:20 AM by 401Killer »

Money Badger

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Re: Mortgage War! (Getting So Close)
« Reply #10 on: May 05, 2015, 09:10:37 PM »
Emergency Fund police checking in -----  do not pass go and take 7 steps back. 

Simply rely on credit cards and HELOCs and his S and P funds as emergency backstops.    Why wait?   

Throw that emergency fund at the house payment now!

Do it  ---  You know you want to because you're already planning on doing it.     

LMAO on this post.    I did exactly this on the last house...   Once we were close after years of chipping away, I put in the emergency fund, sold an expensive truck that was already paid for, etc. to kill the mortgage.   It's chinese water torture to see a monthly statement from a mortgage when you have easy means of paying it off!!

nereo

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Re: Mortgage War! (Getting So Close)
« Reply #11 on: May 06, 2015, 04:05:16 AM »

LMAO on this post.    I did exactly this on the last house...   Once we were close after years of chipping away, I put in the emergency fund, sold an expensive truck that was already paid for, etc. to kill the mortgage.   It's chinese water torture to see a monthly statement from a mortgage when you have easy means of paying it off!!
Really...??  It's Chinese water torture to see over 95% of each mortgage payment going toward principle during the final 24 monthly payments?  That part would fill me with glee.  Selling investments and possessions, now that would bum me out.
(shrug) - I just don't get it.  Congrats on being mortgage free though!

Money Badger

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Re: Mortgage War! (Getting So Close)
« Reply #12 on: May 07, 2015, 10:01:54 PM »
Nereo, LOL!  I guess it comes down to the motivations behind the mortgage pay-off in the first place...   Personal history, attitude, risk tolerance all comes into play.    Agree the math favors the steady investing which is obvious, but "freedom" and "quality of life" have higher value to some, though they are not even remotely financial...

When one is climbing his or her equivalent of financial Mt. Everest, there's no dawdling about reaching the summit when you're meters away...   Instead, sprint to conquer the mountain, breath in the smells of rarified victory at the top, and then move on to the next, higher financial mountain sooner!   

nereo

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Re: Mortgage War! (Getting So Close)
« Reply #13 on: May 08, 2015, 05:43:48 AM »
Nereo, LOL!  I guess it comes down to the motivations behind the mortgage pay-off in the first place...   Personal history, attitude, risk tolerance all comes into play.    Agree the math favors the steady investing which is obvious, but "freedom" and "quality of life" have higher value to some, though they are not even remotely financial...

When one is climbing his or her equivalent of financial Mt. Everest, there's no dawdling about reaching the summit when you're meters away...   Instead, sprint to conquer the mountain, breath in the smells of rarified victory at the top, and then move on to the next, higher financial mountain sooner!
yeah.... I applaud the OP for polishing off his/her mortgage, regardless of which method they decided on, and you're right that it all comes down to personal choice. It isn't what I would have done but it wasn't a bad decision either.
I just think we severely overuse hyperbole and that's what I was objecting to.  It seems I can't watch the news or a sporting even without something happening with is 'unprecedented' or 'absolutely unbelievable' or 'literally the worst/best thing that could have happened.'  Now the final payments of a mortgage with a historically low interest rate is 'Chinese water torture'?  No, it isn't.
... that's all.

Cheddar Stacker

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Re: Mortgage War! (Getting So Close)
« Reply #14 on: May 08, 2015, 06:03:22 AM »
'Chinese water torture'?  No, it isn't.

Well, when you consider the thread title, maybe it is. We are at war dammit! So it fits the hyperbole theme.

midweststache

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Re: Mortgage War! (Getting So Close)
« Reply #15 on: May 08, 2015, 07:35:45 AM »
This is AMAZING! Congrats 401Killer!

Think about all the things you can do with that additional $2,500/month! (Have you guys thought about what you'll do with that monthly surplus?)

- You could replenish the money you take from your "Emergency Fund" to annihilate that final $10,000 in about four months!

- You could put $30,000 in taxable investment accounts in one year!

- You could take a lavish trip around the world, staying in overpriced hotels and buying lots of unnecessary touristy crap!

OK, maybe not the "lavish" and "overpriced hotels/touristy crap" part of that last one... :)

nereo

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Re: Mortgage War! (Getting So Close)
« Reply #16 on: May 08, 2015, 07:51:07 AM »
'Chinese water torture'?  No, it isn't.

Well, when you consider the thread title, maybe it is. We are at war dammit! So it fits the hyperbole theme.
Ok, so let's consider the thread title (WAR!!)  The hyperbole still doesn't fit the situation.  "Chinese water torture" is very slow, and inflicts a high level of pain and fear almost continuously.  That analogy would make sense during the start of mortgage when you keep making payments and the principle barely budges. In battle-terminology, at the start you're deploying all manpower and firepower, going block-to-block in an effort to gain ground.
By the end of your mortgage, your enemy (interest) is out of ammo and in full retreat.  You're capturing ground just as fast as your tanks can drive over the fleeing enemy.  All sides acknowledge the end is near and the brass are drafting up terms of surrender.  Regardless of whether you deploy more resources or keep your current fighting force the end is imminent.  It's the exact opposite of slow and painful.

EDIT: fixed a stupid grammar mistake... sigh...  I'm off my game.
« Last Edit: May 08, 2015, 02:16:57 PM by nereo »

401Killer

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Re: Mortgage War! (Getting So Close)
« Reply #17 on: May 08, 2015, 08:32:40 AM »
This is AMAZING! Congrats 401Killer!

Think about all the things you can do with that additional $2,500/month! (Have you guys thought about what you'll do with that monthly surplus?)

- You could replenish the money you take from your "Emergency Fund" to annihilate that final $10,000 in about four months!

- You could put $30,000 in taxable investment accounts in one year!

- You could take a lavish trip around the world, staying in overpriced hotels and buying lots of unnecessary touristy crap!

OK, maybe not the "lavish" and "overpriced hotels/touristy crap" part of that last one... :)

With my 401K set to max out at the end of the year I will simply change it to the company max(50%) and max it out early. I'll immediately start(or before the payoff) my Vanguard account for the wife and I and max out our Roth IRA's. Then depending how we are doing max out her 401K as well. That first year we are planning on showing our home a little TLC and do a few things it needs but after that is going to be our race to a net worth of a half million. Currently at around $215,000. I don't think it will take very long.

Our long term retirement plans are to simply have a small ish motor home or camper trailer and explore North America slow traveling. Knowing we don't need a motor home or trailer with marble countertops and custom paint jobs the cost is much more inline with what we would spend.

It really feels like we are sitting on a winning lottery ticket that we don't even need to cash. Knowing that we will never HAVE to pay interest for anything for the rest of our lives is just stupid. To know that we could basically have anything we wanted, we could drive any car we could ever desire but choose not too. The benefits are 10x more then actually having that stuff. We are not even close to having as big of a moustache as many people on here but the changes in our lives are huge.

Clean Shaven

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Re: Mortgage War! (Getting So Close)
« Reply #18 on: May 08, 2015, 08:42:35 AM »


Knowing that we will never HAVE to pay interest for anything for the rest of our lives

That's an awesome feeling, isn't it? Congrats!

When I realized that I don't ever need to take out a loan for anything ever again, I decided to start churning credit cards for the sign up bonuses. I don't care what it looks like on my credit report, because I don't need credit. May as well take advantage of all the freebies that giant corporations want to throw at me!

brooklynguy

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Re: Mortgage War! (Getting So Close)
« Reply #19 on: May 08, 2015, 08:46:25 AM »
Ok, so let's consider the thread title (WAR!!)  The hyperbole still doesn't fit the situation.  "Chinese water torture" is very slow, and inflicts a high level of pain and fear almost continuously.  That analogy would make sense during the start of mortgage when you keep making payments and the principle barely budges. In battle-terminology, at the start you're deploying all manpower and firepower, going block-to-block in an effort to gain ground.
By the end of your mortgage, you're enemy (interest) is out of ammo and in full retreat.  You're capturing ground just as fast as your tanks can drive over the fleeing enemy.  All sides acknowledge the end is near and the brass are drafting up terms of surrender.  Regardless of whether you deploy more resources or keep your current fighting force the end is imminent.  It's the exact opposite of slow and painful.

I loved this post.  And it's the opposite feeling for those of us taking the opposite approach:  "No, dammit!  Don't make me pay back more principal on my ultra-cheap debt!  I want to keep it outstanding for as long as possible, so I'm going to call in the fighter jets and heavy artillery and refinance into a new 30-year mortgage!"

Sorry if I'm helping to rain on anyone's parade -- I heard the request for back-up on my Mortgage Payoff Police radio and couldn't resist answering the call.

Congrats to everyone who paid off their mortgage wanting to do so!

Cheddar Stacker

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Re: Mortgage War! (Getting So Close)
« Reply #20 on: May 08, 2015, 01:27:05 PM »
Ok, so let's consider the thread title (WAR!!)  The hyperbole still doesn't fit the situation.  "Chinese water torture" is very slow, and inflicts a high level of pain and fear almost continuously.  That analogy would make sense during the start of mortgage when you keep making payments and the principle barely budges. In battle-terminology, at the start you're deploying all manpower and firepower, going block-to-block in an effort to gain ground.
By the end of your mortgage, you're enemy (interest) is out of ammo and in full retreat.  You're capturing ground just as fast as your tanks can drive over the fleeing enemy.  All sides acknowledge the end is near and the brass are drafting up terms of surrender.  Regardless of whether you deploy more resources or keep your current fighting force the end is imminent.  It's the exact opposite of slow and painful.

I loved this post.  And it's the opposite feeling for those of us taking the opposite approach:  "No, dammit!  Don't make me pay back more principal on my ultra-cheap debt!  I want to keep it outstanding for as long as possible, so I'm going to call in the fighter jets and heavy artillery and refinance into a new 30-year mortgage!"

Sorry if I'm helping to rain on anyone's parade -- I heard the request for back-up on my Mortgage Payoff Police radio and couldn't resist answering the call.

Congrats to everyone who paid off their mortgage wanting to do so!

Yes, congrats again 401Killer. Or anyone else who chooses that path. Not for me, but I commend you nonetheless.

nereo, you're spot on. I just happened to see your post this morning, and thought the irony of the title and the torture analogy was too good to ignore so I had to chime in on it.

brooklyn, if I may, I believe the refi to a brand new 30 yr mortgage might be considered "re-deploying most of your troops to another battlefield and letting this little, already victorious battle continue on indefinitely." You've won the battle when you can pay it off, but you can win the war faster when you strategically put those resources to work elsewhere.

brooklynguy

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Re: Mortgage War! (Getting So Close)
« Reply #21 on: May 08, 2015, 03:27:25 PM »
brooklyn, if I may, I believe the refi to a brand new 30 yr mortgage might be considered "re-deploying most of your troops to another battlefield and letting this little, already victorious battle continue on indefinitely." You've won the battle when you can pay it off, but you can win the war faster when you strategically put those resources to work elsewhere.

Good point, Cheddar!  Though I suppose the war analogy doesn't really translate properly into our scenario, because the mortgage isn't an enemy we're trying to defeat, but one of the weapons we're using in our war against a different enemy (working tenure and/or portfolio failure?).

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Re: Mortgage War! (Getting So Close)
« Reply #22 on: May 08, 2015, 04:13:05 PM »
Great going.  Good luck.

I'm so impatient about the last $36K of mortgage from now until Jan 2016.

I don't like having such a tight budget due to the extra principal payments that if I want to do something extra, I have to put in OT to cover it.

nereo

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Re: Mortgage War! (Getting So Close)
« Reply #23 on: May 09, 2015, 05:44:27 AM »
I'm so impatient about the last $36K of mortgage from now until Jan 2016.

I don't like having such a tight budget due to the extra principal payments that if I want to do something extra, I have to put in OT to cover it.
This is exactly the sort of logic that baffles me.  During the final year or two of a mortgage, making extra payments has the least amount of impact on the amount of interest that you pay.  It reduces that inflation hedge (one of the great strengths of having a mortgage, particularly in today's environment) and in this example it reduces cash flow and puts a cramp in his/her lifestyle.

401Killer

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Re: Mortgage War! (Getting So Close)
« Reply #24 on: May 14, 2015, 09:30:26 AM »
Well.. I've opened a Vanguard account and am just trying to read all of the information on the MMM boards about it all. I'm looking at the VTHRX(2030) to start(or stay) with(36 y/o). After this post it got me thinking more about not waiting until the house is paid off to really begin my Roth IRA.

Looking at my loan calculator is amazing to see that currently out of my total payment only $112.23 is interest. I knew that the number was low but when I really look at the numbers it pushes me to reduce my extra payment amount and invest more. Its just the weigh of that mortgage bill is heavy on the shoulders but when you really look at the numbers its not real weight. In 3 months the interest will be below $100...

The mortgage is just such a huge goal I can't get past deferring any of that money. I would really like to fund the Roth IRA to $5,500 and just dump the rest back on the mortgage war. That would max 401k and Roth. Once they are taken care of, kill the mortgage!

I few more days/weeks of reading and I think I'll be getting there... This is much more of a mental war than anything else.
« Last Edit: May 15, 2015, 08:21:08 AM by 401Killer »

Cheddar Stacker

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Re: Mortgage War! (Getting So Close)
« Reply #25 on: May 14, 2015, 02:18:40 PM »
The things is, once the 2014/2015/2016 IRA/401K window closes, it never opens again. You can't make the contribution in the future.

Bartstache

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Re: Mortgage War! (Getting So Close)
« Reply #26 on: May 14, 2015, 02:38:56 PM »
Congratulations and it is well worth it.  We paid our mortgage off about a year ago and never looked back.  It is a very empowering feeling.

401Killer

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Re: Mortgage War! (Getting So Close)
« Reply #27 on: May 15, 2015, 05:11:12 AM »
The things is, once the 2014/2015/2016 IRA/401K window closes, it never opens again. You can't make the contribution in the future.

Hmm, I don't know exactly what that means. Time for Goggle.

Cheddar Stacker

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Re: Mortgage War! (Getting So Close)
« Reply #28 on: May 15, 2015, 05:50:51 AM »
The things is, once the 2014/2015/2016 IRA/401K window closes, it never opens again. You can't make the contribution in the future.

Hmm, I don't know exactly what that means. Time for Goggle.

Nothing fancy, it's just opportunity cost. You can only use your money once. Once you apply it to the mortgage it's no longer available to put in an IRA. Each year you have a limited amount to put in an IRA. So you can't go all out funding the tax deferred accounts like you did with the mortgage. Better to use the tax deferred space before it runs out.

401Killer

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Re: Mortgage War! (Getting So Close)
« Reply #29 on: May 15, 2015, 12:09:53 PM »
WOO!!!

Read a bit more and opened the Vanguard account and tossed $1500 into the Roth IRA for the 2040 fund! Now fully understand the rules and advantages.

nereo

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Re: Mortgage War! (Getting So Close)
« Reply #30 on: May 15, 2015, 12:30:20 PM »
WOO!!!

Read a bit more and opened the Vanguard account and tossed $1500 into the Roth IRA for the 2040 fund! Now fully understand the rules and advantages.
Well done.  If you are under 55 you can contribute $5500 this year towards your IRA.  Have you read up on "ROTH vs tIRA" to make sure ROTH is what's right for you?  Whichever you choose it's an incredibly powerful investment vehicle.

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Re: Mortgage War! (Getting So Close)
« Reply #31 on: May 19, 2015, 01:27:47 AM »
Congrats mortgagekiller!

We are 8 months from the mortgage burning party ourselves (41 yo). Until this year of MMM, I've allowed the wife to increase payments whenever possible, but now have put a stop to more increases, instead investing any extra. 

With the mortgage being 50-65% of monthly expenses soon to be diverted to add to the 30% we are already investing - look out boss, a FIRE's coming your way!

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Re: Mortgage War! (Getting So Close)
« Reply #32 on: May 19, 2015, 04:31:06 AM »
If rates are still low when you reach payoff, grab a juicy HELOC and jump into the stock market.  No sense in all that cash sitting in a house doing nothing for you.

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Re: Mortgage War! (Getting So Close)
« Reply #33 on: May 19, 2015, 08:53:51 AM »
congrats on the planning and being so close to the end!!!  It feels good doesnt it?

I am also one who wanted to, and almost has paid off her mortgage (aug 2015).  Reasons for me is i couldnt afford to save for a car and invest and pay my mortgage all at once.  Living by myself all bills are on my head.  Unfortunately 3 years ago i was off work for 5 months having to work hard to get by.  It was stressful and i hated every second of it.  I dont ever want to have to worry about it again.

For me this is a huge accomplishment and it allows me to dramatically increase my savings amount now.  I would rather have security than take the risk of MAYBE making 1% or 3% more in the market when i have a low risk tolerance.  Instead of trickling money into investments i can go all at it now

401Killer

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Re: Mortgage War! (Getting So Close)
« Reply #34 on: May 19, 2015, 09:01:20 AM »
If rates are still low when you reach payoff, grab a juicy HELOC and jump into the stock market.  No sense in all that cash sitting in a house doing nothing for you.

Well the whole point of paying the house off is peace of mind. Doing a HELOC puts me right back into the same situation of losing the house if the worst case scenario happens and am laid off or something else. All that cash sitting in a house means I'll never loose my home if the market crashes or my industry takes another crap(which it will).

Heckler

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Re: Mortgage War! (Getting So Close)
« Reply #35 on: May 19, 2015, 10:08:04 AM »

Well the whole point of paying the house off is peace of mind. Doing a HELOC puts me right back into the same situation of losing the house if the worst case scenario happens and am laid off or something else. All that cash sitting in a house means I'll never loose my home if the market crashes or my industry takes another crap(which it will).

Amen to that!  To HEL with a HELOC.   I've been laid off twice, and the wife once.  Not a good feeling, but once you find a new job, invest the remainder of the severance!