Author Topic: DONT Payoff your Mortgage Club  (Read 29510 times)

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #300 on: July 09, 2017, 07:32:08 PM »
Pizza Steve this thread is for people to get together about not paying off their mortgages. Feel free to spread you stock fear in your own thread.
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financiallypossible

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Re: DONT Payoff your Mortgage Club
« Reply #301 on: July 09, 2017, 08:29:15 PM »
Pizza Steve this thread is for people to get together about not paying off their mortgages. Feel free to spread you stock fear in your own thread.

His point about couples needing to be on the same page is extremely valid. Wisdom, pure and simple. And anybody feeling 100% certain that stocks will deliver a better rate of return than paying down a mortgage over any period of time (either 5 years or 29 years) should reevaluate why they hold such a belief.
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Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #302 on: July 09, 2017, 11:50:19 PM »
@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?

We're not spatting. I really do think calling the market's recent (i.e. 2-3 months. WTH?) performance "floundering" was hilarious.

I'm older, I've seen a lot, and I know what the word means. Nowhere close to floundering. In fact, I'm sure it will be interesting to see what some people do should when the market actually does flounder. Well, it won't be at all interesting to watch me, because that will be boring as shit, 'cuz I won't be doing much besides maybe dumping a little extra cash into the market when it's on sale.

My kind of dice games are Yahtzee and a Bunco-like game called "5000". Been playing with a group of 12 once a month for decades. I've never played Axis & Allies. Good guess, though. It's kind of a play on my old name, which I changed when I started a journal.
« Last Edit: July 09, 2017, 11:51:58 PM by Dicey »
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financiallypossible

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Re: DONT Payoff your Mortgage Club
« Reply #303 on: July 10, 2017, 05:37:53 AM »
I've never played Axis & Allies. Good guess, though. It's kind of a play on my old name, which I changed when I started a journal.

One of the sites I played on used a dice server to handle the rolls for online play. That server was called dicey and would send emails to each player with the dice results in real time.
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boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #304 on: July 10, 2017, 06:12:46 AM »
Pizza Steve this thread is for people to get together about not paying off their mortgages. Feel free to spread you stock fear in your own thread.

His point about couples needing to be on the same page is extremely valid. Wisdom, pure and simple. And anybody feeling 100% certain that stocks will deliver a better rate of return than paying down a mortgage over any period of time (either 5 years or 29 years) should reevaluate why they hold such a belief.

Feel free to start your own upteenth thread to discuss this. 

this is a thread for people who have chosen to not to pay down your mortgage.  If you'd like to discuss the hypocracy in following some version of the 4% rule and paying down a mortgage faster than necessary with a low fixed rate there are probably 50+ threads you could go to find this information in ... or you could start another.

pizza steve is an extremely overly conservative person pushing into sub 2% SWR levels. 
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YoungGranny

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Re: DONT Payoff your Mortgage Club
« Reply #305 on: July 10, 2017, 07:35:45 AM »
Fair point - just chiming in to add my husband and I are 100% on the same page now - communication truly goes a long way. I won't argue about what provides a better return, to be fair history may not repeat itself. My husband and I both understand the stock market may go up or down in any given time period but usually in the long haul it does go up.

I don't want to hijack this thread though so I'll just add that we're excited to be 2 weeks out from closing on our next rental and adding another mortgage to the pile (along with some nice CF). Cheers to everyone on their journey :)

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #306 on: July 10, 2017, 09:31:46 AM »
Pretty sure when I got my wife to agree to a 5/1 ARM, she thought we'd be paying it down a lot faster than we are.

But my wife is pragmatic, and she appreciates the returns on our other investments that have been possible because we, ahem, failed to do this.

BrandNewPapa

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Re: DONT Payoff your Mortgage Club
« Reply #307 on: July 10, 2017, 11:06:44 AM »
Count me, somewhat reluctantly, in. We have a 15 year fixed-rated at 3.25% (was supposed to be 2.89%, but that's a story for another time). We have about 10 years left with a balance around 117k, closing in on 50% equity.

I really hate debt and wanted to pay it off early.

My wife and I ran the numbers on this a few weeks ago. I was hoping we could pay it of in 2-3 years so she could quit her job after we have a second child. We decided throwing all her paycheck that isn't going towards bills into savings instead of the mortgage. We could make a nice dent in the principle, but it wasn't enough for either of us to feel comfortable or to pay it off.

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #308 on: July 12, 2017, 05:52:57 AM »
Count me, somewhat reluctantly, in. We have a 15 year fixed-rated at 3.25% (was supposed to be 2.89%, but that's a story for another time). We have about 10 years left with a balance around 117k, closing in on 50% equity.

I really hate debt and wanted to pay it off early.

My wife and I ran the numbers on this a few weeks ago. I was hoping we could pay it of in 2-3 years so she could quit her job after we have a second child. We decided throwing all her paycheck that isn't going towards bills into savings instead of the mortgage. We could make a nice dent in the principle, but it wasn't enough for either of us to feel comfortable or to pay it off.

good choice investing the money will win over the long run.  you dont need a paid off house for her to quit her job if you invest the money you would have put towards the house and then draw from it for cash flow if needed you'll likely come out farther ahead than having pumped it in.
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financiallypossible

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Re: DONT Payoff your Mortgage Club
« Reply #309 on: July 12, 2017, 06:38:35 AM »
Count me, somewhat reluctantly, in. We have a 15 year fixed-rated at 3.25% (was supposed to be 2.89%, but that's a story for another time). We have about 10 years left with a balance around 117k, closing in on 50% equity.

I really hate debt and wanted to pay it off early.

My wife and I ran the numbers on this a few weeks ago. I was hoping we could pay it of in 2-3 years so she could quit her job after we have a second child. We decided throwing all her paycheck that isn't going towards bills into savings instead of the mortgage. We could make a nice dent in the principle, but it wasn't enough for either of us to feel comfortable or to pay it off.

good choice investing the money probably will win over the long run.  you dont need a paid off house for her to quit her job if you invest the money you would have put towards the house and then draw from it for cash flow if needed you'll likely come out farther ahead than having pumped it in.
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boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #310 on: July 12, 2017, 07:07:24 AM »
Count me, somewhat reluctantly, in. We have a 15 year fixed-rated at 3.25% (was supposed to be 2.89%, but that's a story for another time). We have about 10 years left with a balance around 117k, closing in on 50% equity.

I really hate debt and wanted to pay it off early.

My wife and I ran the numbers on this a few weeks ago. I was hoping we could pay it of in 2-3 years so she could quit her job after we have a second child. We decided throwing all her paycheck that isn't going towards bills into savings instead of the mortgage. We could make a nice dent in the principle, but it wasn't enough for either of us to feel comfortable or to pay it off.

good choice investing the money probably will win over the long run.  you dont need a paid off house for her to quit her job if you invest the money you would have put towards the house and then draw from it for cash flow if needed you'll likely come out farther ahead than having pumped it in.

apply that to absolutely anything to do with investing money and expecting it to last regardless of in your home or in the market or in real estate. 

the earth probably will be around tomorrow
donald trump probably will still be president
you probably will be alive tomorrow
the sun probably will come up tomorrow. 
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runewell

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Re: DONT Payoff your Mortgage Club
« Reply #311 on: July 12, 2017, 08:26:38 AM »
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.

4. Stocks are bought and sold every day.  That's a lot of market timing.
5. Ben Stein wrote an interesting book called "Yes you can time the market" which agrees with the concept of not buying stocks when they are more expensive compared to a long-term average.

I think that stocks are expensive and a more conservative asset allocation could make a lot of sense right now.
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boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #312 on: July 12, 2017, 10:21:30 AM »
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.

4. Stocks are bought and sold every day.  That's a lot of market timing.
5. Ben Stein wrote an interesting book called "Yes you can time the market" which agrees with the concept of not buying stocks when they are more expensive compared to a long-term average.

I think that stocks are expensive and a more conservative asset allocation could make a lot of sense right now.

you think. 

its a poor way to manage your money to try and time the market.  people have been saying stocks are overvalued for the last 3 years .. you'd have missed a lot of run up.  the current PE is around 26 which isnt that much higher than 25 which is what sustains the 4% SWR.  the Shiller PE has 2 really shitty years of earnings in it that are inflating the 10 year PE alot.  i'd say stocks are slightly over valued right now but earnings are rising again.  we could just be in a happy sweet spot.  but you pick a AA and you stick to it.  anything else is market timing. 

Yeah sure it COULD make sense right now but we wont know that answer til next year or later.  dump in all you're willing to dump in as soon as its available and you'll come out far ahead of those trying to time the markets and assume values.
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financiallypossible

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Re: DONT Payoff your Mortgage Club
« Reply #313 on: July 12, 2017, 11:08:15 AM »
Count me, somewhat reluctantly, in. We have a 15 year fixed-rated at 3.25% (was supposed to be 2.89%, but that's a story for another time). We have about 10 years left with a balance around 117k, closing in on 50% equity.

I really hate debt and wanted to pay it off early.

My wife and I ran the numbers on this a few weeks ago. I was hoping we could pay it of in 2-3 years so she could quit her job after we have a second child. We decided throwing all her paycheck that isn't going towards bills into savings instead of the mortgage. We could make a nice dent in the principle, but it wasn't enough for either of us to feel comfortable or to pay it off.

good choice investing the money probably will win over the long run.  you dont need a paid off house for her to quit her job if you invest the money you would have put towards the house and then draw from it for cash flow if needed you'll likely come out farther ahead than having pumped it in.

apply that to absolutely anything to do with investing money and expecting it to last regardless of in your home or in the market or in real estate. 

the earth probably will be around tomorrow
donald trump probably will still be president
you probably will be alive tomorrow
the sun probably will come up tomorrow.

Love it!

On the 3rd one, I never assume so anymore as I have integrated this thought into my world view.

“Live as if you were to die tomorrow. #Learn as if you were to live #forever.” Favorite #Ghandi quote. #neverstoplearning
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Missy B

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Re: DONT Payoff your Mortgage Club
« Reply #314 on: July 12, 2017, 03:56:34 PM »
I just came to the conclusion I need to join the club. It wasn't an entirely welcome realization, as I hate debt.
But I'll be renewing at 2.34%, so I save very little from extra payments and lose what returns I could get from the market. And then I'd just pay more tax, because less interest to write off. (I'm Canadian, but this is an investment property.) And then it reduces my cash flow too.
I'll probably be considering refinancing at some future point, either to reduce my payments further or take advantage of equity.
I will be keeping an account with money saved in case interest rates jump substantially on renewal.

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #315 on: July 13, 2017, 05:39:54 AM »
I just came to the conclusion I need to join the club. It wasn't an entirely welcome realization, as I hate debt.
But I'll be renewing at 2.34%, so I save very little from extra payments and lose what returns I could get from the market. And then I'd just pay more tax, because less interest to write off. (I'm Canadian, but this is an investment property.) And then it reduces my cash flow too.
I'll probably be considering refinancing at some future point, either to reduce my payments further or take advantage of equity.
I will be keeping an account with money saved in case interest rates jump substantially on renewal.

congratulations stick around here and keep it up ... your future self will look back and thank you.
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boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #316 on: July 13, 2017, 05:41:13 AM »
Fair point - just chiming in to add my husband and I are 100% on the same page now - communication truly goes a long way. I won't argue about what provides a better return, to be fair history may not repeat itself. My husband and I both understand the stock market may go up or down in any given time period but usually in the long haul it does go up.

I don't want to hijack this thread though so I'll just add that we're excited to be 2 weeks out from closing on our next rental and adding another mortgage to the pile (along with some nice CF). Cheers to everyone on their journey :)
Great to hear it!

Boarder42 often throws out personal attacks at me that missrepresent and selectively quote what i write.  I strongly support the intent of this thread and the strategy of growing personal wealth, as long as everyone fully understands their decision and respects those who chose other paths.  I hope you reach the point where the mortgage is so small relative to your wealth, it doesnt matter much.  We all want the long bull market to continue (in the long term).

I wish your family much success with your investments and real estate.

nothing in my post was a personal attack.  i said this was about paying down mortgages and you could feel free to spread your stock fear thread else where. 

show me where thats a personal attack.  i gave you the full right to go spread your statement somewhere else and only commented on your statement.

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talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #317 on: July 13, 2017, 08:15:54 AM »
Ten-year (US) treasuries recently spiked from yielding 2.15% to yielding 2.38%. Get those low mortgages while they can still be gotten!

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #318 on: July 13, 2017, 08:49:21 AM »


I strongly support the intent of this thread and the strategy of growing personal wealth, as long as everyone fully understands their decision and respects those who chose other paths.
The thing I love about this thread those like it, especially as championed by B42, is that this approach tends to get little respect. People just don't understand the math. The emotional response to "kill all the debt" because "all debt is bad" is fine if your hair is on fire with sukka consumer debt. However, if one is solvent and desires to create wealth, that approach is simplistic, at best.

The vitriol spewed by debt-haters on this (and many other sites) is epic. I salute B42 for their diligence in promoting what is surely a more efficient path to FI. Long live B42!

To use a gambling analogy, keeping an affordable mortgage in order to stuff other financial vehicles is kind of like playing the Don't Pass Line in Craps*. The odds are better, but you're playing against the rest of the table. It takes a surprising amount of confidence to do this, but that's where the best results are. And OMG, is it fun!

*Don't worry, I don't actually play craps any more, but I had a group of friends (including BF) who liked to go to the casinos after a day of snow or water skiing, back when I was in college. I figured out that if I was going to do this, playing the Don't Pass Line in Craps with full odds was the way to go. It was fun, interesting, and I pretty much broke even. One of the hallmarks of true Mustachianism is to be able to play the part if/when desired, without becoming an actual sukka.

And here's a P.S. to get us back on track:

Frankly, I don't give a flying fuck about how great anyone says it "feels" to pay off a mortgage. What is a far better feeling is to know you have enough green soldiers to RE ~and~ pay your mortgage off any time you feel like it. That, as more and more people are learning, is true peace of mind and amazing power.
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financiallypossible

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Re: DONT Payoff your Mortgage Club
« Reply #319 on: July 13, 2017, 01:49:56 PM »


I strongly support the intent of this thread and the strategy of growing personal wealth, as long as everyone fully understands their decision and respects those who chose other paths.
The thing I love about this thread those like it, especially as championed by B42, is that this approach tends to get little respect. People just don't understand the math. The emotional response to "kill all the debt" because "all debt is bad" is fine if your hair is on fire with sukka consumer debt. However, if one is solvent and desires to create wealth, that approach is simplistic, at best.

.
.

To use a gambling analogy, keeping an affordable mortgage in order to stuff other financial vehicles is kind of like playing the Don't Pass Line in Craps*. The odds are better, but you're playing against the rest of the table. It takes a surprising amount of confidence to do this, but that's where the best results are. And OMG, is it fun!

.
.

What is a far better feeling is to know you have enough green soldiers to RE ~and~ pay your mortgage off any time you feel like it. That, as more and more people are learning, is true peace of mind and amazing power.

In order of these 3 paragraphs - gold, great metaphor, and platinum!

If I could speak to my 18 year old self, then the main conversation I'd have is around my own psychology of debt. Even though I have no debt today, I'm not vehemently opposed to using good debt tactically anymore.
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justaguy

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Re: DONT Payoff your Mortgage Club
« Reply #320 on: July 13, 2017, 03:22:37 PM »
So I have paid my mortgage ahead a couple months and count that as part of my 'emergency fund'  (current mortgage due October 1st).  It is by no means a significant chunk of my emergency fund' but if sh*t hits the fan - not worrying about a mortgage for a couple months would be nice.  Does that allow me to be part of the 'don't payoff my mortgage club'?  I'm a new convert to this mmm team and I'm open to suggestions. 

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #321 on: July 13, 2017, 06:00:40 PM »
So I have paid my mortgage ahead a couple months and count that as part of my 'emergency fund'  (current mortgage due October 1st).  It is by no means a significant chunk of my emergency fund' but if sh*t hits the fan - not worrying about a mortgage for a couple months would be nice.  Does that allow me to be part of the 'don't payoff my mortgage club'?  I'm a new convert to this mmm team and I'm open to suggestions.

Yes welcome to the club.  As your stache grows assuming you have stable employment. You'll like find a traditional Efund of any type to be mostly unneeded. And you'll be able to let your mortgage even role back to right on time. 
« Last Edit: July 13, 2017, 06:02:11 PM by boarder42 »
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Lmoot

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Re: DONT Payoff your Mortgage Club
« Reply #322 on: July 13, 2017, 06:06:55 PM »
So I have paid my mortgage ahead a couple months and count that as part of my 'emergency fund'  (current mortgage due October 1st).  It is by no means a significant chunk of my emergency fund' but if sh*t hits the fan - not worrying about a mortgage for a couple months would be nice.  Does that allow me to be part of the 'don't payoff my mortgage club'?  I'm a new convert to this mmm team and I'm open to suggestions.

I don't personally see the benefit of that. It seems more beneficial to keep the funds in high yields savings where it is earning at least over 1% as I don't believe pre-paying the mortgage saves you anything on interest.

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #323 on: July 13, 2017, 06:07:42 PM »


I strongly support the intent of this thread and the strategy of growing personal wealth, as long as everyone fully understands their decision and respects those who chose other paths.
The thing I love about this thread those like it, especially as championed by B42, is that this approach tends to get little respect. People just don't understand the math. The emotional response to "kill all the debt" because "all debt is bad" is fine if your hair is on fire with sukka consumer debt. However, if one is solvent and desires to create wealth, that approach is simplistic, at best.

.
.

To use a gambling analogy, keeping an affordable mortgage in order to stuff other financial vehicles is kind of like playing the Don't Pass Line in Craps*. The odds are better, but you're playing against the rest of the table. It takes a surprising amount of confidence to do this, but that's where the best results are. And OMG, is it fun!

.
.

What is a far better feeling is to know you have enough green soldiers to RE ~and~ pay your mortgage off any time you feel like it. That, as more and more people are learning, is true peace of mind and amazing power.

In order of these 3 paragraphs - gold, great metaphor, and platinum!

If I could speak to my 18 year old self, then the main conversation I'd have is around my own psychology of debt. Even though I have no debt today, I'm not vehemently opposed to using good debt tactically anymore.

Like button.

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boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #324 on: July 13, 2017, 06:08:48 PM »
So I have paid my mortgage ahead a couple months and count that as part of my 'emergency fund'  (current mortgage due October 1st).  It is by no means a significant chunk of my emergency fund' but if sh*t hits the fan - not worrying about a mortgage for a couple months would be nice.  Does that allow me to be part of the 'don't payoff my mortgage club'?  I'm a new convert to this mmm team and I'm open to suggestions.

I don't personally see the benefit of that. It seems more beneficial to keep the funds in high yields savings where it is earning at least over 1% as I don't believe pre-paying the mortgage saves you anything on interest.

I'd agree. Figured I'd let him dip his toe first before throwing down on that plan.

But this is much better advise.
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Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #325 on: July 14, 2017, 05:35:08 AM »
So I have paid my mortgage ahead a couple months and count that as part of my 'emergency fund'  (current mortgage due October 1st).  It is by no means a significant chunk of my emergency fund' but if sh*t hits the fan - not worrying about a mortgage for a couple months would be nice.  Does that allow me to be part of the 'don't payoff my mortgage club'?  I'm a new convert to this mmm team and I'm open to suggestions.
In the US, for the vast majority of mortgages, paying ahead doesn't earn you any grace period at all. Payment is due on the due date, every month, without fail. Missing payments can trigger foreclosure, no matter how far "ahead" you are. There are many better uses for "extra" money, like investing it so one never has to worry about missing payments.

I appreciate your willingness to learn, jag, so, welcome!
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boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #326 on: July 14, 2017, 09:05:17 AM »
So I have paid my mortgage ahead a couple months and count that as part of my 'emergency fund'  (current mortgage due October 1st).  It is by no means a significant chunk of my emergency fund' but if sh*t hits the fan - not worrying about a mortgage for a couple months would be nice.  Does that allow me to be part of the 'don't payoff my mortgage club'?  I'm a new convert to this mmm team and I'm open to suggestions.
In the US, for the vast majority of mortgages, paying ahead doesn't earn you any grace period at all. Payment is due on the due date, every month, without fail. Missing payments can trigger foreclosure, no matter how far "ahead" you are. There are many better uses for "extra" money, like investing it so one never has to worry about missing payments.

I appreciate your willingness to learn, jag, so, welcome!

he has paid it ahead... which should mean he has a grace period.  vs using the money against principal now.  Really he should just pump his mortgage payment into the market til his next one is due.
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Re: DONT Payoff your Mortgage Club
« Reply #327 on: July 14, 2017, 06:39:02 PM »
I get to join the "we-have-a-mortgage-club" again soon.  No current plans to pay it off in any rapidly early way unless SHTF somewhere.  150K at 3.5%.....  just in time to FIRE in August. :-)
« Last Edit: August 03, 2017, 10:56:12 AM by ks135ks »

SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #328 on: July 14, 2017, 06:49:12 PM »
he has paid it ahead... which should mean he has a grace period. 

"Should" is a word that can cause you to get foreclosed on.

Different banks handle it differently.

Let's say I have a coupon book with one payment coupon per month.

But I want to pay it off twice as fast, so I send in one payment every 1/2 month when I get paid.  I use a new payment coupon each time.

My bank might match my payments to the date of the coupon.   In that case, I would have a grace period.

Or, they might apply each payment against the month it was received in.  In that case, I would have no grace period.

I've had both situation come up with different banks.

Want to know what will happen?  Ask your mortgage holder and get an OFFICIAL answer IN WRITING.

runewell

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Re: DONT Payoff your Mortgage Club
« Reply #329 on: July 18, 2017, 12:54:35 PM »
But I want to pay it off twice as fast, so I send in one payment every 1/2 month when I get paid. 

This would not pay off your mortgage twice as fast.  It would be sooner.  15-year mortgages are not twice the payment of 30-year mortgages.
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SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #330 on: July 18, 2017, 04:14:06 PM »
But I want to pay it off twice as fast, so I send in one payment every 1/2 month when I get paid. 

This would not pay off your mortgage twice as fast.  It would be sooner.  15-year mortgages are not twice the payment of 30-year mortgages.

You are absolutely and completely correct!   


talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #331 on: July 24, 2017, 09:05:39 AM »
Part of the club, but wondering: have investment gains from the market lately been so extraordinary, that rebalancing a little bit makes sense?

Example: I have a $100,000 mortgage, but also $130,000 investment account. During the past eight months, that investment account has increased in value to $160,000, while--simply by making payments on time--that mortgage balance has decreased to $98,000.

Should I sell some of the gains while the market is up to throw against the mortgage? I'm thinking about 20% of my investment gains (which would be equivalent to rebalancing at 80-20 if you think of mortgage as "negative" bonds)?

RWD

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Re: DONT Payoff your Mortgage Club
« Reply #332 on: July 24, 2017, 09:17:24 AM »
Part of the club, but wondering: have investment gains from the market lately been so extraordinary, that rebalancing a little bit makes sense?

Example: I have a $100,000 mortgage, but also $130,000 investment account. During the past eight months, that investment account has increased in value to $160,000, while--simply by making payments on time--that mortgage balance has decreased to $98,000.

Should I sell some of the gains while the market is up to throw against the mortgage? I'm thinking about 20% of my investment gains (which would be equivalent to rebalancing at 80-20 if you think of mortgage as "negative" bonds)?

You may wish to rebalance your investment portfolio (e.g. stocks/bonds ratio). But selling investments to pay down your mortgage actually decreases your total gross assets. All you gain is more home equity (less leverage). The value of your house does not change.

financiallypossible

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Re: DONT Payoff your Mortgage Club
« Reply #333 on: July 24, 2017, 09:38:49 AM »
Part of the club, but wondering: have investment gains from the market lately been so extraordinary, that rebalancing a little bit makes sense?

Example: I have a $100,000 mortgage, but also $130,000 investment account. During the past eight months, that investment account has increased in value to $160,000, while--simply by making payments on time--that mortgage balance has decreased to $98,000.

Should I sell some of the gains while the market is up to throw against the mortgage? I'm thinking about 20% of my investment gains (which would be equivalent to rebalancing at 80-20 if you think of mortgage as "negative" bonds)?

You may wish to rebalance your investment portfolio (e.g. stocks/bonds ratio). But selling investments to pay down your mortgage actually decreases your total gross assets. All you gain is more home equity (less leverage). The value of your house does not change.

I agree with both of your viewpoints. Tax considerations are a large consideration for taking either of these courses of action though.
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marielle

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Re: DONT Payoff your Mortgage Club
« Reply #334 on: July 24, 2017, 09:44:29 AM »
Is there a thread/post somewhere on here listing all the arguments for not paying off your mortgage? I'm fully on board (if I had a mortgage), but can't seem to convince someone. He's apparently pretty risk-averse, but I'm trying to make him see that it's hypocritical to want to rely on a 4% withdrawal rate in retirement yet want to pay off a 3% mortgage early.

tyort1

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Re: DONT Payoff your Mortgage Club
« Reply #335 on: July 24, 2017, 11:18:47 AM »
Part of the club, but wondering: have investment gains from the market lately been so extraordinary, that rebalancing a little bit makes sense?

Example: I have a $100,000 mortgage, but also $130,000 investment account. During the past eight months, that investment account has increased in value to $160,000, while--simply by making payments on time--that mortgage balance has decreased to $98,000.

Should I sell some of the gains while the market is up to throw against the mortgage? I'm thinking about 20% of my investment gains (which would be equivalent to rebalancing at 80-20 if you think of mortgage as "negative" bonds)?

You're better off saving/investing until you have enough $$ to pay the mortgage in full.  Which is where you are right now.  So your choice is: Cash out investments and get rid of the mortgage, so that expense is totally gone.  Or, keep the $$ invested and let it accumulate at an accelerated rate, knowing that you can cash out and pay the mortgage any time you want.
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nottoolatetostart

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Re: DONT Payoff your Mortgage Club
« Reply #336 on: July 25, 2017, 04:38:34 AM »
Part of the club, but wondering: have investment gains from the market lately been so extraordinary, that rebalancing a little bit makes sense?

Example: I have a $100,000 mortgage, but also $130,000 investment account. During the past eight months, that investment account has increased in value to $160,000, while--simply by making payments on time--that mortgage balance has decreased to $98,000.

Should I sell some of the gains while the market is up to throw against the mortgage? I'm thinking about 20% of my investment gains (which would be equivalent to rebalancing at 80-20 if you think of mortgage as "negative" bonds)?

You're better off saving/investing until you have enough $$ to pay the mortgage in full.  Which is where you are right now.  So your choice is: Cash out investments and get rid of the mortgage, so that expense is totally gone.  Or, keep the $$ invested and let it accumulate at an accelerated rate, knowing that you can cash out and pay the mortgage any time you want.

We too could pay off mortgage now. Honestly, we have had large amounts of cash for so long and such a great low monthly payment for the next 30 years that it is no longer appealing to pay it off. I would freak out, in your shoes, ONLY having that $60k cash (I assuming you have other $$$ too as we do). I don't know if I could sleep at night having that low reserves and a paid off house.

Is your mortgage payment high (i.e.is the payment based on a higher original principle balance? Could you refinance to get a lower payment based off the 100k so basically your dividends are close to paying your mortgage interest payment? Since we did something similar, thanks to this forum thread, and running my own calculations, our refi'd mortgage is such a laughable amount, I kind of love it and get tickled every month I pay it. AND we get to keep all our cash.

A non-inflation adjusted mortgage with our cash reserves has a 100% chance of success. If SHTF, I could work for minimum wage somewhere, anywhere and still make my payment.

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Re: DONT Payoff your Mortgage Club
« Reply #337 on: July 25, 2017, 05:59:30 PM »
Rebalancing into a liquid asset is rebalancing. Putting it in your mortgage at a low fixed rate. More or less locks it in at that interest rate for today forever. In the event of a market down turn you don't have a real opportunity to rebalance the other way easily. Also market timing so quit it.
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Re: DONT Payoff your Mortgage Club
« Reply #338 on: July 31, 2017, 11:54:18 AM »
Count me in. One upside of living in Finland are low interest rates, my mortgage is currently (variable rate) at 0.79% AND the government also supports homeowners by allowing almost half of the interest to be deductible. There are people here who took mortgages before the financial crisis and have currently 0% interest rate on their mortgage! That's because the variable part of the rate is actually negative.

So there is zero sense in any extra payments. In fact, I just took a "free" (as in no fees) year off payments, just paying interest for another 6 months, which is around €100 per month on a ~150k mortgage. Currently throwing all I can at the stock market as well as looking for new rental properties.

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Re: DONT Payoff your Mortgage Club
« Reply #339 on: July 31, 2017, 12:02:19 PM »
Count me in. One upside of living in Finland are low interest rates, my mortgage is currently (variable rate) at 0.79% AND the government also supports homeowners by allowing almost half of the interest to be deductible. There are people here who took mortgages before the financial crisis and have currently 0% interest rate on their mortgage! That's because the variable part of the rate is actually negative.

So there is zero sense in any extra payments. In fact, I just took a "free" (as in no fees) year off payments, just paying interest for another 6 months, which is around €100 per month on a ~150k mortgage. Currently throwing all I can at the stock market as well as looking for new rental properties.
That is so enlightened! Both you and your government. Kudos!
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runewell

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Re: DONT Payoff your Mortgage Club
« Reply #340 on: July 31, 2017, 02:23:44 PM »
the current PE is around 26 which isnt that much higher than 25 which is what sustains the 4% SWR. 

A 25 P/E implies a 4% return on equity, not a 4% withdrawal rate. 
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runewell

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Re: DONT Payoff your Mortgage Club
« Reply #341 on: July 31, 2017, 02:26:21 PM »

You may wish to rebalance your investment portfolio (e.g. stocks/bonds ratio). But selling investments to pay down your mortgage actually decreases your total gross assets. All you gain is more home equity (less leverage). The value of your house does not change.

Gross assets?  You mean investible assets?
Net worth would remain unchanged; the reduction in assets would correspond to a reduction in liabilities.
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runewell

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Re: DONT Payoff your Mortgage Club
« Reply #342 on: July 31, 2017, 02:28:49 PM »
Count me, somewhat reluctantly, in. We have a 15 year fixed-rated at 3.25% (was supposed to be 2.89%, but that's a story for another time). We have about 10 years left with a balance around 117k, closing in on 50% equity.

I really hate debt and wanted to pay it off early.

My wife and I ran the numbers on this a few weeks ago. I was hoping we could pay it of in 2-3 years so she could quit her job after we have a second child. We decided throwing all her paycheck that isn't going towards bills into savings instead of the mortgage. We could make a nice dent in the principle, but it wasn't enough for either of us to feel comfortable or to pay it off.

good choice investing the money probably will win over the long run.  you dont need a paid off house for her to quit her job if you invest the money you would have put towards the house and then draw from it for cash flow if needed you'll likely come out farther ahead than having pumped it in.

apply that to absolutely anything to do with investing money and expecting it to last regardless of in your home or in the market or in real estate. 


P/E and P/B ratios for US stocks are high enough now that it is no longer clear whether one should expect a higher return on stocks or mortgage payoff over the next 10-15 years.  Over a 30-yr time period I would still think stocks.
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talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #343 on: August 02, 2017, 02:36:14 PM »
My wife asked me what we should do about the mortgage last night. We have a fixed rate through another 15 payments. Looking for strategies to put her mind at ease.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #344 on: August 03, 2017, 07:21:02 AM »
My wife asked me what we should do about the mortgage last night. We have a fixed rate through another 15 payments. Looking for strategies to put her mind at ease.
More details needed to help. Rate? Balance? Overall financial health?
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DarkandStormy

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Re: DONT Payoff your Mortgage Club
« Reply #345 on: August 03, 2017, 07:43:59 AM »
My wife asked me what we should do about the mortgage last night. We have a fixed rate through another 15 payments. Looking for strategies to put her mind at ease.

Depends on your interest rate.  Is clearing that debt your top priority?  If so, then you could double up the payment each month and get it off the books sooner.  Would you rather be investing as much as possible the next 15 months?  Then make the minimum payments.

With just over a year left I don't think it will make a huge difference either way.  Congrats on nearly reaching the end!
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boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #346 on: August 03, 2017, 05:38:55 PM »
My wife asked me what we should do about the mortgage last night. We have a fixed rate through another 15 payments. Looking for strategies to put her mind at ease.

Depends on your interest rate.  Is clearing that debt your top priority?  If so, then you could double up the payment each month and get it off the books sooner.  Would you rather be investing as much as possible the next 15 months?  Then make the minimum payments.

With just over a year left I don't think it will make a huge difference either way.  Congrats on nearly reaching the end!

15 months left fixed I assume he isn't 15 payments from the end
« Last Edit: August 03, 2017, 05:42:45 PM by boarder42 »
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DarkandStormy

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Re: DONT Payoff your Mortgage Club
« Reply #347 on: August 04, 2017, 07:24:31 AM »
My wife asked me what we should do about the mortgage last night. We have a fixed rate through another 15 payments. Looking for strategies to put her mind at ease.

Depends on your interest rate.  Is clearing that debt your top priority?  If so, then you could double up the payment each month and get it off the books sooner.  Would you rather be investing as much as possible the next 15 months?  Then make the minimum payments.

With just over a year left I don't think it will make a huge difference either way.  Congrats on nearly reaching the end!

15 months left fixed I assume he isn't 15 payments from the end

Good catch, my bad.
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talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #348 on: August 04, 2017, 02:30:17 PM »
We're fixed at 3% ARM for the fifteen remaining payments.

The rational Part of my wife understands the math about saving $2,000/year in interest because we had a lower rate than would have come with 30-year fixed. The irrational part of my wife is concerned about what jump in payments could be arriving in late 2018 as interest rates normalize. IF they normalize.

tyort1

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Re: DONT Payoff your Mortgage Club
« Reply #349 on: August 04, 2017, 02:35:39 PM »
If it were me, I'd pay off the house.  Its on a short enough time line that the market is more volatile.  Plus, how awesome would it be to never have another mortgage payment?
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