Author Topic: Paid-off mortgage people: How long did it take you to pay off the house?  (Read 15428 times)

Boofinator

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #250 on: September 30, 2018, 11:33:00 AM »
I'd like to thank b42 (and others) for keeping this thread in check; you provide a valuable service to newcomers such as myself. The personal attacks were unnecessary, but holding the celebrators' feet to the fire seems absolutely appropriate, especially when the thread is in a forum section called "Share Your Badassity".  Instead of "Yay, I paid off my mortgage early!", I'd like to see "Yay, I paid off my mortgage early, and here are the reasons/math for why it made sense in my rare situation, because I realize the vast majority of the time paying off a mortgage early increases risk and delays FIRE, so I want to make sure any new people to this forum don't assume paying off a mortgage early is always an optimal choice!"

I just bought my first house 4 months ago, and unfortunately I discovered the world of FIRE after I had already put down enough to avoid PMI (face punch!), but fortunately, since then I've learned enough on this forum to scrap my plan of paying down my mortgage at lightning speed.

I'm glad that the celebrators' feel good about their decision, which is certainly closer to the "smart" end on the continuum of financial choices, but to frame it as "Badassity" without explaining why it's more badass than investing the extra money does a disservice.

No face punches necessary. Please give us details on your PMI. I am in the camp that choosing to pay PMI is an unwise choice in almost all circumstances when considering expected return (not even getting into risk-adjusted return).

I-Ranger

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #251 on: September 30, 2018, 02:37:45 PM »
I'd like to thank b42 (and others) for keeping this thread in check; you provide a valuable service to newcomers such as myself. The personal attacks were unnecessary, but holding the celebrators' feet to the fire seems absolutely appropriate, especially when the thread is in a forum section called "Share Your Badassity".  Instead of "Yay, I paid off my mortgage early!", I'd like to see "Yay, I paid off my mortgage early, and here are the reasons/math for why it made sense in my rare situation, because I realize the vast majority of the time paying off a mortgage early increases risk and delays FIRE, so I want to make sure any new people to this forum don't assume paying off a mortgage early is always an optimal choice!"

I just bought my first house 4 months ago, and unfortunately I discovered the world of FIRE after I had already put down enough to avoid PMI (face punch!), but fortunately, since then I've learned enough on this forum to scrap my plan of paying down my mortgage at lightning speed.

I'm glad that the celebrators' feel good about their decision, which is certainly closer to the "smart" end on the continuum of financial choices, but to frame it as "Badassity" without explaining why it's more badass than investing the extra money does a disservice.

No face punches necessary. Please give us details on your PMI. I am in the camp that choosing to pay PMI is an unwise choice in almost all circumstances when considering expected return (not even getting into risk-adjusted return).

Cost of house: $77,500
Mortgage: 30 year fixed at 4.875%
PMI rate: Don't know because I never considered paying it.

By my calculations, the $15,500 I put down on the house would be worth $32,635 invested for 11 years at a 7% return. (It would take me about 11 years of regular payments on the loan to get to 20% equity.)

By putting the $15,500 down, I save $8,525 if PMI is 1%, $4,262.5 if PMI is 0.5%.

It seems that paying PMI would have been a much better choice for me, about $6,000 better, if my math is correct. Thoughts?


 

One

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #252 on: September 30, 2018, 04:00:52 PM »
If you think a historical 7% in the markets is better than a fixed 4.875% then you should definitely invest.  If you think valuations are high and the market has run up you could take the guaranteed 4.875%.  You could also do both, pay extra on the mortgage now and if there's a sale in the stock market divert the extra towards the market, go back and forth.  There's no right or wrong just different risks which are mostly subjective.

Boofinator

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #253 on: September 30, 2018, 04:30:02 PM »
I'd like to thank b42 (and others) for keeping this thread in check; you provide a valuable service to newcomers such as myself. The personal attacks were unnecessary, but holding the celebrators' feet to the fire seems absolutely appropriate, especially when the thread is in a forum section called "Share Your Badassity".  Instead of "Yay, I paid off my mortgage early!", I'd like to see "Yay, I paid off my mortgage early, and here are the reasons/math for why it made sense in my rare situation, because I realize the vast majority of the time paying off a mortgage early increases risk and delays FIRE, so I want to make sure any new people to this forum don't assume paying off a mortgage early is always an optimal choice!"

I just bought my first house 4 months ago, and unfortunately I discovered the world of FIRE after I had already put down enough to avoid PMI (face punch!), but fortunately, since then I've learned enough on this forum to scrap my plan of paying down my mortgage at lightning speed.

I'm glad that the celebrators' feel good about their decision, which is certainly closer to the "smart" end on the continuum of financial choices, but to frame it as "Badassity" without explaining why it's more badass than investing the extra money does a disservice.

No face punches necessary. Please give us details on your PMI. I am in the camp that choosing to pay PMI is an unwise choice in almost all circumstances when considering expected return (not even getting into risk-adjusted return).

Cost of house: $77,500
Mortgage: 30 year fixed at 4.875%
PMI rate: Don't know because I never considered paying it.

By my calculations, the $15,500 I put down on the house would be worth $32,635 invested for 11 years at a 7% return. (It would take me about 11 years of regular payments on the loan to get to 20% equity.)

By putting the $15,500 down, I save $8,525 if PMI is 1%, $4,262.5 if PMI is 0.5%.

It seems that paying PMI would have been a much better choice for me, about $6,000 better, if my math is correct. Thoughts?

Did you take the costs out to the full duration of the loan?
Let's break it down:
Stock earnings: 7% in perpetuity
Increase in mortgage payment: $980 per year for 30 years ($4915-$3935)
PMI: $388 per year for 11 years
By my calculations, you come out negative at the end of 30 years (somewhere between barely negative and about $6 thousand dollars negative depending on how you want to assume interest applies).

However, other considerations are 0.5% PMI might be overly optimistic for 100% loan-to-value (if you can even get 100%), even with excellent credit scores based on my very preliminary internet review. As you mentioned, you aren't sure the actual PMI rates, and neither am I (since even at the most optimistic you don't beat PMI with 7% returns).

Thanks for encouraging me to do the math to break it down, it actually came closer than I expected.
« Last Edit: September 30, 2018, 04:55:58 PM by Boofinator »

I-Ranger

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #254 on: September 30, 2018, 04:43:14 PM »
I'd like to thank b42 (and others) for keeping this thread in check; you provide a valuable service to newcomers such as myself. The personal attacks were unnecessary, but holding the celebrators' feet to the fire seems absolutely appropriate, especially when the thread is in a forum section called "Share Your Badassity".  Instead of "Yay, I paid off my mortgage early!", I'd like to see "Yay, I paid off my mortgage early, and here are the reasons/math for why it made sense in my rare situation, because I realize the vast majority of the time paying off a mortgage early increases risk and delays FIRE, so I want to make sure any new people to this forum don't assume paying off a mortgage early is always an optimal choice!"

I just bought my first house 4 months ago, and unfortunately I discovered the world of FIRE after I had already put down enough to avoid PMI (face punch!), but fortunately, since then I've learned enough on this forum to scrap my plan of paying down my mortgage at lightning speed.

I'm glad that the celebrators' feel good about their decision, which is certainly closer to the "smart" end on the continuum of financial choices, but to frame it as "Badassity" without explaining why it's more badass than investing the extra money does a disservice.

No face punches necessary. Please give us details on your PMI. I am in the camp that choosing to pay PMI is an unwise choice in almost all circumstances when considering expected return (not even getting into risk-adjusted return).

Cost of house: $77,500
Mortgage: 30 year fixed at 4.875%
PMI rate: Don't know because I never considered paying it.

By my calculations, the $15,500 I put down on the house would be worth $32,635 invested for 11 years at a 7% return. (It would take me about 11 years of regular payments on the loan to get to 20% equity.)

By putting the $15,500 down, I save $8,525 if PMI is 1%, $4,262.5 if PMI is 0.5%.

It seems that paying PMI would have been a much better choice for me, about $6,000 better, if my math is correct. Thoughts?

Did you take the costs out to the full duration of the loan?
Let's break it down:
Stock earnings: 7% in perpetuity
Increase in mortgage payment: $980 per month for 30 years ($4915-$3935)
PMI: $388 per month for 11 years
By my calculations, you come out negative at the end of 30 years (somewhere between barely negative and about $6 thousand dollars negative depending on how you want to assume interest applies).

However, other considerations are 0.5% PMI might be overly optimistic for 100% loan-to-value (if you can even get 100%), even with excellent credit scores based on my very preliminary internet review. As you mentioned, you aren't sure the actual PMI rates, and neither am I (since even at the most optimistic you don't beat PMI with 7% returns).

Thanks for encouraging me to do the math to break it down, it actually came closer than I expected.

Thanks for the analysis! But i'm wondering how you got a $980 monthly mortgage payment based on my numbers? It just seems shockingly high, considering my actual payment is $328/mo. (It would have been $410 had I put $0 down.) I admit I know just enough to be dangerous, so I may have omitted an important piece of info in my last post.

 

Boofinator

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #255 on: September 30, 2018, 04:56:50 PM »
I'd like to thank b42 (and others) for keeping this thread in check; you provide a valuable service to newcomers such as myself. The personal attacks were unnecessary, but holding the celebrators' feet to the fire seems absolutely appropriate, especially when the thread is in a forum section called "Share Your Badassity".  Instead of "Yay, I paid off my mortgage early!", I'd like to see "Yay, I paid off my mortgage early, and here are the reasons/math for why it made sense in my rare situation, because I realize the vast majority of the time paying off a mortgage early increases risk and delays FIRE, so I want to make sure any new people to this forum don't assume paying off a mortgage early is always an optimal choice!"

I just bought my first house 4 months ago, and unfortunately I discovered the world of FIRE after I had already put down enough to avoid PMI (face punch!), but fortunately, since then I've learned enough on this forum to scrap my plan of paying down my mortgage at lightning speed.

I'm glad that the celebrators' feel good about their decision, which is certainly closer to the "smart" end on the continuum of financial choices, but to frame it as "Badassity" without explaining why it's more badass than investing the extra money does a disservice.

No face punches necessary. Please give us details on your PMI. I am in the camp that choosing to pay PMI is an unwise choice in almost all circumstances when considering expected return (not even getting into risk-adjusted return).

Cost of house: $77,500
Mortgage: 30 year fixed at 4.875%
PMI rate: Don't know because I never considered paying it.

By my calculations, the $15,500 I put down on the house would be worth $32,635 invested for 11 years at a 7% return. (It would take me about 11 years of regular payments on the loan to get to 20% equity.)

By putting the $15,500 down, I save $8,525 if PMI is 1%, $4,262.5 if PMI is 0.5%.

It seems that paying PMI would have been a much better choice for me, about $6,000 better, if my math is correct. Thoughts?

Did you take the costs out to the full duration of the loan?
Let's break it down:
Stock earnings: 7% in perpetuity
Increase in mortgage payment: $980 per month for 30 years ($4915-$3935)
PMI: $388 per month for 11 years
By my calculations, you come out negative at the end of 30 years (somewhere between barely negative and about $6 thousand dollars negative depending on how you want to assume interest applies).

However, other considerations are 0.5% PMI might be overly optimistic for 100% loan-to-value (if you can even get 100%), even with excellent credit scores based on my very preliminary internet review. As you mentioned, you aren't sure the actual PMI rates, and neither am I (since even at the most optimistic you don't beat PMI with 7% returns).

Thanks for encouraging me to do the math to break it down, it actually came closer than I expected.

Thanks for the analysis! But i'm wondering how you got a $980 monthly mortgage payment based on my numbers? It just seems shockingly high, considering my actual payment is $328/mo. (It would have been $410 had I put $0 down.) I admit I know just enough to be dangerous, so I may have omitted an important piece of info in my last post.

Sorry about that, those were annual rates, not monthly. (I edited my original post to reflect.) Note the value of $328 * 12. :)
« Last Edit: September 30, 2018, 04:58:56 PM by Boofinator »

I-Ranger

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #256 on: September 30, 2018, 05:33:33 PM »
If you think a historical 7% in the markets is better than a fixed 4.875% then you should definitely invest.  If you think valuations are high and the market has run up you could take the guaranteed 4.875%.  You could also do both, pay extra on the mortgage now and if there's a sale in the stock market divert the extra towards the market, go back and forth.  There's no right or wrong just different risks which are mostly subjective.

Two things:

1. This sounds like market timing, which I wouldn't do.

2. I get that people have different risk tolerances, but should paying off your mortgage early just because it made you feel good be considered Badassity? Driving my 2015 Jeep Grand Cherokee that I stupidly bought a year ago makes me feel good, I admit, but should that be considered Badassity? (I'm selling it and buying a Honda Fit in two weeks, by the way.) I have no qualms with people reaching and celebrating milestones they were aiming for, but I still feel that b42 and others performed a public service by pointing out that far more often than not, paying off your mortgage early is not Badass.

Boofinator

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #257 on: September 30, 2018, 06:10:55 PM »
If you think a historical 7% in the markets is better than a fixed 4.875% then you should definitely invest.  If you think valuations are high and the market has run up you could take the guaranteed 4.875%.  You could also do both, pay extra on the mortgage now and if there's a sale in the stock market divert the extra towards the market, go back and forth.  There's no right or wrong just different risks which are mostly subjective.

Two things:

1. This sounds like market timing, which I wouldn't do.

2. I get that people have different risk tolerances, but should paying off your mortgage early just because it made you feel good be considered Badassity? Driving my 2015 Jeep Grand Cherokee that I stupidly bought a year ago makes me feel good, I admit, but should that be considered Badassity? (I'm selling it and buying a Honda Fit in two weeks, by the way.) I have no qualms with people reaching and celebrating milestones they were aiming for, but I still feel that b42 and others performed a public service by pointing out that far more often than not, paying off your mortgage early is not Badass.

I have to disagree (which is why I joined this forum a few days ago), paying off your mortgage early is badass as hell. More badass than a large portion of the population. Compared to stocks, it doesn't maximize expected returns, true, nor does it often minimize expected time to FI, but it provides guaranteed returns. What a lot of people on this forum fail to understand is that we expect stock returns to beat mortgage returns based off historical data, but it is not a guarantee going forward (especially when one considers Mustachian time frames). So just because people made a different choice than you and then in retrospect your choice turned out to be the better one doesn't mean their choice is any less valid, because they are still Mustachian as hell by not spending money on stupid shit and investing their money in paying off debt.

I appreciate educating people about the value of the stock market and taking a little risk using debt, but to act as if elimination of most people's largest source of debt is not badass is counter to reality (even if they are expected to have to continue earning a paycheck for a few more years over the alternative choice).

Major props to both the stock investors and the mortgage-free crowd.

Radagast

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #258 on: September 30, 2018, 11:50:21 PM »
I guess it depends on whether you view your home as an expense or an investment. If it is an investment, you should buy as much as you can; if it is an expense, as little.

Slee_stack

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #259 on: October 01, 2018, 08:11:21 AM »
I have to disagree (which is why I joined this forum a few days ago), paying off your mortgage early is badass as hell. More badass than a large portion of the population. Compared to stocks, it doesn't maximize expected returns, true, nor does it often minimize expected time to FI, but it provides guaranteed returns. What a lot of people on this forum fail to understand is that we expect stock returns to beat mortgage returns based off historical data, but it is not a guarantee going forward (especially when one considers Mustachian time frames). So just because people made a different choice than you and then in retrospect your choice turned out to be the better one doesn't mean their choice is any less valid, because they are still Mustachian as hell by not spending money on stupid shit and investing their money in paying off debt.

I appreciate educating people about the value of the stock market and taking a little risk using debt, but to act as if elimination of most people's largest source of debt is not badass is counter to reality (even if they are expected to have to continue earning a paycheck for a few more years over the alternative choice).

Major props to both the stock investors and the mortgage-free crowd.
Forum context.

We know the general public is terrible with finances.

Should we pat ourselves on the back for being better than a D student?

This is a FIRE forum in which most threads are geared towards optimization.  The bar is higher here.

Hopefully nobody is just looking for a participation trophy.

GuitarStv

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #260 on: October 01, 2018, 08:39:13 AM »
I guess it depends on whether you view your home as an expense or an investment. If it is an investment, you should buy as much as you can; if it is an expense, as little.

I don't think this should matter in the calculation.  If your home is an investment, you still reap the rewards/failure of that investment when you sell - regardless of the mortgage you do or don't have on it.

neo von retorch

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #261 on: October 01, 2018, 09:20:19 AM »
I guess it depends on whether you view your home as an expense or an investment. If it is an investment, you should buy as much as you can; if it is an expense, as little.

I don't think this should matter in the calculation.  If your home is an investment, you still reap the rewards/failure of that investment when you sell - regardless of the mortgage you do or don't have on it.

Right - the decision of how much home to buy is made at the time that you purchase your home. The mortgage is a loan and the decision to pay it off or not should be whether or not it's the best use of your money at the time of each payment. If you have 20+ years left on a 4% interest, the investment horizon is easily in "stocks will do better" territory. If you're on a much shorter time horizon, or the rate is higher, it's not so clear cut, and it's very reasonable to pay off the mortgage (and to celebrate removing that loan payment from your monthly budget.)

skp

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #262 on: October 01, 2018, 09:53:26 AM »
We bought our house in 1983 when interest rates where running something like  13% (don't remember exact numbers- but HIGH).  I was always debt adverse and frugal but never really had any plans to FIRE- never even heard of it, or knew anyone who would do anything like that.  I didn't accelerate payments until my husband got big raises and I thought what are we going to do with all this money.  We were already living on 1/2 our salaries, saving a lot of money, and instead of figuring out ways of spending his huge raise, I decided to pay off the mortgage.  I didn't want to refinance- that costs money- and I thought that I'd be better off just aggressively paying it off.  Basically I did it because I didn't know any better. I doubled the payments the last 5 years or so and we paid it off in 12 years.   Just before he paid it off, my husband was having trouble at work.  He hated his boss, hated his job and just wanted to quit.  Without a house payment, we could live on my salary alone so we talked it over- what were we going to do with our money with no house payment and all this money we didn't really need- so he FIRE (with a few side gigs once in a while. I don't think I would have "allowed" him to FIRE without the house being payed off and  I would have freeked out taking that huge amount of money out of savings with him not planning to go back to work. I need a nest egg. 
The point of this story is I had no intention of FIREing, it just happened, and it was because the house was paid off.

Boofinator

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #263 on: October 01, 2018, 10:13:53 AM »
I have to disagree (which is why I joined this forum a few days ago), paying off your mortgage early is badass as hell. More badass than a large portion of the population. Compared to stocks, it doesn't maximize expected returns, true, nor does it often minimize expected time to FI, but it provides guaranteed returns. What a lot of people on this forum fail to understand is that we expect stock returns to beat mortgage returns based off historical data, but it is not a guarantee going forward (especially when one considers Mustachian time frames). So just because people made a different choice than you and then in retrospect your choice turned out to be the better one doesn't mean their choice is any less valid, because they are still Mustachian as hell by not spending money on stupid shit and investing their money in paying off debt.

I appreciate educating people about the value of the stock market and taking a little risk using debt, but to act as if elimination of most people's largest source of debt is not badass is counter to reality (even if they are expected to have to continue earning a paycheck for a few more years over the alternative choice).

Major props to both the stock investors and the mortgage-free crowd.
Forum context.

We know the general public is terrible with finances.

Should we pat ourselves on the back for being better than a D student?

This is a FIRE forum in which most threads are geared towards optimization.  The bar is higher here.

Hopefully nobody is just looking for a participation trophy.

Yes, forum context. This forum (on average) is woefully undereducated when it comes to pricing risk into expected returns. MMM clearly understood this concept when he paid off his mortgage early (regardless of whether it was the optimal choice in hindsight).

To repeat, paying off your mortgage is often the optimal decision. It is also often not the optimal decision. But it is based on context, and the blanket statements that paying off your mortgage early isn't badass show a complete ignorance of pricing risk into the equation.

One

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #264 on: October 01, 2018, 10:30:49 AM »
I have to disagree (which is why I joined this forum a few days ago), paying off your mortgage early is badass as hell. More badass than a large portion of the population. Compared to stocks, it doesn't maximize expected returns, true, nor does it often minimize expected time to FI, but it provides guaranteed returns. What a lot of people on this forum fail to understand is that we expect stock returns to beat mortgage returns based off historical data, but it is not a guarantee going forward (especially when one considers Mustachian time frames). So just because people made a different choice than you and then in retrospect your choice turned out to be the better one doesn't mean their choice is any less valid, because they are still Mustachian as hell by not spending money on stupid shit and investing their money in paying off debt.

I appreciate educating people about the value of the stock market and taking a little risk using debt, but to act as if elimination of most people's largest source of debt is not badass is counter to reality (even if they are expected to have to continue earning a paycheck for a few more years over the alternative choice).

Major props to both the stock investors and the mortgage-free crowd.
Forum context.

We know the general public is terrible with finances.

Should we pat ourselves on the back for being better than a D student?

This is a FIRE forum in which most threads are geared towards optimization.  The bar is higher here.

Hopefully nobody is just looking for a participation trophy.

If youíre looking for optimization and you want to be better than a D student maybe it would be wise to also take into consideration others opinions. This guy is not the general public.

https://www.cnbc.com/2018/10/01/bull-run-has-echoes-of-1920s-nobel-prize-winning-economist-shiller.html
« Last Edit: October 01, 2018, 01:13:46 PM by One »

dandarc

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #265 on: October 01, 2018, 11:00:30 AM »
I have to disagree (which is why I joined this forum a few days ago), paying off your mortgage early is badass as hell. More badass than a large portion of the population. Compared to stocks, it doesn't maximize expected returns, true, nor does it often minimize expected time to FI, but it provides guaranteed returns. What a lot of people on this forum fail to understand is that we expect stock returns to beat mortgage returns based off historical data, but it is not a guarantee going forward (especially when one considers Mustachian time frames). So just because people made a different choice than you and then in retrospect your choice turned out to be the better one doesn't mean their choice is any less valid, because they are still Mustachian as hell by not spending money on stupid shit and investing their money in paying off debt.

I appreciate educating people about the value of the stock market and taking a little risk using debt, but to act as if elimination of most people's largest source of debt is not badass is counter to reality (even if they are expected to have to continue earning a paycheck for a few more years over the alternative choice).

Major props to both the stock investors and the mortgage-free crowd.
Forum context.

We know the general public is terrible with finances.

Should we pat ourselves on the back for being better than a D student?

This is a FIRE forum in which most threads are geared towards optimization.  The bar is higher here.

Hopefully nobody is just looking for a participation trophy.

If your looking for optimization and you want to be better than a D student maybe it would be wise to also take into consideration others opinions. This guy is not the general public.

https://www.cnbc.com/2018/10/01/bull-run-has-echoes-of-1920s-nobel-prize-winning-economist-shiller.html
I assume you've gone to cash for all of your holdings then? If you're trying to time the market, go all out.

One

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #266 on: October 01, 2018, 11:07:47 AM »
I have to disagree (which is why I joined this forum a few days ago), paying off your mortgage early is badass as hell. More badass than a large portion of the population. Compared to stocks, it doesn't maximize expected returns, true, nor does it often minimize expected time to FI, but it provides guaranteed returns. What a lot of people on this forum fail to understand is that we expect stock returns to beat mortgage returns based off historical data, but it is not a guarantee going forward (especially when one considers Mustachian time frames). So just because people made a different choice than you and then in retrospect your choice turned out to be the better one doesn't mean their choice is any less valid, because they are still Mustachian as hell by not spending money on stupid shit and investing their money in paying off debt.

I appreciate educating people about the value of the stock market and taking a little risk using debt, but to act as if elimination of most people's largest source of debt is not badass is counter to reality (even if they are expected to have to continue earning a paycheck for a few more years over the alternative choice).

Major props to both the stock investors and the mortgage-free crowd.
Forum context.

We know the general public is terrible with finances.

Should we pat ourselves on the back for being better than a D student?

This is a FIRE forum in which most threads are geared towards optimization.  The bar is higher here.

Hopefully nobody is just looking for a participation trophy.

If your looking for optimization and you want to be better than a D student maybe it would be wise to also take into consideration others opinions. This guy is not the general public.

https://www.cnbc.com/2018/10/01/bull-run-has-echoes-of-1920s-nobel-prize-winning-economist-shiller.html
I assume you've gone to cash for all of your holdings then? If you're trying to time the market, go all out.

No, I have not have not gone all cash, but if I had the option of paying down a mortgage at 4.75% today vs dumping more in the market I would take the 4.75%

I-Ranger

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #267 on: October 01, 2018, 11:14:30 AM »
I have to disagree (which is why I joined this forum a few days ago), paying off your mortgage early is badass as hell. More badass than a large portion of the population. Compared to stocks, it doesn't maximize expected returns, true, nor does it often minimize expected time to FI, but it provides guaranteed returns. What a lot of people on this forum fail to understand is that we expect stock returns to beat mortgage returns based off historical data, but it is not a guarantee going forward (especially when one considers Mustachian time frames). So just because people made a different choice than you and then in retrospect your choice turned out to be the better one doesn't mean their choice is any less valid, because they are still Mustachian as hell by not spending money on stupid shit and investing their money in paying off debt.

I appreciate educating people about the value of the stock market and taking a little risk using debt, but to act as if elimination of most people's largest source of debt is not badass is counter to reality (even if they are expected to have to continue earning a paycheck for a few more years over the alternative choice).

Major props to both the stock investors and the mortgage-free crowd.
Forum context.

We know the general public is terrible with finances.

Should we pat ourselves on the back for being better than a D student?

This is a FIRE forum in which most threads are geared towards optimization.  The bar is higher here.

Hopefully nobody is just looking for a participation trophy.

Yes, forum context. This forum (on average) is woefully undereducated when it comes to pricing risk into expected returns. MMM clearly understood this concept when he paid off his mortgage early (regardless of whether it was the optimal choice in hindsight).

To repeat, paying off your mortgage is often the optimal decision. It is also often not the optimal decision. But it is based on context, and the blanket statements that paying off your mortgage early isn't badass show a complete ignorance of pricing risk into the equation.

I agree that blanket statements such as "paying off your mortgage is always suboptimal" are false, as are blanket statements like: "This forum (on average) is woefully undereducated when it comes to pricing risk into expected returns." ;)

I just agree with those who say the bar should be higher in this forum, as evidenced by this MMM quote:
"To justify not paying off your mortgage, you have to demonstrate a genuine desire to get ahead through investment. That means having low living expenses (letís say equal to or lower than mine), and a correspondingly high savings rate (50% or higher). At this point, I will grudgingly admit that you will probably do much better investing in Index funds rather than paying off your mortgage"

Considering this forum is dedicated to low living expenses and high savings rates, then shouldn't the investing option MMM alludes to always be considered the default choice in this debate, with the expectation that any claims of a "badsass" mortgage payoff be accompanied by an explanation other than "it feels great!"? (In the Share Your Badassity section, at least.)

I'm sure paying off a mortgage does feel great, and it is certainly an excellent financial decision when you consider the entire spectrum of financial decisions, but wouldn't the vast majority of forum members (most importantly newcomers) benefit most from being freed from the mainstream belief that paying off your mortgage early is always a great idea? 

JohnGalt79

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #268 on: October 01, 2018, 11:32:46 AM »
I have to disagree (which is why I joined this forum a few days ago), paying off your mortgage early is badass as hell. More badass than a large portion of the population. Compared to stocks, it doesn't maximize expected returns, true, nor does it often minimize expected time to FI, but it provides guaranteed returns. What a lot of people on this forum fail to understand is that we expect stock returns to beat mortgage returns based off historical data, but it is not a guarantee going forward (especially when one considers Mustachian time frames). So just because people made a different choice than you and then in retrospect your choice turned out to be the better one doesn't mean their choice is any less valid, because they are still Mustachian as hell by not spending money on stupid shit and investing their money in paying off debt.

I appreciate educating people about the value of the stock market and taking a little risk using debt, but to act as if elimination of most people's largest source of debt is not badass is counter to reality (even if they are expected to have to continue earning a paycheck for a few more years over the alternative choice).

Major props to both the stock investors and the mortgage-free crowd.
Forum context.

We know the general public is terrible with finances.

Should we pat ourselves on the back for being better than a D student?

This is a FIRE forum in which most threads are geared towards optimization.  The bar is higher here.

Hopefully nobody is just looking for a participation trophy.

Yes, forum context. This forum (on average) is woefully undereducated when it comes to pricing risk into expected returns. MMM clearly understood this concept when he paid off his mortgage early (regardless of whether it was the optimal choice in hindsight).

To repeat, paying off your mortgage is often the optimal decision. It is also often not the optimal decision. But it is based on context, and the blanket statements that paying off your mortgage early isn't badass show a complete ignorance of pricing risk into the equation.

I am so thankful that some people here are able to comprehend this, and express it well. 

Thank you SIR!!!

PizzaSteve

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #269 on: October 01, 2018, 01:05:02 PM »
Now, how about back to the purpose of the thread, because OP was very clear,..., for people who paid it off, how long did it take?

Dicey

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #270 on: October 01, 2018, 01:19:03 PM »
Now, how about back to the purpose of the thread, because OP was very clear,..., for people who paid it off, how long did it take?
If the point of this whole MMM thing is to learn, then it's fine that the OP's question has generated such far reaching discussion, including alternate points of view, IMO. We're not just about one-sided conversations, hence the term "forum".

DS

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #271 on: October 01, 2018, 01:41:27 PM »
Now, how about back to the purpose of the thread, because OP was very clear,..., for people who paid it off, how long did it take?
If the point of this whole MMM thing is to learn, then it's fine that the OP's question has generated such far reaching discussion, including alternate points of view, IMO. We're not just about one-sided conversations, hence the term "forum".

Agree with this. Also, how long people took to pay off their mortgage alone as a number offers little useful information. So many factors at play including: location, year of payoff, whether they took any loans against it during the term, income, marital status, etc.

Boofinator

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #272 on: October 01, 2018, 01:57:52 PM »

I agree that blanket statements such as "paying off your mortgage is always suboptimal" are false, as are blanket statements like: "This forum (on average) is woefully undereducated when it comes to pricing risk into expected returns." ;)

I just agree with those who say the bar should be higher in this forum, as evidenced by this MMM quote:
"To justify not paying off your mortgage, you have to demonstrate a genuine desire to get ahead through investment. That means having low living expenses (letís say equal to or lower than mine), and a correspondingly high savings rate (50% or higher). At this point, I will grudgingly admit that you will probably do much better investing in Index funds rather than paying off your mortgage"

Considering this forum is dedicated to low living expenses and high savings rates, then shouldn't the investing option MMM alludes to always be considered the default choice in this debate, with the expectation that any claims of a "badsass" mortgage payoff be accompanied by an explanation other than "it feels great!"? (In the Share Your Badassity section, at least.)

I'm sure paying off a mortgage does feel great, and it is certainly an excellent financial decision when you consider the entire spectrum of financial decisions, but wouldn't the vast majority of forum members (most importantly newcomers) benefit most from being freed from the mainstream belief that paying off your mortgage early is always a great idea?

Not paying off the mortgage and investing in equity is more important for those with a low savings rate than those with a high savings rate, simply because the former have a much longer time horizon (thereby reducing risk). Paying off the mortgage really only makes financial sense (at these interest rates) when you are approaching FI to help reduce sequence of return risk.

One

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #273 on: October 01, 2018, 02:54:48 PM »

I agree that blanket statements such as "paying off your mortgage is always suboptimal" are false, as are blanket statements like: "This forum (on average) is woefully undereducated when it comes to pricing risk into expected returns." ;)

I just agree with those who say the bar should be higher in this forum, as evidenced by this MMM quote:
"To justify not paying off your mortgage, you have to demonstrate a genuine desire to get ahead through investment. That means having low living expenses (letís say equal to or lower than mine), and a correspondingly high savings rate (50% or higher). At this point, I will grudgingly admit that you will probably do much better investing in Index funds rather than paying off your mortgage"

Considering this forum is dedicated to low living expenses and high savings rates, then shouldn't the investing option MMM alludes to always be considered the default choice in this debate, with the expectation that any claims of a "badsass" mortgage payoff be accompanied by an explanation other than "it feels great!"? (In the Share Your Badassity section, at least.)

I'm sure paying off a mortgage does feel great, and it is certainly an excellent financial decision when you consider the entire spectrum of financial decisions, but wouldn't the vast majority of forum members (most importantly newcomers) benefit most from being freed from the mainstream belief that paying off your mortgage early is always a great idea?

Not paying off the mortgage and investing in equity is more important for those with a low savings rate than those with a high savings rate, simply because the former have a much longer time horizon (thereby reducing risk). Paying off the mortgage really only makes financial sense (at these interest rates) when you are approaching FI to help reduce sequence of return risk.

I agree, depends on situation and personal risk tolerance, thanks for sharing your wisdom and welcome to the forum!

Dicey

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #274 on: October 01, 2018, 10:37:37 PM »
Now, how about back to the purpose of the thread, because OP was very clear,..., for people who paid it off, how long did it take?
If the point of this whole MMM thing is to learn, then it's fine that the OP's question has generated such far reaching discussion, including alternate points of view, IMO. We're not just about one-sided conversations, hence the term "forum".
One more thought: Suppose someone started a thread called "I Just Bought A Vitamix and Paid Full Retail and I Love It and You Should Buy One Too!" Then imagine that no one was allowed to do anything but support their decision and congratulate them. That's kind of how it felt with the mortgage celebration threads. But the mods spoke, and the "Don't" folks were effectively banished. This thread was different, therefore all points of view should be embraced by those who want to learn.
 
I'm nearly six years FIRE. I stay to help others, as many others do. Now that B42, a full Walrus, has been banned, I am very sad for the loss of his voice. His perspective and unflagging enthusiasm made a difference in people's journey to FIRE.

We are outliers, let's continue to act like it. The whole point is to learn from each other to reach our goals as efficiently as possible.

One

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #275 on: October 01, 2018, 11:15:49 PM »
Now, how about back to the purpose of the thread, because OP was very clear,..., for people who paid it off, how long did it take?
If the point of this whole MMM thing is to learn, then it's fine that the OP's question has generated such far reaching discussion, including alternate points of view, IMO. We're not just about one-sided conversations, hence the term "forum".
One more thought: Suppose someone started a thread called "I Just Bought A Vitamix and Paid Full Retail and I Love It and You Should Buy One Too!" Then imagine that no one was allowed to do anything but support their decision and congratulate them. That's kind of how it felt with the mortgage celebration threads. But the mods spoke, and the "Don't" folks were effectively banished. This thread was different, therefore all points of view should be embraced by those who want to learn.
 
I'm nearly six years FIRE. I stay to help others, as many others do. Now that B42, a full Walrus, has been banned, I am very sad for the loss of his voice. His perspective and unflagging enthusiasm made a difference in people's journey to FIRE.

We are outliers, let's continue to act like it. The whole point is to learn from each other to reach our goals as efficiently as possible.

Wasn't the idea, was the delivery, read post #93 by scantee, he summed it up well

Dicey

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #276 on: October 01, 2018, 11:30:34 PM »
Now, how about back to the purpose of the thread, because OP was very clear,..., for people who paid it off, how long did it take?
If the point of this whole MMM thing is to learn, then it's fine that the OP's question has generated such far reaching discussion, including alternate points of view, IMO. We're not just about one-sided conversations, hence the term "forum".
One more thought: Suppose someone started a thread called "I Just Bought A Vitamix and Paid Full Retail and I Love It and You Should Buy One Too!" Then imagine that no one was allowed to do anything but support their decision and congratulate them. That's kind of how it felt with the mortgage celebration threads. But the mods spoke, and the "Don't" folks were effectively banished. This thread was different, therefore all points of view should be embraced by those who want to learn.
 
I'm nearly six years FIRE. I stay to help others, as many others do. Now that B42, a full Walrus, has been banned, I am very sad for the loss of his voice. His perspective and unflagging enthusiasm made a difference in people's journey to FIRE.

We are outliers, let's continue to act like it. The whole point is to learn from each other to reach our goals as efficiently as possible.

Wasn't the idea, was the delivery, read post #93 by scantee, he summed it up well
You have no idea what you're poking your finger into. Please know I have read every word in this thread and many more from long before you joined this forum. You are completely welcome to your opinion, but kindly refrain from telling me what to do.


Telecaster

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #277 on: October 02, 2018, 12:52:34 AM »

If youíre looking for optimization and you want to be better than a D student maybe it would be wise to also take into consideration others opinions. This guy is not the general public.

https://www.cnbc.com/2018/10/01/bull-run-has-echoes-of-1920s-nobel-prize-winning-economist-shiller.html

Indeed.  However, one thing you must keep in mind is if you are comparing paying off a 30-year mortgage vs. not paying off a 30-year mortgage, then your comparison period is 30 years.   From August 1929 (market high) to August 1959, the S&P 500 including dividends reinvested was up over 800% with an annualized return of 7.7%. 

So if this is 1929 all over again as Schiller suggests, then you are still better off not paying off the mortgage.

One

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #278 on: October 02, 2018, 01:28:21 AM »

If youíre looking for optimization and you want to be better than a D student maybe it would be wise to also take into consideration others opinions. This guy is not the general public.

https://www.cnbc.com/2018/10/01/bull-run-has-echoes-of-1920s-nobel-prize-winning-economist-shiller.html

Indeed.  However, one thing you must keep in mind is if you are comparing paying off a 30-year mortgage vs. not paying off a 30-year mortgage, then your comparison period is 30 years.   From August 1929 (market high) to August 1959, the S&P 500 including dividends reinvested was up over 800% with an annualized return of 7.7%. 

So if this is 1929 all over again as Schiller suggests, then you are still better off not paying off the mortgage.

Good point

Boofinator

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #279 on: October 02, 2018, 07:38:49 AM »

If youíre looking for optimization and you want to be better than a D student maybe it would be wise to also take into consideration others opinions. This guy is not the general public.

https://www.cnbc.com/2018/10/01/bull-run-has-echoes-of-1920s-nobel-prize-winning-economist-shiller.html

Indeed.  However, one thing you must keep in mind is if you are comparing paying off a 30-year mortgage vs. not paying off a 30-year mortgage, then your comparison period is 30 years.   From August 1929 (market high) to August 1959, the S&P 500 including dividends reinvested was up over 800% with an annualized return of 7.7%. 

So if this is 1929 all over again as Schiller suggests, then you are still better off not paying off the mortgage.

Not necessarily. Your time period is the amount of time to get "enough" to be FI (at least in my book). Because after that everything is gravy.

To use an example: You have five years left on a 30-year $200k mortgage (~$13k mortgage payments per year), which works out to about $50k outstanding. You have $1M in the bank, current expenses of about $50k per year, and you're itching to be out of the rat race. What's your move?

GuitarStv

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #280 on: October 02, 2018, 07:53:27 AM »
Now, how about back to the purpose of the thread, because OP was very clear,..., for people who paid it off, how long did it take?
If the point of this whole MMM thing is to learn, then it's fine that the OP's question has generated such far reaching discussion, including alternate points of view, IMO. We're not just about one-sided conversations, hence the term "forum".
One more thought: Suppose someone started a thread called "I Just Bought A Vitamix and Paid Full Retail and I Love It and You Should Buy One Too!" Then imagine that no one was allowed to do anything but support their decision and congratulate them. That's kind of how it felt with the mortgage celebration threads. But the mods spoke, and the "Don't" folks were effectively banished. This thread was different, therefore all points of view should be embraced by those who want to learn.
 
I'm nearly six years FIRE. I stay to help others, as many others do. Now that B42, a full Walrus, has been banned, I am very sad for the loss of his voice. His perspective and unflagging enthusiasm made a difference in people's journey to FIRE.

We are outliers, let's continue to act like it. The whole point is to learn from each other to reach our goals as efficiently as possible.

There's a key difference though.  Buying a Vitamix is always a sub-optimal decision, as is travelling anywhere for pleasure, owning a cell phone, watching a television, eating a low carb, driving a car any distance less than 20 km, buying organic food, eating meat, etc.

Paying off your mortgage isn't always a sub-optimal decision (although granted, it seems to usually be sub-optimal if you live in the US, have access to American extremely long fixed rate mortgages, US mortgage tax incentives, and with the current historically low interest rates).  In Canada for example, a 30 year fixed rate mortgage is a rarity . . . most mortgages are 5 years or less.  We also don't get the same tax breaks that American citizens get for carrying a mortgage.

One

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #281 on: October 02, 2018, 08:04:42 AM »

If youíre looking for optimization and you want to be better than a D student maybe it would be wise to also take into consideration others opinions. This guy is not the general public.

https://www.cnbc.com/2018/10/01/bull-run-has-echoes-of-1920s-nobel-prize-winning-economist-shiller.html

Indeed.  However, one thing you must keep in mind is if you are comparing paying off a 30-year mortgage vs. not paying off a 30-year mortgage, then your comparison period is 30 years.   From August 1929 (market high) to August 1959, the S&P 500 including dividends reinvested was up over 800% with an annualized return of 7.7%. 

So if this is 1929 all over again as Schiller suggests, then you are still better off not paying off the mortgage.

Not necessarily. Your time period is the amount of time to get "enough" to be FI (at least in my book). Because after that everything is gravy.

To use an example: You have five years left on a 30-year $200k mortgage (~$13k mortgage payments per year), which works out to about $50k outstanding. You have $1M in the bank, current expenses of about $50k per year, and you're itching to be out of the rat race. What's your move?

Worst case would be someone closer to FI joins the forum, gets swept up in don't pay off your mortgage, takes out home equity to invest.

GuitarStv

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #282 on: October 02, 2018, 08:20:05 AM »

If youíre looking for optimization and you want to be better than a D student maybe it would be wise to also take into consideration others opinions. This guy is not the general public.

https://www.cnbc.com/2018/10/01/bull-run-has-echoes-of-1920s-nobel-prize-winning-economist-shiller.html

Indeed.  However, one thing you must keep in mind is if you are comparing paying off a 30-year mortgage vs. not paying off a 30-year mortgage, then your comparison period is 30 years.   From August 1929 (market high) to August 1959, the S&P 500 including dividends reinvested was up over 800% with an annualized return of 7.7%. 

So if this is 1929 all over again as Schiller suggests, then you are still better off not paying off the mortgage.

Not necessarily. Your time period is the amount of time to get "enough" to be FI (at least in my book). Because after that everything is gravy.

To use an example: You have five years left on a 30-year $200k mortgage (~$13k mortgage payments per year), which works out to about $50k outstanding. You have $1M in the bank, current expenses of about $50k per year, and you're itching to be out of the rat race. What's your move?

Worst case would be someone closer to FI joins the forum, gets swept up in don't pay off your mortgage, takes out home equity to invest.

I asked a question about that in one of these 'never pay off your mortgage' threads and was told that you should always remortgage your home to invest.

Dicey

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #283 on: October 02, 2018, 09:34:26 AM »
Now, how about back to the purpose of the thread, because OP was very clear,..., for people who paid it off, how long did it take?
If the point of this whole MMM thing is to learn, then it's fine that the OP's question has generated such far reaching discussion, including alternate points of view, IMO. We're not just about one-sided conversations, hence the term "forum".
One more thought: Suppose someone started a thread called "I Just Bought A Vitamix and Paid Full Retail and I Love It and You Should Buy One Too!" Then imagine that no one was allowed to do anything but support their decision and congratulate them. That's kind of how it felt with the mortgage celebration threads. But the mods spoke, and the "Don't" folks were effectively banished. This thread was different, therefore all points of view should be embraced by those who want to learn.
 
I'm nearly six years FIRE. I stay to help others, as many others do. Now that B42, a full Walrus, has been banned, I am very sad for the loss of his voice. His perspective and unflagging enthusiasm made a difference in people's journey to FIRE.

We are outliers, let's continue to act like it. The whole point is to learn from each other to reach our goals as efficiently as possible.

There's a key difference though.  Buying a Vitamix is always a sub-optimal decision, as is travelling anywhere for pleasure, owning a cell phone, watching a television, eating a low carb, driving a car any distance less than 20 km, buying organic food, eating meat, etc.

Paying off your mortgage isn't always a sub-optimal decision (although granted, it seems to usually be sub-optimal if you live in the US, have access to American extremely long fixed rate mortgages, US mortgage tax incentives, and with the current historically low interest rates).  In Canada for example, a 30 year fixed rate mortgage is a rarity . . . most mortgages are 5 years or less.  We also don't get the same tax breaks that American citizens get for carrying a mortgage.

@GuitarStv, I totally agree with you! This was my reply to you way back at #189!

Dude! You're in Canada! This discussion applies to cheap, fixed-rate mortgages! Sure, it's better, but not nearly as good as the sweet, sweet deals still available to US homeowners. Cheap, fixed for thirty long years, and tax deductible to boot. It's nuts not to take advantage of it! You could even call it anti- mustachian not to. Your system would scare the hell out of me. I'd have to do a lot more math. Much harder decision for you folks in the frozen north.

DreamFIRE

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #284 on: October 04, 2018, 05:29:32 PM »

I paid off my first house in 8 years after a small down payment and paying PMI.  Interest rate was close to 9% back in the early 90's.

I paid off my second house in 2 years after a very large down payment.  Interest rate was close to 7% almost 20 years ago.

Standard deduction exceeded what I could get by deducting interest on both occasions.  This was way before I ever thought of retiring early or investing in index funds outside of my work 401K.  Since paying off that house all those years ago, I've maintained a pretty high savings rate almost every year, sometimes over 80% including this year.

SwordGuy

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #285 on: October 04, 2018, 07:10:41 PM »
Shooting for 30 years before paying it off.

With my current rate of 2.5% I'd be a fool to pay it down rather than investing. I took a 5 year fixed term so that could change once renewal is up, but anything below 6% I'll be staying leveraged until I can at least wipe it out in one shot. Tying up that liquidity increases risk too much for my liking (due to a high paying but unstable job).

This reason should be in bold and all caps bc so many people incorrectly choose to pay down their mortgage for the same reason not realizing how terrible it is.

No kidding.

Too many people confuse "security from having no mortgage" with "still having a mortgage but stuffing all available cash into it".   The first case provides additional financial security.  The second case just makes it easier for the bank to sell your foreclosed house for what you still owe.

Miss Piggy

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #286 on: October 05, 2018, 07:26:41 AM »
In Canada for example, a 30 year fixed rate mortgage is a rarity . . . most mortgages are 5 years or less. 

@GuitarStv  Holy crap...seriously? No wonder we always see news down here about people no longer buying homes in Toronto because of the prices. (Of course, they don't share the "mortgage" part of the story, or maybe I just lose interest too quickly. No pun intended.)

Cranky

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #287 on: October 05, 2018, 09:34:04 AM »
In Canada for example, a 30 year fixed rate mortgage is a rarity . . . most mortgages are 5 years or less. 

@GuitarStv  Holy crap...seriously? No wonder we always see news down here about people no longer buying homes in Toronto because of the prices. (Of course, they don't share the "mortgage" part of the story, or maybe I just lose interest too quickly. No pun intended.)

I think you get a new mortgage every 5 years, though. It does mean that you aren't locked into a fixed rate, and I would guess you have fees each time.

GuitarStv

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #288 on: October 05, 2018, 10:07:17 AM »
In Canada for example, a 30 year fixed rate mortgage is a rarity . . . most mortgages are 5 years or less. 

@GuitarStv  Holy crap...seriously? No wonder we always see news down here about people no longer buying homes in Toronto because of the prices. (Of course, they don't share the "mortgage" part of the story, or maybe I just lose interest too quickly. No pun intended.)

I think you get a new mortgage every 5 years, though. It does mean that you aren't locked into a fixed rate, and I would guess you have fees each time.

Yes, renegotiating your mortgage is pretty common since fixed rates are commonly offered for 5 year periods.

albireo13

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #289 on: October 05, 2018, 10:20:05 AM »
Signed a 30yr at 3.625%.  Am in no hurry to pay it off since investments should better that, especially counting inflation.

solon

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #290 on: October 05, 2018, 10:23:27 AM »
Signed a 30yr at 3.625%.  Am in no hurry to pay it off since investments should better that, especially counting inflation.

How did you get 3.625%? Was it recent? Did you pay points?

I might be talked into refi-ing at that rate.

K-ice

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #291 on: October 05, 2018, 04:05:41 PM »
In Canada for example, a 30 year fixed rate mortgage is a rarity . . . most mortgages are 5 years or less. 

@GuitarStv  Holy crap...seriously? No wonder we always see news down here about people no longer buying homes in Toronto because of the prices. (Of course, they don't share the "mortgage" part of the story, or maybe I just lose interest too quickly. No pun intended.)

I think you get a new mortgage every 5 years, though. It does mean that you aren't locked into a fixed rate, and I would guess you have fees each time.

Yes, renegotiating your mortgage is pretty common since fixed rates are commonly offered for 5 year periods.

Yes the term is most commonly 5 years, but the amortization period is usually 25.

So every 5 years you need to renegotiate, and the first offer the bank sends you at about the 4.5 year mark is laughable.

But generally rates have been going down every year. 

After your first 5 years you get another 5 year term but this time with a 20y amortization.

You would have been in trouble in 1977 if you first got your mortgage at 10.25% and then had to renew in 1982 at about 20%. 

But I don't think there is any day within the last 30 years where it jumped more than 2% for your renewal.

https://www.ratehub.ca/5-year-fixed-mortgage-rate-history

That said, we are much more uncertain about the future of mortgage rates in Canada because we have to deal with it every 5 years.

Because rates have been so low for so long they now only approve you if you can pass a mortgage stress test that basically sees if you would be approved at the current 5y rate +2%. 

They want to be sure you can still afford your mortgage 5 years from now if the rates go up by 2%.

Boofinator

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #292 on: October 05, 2018, 07:06:24 PM »
Signed a 30yr at 3.625%.  Am in no hurry to pay it off since investments should better that, especially counting inflation.

Excellent deal on the mortgage. However, one comment on inflation: Inflation has nothing to do with the interest rate paid on the outstanding portion of the mortgage. Regardless of whether you pay early or not, you'll still owe 3.625% on the outstanding principle, which is the number to compare to expected stock returns (unless you can deduct some portion from your taxes).

Where inflation does help (in the case of mortgages) is that your cost of living related to your mortgage payment does not go up with inflation (minus the escrow portion, like property taxes and insurance), which tends not to be the case for rent.

Money Badger

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #293 on: October 08, 2018, 07:23:47 AM »
First house, took 11 years.     2nd house with a $100K bigger mortgage, 7 years (literally put rolled change and sold a bunch of $hit to get rid of it).   The key both times was to just go "all-in" on monthly habits to make margin in our budget to get rid of the debt.   Then use that good habit towards investing in other assets to achieve FI.

Dabnasty

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #294 on: October 08, 2018, 09:58:13 AM »
First house, took 11 years.     2nd house with a $100K bigger mortgage, 7 years (literally put rolled change and sold a bunch of $hit to get rid of it).   The key both times was to just go "all-in" on monthly habits to make margin in our budget to get rid of the debt.   Then use that good habit towards investing in other assets to achieve FI.

What kind of rates did you have?

TexasRunner

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #295 on: October 08, 2018, 01:29:45 PM »
Signed a 30yr at 3.625%.  Am in no hurry to pay it off since investments should better that, especially counting inflation.

Excellent deal on the mortgage. However, one comment on inflation: Inflation has nothing to do with the interest rate paid on the outstanding portion of the mortgage. Regardless of whether you pay early or not, you'll still owe 3.625% on the outstanding principle, which is the number to compare to expected stock returns (unless you can deduct some portion from your taxes).

Where inflation does help (in the case of mortgages) is that your cost of living related to your mortgage payment does not go up with inflation (minus the escrow portion, like property taxes and insurance), which tends not to be the case for rent.

Inflation does matter because I could pay in $1 of principle at today's value or I could pay (in 30 years) $1 of today's principle in dollar valuation 30 years from now...

A 1988 dollar bill is 49.29 cents today.  If I got a 100k 30-year mortgage in 1988, and paid it in full the next day, I would have spent 100k in 1988 dollars.  If I waited the full term, that last dollar of principle would have cost me $0.48 in 1988 dollars.  It applies.  Not fully, but mostly.

The only way to lose would be in a deflation scenario, but thats a worst case that none of this really works for...

Money Badger

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #296 on: October 08, 2018, 07:17:10 PM »
First house, took 11 years.     2nd house with a $100K bigger mortgage, 7 years (literally put rolled change and sold a bunch of $hit to get rid of it).   The key both times was to just go "all-in" on monthly habits to make margin in our budget to get rid of the debt.   Then use that good habit towards investing in other assets to achieve FI.

What kind of rates did you have?
Around 5.7% on the first one around 2000 (30 year fixed, then recast, then paid it off).    And just under 4% on a 7 year ARM on the 2nd, then refi'd to 2.9% 7 year ARM (in the dark days of 2011, bankers loved anyone with equity and a steady job), then recast it (with a chunk of other equity thrown into it) which really accelerated pay down every month.   The financial industry pays me rent on all my equity from here on, not the other way around.

Dicey

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #297 on: October 08, 2018, 07:19:12 PM »
First house, took 11 years.     2nd house with a $100K bigger mortgage, 7 years (literally put rolled change and sold a bunch of $hit to get rid of it).   The key both times was to just go "all-in" on monthly habits to make margin in our budget to get rid of the debt.   Then use that good habit towards investing in other assets to achieve FI.

What kind of rates did you have?
Around 5.7% on the first one around 2000 (30 year fixed, then recast, then paid it off).    And just under 4% on a 7 year ARM on the 2nd, then refi'd to 2.9% 7 year ARM (in the dark days of 2011, bankers loved anyone with equity and a steady job), then recast it (with a chunk of other equity thrown into it) which really accelerated pay down every month.   The financial industry pays me rent on all my equity from here on, not the other way around.
Hmmm, more details please!

PizzaSteve

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #298 on: October 08, 2018, 07:29:43 PM »
removed as was a misdunderstood post
« Last Edit: October 09, 2018, 12:21:50 AM by PizzaSteve »

TexasRunner

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Re: Paid-off mortgage people: How long did it take you to pay off the house?
« Reply #299 on: October 08, 2018, 08:28:58 PM »
Signed a 30yr at 3.625%.  Am in no hurry to pay it off since investments should better that, especially counting inflation.

Excellent deal on the mortgage. However, one comment on inflation: Inflation has nothing to do with the interest rate paid on the outstanding portion of the mortgage. Regardless of whether you pay early or not, you'll still owe 3.625% on the outstanding principle, which is the number to compare to expected stock returns (unless you can deduct some portion from your taxes).

Where inflation does help (in the case of mortgages) is that your cost of living related to your mortgage payment does not go up with inflation (minus the escrow portion, like property taxes and insurance), which tends not to be the case for rent.

Inflation does matter because I could pay in $1 of principle at today's value or I could pay (in 30 years) $1 of today's principle in dollar valuation 30 years from now...

A 1988 dollar bill is 49.29 cents today.  If I got a 100k 30-year mortgage in 1988, and paid it in full the next day, I would have spent 100k in 1988 dollars.  If I waited the full term, that last dollar of principle would have cost me $0.48 in 1988 dollars.  It applies.  Not fully, but mostly.

The only way to lose would be in a deflation scenario, but thats a worst case that none of this really works for...
Its a good point.  As an over simplification, but one could say expected inflation, expected stock returns, and the risk premium are all priced into the 30 year mortgage rate. 

So, for example, if we assume long term 7% stock returns and a 4% 30 year fixed mortgage in a 2% inflation, 3% long term 30 yr treasuries rate world, investors are requiring a 3% premium over treasuries for the capital risk of equities (primarily economic slowdown risk, etc).  Equities earn almost double the risk free return rate of of tbills, which makes sense because of the greater chances they lose their principal.  Banks make something like a 1% spread on their loan, assuming no fees or points, though the capital requirements allow them to loan more than they have, so they are getting equity like returns making loans.

So even though you pay some future dollars at a discount, that should be priced into the offered interest rate, which could be something like 1% without inflation.  In the 90s most Japanese banks made 0% loans available for quite a while as prices deflated hoping people would stay in the homes to avoid foreclosures, and because they made money at 0% in a deflationary period.  The yen was very strong then and appretiated, which really hurt their exports.

When inflation is low and under control, the risk premiums shrink and the future dollar vs current dollar discounts do as well.  It can invert, as it did in Japan, where future yen were more expensive than current yen for a bit.

https://www.poundsterlinglive.com/bank-of-england-spot/historical-spot-exchange-rates/usd/USD-to-JPY#charts

Which is exactly what I said...  Deflation. 

If you want to treat a paid-off house as a deflationary hedge, thats fine, but you need to admit that it is an under-performing asset in your allocation against a near-impossible risk.  Treating it as a security, however, and the mindset of housing as an investment is misguided and the "pay-it-off-at-all-costs" group doesn't seem to be willing to point out that fact.


As an over simplification, but one could say expected inflation, expected stock returns, and the risk premium are all priced into the 30 year mortgage rate. 

And if you don't believe in expected inflation and expected stock returns, then you can never FIRE and shouldn't be on this forum to begin with.  That math is what ALL of this is set up on anyway.  If you don't trust it over a 30-Year span, how will you ever trust it to FIRE?