Author Topic: DONT Payoff your Mortgage Club  (Read 37275 times)

Timmm

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Re: DONT Payoff your Mortgage Club
« Reply #250 on: May 29, 2017, 11:33:05 AM »
Ah, I think I've found my people on this board! I've been milking mortgages for about 20 years now after a brief with extra payments on our first mortgage in the mid-90s. We've got a few now:

Residence: 2.625% fixed for another 30 months, then 25 years adjustable, balance $510k
Rental 1: 3.75% for another 29.5 years, balance $200k
Rental 2: 3.75% for another 29.5 years, balance $340k

We've been actively refinancing all of them all along, probably average about 1 per year. Always for very low cost up-front - never more than 12 mos ROI, to paying us immediate cash about 20% of the time. Only a couple were true "cash out" refinances, but we always take as much of a balance increase as the lender will allow while avoiding the higher rates for cash out. That money generally goes toward any real closing costs, escrow balances, a month or two of skipped payments. For us, the money has most directly gone toward holding all 3 properties, but also covering big expenses like college. We've been maxing out 401k and IRA contributions for about 10 years (plus smaller contributions before that). We've also built substantial nonretirement savings, invested in cheap funds and an overweight portion in a previous employer's stock that I've started selling off this year. We have good W2 income and are frugal in most important ways, but the flexibility and leverage from all of this cheap money has been a key to our savings growing so well. My wife was impressed when I pointed out just yesterday that for a few years now, our investment gains, not even including our contributions, have outpaced our job incomes for several years now. We've had some good fortune there, but we wouldn't have come close without the mortgage money on our side.

It looks like the refinancing bonanza days are probably behind us, but I expect at least one more mortgage in our future as we are nearly ready to RE. All 3 of our properties have appreciated significantly since our purchases - LTV well under 50% now for each. We may relocate, and I hope to be able to keep mortgage leverage for investment, whether that's rental property and/or market funds. And even if we stay put, our biggest mortgage now is a 5/1 ARM and there's a decent chance a refi in a couple of years would make sense - locking in a fixed rate and maybe paying it down to a non-jumbo balance.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #251 on: May 29, 2017, 07:51:25 PM »
Ah, I think I've found my people on this board! I've been milking mortgages for about 20 years now after a brief with extra payments on our first mortgage in the mid-90s. We've got a few now:

Residence: 2.625% fixed for another 30 months, then 25 years adjustable, balance $510k
Rental 1: 3.75% for another 29.5 years, balance $200k
Rental 2: 3.75% for another 29.5 years, balance $340k

We've been actively refinancing all of them all along, probably average about 1 per year. Always for very low cost up-front - never more than 12 mos ROI, to paying us immediate cash about 20% of the time. Only a couple were true "cash out" refinances, but we always take as much of a balance increase as the lender will allow while avoiding the higher rates for cash out. That money generally goes toward any real closing costs, escrow balances, a month or two of skipped payments. For us, the money has most directly gone toward holding all 3 properties, but also covering big expenses like college. We've been maxing out 401k and IRA contributions for about 10 years (plus smaller contributions before that). We've also built substantial nonretirement savings, invested in cheap funds and an overweight portion in a previous employer's stock that I've started selling off this year. We have good W2 income and are frugal in most important ways, but the flexibility and leverage from all of this cheap money has been a key to our savings growing so well. My wife was impressed when I pointed out just yesterday that for a few years now, our investment gains, not even including our contributions, have outpaced our job incomes for several years now. We've had some good fortune there, but we wouldn't have come close without the mortgage money on our side.

It looks like the refinancing bonanza days are probably behind us, but I expect at least one more mortgage in our future as we are nearly ready to RE. All 3 of our properties have appreciated significantly since our purchases - LTV well under 50% now for each. We may relocate, and I hope to be able to keep mortgage leverage for investment, whether that's rental property and/or market funds. And even if we stay put, our biggest mortgage now is a 5/1 ARM and there's a decent chance a refi in a couple of years would make sense - locking in a fixed rate and maybe paying it down to a non-jumbo balance.
Ooh, Timmm, how are you finding such low rates on rental properties?
« Last Edit: May 30, 2017, 10:43:24 AM by Dicey »
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Timmm

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Re: DONT Payoff your Mortgage Club
« Reply #252 on: May 30, 2017, 08:01:20 AM »
Ooh, Timm, how are you finding such low rates on rental properties?

Those were locked last September, I think near general lows. Even better, they paid us real money at closing, after all closing costs. I found the broker through the referal/ads on a very large site that offers free and sometimes useful property value 'estimates'. I'm pretty new here, not sure it's ok to just mention them by name. There's no referral scheme or anything. And I've used other similar mortgage broker marketplaces in the past, that one has just had the best deals for me for a while.

Those are our only two rental properties and we're ideal borrowers - plenty of W2 income, no other debt, very good credit scores (actually only in the 740s at the time due to some CC balance shenanigans, but I suspected the rate offers would not wait). I'm getting off topic here, is there a better thread for rental financing discussion? PM is fine too.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #253 on: May 30, 2017, 10:45:52 AM »
PM sent and third "m" added. Thanks a lot, autocorrect.
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Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #254 on: June 07, 2017, 05:52:26 PM »
I like this thread so much, I'm giving it a bump. We submitted loan paperwork last week to get pre-approved for the next rental we intend to buy. As long as we're at it, we're checking to see if he can lower our rates on any of our other properties.
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talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #255 on: June 08, 2017, 07:00:49 AM »
timing is really good for lower rates right now: 10-year treasury yield was 2.15% yesterday.

dreadmoose

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Re: DONT Payoff your Mortgage Club
« Reply #256 on: June 08, 2017, 08:44:06 AM »
I like this thread so much, I'm giving it a bump. We submitted loan paperwork last week to get pre-approved for the next rental we intend to buy. As long as we're at it, we're checking to see if he can lower our rates on any of our other properties.

Kind of a catch-22 for this club. Once we decide to not pay off our mortgage's there isn't really anything to track in here to keep bumping the thread. We could start tracking how much money we've "saved" by not paying off our mortgage's, though real numbers for that are trickier to standardize than chasing your mortgage to zero.
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RWD

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Re: DONT Payoff your Mortgage Club
« Reply #257 on: June 08, 2017, 10:10:09 AM »
We made another minimum payment on our mortgage this month

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #258 on: June 08, 2017, 10:13:41 AM »
We made another minimum payment on our mortgage this month
Woot!

ETA: I got so excited for you, my response got caught in the quote bracket. Fixed it.
« Last Edit: July 09, 2017, 08:33:32 PM by Dicey »
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FrozenBits

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Re: DONT Payoff your Mortgage Club
« Reply #259 on: June 08, 2017, 10:45:48 AM »
I like this thread so much, I'm giving it a bump. We submitted loan paperwork last week to get pre-approved for the next rental we intend to buy. As long as we're at it, we're checking to see if he can lower our rates on any of our other properties.

Kind of a catch-22 for this club. Once we decide to not pay off our mortgage's there isn't really anything to track in here to keep bumping the thread. We could start tracking how much money we've "saved" by not paying off our mortgage's, though real numbers for that are trickier to standardize than chasing your mortgage to zero.

Why not track your investments versus your mortgage?  I like to think of this thread as an investment challenge.  Put your money to work in the most efficient way possible via index funds.  This way we could regularly celebrate contributions to investments rather than mortgage pay-down.  That's what I'm doing, planning on posting monthly updates at a minimum.

Hopefully this thread doesn't die off.  I've really enjoyed it so far.

runewell

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Re: DONT Payoff your Mortgage Club
« Reply #260 on: June 08, 2017, 11:23:17 AM »
Quote
We could start tracking how much money we've "saved" by not paying off our mortgage's, though real numbers for that are trickier to standardize than chasing your mortgage to zero.

I have $112K left on my mortgage.  Five months of interest payments would be approximately $112,000 x 0.02625 / 12 * 5 = $1,225 in interest I paid this year.
My not paying down my mortgage, it has been invested in the market.  Even though I have several investments, I would guess that I am 1/3 DOW, 1/3 S&P, 1/3 Nasdaq. 
Looking at the ETF's DIA, VOO, and QQQ they are up (including dividends) 8.48%, 9.58%, and 21.20% this year, for an average of 13.09%. 

$112,000 x 0.1309 = $14,661.  So far this year alone I have saved $14,661 - $1,225 = $13,436 by not paying my mortgage down.  To say nothing of all the other years where I did not pay my mortgage down, that all continues to compound.  I'm talking about a limited time frame and amount of money here.

Your allocation may certainly be different.  Mine isn't 1/3 of each, I actually have no DOW but a lot of VOO and QQQ but wanted to "penalize" them for my other holdings which were different.
« Last Edit: June 08, 2017, 11:26:12 AM by runewell »
Please leave Dicey out of this! Have you not been paying any attention? Trolls are not welcome here!

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #261 on: June 08, 2017, 12:20:14 PM »
I pay about $460/month in mortgage interest. (so about $1,380 per quarter)

In the last three months, I've received about $820 in dividends in a taxable investment account. I think an appropriate goal is to close the rest of that gap.

starbuck

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Re: DONT Payoff your Mortgage Club
« Reply #262 on: July 03, 2017, 07:37:45 PM »
Current mortgage balance: $173,761.36
Current taxable account balance: $220,206.22

Someone was describing their friend's recent property purchase, and how they bought it with cash and hated having a mortgage. She thought they were financial wizards, and all I could think of was the buttloads of lost financial leverage.

RWD

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Re: DONT Payoff your Mortgage Club
« Reply #263 on: July 03, 2017, 08:05:20 PM »
Made another minimum payment this month. The sum of our invested assets has now passed double our mortgage balance.

rpr

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Re: DONT Payoff your Mortgage Club
« Reply #264 on: July 03, 2017, 09:41:28 PM »
With the rising stock market, it has certainly paid to not payoff the mortgage.  I've been tracking for the last 5 years since I refinanced a balance of 280K at a rate of 3.5% for 30 years FRM.

A. Current mortgage balance: 251K
B. Taxable account balance: 52K
C. Dividends received: 3K

Net debt A - (B + C) = 196K

Had I prepaid mortgage instead of investing in taxable, my mortgage balance would be 205K.

Net savings = 9K.

Edit to add: The numbers are even better if I take into account tax savings.

My mortgage interest deductions are currently taken in the 33% bracket  (25% federal + 8% state).
Total tax savings from mortgage interest deduction in the years 2012 to 2016 = 12K.

If taxable account is liquidated, then taxes will be about 3K.

So effective savings = 9 + 12 - 3 = 18K.

Am I missing anything?
« Last Edit: July 04, 2017, 12:41:36 AM by rpr »

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #265 on: July 04, 2017, 12:13:38 AM »
Thanks for the bumps, guys! I love this thread.
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Davids

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Re: DONT Payoff your Mortgage Club
« Reply #266 on: July 04, 2017, 05:34:37 AM »
In March 2015 we refinanced to a 15 year 3% mortgage (Bought house in March 2010 on 30 year 4.25% mortgage). Prior to refi in 2013 and 2014 we were very aggressive in paying down our mortgage. We still do put extra each month in our mortgage but not as crazily. Our current mortgage balance is $92K and at this rate we should have it fully paid off in 2025.

I would put us in the in between club. I agree not to go crazy in paying off mortgage but as a peace of mind I would like to get rid of this even though the rate is low.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #267 on: July 04, 2017, 07:50:36 AM »
In March 2015 we refinanced to a 15 year 3% mortgage (Bought house in March 2010 on 30 year 4.25% mortgage). Prior to refi in 2013 and 2014 we were very aggressive in paying down our mortgage. We still do put extra each month in our mortgage but not as crazily. Our current mortgage balance is $92K and at this rate we should have it fully paid off in 2025.

I would put us in the in between club. I agree not to go crazy in paying off mortgage but as a peace of mind I would like to get rid of this even though the rate is low.
The peace of mind you feel when you have a shit load of money in investments is really something! It's unbelievable how good it feels when you have more invested than you owe on the mortgage. When your investments compound at such a rapid rate that eventually they earn more than you do at your day job, it's mind-blowing.. You can make your puny little infllation-protected fixed-rate mortgage payments forever as your 'stache continues to flourish. Peaceful, easy feeling indeed!
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Le Barbu

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Re: DONT Payoff your Mortgage Club
« Reply #268 on: July 04, 2017, 10:55:38 AM »
In March 2015 we refinanced to a 15 year 3% mortgage (Bought house in March 2010 on 30 year 4.25% mortgage). Prior to refi in 2013 and 2014 we were very aggressive in paying down our mortgage. We still do put extra each month in our mortgage but not as crazily. Our current mortgage balance is $92K and at this rate we should have it fully paid off in 2025.

I would put us in the in between club. I agree not to go crazy in paying off mortgage but as a peace of mind I would like to get rid of this even though the rate is low.
The peace of mind you feel when you have a shit load of money in investments is really something! It's unbelievable how good it feels when you have more invested than you owe on the mortgage. When your investments compound at such a rapid rate that eventually they earn more than you do at your day job, it's mind-blowing.. You can make your puny little infllation-protected fixed-rate mortgage payments forever as your 'stache continues to flourish. Peaceful, easy feeling indeed!

And when investments compound faster than your day job, you really begin asking yourself if working worth it! No matter what the mortgage balance is...
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talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #269 on: July 05, 2017, 12:46:42 PM »
The downside of having that much invested is that--when it goes down--you ask yourself "why did I lose a year's worth of income today?".

financiallypossible

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Re: DONT Payoff your Mortgage Club
« Reply #270 on: July 05, 2017, 01:08:08 PM »
Lets do this the right way.  And spread the word about how great NOT paying down our mortgages are for our FIRE dates.

I have a 349k Left on my mortgage and i will be taking that the full 29 years left.  Who's with me!!

3.25% fixed for 30 years

An oversimplification. When weighing the opportunity costs, one should always consider interest rates (both for your mortgage and the federal rate), loan balance, and prevailing stock/bond market valuations.

To say never pay off your mortgage or to say always pay off your mortgage is to ignore these very real variables.

I made this mistake myself in my early 20s. I shared this mistake as my-biggest-financial-mistake-part-i My Biggest Financial Mistake (Part 1) and going-small Lack of Self Awareness and Thinking Ahead of Myself Was Costly.

The mortgage interest deduction is IMO the most overrated and insidious tax policy in the US. Most individuals don't weigh it against the amazing standard deduction and it encourages people to buy too much house.
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Le Barbu

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Re: DONT Payoff your Mortgage Club
« Reply #271 on: July 05, 2017, 04:12:21 PM »
Lets do this the right way.  And spread the word about how great NOT paying down our mortgages are for our FIRE dates.

I have a 349k Left on my mortgage and i will be taking that the full 29 years left.  Who's with me!!

3.25% fixed for 30 years

An oversimplification. When weighing the opportunity costs, one should always consider interest rates (both for your mortgage and the federal rate), loan balance, and prevailing stock/bond market valuations.

To say never pay off your mortgage or to say always pay off your mortgage is to ignore these very real variables.

I made this mistake myself in my early 20s. I shared this mistake as my-biggest-financial-mistake-part-i My Biggest Financial Mistake (Part 1) and going-small Lack of Self Awareness and Thinking Ahead of Myself Was Costly.

The mortgage interest deduction is IMO the most overrated and insidious tax policy in the US. Most individuals don't weigh it against the amazing standard deduction and it encourages people to buy too much house.

The "not prepaying mortgage" strategy does not offset the mistake of owning to much of a house!
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Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #272 on: July 05, 2017, 10:53:35 PM »
Lets do this the right way.  And spread the word about how great NOT paying down our mortgages are for our FIRE dates.

I have a 349k Left on my mortgage and i will be taking that the full 29 years left.  Who's with me!!

3.25% fixed for 30 years

An oversimplification. When weighing the opportunity costs, one should always consider interest rates (both for your mortgage and the federal rate), loan balance, and prevailing stock/bond market valuations.

To say never pay off your mortgage or to say always pay off your mortgage is to ignore these very real variables.

I made this mistake myself in my early 20s. I shared this mistake as my-biggest-financial-mistake-part-i My Biggest Financial Mistake (Part 1) and going-small Lack of Self Awareness and Thinking Ahead of Myself Was Costly.

The mortgage interest deduction is IMO the most overrated and insidious tax policy in the US. Most individuals don't weigh it against the amazing standard deduction and it encourages people to buy too much house.

The "not prepaying mortgage" strategy does not offset the mistake of owning to much of a house!
Amen!
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DarkandStormy

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Re: DONT Payoff your Mortgage Club
« Reply #273 on: July 06, 2017, 08:16:28 AM »
If the "top" is in on the market (whenever that is), then it might make sense to throw extra money at the mortgage while waiting for stocks to bottom out -> then flip and buy those cheap investments!  Of course, that relies on "timing the market" so to speak, but for now, stocks have floundered around all-time highs for 2-3 months.  Will be interesting to see what Q3 and Q4 brings.
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Canadian Ben

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Re: DONT Payoff your Mortgage Club
« Reply #274 on: July 06, 2017, 08:28:14 AM »
I bought a house in Ottawa with 20% down, 2.09% for three years... I see no reason to pay it down at all. Just waiting for the military to post me again, and I do the same thing and remove the very small amount of principal I paid back... but also the huge amounts of leverage it allowed me to continue using and investing!

My current house is selling at break even (loss if you count inflation) so it's pretty easy to see that housing isn't an investment.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #275 on: July 06, 2017, 11:05:39 AM »
If the "top" is in on the market (whenever that is), then it might make sense to throw extra money at the mortgage while waiting for stocks to bottom out -> then flip and buy those cheap investments!  Of course, that relies on "timing the market" so to speak, but for now, stocks have floundered around all-time highs for 2-3 months.  Will be interesting to see what Q3 and Q4 brings.
...stocks have "floundered" for 2-3 months? That's hilarious on so many levels!
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DarkandStormy

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Re: DONT Payoff your Mortgage Club
« Reply #276 on: July 06, 2017, 11:34:21 AM »
If the "top" is in on the market (whenever that is), then it might make sense to throw extra money at the mortgage while waiting for stocks to bottom out -> then flip and buy those cheap investments!  Of course, that relies on "timing the market" so to speak, but for now, stocks have floundered around all-time highs for 2-3 months.  Will be interesting to see what Q3 and Q4 brings.
...stocks have "floundered" for 2-3 months? That's hilarious on so many levels!

A lot of people love indexed funds, right?

S&P500:
March 1: 2,395
May 5: 2,399
midday today: 2,422

The S&P 500 has barely increased 1% in over 4 months (plus a few days).  Depending on which fund you are using, your dividend yield in June may have been in the 1.8 range (typically has been about $1/share, but again, depends on where you are investing it).

DOW JONES:
March 1: 21,115
May 5: 21,007
midday today: 21,415

Similar outlook for the DOW - up about 1.4% over the last 4 months.

NASDAQ:
March 1: 5,904
May 5: 6,101
midday today: 6,110

While the NASDAQ is up 3.5% since March 1st, it's essentially flat over the last two months.

A 4-month increase of ~1% = 3% annual ROI

Unless you are actively investing and outpacing the major indices, please tell me how my original statement was wrong.  If you are invested in indexed funds, your investments have increased very little (minus reinvested dividends, if you received any and reinvested them) over the last 2 months, and in some cases over the last 4 months.
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RWD

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Re: DONT Payoff your Mortgage Club
« Reply #277 on: July 06, 2017, 12:05:15 PM »
VTIAX is up 6.3% (plus dividend) over the last four months. I'm glad my portfolio is diversified.

DarkandStormy

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Re: DONT Payoff your Mortgage Club
« Reply #278 on: July 06, 2017, 12:27:21 PM »
VTIAX is up 6.3% (plus dividend) over the last four months. I'm glad my portfolio is diversified.

Up 1.7% the last two months which is better than the U.S. indices - and international has outpaced domestic for most of the year.  So it depends on your AA.
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Canadian Ben

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Re: DONT Payoff your Mortgage Club
« Reply #279 on: July 06, 2017, 12:31:45 PM »
In this thread, we only need the index to go up by our mortgage % yearly and we're breaking even.

If you throw in the fact that it's leveraged money, tax deductible mortgage portions, the same % in the index is actually profit for us.

I don't know about you, but since most people look to the 4% rule (not every single month, but Yearly; 1.7% for four months is fine, as long as it continues to beat my mortgage) Which it does!

tyort1

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Re: DONT Payoff your Mortgage Club
« Reply #280 on: July 06, 2017, 01:05:27 PM »
If the "top" is in on the market (whenever that is), then it might make sense to throw extra money at the mortgage while waiting for stocks to bottom out -> then flip and buy those cheap investments!  Of course, that relies on "timing the market" so to speak, but for now, stocks have floundered around all-time highs for 2-3 months.  Will be interesting to see what Q3 and Q4 brings.
...stocks have "floundered" for 2-3 months? That's hilarious on so many levels!

A lot of people love indexed funds, right?

S&P500:
March 1: 2,395
May 5: 2,399
midday today: 2,422

The S&P 500 has barely increased 1% in over 4 months (plus a few days).  Depending on which fund you are using, your dividend yield in June may have been in the 1.8 range (typically has been about $1/share, but again, depends on where you are investing it).

DOW JONES:
March 1: 21,115
May 5: 21,007
midday today: 21,415

Similar outlook for the DOW - up about 1.4% over the last 4 months.

NASDAQ:
March 1: 5,904
May 5: 6,101
midday today: 6,110

While the NASDAQ is up 3.5% since March 1st, it's essentially flat over the last two months.

A 4-month increase of ~1% = 3% annual ROI

Unless you are actively investing and outpacing the major indices, please tell me how my original statement was wrong.  If you are invested in indexed funds, your investments have increased very little (minus reinvested dividends, if you received any and reinvested them) over the last 2 months, and in some cases over the last 4 months.

Well, I got my mortgage 3 years ago, lets see how much stocks have floundered since then....

https://dqydj.com/sp-500-return-calculator/

From July 2014 to May 2017, the S&P 500 average return was 7%.  So still better than the 3.95% rate of my mortgage. 

BUT I also re-invest dividends, so that brings my return to 9%, which pretty much crushes my 4% mortgage.
Frugalite in training.

DarkandStormy

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Re: DONT Payoff your Mortgage Club
« Reply #281 on: July 06, 2017, 01:30:32 PM »
[quote author=tyort1 link=topic=69225.msg1614487#msg1614487
From July 2014 to May 2017, the S&P 500 average return was 7%.  So still better than the 3.95% rate of my mortgage. 

BUT I also re-invest dividends, so that brings my return to 9%, which pretty much crushes my 4% mortgage.
[/quote]

Oh, no, I definitely agree.  Any loan under 5% I'd be investing the excess cash flow instead of paying additional to the principal on the loan.

What I was saying when the markets start to slide (and they will eventually) then it would be advantageous to pay extra on the mortgage.
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Canadian Ben

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Re: DONT Payoff your Mortgage Club
« Reply #282 on: July 06, 2017, 02:02:23 PM »
Not especially, since you are then trying to ''time'' the market.

Are you going to wait until it goes back up before buying again? Because that is literally the way to lose money.

It's always time to buy, and then wait long term. That's what the 4-7% return means long term.

If you start timing the market, thats when people lose out.


When Markets start to slideeeeeee,  Yay it's on sale! Buy more.

financiallypossible

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Re: DONT Payoff your Mortgage Club
« Reply #283 on: July 06, 2017, 02:13:40 PM »
If the "top" is in on the market (whenever that is), then it might make sense to throw extra money at the mortgage while waiting for stocks to bottom out -> then flip and buy those cheap investments!  Of course, that relies on "timing the market" so to speak, but for now, stocks have floundered around all-time highs for 2-3 months.  Will be interesting to see what Q3 and Q4 brings.

Your thinking is much like mine. In short, the answer to the question of whether or not to throw extra money at a mortgage is it depends.

But the much important decision is how much mortgage to take in the first place. And my answer is always as small as possible.
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Lmoot

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Re: DONT Payoff your Mortgage Club
« Reply #284 on: July 06, 2017, 03:37:03 PM »
If the "top" is in on the market (whenever that is), then it might make sense to throw extra money at the mortgage while waiting for stocks to bottom out -> then flip and buy those cheap investments!  Of course, that relies on "timing the market" so to speak, but for now, stocks have floundered around all-time highs for 2-3 months.  Will be interesting to see what Q3 and Q4 brings.

Your thinking is much like mine. In short, the answer to the question of whether or not to throw extra money at a mortgage is it depends.

But the much important decision is how much mortgage to take in the first place. And my answer is always as small as possible.

Keep the mortgage small?  Or keep the price low? Because nothing is smaller than no mortgage.

Canadian Ben

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Re: DONT Payoff your Mortgage Club
« Reply #285 on: July 06, 2017, 03:41:24 PM »
If it costs less to own than rent, its worth having a mortgage.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #286 on: July 06, 2017, 10:02:17 PM »
If the "top" is in on the market (whenever that is), then it might make sense to throw extra money at the mortgage while waiting for stocks to bottom out -> then flip and buy those cheap investments!  Of course, that relies on "timing the market" so to speak, but for now, stocks have floundered around all-time highs for 2-3 months.  Will be interesting to see what Q3 and Q4 brings.
...stocks have "floundered" for 2-3 months? That's hilarious on so many levels!

A lot of people love indexed funds, right?

S&P500:
March 1: 2,395
May 5: 2,399
midday today: 2,422

The S&P 500 has barely increased 1% in over 4 months (plus a few days).  Depending on which fund you are using, your dividend yield in June may have been in the 1.8 range (typically has been about $1/share, but again, depends on where you are investing it).

DOW JONES:
March 1: 21,115
May 5: 21,007
midday today: 21,415

Similar outlook for the DOW - up about 1.4% over the last 4 months.

NASDAQ:
March 1: 5,904
May 5: 6,101
midday today: 6,110

While the NASDAQ is up 3.5% since March 1st, it's essentially flat over the last two months.

A 4-month increase of ~1% = 3% annual ROI

Unless you are actively investing and outpacing the major indices, please tell me how my original statement was wrong.  If you are invested in indexed funds, your investments have increased very little (minus reinvested dividends, if you received any and reinvested them) over the last 2 months, and in some cases over the last 4 months.

From vocabulary.com:

"A flounder is a fish, but as a verb, it means to blunder about, to be in serious trouble. In the following examples, something is struggling but hasn't completely failed:

He set out for it, limping, while the sharp gravel rolled under his bleeding feet as he floundered up the climbing trail. (Harold Bindloss)

It is a war that has floundered for nine years without a rational strategy and may endure for another decade. (Sydney Morning Herald)

Just as he turned around that floundering business, he suggests, so too could he reverse the country's sagging fortunes as its chief executive. (Washington Post)"

From Dicey:

Mustachians generally take the loooooong view of the stock market. Such a short time period ain't nothin', man.
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tyort1

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Re: DONT Payoff your Mortgage Club
« Reply #287 on: July 06, 2017, 10:19:13 PM »
Oh, no, I definitely agree.  Any loan under 5% I'd be investing the excess cash flow instead of paying additional to the principal on the loan.

What I was saying when the markets start to slide (and they will eventually) then it would be advantageous to pay extra on the mortgage.

This is quite wrong.  When the market drops is the MOST IMPORTANT time to keep investing in it. 
Frugalite in training.

PizzaSteve

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Re: DONT Payoff your Mortgage Club
« Reply #288 on: July 07, 2017, 12:33:19 AM »
If the "top" is in on the market (whenever that is), then it might make sense to throw extra money at the mortgage while waiting for stocks to bottom out -> then flip and buy those cheap investments!  Of course, that relies on "timing the market" so to speak, but for now, stocks have floundered around all-time highs for 2-3 months.  Will be interesting to see what Q3 and Q4 brings.
...stocks have "floundered" for 2-3 months? That's hilarious on so many levels!

A lot of people love indexed funds, right?

S&P500:
March 1: 2,395
May 5: 2,399
midday today: 2,422

The S&P 500 has barely increased 1% in over 4 months (plus a few days).  Depending on which fund you are using, your dividend yield in June may have been in the 1.8 range (typically has been about $1/share, but again, depends on where you are investing it).

DOW JONES:
March 1: 21,115
May 5: 21,007
midday today: 21,415

Similar outlook for the DOW - up about 1.4% over the last 4 months.

NASDAQ:
March 1: 5,904
May 5: 6,101
midday today: 6,110

While the NASDAQ is up 3.5% since March 1st, it's essentially flat over the last two months.

A 4-month increase of ~1% = 3% annual ROI

Unless you are actively investing and outpacing the major indices, please tell me how my original statement was wrong.  If you are invested in indexed funds, your investments have increased very little (minus reinvested dividends, if you received any and reinvested them) over the last 2 months, and in some cases over the last 4 months.
Very little?  In real terms vs interest rates??? Stocks are still killing it. If you think this was a bad quarter, you are young...

PS.  Mortgage is still dead and i dance on its grave.
« Last Edit: July 07, 2017, 12:36:09 AM by PizzaSteve »
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financiallypossible

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Re: DONT Payoff your Mortgage Club
« Reply #289 on: July 07, 2017, 06:13:36 AM »
If the "top" is in on the market (whenever that is), then it might make sense to throw extra money at the mortgage while waiting for stocks to bottom out -> then flip and buy those cheap investments!  Of course, that relies on "timing the market" so to speak, but for now, stocks have floundered around all-time highs for 2-3 months.  Will be interesting to see what Q3 and Q4 brings.

Your thinking is much like mine. In short, the answer to the question of whether or not to throw extra money at a mortgage is it depends.

But the much important decision is how much mortgage to take in the first place. And my answer is always as small as possible.

Keep the mortgage small?  Or keep the price low? Because nothing is smaller than no mortgage.

Haha, I was intentionally ambiguous. Of course I meant keep the price low (and size of home smaller).

Mortgages can be used very tactically and judiciously to use other people's money to fund your home while your own money seeks higher returns. Most of the time you'll win, but sometimes you could lose. And you won't know which case you're truly in until you have the benefit of hindsight. There is a certain peace to not having a mortgage at all.

The word mortgage itself means death contract. They should not be taken lightly.
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financiallypossible

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Re: DONT Payoff your Mortgage Club
« Reply #290 on: July 07, 2017, 06:19:29 AM »
@DarkandStormy
@Dicey

I'm enjoying this spat between you two as you both have great points you're making.

Dicey - do you happen to be an Axis & Allies player or a player of some other dice-heavy game?
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boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #291 on: July 07, 2017, 06:40:41 AM »
Oh, no, I definitely agree.  Any loan under 5% I'd be investing the excess cash flow instead of paying additional to the principal on the loan.

What I was saying when the markets start to slide (and they will eventually) then it would be advantageous to pay extra on the mortgage.

extremely flawed thinking.  for multiple reasons.

1. this is market timing
2. the money once dumped into the mortgage cant be easily removed to invest in stocks at the bottom.  I'd bet you be very hard pressed to find a historical 30 year period where this strategy actually worked well. 
3. see number 1.



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icbatbh

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Re: DONT Payoff your Mortgage Club
« Reply #292 on: July 07, 2017, 06:57:11 AM »
Wow I like this thread - it's very unsusual not to be treated like a leper for not paying the mortgage off as soon as possible!

Congratulations to those of you who have a higher amount in investments than they do mortgage balance. I've only been investing since April last year so that day is quite a few years away from me yet.

Currently I have just under one year remaining of a 3.89% fix, and 31 years left on my mortgage. Come April next year I will shop around for the best fixed deal I can find as I don't like the idea of switching to variable with the interest rate being so low in the UK at the moment.

YoungGranny

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Re: DONT Payoff your Mortgage Club
« Reply #293 on: July 07, 2017, 07:15:25 AM »
After flip-flopping and running scenarios to try to figure out what works best for our FIRE goals my DH and I finally decided to join y'all in the not-paying-off mortgage club. Well, we still are going to pay it off eventually since I'm going to continue making regular monthly payments but I forsee our total mortgage balance growing quite a bit over the next few years as we buy more rental units. We currently own 1 rental unit that was a cash deal (only cost $30k) and are in the process of buying our second one that will come with a $100k mortgage. We plan to buy another one within a year or so as we continue to keep our eyes on what comes up for sale.


boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #294 on: July 07, 2017, 07:17:45 AM »
Wow I like this thread - it's very unsusual not to be treated like a leper for not paying the mortgage off as soon as possible!

Congratulations to those of you who have a higher amount in investments than they do mortgage balance. I've only been investing since April last year so that day is quite a few years away from me yet.

Currently I have just under one year remaining of a 3.89% fix, and 31 years left on my mortgage. Come April next year I will shop around for the best fixed deal I can find as I don't like the idea of switching to variable with the interest rate being so low in the UK at the moment.

welcome.

I treat people like lepers for paying off their low fixed rate mortgages.  I'm of the opinion it should be very high on your list of optimizing your spending/investing around here.  and yet its treated very much as a personal decision - which is why we have a 55 page thread of people paying down sub 4% interest mortgages. 
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YoungGranny

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Re: DONT Payoff your Mortgage Club
« Reply #295 on: July 07, 2017, 07:42:08 AM »
Wow I like this thread - it's very unsusual not to be treated like a leper for not paying the mortgage off as soon as possible!

Congratulations to those of you who have a higher amount in investments than they do mortgage balance. I've only been investing since April last year so that day is quite a few years away from me yet.

Currently I have just under one year remaining of a 3.89% fix, and 31 years left on my mortgage. Come April next year I will shop around for the best fixed deal I can find as I don't like the idea of switching to variable with the interest rate being so low in the UK at the moment.

welcome.

I treat people like lepers for paying off their low fixed rate mortgages.  I'm of the opinion it should be very high on your list of optimizing your spending/investing around here.  and yet its treated very much as a personal decision - which is why we have a 55 page thread of people paying down sub 4% interest mortgages.

Thanks!

I do understand that mathematically it is the best thing to do but I did need to convince my DH. I think staying on the same page financially is also quite important. I also think it's important to note we continued funding our 401ks and IRAs and I would NEVER advocate paying extra by sacrificing those things. For us it was the desire to grow our real estate portfolio that helped us finally commit to not paying it off. Lots of spreadsheets and scenarios were used to show my husband the power of leveraging :)

DarkandStormy

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Re: DONT Payoff your Mortgage Club
« Reply #296 on: July 07, 2017, 08:03:19 AM »
@DarkandStormy
@Dicey

I'm enjoying this spat between you two as you both have great points you're making.

Dicey - do you happen to be an Axis & Allies player or a player of some other dice-heavy game?

Fair enough.  Just started on my mortgage, and of course have been paying the minimum required on a 30-year fixed.  I know I'm not going to "time" the market, so in practice, I'll probably continue to pay the minimum and either keep cash on the sidelines or in bonds.  So it's a bit hollow/hypocritical to be making the point I was haha.
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boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #297 on: July 07, 2017, 08:33:42 AM »
@DarkandStormy
@Dicey

I'm enjoying this spat between you two as you both have great points you're making.

Dicey - do you happen to be an Axis & Allies player or a player of some other dice-heavy game?

Fair enough.  Just started on my mortgage, and of course have been paying the minimum required on a 30-year fixed.  I know I'm not going to "time" the market, so in practice, I'll probably continue to pay the minimum and either keep cash on the sidelines or in bonds.  So it's a bit hollow/hypocritical to be making the point I was haha.

the two bolded statements above directly contradict one another.
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talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #298 on: July 09, 2017, 09:48:09 AM »
The point about the standard deduction is a very good one. The TallTexan household has several important deductions come tax time each year:

1. Mortgage interest
2. Childcare expenses (some of which are through a Spending Account)
3. Charitable contributions
4. Traditional IRA contributions

#1 may actually be the smallest of the four for us already (and we still have about 24.5 years left on our mortgage according to the amortization tables).

PizzaSteve

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Re: DONT Payoff your Mortgage Club
« Reply #299 on: July 09, 2017, 10:11:09 AM »
Left community - deleted
« Last Edit: July 13, 2017, 10:31:52 PM by PizzaSteve »
All posts are opinions of the author subject to independent verification by the reader.  No representations of fact are asserted regarding commercial products or services.

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