Author Topic: DONT Payoff your Mortgage Club  (Read 5032 times)

Goldielocks

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Re: DONT Payoff your Mortgage Club
« Reply #100 on: March 04, 2017, 04:07:39 PM »
I'm a firm member of this club - 1.5% mortgage rate currently, about 18 years remaining.
How in the world did you get that low of a rate?

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The lowest rate around here is 1.8% to 1.85% variable -- with a smaller lending firm, not as much free legal docs included, etc., and the rate moves with the changes in interest rates, and is locked into that lender for 5 years, even if you have a 15 or 20 or 25 year amortization.   You need great credit, of course, but this is possible in our very low rate bond markets....   but you have to accept risk of rates adjusting.

FrozenBits

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Re: DONT Payoff your Mortgage Club
« Reply #101 on: March 04, 2017, 05:43:39 PM »


I'm a firm member of this club - 1.5% mortgage rate currently, about 18 years remaining.
How in the world did you get that low of a rate?

Sent from my SM-G935F using Tapatalk

The lowest rate around here is 1.8% to 1.85% variable -- with a smaller lending firm, not as much free legal docs included, etc., and the rate moves with the changes in interest rates, and is locked into that lender for 5 years, even if you have a 15 or 20 or 25 year amortization.   You need great credit, of course, but this is possible in our very low rate bond markets....   but you have to accept risk of rates adjusting.

Wow, that's a crazy good deal even for an adjustable rate.  Curious now, where are you located at?

The best adjustable rate I've seen lately is around 3.25% for a 5 year fixed and then adjusted yearly after that.





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SwedishMoustache

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Re: DONT Payoff your Mortgage Club
« Reply #102 on: March 05, 2017, 02:10:52 AM »
I'm in on this thread. Paying off my mortgage beyond the rate that swedish law requires would actually be a loss for me, given the average 4.36% Yield (4.78% YoC) that my dividend portfolio currently nets.

After much haggling, i've gotten my mortgage down to 1.19% using a local bank. The only way for me to get this lower, would be to have assets/cash of more than 500 000$ on the bank, after which i could get a 0.99% interest rate. Unfortunately, that is not the case.

Still, any penny spent on my mortgage right now is actually loss for me, since it could be spent on dividend stocks, increasing my net worth and yielding dividends.

I'll have to see if i fix it for 3-5 years. The current fixable rate for me is 1.87%, which is still good but...think i'll wait a bit :).

Lmoot

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Re: DONT Payoff your Mortgage Club
« Reply #103 on: March 06, 2017, 03:29:40 AM »
I have kind of gone back and forth on this myself. I prepaid my mortgage (5.375% rate on a rental property) but stopped after about $15k paid down. I only have about $40k left, which I could wipe out in less than 2 years and be mortgage free at 33. If I paid it off I would lower my DTI allowing me to more easily qualify for other investment properties, for cheaper. I don't make much (even with the rental income included) and so it doesn't take much debt to put me out of reach of the loans I would need to get this rolling.

Obviously I am investing in real estate because I am seeking to beat the market with rental properties. I currently only have retirement in stocks, which I contribute up to the employer max (since age 25), but never more, and some cash in a ROTH I do not currently contribute to.

For now I think I will hold off on paying off the mortgage on my one rental, and instead recast it as I believe that will reduce the monthly payment enough to give me a qualifying DTI. I plan on using the cash I would have used to pay it off, to purchase a second rental early next year. I do want to pay off property 1 before buying a 3rd property as it used to be my primary property, and I plan on making it my primary property again one day, and I don't want it to be at risk of foreclosure if something should happen. Since I don't have any stock investments that don't come with a penalty, I don't have an incentive to turn to my investments to pay my mortgage in a time of crisis; I would be paying a steep price to do that.

I do want to start investing in mutual, because I believe in a well-rounded portfolio (that is the main reason I don't want to automatically pour all of my money into stocks). I just want to first get over the hurdle of buying at least a second and 3rd property, so I can use the cashflow from them to run my real estate game, while I can use my earned income for investments. I highly expect someone to tell me I am doing it all wrong LOL.

Le Barbu

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Re: DONT Payoff your Mortgage Club
« Reply #104 on: March 06, 2017, 06:00:21 AM »
I have kind of gone back and forth on this myself. I prepaid my mortgage (5.375% rate on a rental property) but stopped after about $15k paid down. I only have about $40k left, which I could wipe out in less than 2 years and be mortgage free at 33. If I paid it off I would lower my DTI allowing me to more easily qualify for other investment properties, for cheaper. I don't make much (even with the rental income included) and so it doesn't take much debt to put me out of reach of the loans I would need to get this rolling.

Obviously I am investing in real estate because I am seeking to beat the market with rental properties. I currently only have retirement in stocks, which I contribute up to the employer max (since age 25), but never more, and some cash in a ROTH I do not currently contribute to.

For now I think I will hold off on paying off the mortgage on my one rental, and instead recast it as I believe that will reduce the monthly payment enough to give me a qualifying DTI. I plan on using the cash I would have used to pay it off, to purchase a second rental early next year. I do want to pay off property 1 before buying a 3rd property as it used to be my primary property, and I plan on making it my primary property again one day, and I don't want it to be at risk of foreclosure if something should happen. Since I don't have any stock investments that don't come with a penalty, I don't have an incentive to turn to my investments to pay my mortgage in a time of crisis; I would be paying a steep price to do that.

I do want to start investing in mutual, because I believe in a well-rounded portfolio (that is the main reason I don't want to automatically pour all of my money into stocks). I just want to first get over the hurdle of buying at least a second and 3rd property, so I can use the cashflow from them to run my real estate game, while I can use my earned income for investments. I highly expect someone to tell me I am doing it all wrong LOL.

Depends of the real estate market prices vs rents in your area. Real estate can bring good cashflow and ROI due to leverage. On the other hand, this investment comes with downsides: high cost to buy/sell/maintain, not very liquid, not diversified, interest rates sensible. Here (where I live), it's a no-no (dumb investment) maybe you can own 1 rental and invest in stocks?
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Lmoot

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Re: DONT Payoff your Mortgage Club
« Reply #105 on: March 06, 2017, 06:53:11 AM »
 I am very lucky that when I purchased my first house it was in a highly rentable area. I purchased it as a primary property as a 20 something that wanted to be in the middle of it all, during the recession so I got it for a steal;plus I got the $8000 first time homebuyer tax credit. It was a stars aligning type of situation.

I want to continue to buy in the same area because I have had back to back (awesome) renters for this house and even people waiting for the current tenants to move out (the new tenants have only been there 2 weeks). It's close to employment and tourist attractions and most of my renters have been full time employees at jobs within short walking distance. However what has been a well kept secret coming into light, and a booming housing market here, plus inventory that had been purchased during the low, by investors only to be flipped and listed at over valued imo, prices, I fear being priced out by the time I am ready to buy next year. I couldn't afford my own home today. If I can't buy here, my plan is to buy student housing by the university.

infromsea

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Re: DONT Payoff your Mortgage Club
« Reply #106 on: March 06, 2017, 09:11:51 AM »

I'd keep the mortgage.

Everyone with a COLA pension can reasonably expect to make money from a 30-year mortgage.  You're using an inflation-adjusted annuity (with a rising stream of nominal income) to make a fixed payment of an obligation that's being eroded by inflation. 

A military pension makes this even easier because the inflation-adjusted annuity is coming from the world's best source.  In 15 years of military retirement, my pension has risen by over 30%... despite three separate years of 0% COLAs. 

To boost the portfolio's success rate even further, money which could have paid off the mortgage can now stay invested in a high-equity portfolio.  However the market volatility is not for the faint of heart.

Back in 2004 my spouse and I signed up for a 30-year mortgage fixed at 5.5%.  We'd been having the usual "Pay off the mortgage or invest?" debate at Early-Retirement.org, so I ran FIRECalc on the success rate and decided to track the result:
http://www.early-retirement.org/forums/f28/covering-a-mortgage-without-losing-your-ass-ets-15237.html

These numbers are for the iShares small-cap value ETF (ticker IJS).  They assume that the dividend distributions are taxed at 15% and the remainder is invested at the next day's share price.  My spreadsheet does not consider the additional tax deduction for paying mortgage interest, because after the first 10 years the interest goes below the standard deduction.  That ETF also has a heftier expense ratio (0.25%), so an equivalent ETF today may have a much smaller drag on returns.

Year::APY
2005: 17.1%
2006: 13.3%
2007: 13.5%
2008: 5.3%
2009: 2.0%
2010: 3.3%
2011: 2.3%
2012:  5.9%
2014: 8.2%
2016:  8.2%

Note that we "won" the early years but suffered a nasty recession during the first decade.  (In early 2009 the APY actually turned negative for a couple months.)  I suspect the Great Recession is a pretty good example of sequence-of-returns risk, and perhaps from now on the long-term APY is going to hold above 7%. 

In other words, borrowing at 5.5% and investing in equities for the long term gave us an after-tax risk premium of over 1.5%.

Last month we decided to refinance our rental-property mortgage (4.625%).  The broker suggested that instead we should pay off its loan by taking out a bigger 30-year mortgage on our home.  The result is that we're borrowing a new 30-year mortgage at 3.25% and using it to pay off the mortgages on our rental property (4.625%) and our home (3.625%).  The refinance drops our monthly payments by over $400 and will pay back the closing costs in less than two years.

Note that since I now have a VA disability rating, we opted for a VA loan where we can waive the 1.25% funding fee.  The payback would be longer if I'd had to pay that fee.

Borrowing money at 3.25% and investing it?  Navy Federal Credit Union is already offering 7-year CDs at 3%.  Now one of my new life goals is outliving the mortgage-- we'll make our final payment when I'm 86 years old.

Again, this works great with a military pension because it has a COLA.  More importantly, that federal pension should be reliably paid for at least the next 30 years.  Those with a corporate COLA pension, or a pension with no COLA at all, will find that mortgage arbitrage is more risky. 

If you're using the 4% SWR with no annuity income whatsoever (except Social Security) then your FIRECalc success rate may be less than 75%... even in a high-equity portfolio.  More importantly, I suspect that the emotions of behavioral financial psychology will be very difficult to handle.

Mortgage arbitrage also makes the most sense for an asset allocation that has an average historical return which is higher than the mortgage interest rate.  If you're holding a large amount of your investment portfolio in bonds or cash then you're just wasting money on the assets which return less than the mortgage.

Thanks for your insights Nord!

I'm tracking. I appreciate the analysis with the consideration for the pension, it does make a big difference in risk and required rates of return from other investments (which I keep about 90% of in stocks since our spending is so low, it's covered by the pension, including the mortgage payment).

I did take advantage of that NFCU CD a few months ago, but it was one per person... one for me, one for the wife, wishing we could get that rate elsewhere but for now, cash will have to sit on the sideline until post retirement cash flows are "stable" and verified....

I still plan to add the analysis of interest payments VS FED tax deductions, I just ran into too many beers with my name on them this weekend! Maybe by weeks end... I don't think it will change much but it's something I've wanted to "nail down" anyway.


powskier

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Re: DONT Payoff your Mortgage Club
« Reply #107 on: March 07, 2017, 12:45:59 AM »
13 years left of 230k @ 3% no PMI
and 13 years left on  an investment property 235k @ 5%.
The best part is that the investment property pays BOTH of these mortgages.

clickhappy

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DONT Payoff your Mortgage Club
« Reply #108 on: March 07, 2017, 09:41:50 AM »
Hi all, my first post here, loving the community and wish I'd discovered this sooner.

I'd been proudly paying off my mortgage at a good rate before hearing about the MMM route to FI, now almost all my capital is tied up in the house.

I owe £30k on a ~£150k house. Currently on 1.9% interest rate.

I think I should probably remortgage and stick the money into some index linked funds (stocks and shares isa) but I'd like some reassurance. Please an you help me with the pros and cons.

Thanks in advance.
« Last Edit: March 07, 2017, 09:43:28 AM by clickhappy »

FrozenBits

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Re: DONT Payoff your Mortgage Club
« Reply #109 on: March 07, 2017, 10:33:11 AM »
13 years left of 230k @ 3% no PMI
and 13 years left on  an investment property 235k @ 5%.
The best part is that the investment property pays BOTH of these mortgages.

Nice!  When did you purchase the investment property and for how much?  That's some awesome cash flow right there!

FrozenBits

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Re: DONT Payoff your Mortgage Club
« Reply #110 on: March 07, 2017, 10:36:06 AM »
Hi all, my first post here, loving the community and wish I'd discovered this sooner.

I'd been proudly paying off my mortgage at a good rate before hearing about the MMM route to FI, now almost all my capital is tied up in the house.

I owe £30k on a ~£150k house. Currently on 1.9% interest rate.

I think I should probably remortgage and stick the money into some index linked funds (stocks and shares isa) but I'd like some reassurance. Please an you help me with the pros and cons.

Thanks in advance.

Welcome!  Can you provide some more details on what rate you would be able to remortgage for and the term?  Would it be 120k at 1.9% adjusted after five years with a 30 year amortization?  Is it fixed or do you have the option for a 30 year fixed?

runewell

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Re: DONT Payoff your Mortgage Club
« Reply #111 on: March 07, 2017, 11:34:05 AM »
Hi all, my first post here, loving the community and wish I'd discovered this sooner.

I'd been proudly paying off my mortgage at a good rate before hearing about the MMM route to FI, now almost all my capital is tied up in the house.

I owe £30k on a ~£150k house. Currently on 1.9% interest rate.

I think I should probably remortgage and stick the money into some index linked funds (stocks and shares isa) but I'd like some reassurance. Please an you help me with the pros and cons.

Thanks in advance.

I don't recommend having all my money tied up in a house.  Let's say you refinance to a nice round number like £100k.  The interest in year 1 will cost less than £1,900.  If the stock market goes up as little 5-10% you would make £5k-£10k with the potential for further compounding.  Yes, it could also go down.  Perhaps you should put it in a Vanguard mutual fund that is a portion of bonds and a bit less in stocks for some stability.  You miss out on upside but don't get hit as much on the downside.

Go back and look at the 10-yr returns on ETF's and mutual funds out there.  It will include the 2007-08 recession as well as the nice recovery.  You will see that a 10-yr time frame under those circumstances was much preferable to a 2% return (even if it was a wild ride). 

Of course there are no guarantees, it could be all downhill from here.

evensjw

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Re: DONT Payoff your Mortgage Club
« Reply #112 on: March 07, 2017, 08:11:02 PM »
I think I might be sold on this idea, but it's amazing how resilient my brain is being to cold hard math.  For so long I have believed in the mantra of paying off a mortgage.  Just think how much money I'll save in interest! 

I currently owe about $145,000 at 3.75%.  I'm putting an extra $300 towards principal each month, but after reading this thread I might just be persuaded to save that $300 instead.
I have 17 years left if I just pay the regular amount.  With the extra $300 I could be done in 12.
If my math is correct, if I save the $300 per month at 7%, in 17 years I will have $114000.  If I pay of the mortgage in 12 years then save what my mortgage payment was, plus the $300, I'll have $92000, so about $22000 different.
Plus more years with a likelihood of being able to itemize my taxes. 

More realistically, I would like to sell my house in about 10 years and downsize as step one in RE.  The difference between making the extra payment or not is either a mortgage balance of $(28000) or, a mortgage balance of $(71000) and savings of $50000.  Not making the extra payment will still leave me in a good place in terms of proceed from the sale for a smaller house, plus $7000 richer.






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Re: DONT Payoff your Mortgage Club
« Reply #113 on: March 07, 2017, 09:26:32 PM »
Hi all, my first post here, loving the community and wish I'd discovered this sooner.

I'd been proudly paying off my mortgage at a good rate before hearing about the MMM route to FI, now almost all my capital is tied up in the house.

I owe £30k on a ~£150k house. Currently on 1.9% interest rate.

I think I should probably remortgage and stick the money into some index linked funds (stocks and shares isa) but I'd like some reassurance. Please an you help me with the pros and cons.

Thanks in advance.
Consider yourself reassured and welcomed, clickhappy!

If you can comfortably afford the payment and will be vigilant about saving and investing, I say go for it!

Be sure you have a healthy EF. If anything awful happens, knowing you can keep making payments will help.
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Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #114 on: March 07, 2017, 09:30:03 PM »
I think I might be sold on this idea, but it's amazing how resilient my brain is being to cold hard math.  For so long I have believed in the mantra of paying off a mortgage.  Just think how much money I'll save in interest! 

I currently owe about $145,000 at 3.75%.  I'm putting an extra $300 towards principal each month, but after reading this thread I might just be persuaded to save that $300 instead.
I have 17 years left if I just pay the regular amount.  With the extra $300 I could be done in 12.
If my math is correct, if I save the $300 per month at 7%, in 17 years I will have $114000.  If I pay of the mortgage in 12 years then save what my mortgage payment was, plus the $300, I'll have $92000, so about $22000 different.
Plus more years with a likelihood of being able to itemize my taxes. 

More realistically, I would like to sell my house in about 10 years and downsize as step one in RE.  The difference between making the extra payment or not is either a mortgage balance of $(28000) or, a mortgage balance of $(71000) and savings of $50000.  Not making the extra payment will still leave me in a good place in terms of proceed from the sale for a smaller house, plus $7000 richer.
The missing piece I see is that you have not factored for inflation. The older your mortgage gets, the more inflation works in your favor. Makes the math even better.
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infromsea

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Re: DONT Payoff your Mortgage Club
« Reply #115 on: March 08, 2017, 04:50:44 AM »
I think I might be sold on this idea, but it's amazing how resilient my brain is being to cold hard math.  For so long I have believed in the mantra of paying off a mortgage.  Just think how much money I'll save in interest! 

I currently owe about $145,000 at 3.75%.  I'm putting an extra $300 towards principal each month, but after reading this thread I might just be persuaded to save that $300 instead.
I have 17 years left if I just pay the regular amount.  With the extra $300 I could be done in 12.
If my math is correct, if I save the $300 per month at 7%, in 17 years I will have $114000.  If I pay of the mortgage in 12 years then save what my mortgage payment was, plus the $300, I'll have $92000, so about $22000 different.
Plus more years with a likelihood of being able to itemize my taxes. 

More realistically, I would like to sell my house in about 10 years and downsize as step one in RE.  The difference between making the extra payment or not is either a mortgage balance of $(28000) or, a mortgage balance of $(71000) and savings of $50000.  Not making the extra payment will still leave me in a good place in terms of proceed from the sale for a smaller house, plus $7000 richer.

Are you maxing all other available retirement accounts before making the extra payment? And, sorry but I don't want to assume, no other debts but the mortgage? How secure is your income?

For me, having a military pension makes the decision different, it's about as solid as an income stream can be (as Nord mentioned, if I can't pay my mortgage due to lack of my pension getting paid, we have bigger issues to worry about....). Your income security may factor into the decision and change your risk threshold, that is one reason many of us are/were in the "pay it off now!" mentality, to reduce risk of losing the home should we not be able to pay the note, and it's a real risk, just one that we should determine how it impacts us individually rather than just taking the "rules" (pay off your mortgage as quick as you can! Debt free is the ONLY way to achieve security) and applying them blindly. (I guess what I used a lot of words to say was... question everything...).

EDIT: Fixed spelling and tried to add clarity of thought...
« Last Edit: March 08, 2017, 06:50:49 AM by infromsea »

davisgang90

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Re: DONT Payoff your Mortgage Club
« Reply #116 on: March 08, 2017, 05:58:49 AM »
Thanks to all for the insights, especially Nords as I'm in the military pension category.

I'm currently renting in Northern VA.  We plan to buy a home in Roanoke VA after I retire next year.  Plan is to keep that mortgage and pay it off per schedule.  My pension will cover mortgage and all monthly expenses.  Plan to take 4% via Roth ladder for extra expenses, vacations etc.
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Nords

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Re: DONT Payoff your Mortgage Club
« Reply #117 on: March 11, 2017, 06:28:49 PM »
Thanks to all for the insights, especially Nords as I'm in the military pension category.

I'm currently renting in Northern VA.  We plan to buy a home in Roanoke VA after I retire next year.  Plan is to keep that mortgage and pay it off per schedule.  My pension will cover mortgage and all monthly expenses.  Plan to take 4% via Roth ladder for extra expenses, vacations etc.
We're in the middle of a refinance.  The mortgage processor is having a very difficult time understanding Roth IRA conversions.  She sees income on the tax return (because it's a taxable event) but she locks up over the idea that the money is just going from one asset account to another.  Luckily the criteria for a VA loan are considerably looser than an FHA mortgage so it might not matter, but I hope I don't have to explain to her how the Roth ladder works.

The processor also did not care about the DFAS income verification letter (for our pension) or the electronic Retiree Account Statement on myPay.  The only evidence she'd accept was two months of checking account statements showing the deposit (where I had to explain the difference between "pension" and "VA compensation") and two years of income-tax returns (with 1099-Rs).

I'm told that she has 14 years of experience.  I suspect it's mostly been on applications with debt, not so much with assets & income.
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bacchi

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Re: DONT Payoff your Mortgage Club
« Reply #118 on: March 20, 2017, 10:00:07 AM »
I am not paying down my 30 year 3.875% mortgage (28 years left). In fact, I've pulled out equity -- about $100k -- to invest.

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #119 on: March 20, 2017, 10:06:19 AM »
I am not paying down my 30 year 3.875% mortgage (28 years left). In fact, I've pulled out equity -- about $100k -- to invest.

Thats the way to do it !!
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talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #120 on: March 21, 2017, 01:37:52 PM »
I'm not persuaded that actively moving new equity out for investment is optimal without more information. You might be able to convince the bank the property will appraise today, but can you convince a buyer of that price in 3 years when you change jobs?

Having a stable cash flow for servicing the debt helps, though.

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #121 on: March 21, 2017, 03:28:51 PM »
I'm not persuaded that actively moving new equity out for investment is optimal without more information. You might be able to convince the bank the property will appraise today, but can you convince a buyer of that price in 3 years when you change jobs?

Having a stable cash flow for servicing the debt helps, though.

who cares if the house doesnt apprasie you money has been making you more money in the markets in most cases than depreciating in your house as you are indicating.  also pulling out 100k in equity doesnt mean the house appreciated it could have been paid down equity
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talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #122 on: March 22, 2017, 01:18:33 PM »
Don't you need the appraisal for the bank to let you do a cash-out refinance?

I agree that letting investment gains from stocks be rebalanced into additional principal when your house has gone down in value is nice, but that will ultimately reduce your mortgage balance, which is not the goal of people on this thread.

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #123 on: March 22, 2017, 01:53:20 PM »
Don't you need the appraisal for the bank to let you do a cash-out refinance?

I agree that letting investment gains from stocks be rebalanced into additional principal when your house has gone down in value is nice, but that will ultimately reduce your mortgage balance, which is not the goal of people on this thread.

yes you need an appraisal but there are many low to no cost companies that will do REFI's i REFId at no cost to a 30 year at 3.25% in august.  i dont quite get your point.  pay 400 dollars for an appraisal to take 100k out.  100k earns say 3% more than the 4% interest loan in the market.  so you're making an extra 3k per year on the money for a fee of an appraisal. 
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twell1

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Re: DONT Payoff your Mortgage Club
« Reply #124 on: March 24, 2017, 08:59:58 AM »
I always figured it was better to keep the mortgage as opposed to paying it off based on the low interest rate,  2.25% tax affected, but wow!  I plugged in my numbers in the excel example mentioned earlier in the post and it produced a $74k savings from maintaining the mortgage.  I used to make extra payments through out the year.  Will immediately stop. 

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Re: DONT Payoff your Mortgage Club
« Reply #125 on: March 24, 2017, 09:12:49 AM »
I always figured it was better to keep the mortgage as opposed to paying it off based on the low interest rate,  2.25% tax affected, but wow!  I plugged in my numbers in the excel example mentioned earlier in the post and it produced a $74k savings from maintaining the mortgage.  I used to make extra payments through out the year.  Will immediately stop.

congrats.  Yes its quite staggering when you look at it from a real numbers side.  all those who pay it down are leaving 10s if not 100s of thousands on the table. for nothing more than feelings.
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Nords

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Re: DONT Payoff your Mortgage Club
« Reply #126 on: March 24, 2017, 09:51:34 AM »
for nothing more than feelings.
I think those who are accustomed to making decisions based on logic & math will struggle to understand the emotions of behavioral financial psychology. 

It's much simpler to figure out which type of decision an investor is likely to make, to highlight the issue (for their self-awareness), and then to say "So if you're going to decide on that basis, then here's what will build your wealth while still helping you sleep better at night."

For example, people who have more money than they need (for whatever reason, including "for the rest of their lives") may choose to stop taking what they used to view as prudent risks. They're still leaving hundreds of thousands of dollars on the table "for nothing more than feelings" but they're much happier about it.  They already have "enough".  Why run up the score?  Why work so hard?

I know several people like this.  It usually involves military retirees (perhaps from senior ranks) with inflation-fighting pensions and cheap healthcare.  One of them, in particular, has the vast majority of their wealth in whole life insurance policies.  We come from very similar backgrounds so I can't simply explain it away by saying "Oh, just one of them emotional types..."
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Lmoot

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Re: DONT Payoff your Mortgage Club
« Reply #127 on: March 24, 2017, 12:57:16 PM »
 Emotions are strong, and they are valid. Motivation is a feeling. If someone is more motivated to put money towards their house than they are motivated to invest it, then they will likely earn more money by paying down their house. Obviously that case study is less likely in this crowd.

FrozenBits

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Re: DONT Payoff your Mortgage Club
« Reply #128 on: March 24, 2017, 02:09:54 PM »
Emotions are strong, and they are valid. Motivation is a feeling. If someone is more motivated to put money towards their house than they are motivated to invest it, then they will likely earn more money by paying down their house. Obviously that case study is less likely in this crowd.

True, but what I find funny is much of what MMM teaches is directly involved with overcoming emotions in order to build a better life for yourself.  Like learning to overcome emotions that make you spend money on crap you don't need.  The whole philosophy of MMM is based around efficiently deploying your little green army so it grows as fast as possible.

It seems like a lot of the MMM community will bash people for making many decisions based on emotions, but as soon as it comes to pre-paying mortgages, well then emotions are totally valid.  And this decision can have a 200k swing in our 30 year time frame, kind of hypocritical IMO.

What they should really be doing is focusing on is overcoming or re-wiring their emotions to the rewards of what the numbers come out to over the long term.  That's what I did, and now investing motivates me more than anything else.  It wasn't always like that though....