Author Topic: DONT Payoff your Mortgage Club  (Read 40816 times)

Snowman99

  • 5 O'Clock Shadow
  • *
  • Posts: 27
Re: DONT Payoff your Mortgage Club
« Reply #400 on: September 19, 2017, 09:43:51 AM »
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

Nice work.  We fetched the same rate on our 30 year at $342k right after Brexit last year.  I don't think a 30 year will ever go lower than that.  Thank you Brits!

boarder42

  • Walrus Stache
  • *******
  • Posts: 6038
Re: DONT Payoff your Mortgage Club
« Reply #401 on: September 19, 2017, 10:10:55 AM »
regardless of starting a business or indexing or real estate investing if i have money left over after paying my minimum mortgage payment it should be going to any one of those 3 over paying down a mortgage b/c if the real estate or the business isnt beating passive investing why in the F. would you being doing it. 

i dont understand any part of what your statement is and it makes 0 sense.

 I didn't mention pre-paying a mortgage in my statement. I was referring to your theory that an emergency fund should be irrrelevant when someone reaches a certain level of investing. But once again, you are assuming that based on only one specific type of investment. And it just reminds me yet again that the underlying bias of most of your comments and maths are assuming a priority on index investing.

there have been many surveys done on this forum and over 90% of this forum index invests.  so the statement is true for most cases.  bringing me back to the point that the default answer to paydown my low cost mortgage or invest question should be invest ... then when compelling evidence is presented otherwise maybe paying it down makes sense. 
Best super bonuses on Credit cards right now - ask me how to Mfg spend to meet the sign up bonus

1. Delta Gold 60k miles Ends 1/31/2018
2. Delta Platinum - 70k miles - Ends 1/31/2018

Delta Business Gold - Ends 1/31/2018

Join Personal Capital - We each get 20 bucks!!
 https://www.talkable.com/x/StjGrn

mizzourah2006

  • Bristles
  • ***
  • Posts: 319
  • Age: 34
  • Location: NWA
Re: DONT Payoff your Mortgage Club
« Reply #402 on: September 19, 2017, 10:39:35 AM »
In. Have 25 years left at 3.375%. I actually had the opportunity to re-fi right to a 15 year right before the election that would have brought my interest rate down to 2.75% and only cost me $800 out of pocket, but the election happened and the broker didn't lock in the rate, so needless to say I never heard from him again. But the up-tick in rates does make me realize that we may never see rates that low again, so the 3.375% is looking mighty good to me.

boarder42

  • Walrus Stache
  • *******
  • Posts: 6038
Re: DONT Payoff your Mortgage Club
« Reply #403 on: September 19, 2017, 12:01:38 PM »
yeah and 25 years at 3.375 is much better than 15 at 2.75
Best super bonuses on Credit cards right now - ask me how to Mfg spend to meet the sign up bonus

1. Delta Gold 60k miles Ends 1/31/2018
2. Delta Platinum - 70k miles - Ends 1/31/2018

Delta Business Gold - Ends 1/31/2018

Join Personal Capital - We each get 20 bucks!!
 https://www.talkable.com/x/StjGrn

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1168
Re: DONT Payoff your Mortgage Club
« Reply #404 on: September 25, 2017, 01:29:31 PM »
Can you go into more detail about why you judge the higher interest rate situation to be better?

boarder42

  • Walrus Stache
  • *******
  • Posts: 6038
Re: DONT Payoff your Mortgage Club
« Reply #405 on: September 25, 2017, 02:47:36 PM »
Can you go into more detail about why you judge the higher interest rate situation to be better?

its really a math equation and can be plugged into https://michaelbluejay.com/house/15vs30.html

my blanket statement wasnt 100% correct as its a sliding scale in most 30 year vs 15 year mortgage situations you're looking at around a .75 to 1% difference in interest rate.  In most cases you must live in your house for 7 years give or take for the 30 year to come out ahead of the 15 year.  in the scenario posted above there were a few less years left meaning higher prinicpal payments being made and there was a smaller spread.  i havent done the math but that would likely take it down to around a 3-4 year break even.  And the poster wasnt talking about selling and we're almost another year in so i made an assumption they would live there longer than the break even point ...
Best super bonuses on Credit cards right now - ask me how to Mfg spend to meet the sign up bonus

1. Delta Gold 60k miles Ends 1/31/2018
2. Delta Platinum - 70k miles - Ends 1/31/2018

Delta Business Gold - Ends 1/31/2018

Join Personal Capital - We each get 20 bucks!!
 https://www.talkable.com/x/StjGrn

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1168
Re: DONT Payoff your Mortgage Club
« Reply #406 on: September 26, 2017, 12:14:26 PM »
Michael's calculator doesn't include the option value of a HELOC against equity (you'd have extra equity with the 15).

I don't want to pay down my mortgage fast, but I *hate* paying interest I don't have to. I was lucky when I got my mortgaage to have such a favorable rate for an ARM at 30-year amortization (it was 3.0 when 30-year fixed was 4.125).

HELOC sounds strange, but people thought rates were going to jump between 2013 and now, and...they haven't.

Le Barbu

  • Pencil Stache
  • ****
  • Posts: 998
  • Age: 45
  • Location: Lake Wobegon
  • We are all strong, handsome and above average
Re: DONT Payoff your Mortgage Club
« Reply #407 on: October 07, 2017, 06:03:26 AM »
I have 11.5 more years to enjoy my 2.625% mortgage.  With the stock market as expensive as it is, it is unlikely that the next 10 yrs of returns will be similar to historical averages.  I think we would be smarter to only plan for 4-5% per year.

Wow, what a coincidence! That's exactly the same rate and approximate payoff date as runewell!

haha nice catch

Who knew there were TWO bridge playing actuaries on this board?!

Registration date is coincidently the same than the "Stop worrying about the 4% rule" thread wreck...

Runewell and JohnSteed both disapeared from the members list!
"The real reason this blog exists, is simply to save the entire human race from destroying itself through overconsumption of its own habitat"

-MMM

Dicey

  • Walrus Stache
  • *******
  • Posts: 6508
  • Age: 59
  • Location: NorCal
Re: DONT Payoff your Mortgage Club
« Reply #408 on: October 07, 2017, 08:59:07 AM »
...Thanks to RWD's great catch. Sharp!
I did it! I have a journal!
A Lot Like This
And hell yes, I am still moving confidently in the direction of my dreams...

Helvegen

  • Pencil Stache
  • ****
  • Posts: 507
  • Location: PNW
Re: DONT Payoff your Mortgage Club
« Reply #409 on: October 09, 2017, 10:34:09 AM »
I'm joining up.

We bought a house on a rushed whim this spring. Not the best way to do it, but the writing was on the wall with our insanely undermarket MTM rental, among a few other things that forced our hands.

We got a 7/1 ARM at 2.9%, no PMI. Our thought is at the end of the term, we will most likely sell. Our daughter will graduate from high school in 7 years, so it is a fairly perfect term in that regard.

We already have a lot of money tied up in the house. There were also several large capital expenditure$ that immediately had to be made to it upon possession. Yeah, I think it has eaten enough of our money for now.

My admission is that I have already made 4 extra principal payments. I knew each time I made them, it probably wasn't the best idea, but it made me feel better to pay down debt. I should really look at it like paying rent instead. I mean, I don't have any intention of owning it free and clear. I don't know if we will buy again after this. If we do buy again, it definitely will not be a bigger or more expensive place. So, it is really just renting with benefits.

The money will be sent to taxable. My Roths have been maxed, my HSA will be maxed next pay period, our 401ks I contribute to the match and not really interested in putting more in there than I have to (15% bracket). My taxable is sad anyway after buying the house and really needs more help than the mortgage does.

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1168
Re: DONT Payoff your Mortgage Club
« Reply #410 on: October 10, 2017, 01:23:10 PM »
That's a great rate. Anything <3 may not be available again for a while. I'm late in the fourth year of a 5/1 at 3.0%, and my co-worker tried to persuade me to refinance to a 3.75% fixed. I said, "no thanks".

Helvegen

  • Pencil Stache
  • ****
  • Posts: 507
  • Location: PNW
Re: DONT Payoff your Mortgage Club
« Reply #411 on: October 10, 2017, 04:17:25 PM »
Seller paid for that rate, so that was about the only nice thing about buying a Fannie Mae foreclosure. The whole process to buy through them was a complete PITA for us, for both agents, for our loan officers. 0/10, do not recommend.

I thought it was interesting when we were going though the disclosure and it said in addition to a maximum adjustment rate of 7.9%, there was a minimum, I think at 1.9%. Darn, no negative interest rate mortgage for me with these terms!

Timmm

  • 5 O'Clock Shadow
  • *
  • Posts: 32
Re: DONT Payoff your Mortgage Club
« Reply #412 on: October 10, 2017, 05:15:11 PM »
I'd have been pretty tempted by that 3.75 fixed option, talltexan. What would your current loan adjust to if it went floating today? Are you thinking you'll still be able to get 3.75 in a year?

We're at 2.625 on a 5/1 with 3 more years fixed, but I'm expecting we'll be very likely to sell within 2-3 years, so it would take a great deal to attract me to refinance this loan. I suppose I'll consider another ARM if it looks like we'll keep it another 5+ years at that time.

PizzaSteve

  • Pencil Stache
  • ****
  • Posts: 667
Re: DONT Payoff your Mortgage Club
« Reply #413 on: October 10, 2017, 05:24:48 PM »
That's a great rate. Anything <3 may not be available again for a while. I'm late in the fourth year of a 5/1 at 3.0%, and my co-worker tried to persuade me to refinance to a 3.75% fixed. I said, "no thanks".
I don't agree rates like this wont be available.  Ten years ago we were paying 2.25 on our adjustable rate that was 30 yr t bills +2.2 (granted a fantastic loan helped by a corp relo).  Best case ARMs have been low for a decade and morgage brokers kept saying...cant get lower, wont last.  Japan had 0% effective rates for over 2 decades.  I believe we will see rates in this range for some time and dont recommend paying the high premium for a 30 year fixed rate (a whopping 30% more in real terms if rates are stable !!!).  Thats a big intererest rate hedge insurance payment.  I would rather self insure against interest rate hikes and invest more in stocks per year, under the leveraged strategy.  If inflation hits, it will also likely inflate your stock prices, so you already have a built in inflation rate increase hedge without giving up almost 1% greater returns per year. 1% per year is huge on a percent basis in low rate envionments.

I had 3/1, 5/1 and 7/1 ARM loans with variable rates for 35 years and never came out behind, all costs and interest payments considered.
« Last Edit: October 10, 2017, 05:29:31 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.

Pizzasteve prefers to avoid excessive critical debates.  In the event of a post, no need to reply or quote if you disagree. I am posting information meant to stand on its own and hope to avoid back and forth debating.

Helvegen

  • Pencil Stache
  • ****
  • Posts: 507
  • Location: PNW
Re: DONT Payoff your Mortgage Club
« Reply #414 on: October 11, 2017, 07:51:15 AM »
That was in the back of my mind when I decided to take the ARM. The thing is, there is no law that says there is a floor to these interest rates and they can only skyrocket from here. NIRP is a thing in some countries. There is nothing magical about the number 0 when it comes to interest rates.

I'm not betting the farm on them dropping to 0, but I can afford the maximum adjustment, should that happen. Again, I don't know how long I plan on being a homeowner past the 7 year term. I may not even live in the country anymore. Who knows.

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1168
Re: DONT Payoff your Mortgage Club
« Reply #415 on: October 12, 2017, 07:20:31 AM »
Here was the trick to persuading my wife to take on the ARM: buying a new house for ~80% of the cost of the old one. (sure sounds Mustachian now that I'm typing it)

Our old mortgage payment: $1,252 (on a 30-year fixed at 4.75), starting loan balance of $240,000
Our new mortgage payment: $893 (on a 5/1 ARM at 3.00), loan balance of $212,000.

I showed my wife on a spreadsheet how much ahead on the new loan we'd have to be to guarantee that we'd never pay more than $1,252 after rate resets, so--shockingly--we paid a little extra in the early years. Then I started freaking out seeing the balance drop so much, so I found other places to be putting that money.

Our index is LIBOR, which appears to have risen about 50 basis points over the last year.

DarkandStormy

  • Pencil Stache
  • ****
  • Posts: 699
  • Age: 28
  • Location: Midwest, USA
Re: DONT Payoff your Mortgage Club
« Reply #416 on: October 12, 2017, 07:59:27 AM »
Our index is LIBOR, which appears to have risen about 50 basis points over the last year.

LIBOR is dead, so I'm curious as to what your index is now.
The Chase Trifecta:
Earn 50,000 Ultimate Rewards points with Chase Sapphire Preferred - $4k spend in 3 months.
https://www.referyourchasecard.com/6/2MOVOLZCEJ
Earn a $150 bonus with Chase Freedom Unlimited - only $500 spend needed in 3 months.
https://www.referyourchasecard.com/18/ENYF0FTS66
Earn a $150 bonus with Chase Freedom - only $500 spend needed in 3 months.
https://www.referyourchasecard.com/2/DBOP9XI9XT

Southwest Cards - Earn 40k miles for $1k spend in 3 months.
Premier -
https://www.referyourchasecard.com/224/JY2BMSDZJ2
Plus -
https://www.referyourchasecard.com/223/F3ZW8H140N

Recommended Cell Service - Google's Project Fi: https://g.co/fi/r/THK0WX

PizzaSteve

  • Pencil Stache
  • ****
  • Posts: 667
Re: DONT Payoff your Mortgage Club
« Reply #417 on: October 12, 2017, 08:48:27 AM »
Here was the trick to persuading my wife to take on the ARM: buying a new house for ~80% of the cost of the old one. (sure sounds Mustachian now that I'm typing it)

Our old mortgage payment: $1,252 (on a 30-year fixed at 4.75), starting loan balance of $240,000
Our new mortgage payment: $893 (on a 5/1 ARM at 3.00), loan balance of $212,000.

I showed my wife on a spreadsheet how much ahead on the new loan we'd have to be to guarantee that we'd never pay more than $1,252 after rate resets, so--shockingly--we paid a little extra in the early years. Then I started freaking out seeing the balance drop so much, so I found other places to be putting that money.

Our index is LIBOR, which appears to have risen about 50 basis points over the last year.
This is a bit of a hidden cost. The low rate encourages extra principal payments.  We also paid extra, and our loan ballance fell fast, over 300k in very little time, so when our rate was 2.25 we were not very leveraged.  Sure, we had a lot of stock anyway, but could have had more in stocks, which in hindsite, did better.  That said, the low balance was confidence building for putting all our savings into maxing retirement accts for 25 yrs.
« Last Edit: October 14, 2017, 10:05:41 AM 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.

Pizzasteve prefers to avoid excessive critical debates.  In the event of a post, no need to reply or quote if you disagree. I am posting information meant to stand on its own and hope to avoid back and forth debating.

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1168
Re: DONT Payoff your Mortgage Club
« Reply #418 on: October 13, 2017, 10:05:20 AM »
Our index is LIBOR, which appears to have risen about 50 basis points over the last year.

LIBOR is dead, so I'm curious as to what your index is now.

Can you explain what you mean by this comment?

RWD

  • Handlebar Stache
  • *****
  • Posts: 1672
  • Location: Mississippi
Re: DONT Payoff your Mortgage Club
« Reply #419 on: October 13, 2017, 10:09:49 AM »
Our index is LIBOR, which appears to have risen about 50 basis points over the last year.

LIBOR is dead, so I'm curious as to what your index is now.

Can you explain what you mean by this comment?

He might mean this?
https://www.cnbc.com/2017/07/27/scandalous-libor-rate-to-end-in-2021.html

terrifictim

  • 5 O'Clock Shadow
  • *
  • Posts: 17
  • Location: San Diego, CA
Re: DONT Payoff your Mortgage Club
« Reply #420 on: October 13, 2017, 04:54:18 PM »
After reading through these posts and others, I'm proud to say I'm now a member off the DPYMC.
I bought in San Diego in 2015 for smallest property that was biking distance to work but have been spending the past two years putting extra payments down. But now that I realize I could have had two years of extra money instead going to VTSAX, sigh. At least like MMM says you're winning either way.

Stats:
Purchased (2BR,1.5BA,1100SF) townhouse 05/2015
Purchase price: 289K.
Current market price: 360K
PITI: $1070/month
Initial Mortgage: $231,200 @ 3.75%
Remaining Mortgage: $202,450

boarder42

  • Walrus Stache
  • *******
  • Posts: 6038
Re: DONT Payoff your Mortgage Club
« Reply #421 on: October 13, 2017, 08:55:33 PM »
After reading through these posts and others, I'm proud to say I'm now a member off the DPYMC.
I bought in San Diego in 2015 for smallest property that was biking distance to work but have been spending the past two years putting extra payments down. But now that I realize I could have had two years of extra money instead going to VTSAX, sigh. At least like MMM says you're winning either way.

Stats:
Purchased (2BR,1.5BA,1100SF) townhouse 05/2015
Purchase price: 289K.
Current market price: 360K
PITI: $1070/month
Initial Mortgage: $231,200 @ 3.75%
Remaining Mortgage: $202,450

Welcome to the club. It's a relief to get that debt elephant off your shoulders isn't it!  When you truly see the light it frees up your life so much more than obsessing over paying down good debt.
Best super bonuses on Credit cards right now - ask me how to Mfg spend to meet the sign up bonus

1. Delta Gold 60k miles Ends 1/31/2018
2. Delta Platinum - 70k miles - Ends 1/31/2018

Delta Business Gold - Ends 1/31/2018

Join Personal Capital - We each get 20 bucks!!
 https://www.talkable.com/x/StjGrn

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1168
Re: DONT Payoff your Mortgage Club
« Reply #422 on: October 16, 2017, 12:59:53 PM »
Our index is LIBOR, which appears to have risen about 50 basis points over the last year.

LIBOR is dead, so I'm curious as to what your index is now.

Can you explain what you mean by this comment?

He might mean this?
https://www.cnbc.com/2017/07/27/scandalous-libor-rate-to-end-in-2021.html

So I read this article, and it sounds like LIBOR is still going to exist in its current form for more than 3 years.

moonpalace

  • Stubble
  • **
  • Posts: 152
  • Age: 42
Re: DONT Payoff your Mortgage Club
« Reply #423 on: October 17, 2017, 06:47:13 AM »
I'm firmly in the DPYMC (15-year @ 2.75%), but I'm a little bit tempted to pay some student loans a little bit early (while still putting ~$40k/year into the stache).

The loans are at just under 4% right now, but they're adjustable rate. If I don't pre-pay they'll be gone in 4.5 years. If I just prepay by a few hundred bucks a month they'll be gone in more like 2.5 years. I wouldn't even consider it if not for the adjustable rate thing.

Thoughts?

Peter Parker

  • Stubble
  • **
  • Posts: 162
Re: DONT Payoff your Mortgage Club
« Reply #424 on: October 17, 2017, 07:08:38 AM »
I'm firmly in the DPYMC (15-year @ 2.75%), but I'm a little bit tempted to pay some student loans a little bit early (while still putting ~$40k/year into the stache).

The loans are at just under 4% right now, but they're adjustable rate. If I don't pre-pay they'll be gone in 4.5 years. If I just prepay by a few hundred bucks a month they'll be gone in more like 2.5 years. I wouldn't even consider it if not for the adjustable rate thing.

Thoughts?

While I'm a big believer in the DPOYM theory (fact!), I feel differently about student loans--especially if they are adjustable.  I feel this way for a number of reasons:

1.  They are generally not tax deductible.
2.  They are not an appreciable asset--housing/real estate generally (not always) goes up in value.
3.  You can't live in, or rent, your student loan.
4.  In worst case scenario, you can' walk away from your mortgage--from my understanding it is harder to discharge student loans in bankruptcy.
5.  4%+ loans starts getting into my "conservative" break even analysis.

So I say, don't pay off your mortgage, but get the student loans off your shoulders and when paid, start dumping that money into investments.

Dicey

  • Walrus Stache
  • *******
  • Posts: 6508
  • Age: 59
  • Location: NorCal
Re: DONT Payoff your Mortgage Club
« Reply #425 on: October 17, 2017, 07:13:52 AM »
I'm firmly in the DPYMC (15-year @ 2.75%), but I'm a little bit tempted to pay some student loans a little bit early (while still putting ~$40k/year into the stache).

The loans are at just under 4% right now, but they're adjustable rate. If I don't pre-pay they'll be gone in 4.5 years. If I just prepay by a few hundred bucks a month they'll be gone in more like 2.5 years. I wouldn't even consider it if not for the adjustable rate thing.

Thoughts?

While I'm a big believer in the DPOYM theory (fact!), I feel differently about student loans--especially if they are adjustable.  I feel this way for a number of reasons:

1.  They are generally not tax deductible.
2.  They are not an appreciable asset--housing/real estate generally (not always) goes up in value.
3.  You can't live in, or rent, your student loan.
4.  In worst case scenario, you can' walk away from your mortgage--from my understanding it is harder to discharge student loans in bankruptcy.
5.  4%+ loans starts getting into my "conservative" break even analysis.

So I say, don't pay off your mortgage, but get the student loans off your shoulders and when paid, start dumping that money into investments.
Not sure if #1 is correct, particularly if you own a home with enough interest expense to itemize.

I tend to agree with P. Pan's final point, unless there are any forgiveness options on the horizon, in which case I'd set minimum autopayments and forget about 'em.
I did it! I have a journal!
A Lot Like This
And hell yes, I am still moving confidently in the direction of my dreams...

marielle

  • Pencil Stache
  • ****
  • Posts: 821
  • Age: 24
  • Location: South Carolina
Re: DONT Payoff your Mortgage Club
« Reply #426 on: October 17, 2017, 07:44:36 AM »
I'm firmly in the DPYMC (15-year @ 2.75%), but I'm a little bit tempted to pay some student loans a little bit early (while still putting ~$40k/year into the stache).

The loans are at just under 4% right now, but they're adjustable rate. If I don't pre-pay they'll be gone in 4.5 years. If I just prepay by a few hundred bucks a month they'll be gone in more like 2.5 years. I wouldn't even consider it if not for the adjustable rate thing.

Thoughts?

While I'm a big believer in the DPOYM theory (fact!), I feel differently about student loans--especially if they are adjustable.  I feel this way for a number of reasons:

1.  They are generally not tax deductible.
2.  They are not an appreciable asset--housing/real estate generally (not always) goes up in value.
3.  You can't live in, or rent, your student loan.
4.  In worst case scenario, you can' walk away from your mortgage--from my understanding it is harder to discharge student loans in bankruptcy.
5.  4%+ loans starts getting into my "conservative" break even analysis.

So I say, don't pay off your mortgage, but get the student loans off your shoulders and when paid, start dumping that money into investments.
Not sure if #1 is correct, particularly if you own a home with enough interest expense to itemize.

I tend to agree with P. Pan's final point, unless there are any forgiveness options on the horizon, in which case I'd set minimum autopayments and forget about 'em.

You don't have to itemize to deduct student loan interest. I think there's an income limit of $80k though if you're single.

https://www.irs.gov/taxtopics/tc450/tc456

You claim this deduction as an adjustment to income, so you don't need to itemize your deductions on Form 1040, Schedule A (PDF), Itemized Deductions.

moonpalace

  • Stubble
  • **
  • Posts: 152
  • Age: 42
Re: DONT Payoff your Mortgage Club
« Reply #427 on: October 17, 2017, 08:33:02 AM »
While I'm a big believer in the DPOYM theory (fact!), I feel differently about student loans--especially if they are adjustable.  I feel this way for a number of reasons:

1.  They are generally not tax deductible.
2.  They are not an appreciable asset--housing/real estate generally (not always) goes up in value.
3.  You can't live in, or rent, your student loan.
4.  In worst case scenario, you can' walk away from your mortgage--from my understanding it is harder to discharge student loans in bankruptcy.
5.  4%+ loans starts getting into my "conservative" break even analysis.

So I say, don't pay off your mortgage, but get the student loans off your shoulders and when paid, start dumping that money into investments.

Thanks! We do get a small deduction for the student-loan interest, but that deduction gets smaller every year. At this point it's probably about $1,000/year at most.

I think I will start pre-paying them a bit more in 2018, while still having a primary focus on investing, which is much more tax-favorable. Current monthly SL payments are $1,244 and current investments per month are ~$3,700. If I get a bit of a raise this fall, might just apply the raise (likely $100-200 / month) to student loans and keep everything else the same.

Goldielocks

  • Magnum Stache
  • ******
  • Posts: 4966
  • Location: BC
Re: DONT Payoff your Mortgage Club
« Reply #428 on: October 17, 2017, 01:41:03 PM »
I will start off by saying that I am FIRE'd, but not drawing down my savings as yet (lifestyle work is enough for the basics).

Recently my mortgage rate went up slightly.   Meanwhile I have a sizable amount (in terms of $'s not %'s) in my asset allocation as bonds.   This had me thinking -- one day, I will likely just pay off my mortgage and reduce my bond allocations.  I have a variable rate that renews every 5 years, so this need for mortgage review comes up somewhat regularly.  (Longer term, fixed rate mortgages are not financially attractive here)

Any of you thought of this?  If so, what would your break even  / switch over point be?

Most of the time we compare mortgage rates to what our overall portfolio is doing, so this is different.  Also, it is not a pure math decision because other factors, like monthly cash flow, and having a mortgage  with fixed risk set up in today's dollars but paying it with tomorrow's dollars, should be considered.

boarder42

  • Walrus Stache
  • *******
  • Posts: 6038
Re: DONT Payoff your Mortgage Club
« Reply #429 on: October 17, 2017, 02:04:46 PM »
I will start off by saying that I am FIRE'd, but not drawing down my savings as yet (lifestyle work is enough for the basics).

Recently my mortgage rate went up slightly.   Meanwhile I have a sizable amount (in terms of $'s not %'s) in my asset allocation as bonds.   This had me thinking -- one day, I will likely just pay off my mortgage and reduce my bond allocations.  I have a variable rate that renews every 5 years, so this need for mortgage review comes up somewhat regularly.  (Longer term, fixed rate mortgages are not financially attractive here)

Any of you thought of this?  If so, what would your break even  / switch over point be?

Most of the time we compare mortgage rates to what our overall portfolio is doing, so this is different.  Also, it is not a pure math decision because other factors, like monthly cash flow, and having a mortgage  with fixed risk set up in today's dollars but paying it with tomorrow's dollars, should be considered.

i dont think you provided enough information for me to answer the question.  but my switch over percent in terms of real rate - meaning after i take my interest deduction would be around 5.5-6% probably - which means somewhere around a rate of 8.7%
Best super bonuses on Credit cards right now - ask me how to Mfg spend to meet the sign up bonus

1. Delta Gold 60k miles Ends 1/31/2018
2. Delta Platinum - 70k miles - Ends 1/31/2018

Delta Business Gold - Ends 1/31/2018

Join Personal Capital - We each get 20 bucks!!
 https://www.talkable.com/x/StjGrn

Goldielocks

  • Magnum Stache
  • ******
  • Posts: 4966
  • Location: BC
Re: DONT Payoff your Mortgage Club
« Reply #430 on: October 17, 2017, 02:32:58 PM »
I will start off by saying that I am FIRE'd, but not drawing down my savings as yet (lifestyle work is enough for the basics).

Recently my mortgage rate went up slightly.   Meanwhile I have a sizable amount (in terms of $'s not %'s) in my asset allocation as bonds.   This had me thinking -- one day, I will likely just pay off my mortgage and reduce my bond allocations.  I have a variable rate that renews every 5 years, so this need for mortgage review comes up somewhat regularly.  (Longer term, fixed rate mortgages are not financially attractive here)

Any of you thought of this?  If so, what would your break even  / switch over point be?

Most of the time we compare mortgage rates to what our overall portfolio is doing, so this is different.  Also, it is not a pure math decision because other factors, like monthly cash flow, and having a mortgage  with fixed risk set up in today's dollars but paying it with tomorrow's dollars, should be considered.

i dont think you provided enough information for me to answer the question.  but my switch over percent in terms of real rate - meaning after i take my interest deduction would be around 5.5-6% probably - which means somewhere around a rate of 8.7%

Oh, thanks...I was unclear...
 I wasn't looking for a specific RATE, but more of the differential between Bond return and Mortgage rate...   and the rationale behind it.

My bonds are in my registered (not taxed) account.  What do you mean by "interest deduction"...   Assume I don't itemize deductions (because I don't, being in Canada).

Canadian Ben

  • Pencil Stache
  • ****
  • Posts: 758
  • Age: 27
  • Location: Ottawa
Re: DONT Payoff your Mortgage Club
« Reply #431 on: October 18, 2017, 06:28:38 AM »
In the US, mortgage interest is tax deductible.

For us, we have to do the Smith maneuver (in order to make the mortgage a loan for investment, thus making it tax deductible up to 80% of the value of the house)

Goldielocks

  • Magnum Stache
  • ******
  • Posts: 4966
  • Location: BC
Re: DONT Payoff your Mortgage Club
« Reply #432 on: October 18, 2017, 12:57:17 PM »
In the US, mortgage interest is tax deductible.

For us, we have to do the Smith maneuver (in order to make the mortgage a loan for investment, thus making it tax deductible up to 80% of the value of the house)
If you don't itemize, I thought that there was no difference about the mortgage being tax deductible?

Regardless, my question still stands -- any takers?

Canadian Ben

  • Pencil Stache
  • ****
  • Posts: 758
  • Age: 27
  • Location: Ottawa
Re: DONT Payoff your Mortgage Club
« Reply #433 on: October 18, 2017, 01:02:49 PM »
I might be misunderstanding, but I think this is what you`re looking for:

The point of switch over would be around 5-6% (because your bonds won`t make more than 5-6%, so might as well pay into the mortgage and get the guaranteed return)



Goldielocks

  • Magnum Stache
  • ******
  • Posts: 4966
  • Location: BC
Re: DONT Payoff your Mortgage Club
« Reply #434 on: October 18, 2017, 01:11:18 PM »
I might be misunderstanding, but I think this is what you`re looking for:

The point of switch over would be around 5-6% (because your bonds won`t make more than 5-6%, so might as well pay into the mortgage and get the guaranteed return)

I am looking for a differential -- are you stating the differential at 0%, and to ignore all other factors, including the fact that a mortgage locks in a purchase price in today's dollars, but pays for them with tomorrow's dollars?

Canadian Ben

  • Pencil Stache
  • ****
  • Posts: 758
  • Age: 27
  • Location: Ottawa
Re: DONT Payoff your Mortgage Club
« Reply #435 on: October 18, 2017, 03:21:25 PM »
I personally use my house as a hedge, and Smith maneuver the rest. Paying off the house would be counter optimized, but that's with the current interest rates. Inflation for houses are quite variable, so I wouldn't be too sure how to calculate out the difference in current/future dollars for the price. Your questions are too advanced for me, Sorry!

Le Barbu

  • Pencil Stache
  • ****
  • Posts: 998
  • Age: 45
  • Location: Lake Wobegon
  • We are all strong, handsome and above average
Re: DONT Payoff your Mortgage Club
« Reply #436 on: October 18, 2017, 03:28:08 PM »
I personally use my house as a hedge, and Smith maneuver the rest. Paying off the house would be counter optimized, but that's with the current interest rates. Inflation for houses are quite variable, so I wouldn't be too sure how to calculate out the difference in current/future dollars for the price. Your questions are too advanced for me, Sorry!

Did you used all of your available HELOC for SM? I actualy use 150k$ and 30k$ is unused. I keep it as a cushion on top of my EF. Actual debt/assets is less than 20% and portfolio is 100% stocks
"The real reason this blog exists, is simply to save the entire human race from destroying itself through overconsumption of its own habitat"

-MMM

Goldielocks

  • Magnum Stache
  • ******
  • Posts: 4966
  • Location: BC
Re: DONT Payoff your Mortgage Club
« Reply #437 on: October 18, 2017, 03:34:10 PM »
I personally use my house as a hedge, and Smith maneuver the rest. Paying off the house would be counter optimized, but that's with the current interest rates. Inflation for houses are quite variable, so I wouldn't be too sure how to calculate out the difference in current/future dollars for the price. Your questions are too advanced for me, Sorry!

I used to look at it that way, too.  But this past month, after rebalancing, and noting the low returns on the bond funds, and then seeing the small increase in my mortgage rate, I started to wonder....  -->Note, I won't increase my mortgage $ in future when I renew (to invest cash in markets), because my income will be too low to be approved for a large mortgage (FIRE  income only).

Essentially -- I have an asset allocation target in FIRE.   Eventually my mortgage will be similar $ in value to the Bond % in my asset allocation.   At what differential should I forgo the bonds and just carry my own mortgage?

When my bond return is = or < mortgage rate?   What else to consider?

Canadian Ben

  • Pencil Stache
  • ****
  • Posts: 758
  • Age: 27
  • Location: Ottawa
Re: DONT Payoff your Mortgage Club
« Reply #438 on: October 18, 2017, 04:35:25 PM »
The point of having bonds is to even out the volatility of the stock market, and to invest in stocks when they crash and bonds go up.
Your mortgage will do little for that.

Goldielocks

  • Magnum Stache
  • ******
  • Posts: 4966
  • Location: BC
Re: DONT Payoff your Mortgage Club
« Reply #439 on: October 18, 2017, 04:56:58 PM »
Hmmm,   good point... my asset rebalancing happens when I am about 5% out of whack,  so I only need to keep a reasonable portion of bonds that I can sell to rebalance, if I include the home value in the allocations..

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1168
Re: DONT Payoff your Mortgage Club
« Reply #440 on: October 19, 2017, 08:15:22 AM »
I'm still not sure what the purpose of bonds is when debt is so cheap and available. Isn't a mortgage basically negative bonds?

terrifictim

  • 5 O'Clock Shadow
  • *
  • Posts: 17
  • Location: San Diego, CA
Re: DONT Payoff your Mortgage Club
« Reply #441 on: October 19, 2017, 08:25:43 AM »
After reading through these posts and others, I'm proud to say I'm now a member off the DPYMC.
I bought in San Diego in 2015 for smallest property that was biking distance to work but have been spending the past two years putting extra payments down. But now that I realize I could have had two years of extra money instead going to VTSAX, sigh. At least like MMM says you're winning either way.

Stats:
Purchased (2BR,1.5BA,1100SF) townhouse 05/2015
Purchase price: 289K.
Current market price: 360K
PITI: $1070/month
Initial Mortgage: $231,200 @ 3.75%
Remaining Mortgage: $202,450

Welcome to the club. It's a relief to get that debt elephant off your shoulders isn't it!  When you truly see the light it frees up your life so much more than obsessing over paying down good debt.

Thanks! I came from an upbringing that was heavily influenced by Dave Ramsey and held that all debt was bad. While there's lots of people for whom his advice makes sense, I'm hopefully enough of an MMM enthusiast that I can still be saving money without the enforcement of paying off the mortgage sooner. Taking that $400 a month extra in principal and applying it to Vanguard is a great boost to the FIRE date.

boarder42

  • Walrus Stache
  • *******
  • Posts: 6038
Re: DONT Payoff your Mortgage Club
« Reply #442 on: October 19, 2017, 09:32:32 AM »
After reading through these posts and others, I'm proud to say I'm now a member off the DPYMC.
I bought in San Diego in 2015 for smallest property that was biking distance to work but have been spending the past two years putting extra payments down. But now that I realize I could have had two years of extra money instead going to VTSAX, sigh. At least like MMM says you're winning either way.

Stats:
Purchased (2BR,1.5BA,1100SF) townhouse 05/2015
Purchase price: 289K.
Current market price: 360K
PITI: $1070/month
Initial Mortgage: $231,200 @ 3.75%
Remaining Mortgage: $202,450

Welcome to the club. It's a relief to get that debt elephant off your shoulders isn't it!  When you truly see the light it frees up your life so much more than obsessing over paying down good debt.

Thanks! I came from an upbringing that was heavily influenced by Dave Ramsey and held that all debt was bad. While there's lots of people for whom his advice makes sense, I'm hopefully enough of an MMM enthusiast that I can still be saving money without the enforcement of paying off the mortgage sooner. Taking that $400 a month extra in principal and applying it to Vanguard is a great boost to the FIRE date.

yep and its as simpe as that
Best super bonuses on Credit cards right now - ask me how to Mfg spend to meet the sign up bonus

1. Delta Gold 60k miles Ends 1/31/2018
2. Delta Platinum - 70k miles - Ends 1/31/2018

Delta Business Gold - Ends 1/31/2018

Join Personal Capital - We each get 20 bucks!!
 https://www.talkable.com/x/StjGrn

OurTown

  • Pencil Stache
  • ****
  • Posts: 534
  • Age: 48
  • Location: Tennessee
Re: DONT Payoff your Mortgage Club
« Reply #443 on: October 27, 2017, 12:28:56 PM »
Okay, in the immortal words of the Monkees, now I'm a believer.

https://www.youtube.com/watch?v=wB9YIsKIEbA

boarder42

  • Walrus Stache
  • *******
  • Posts: 6038
Re: DONT Payoff your Mortgage Club
« Reply #444 on: October 27, 2017, 12:46:01 PM »
Okay, in the immortal words of the Monkees, now I'm a believer.

https://www.youtube.com/watch?v=wB9YIsKIEbA

Awesome and welcome its so hard to get over the mental hurdles of debt is bad and how can it be not in my best interest to pay this down.
Best super bonuses on Credit cards right now - ask me how to Mfg spend to meet the sign up bonus

1. Delta Gold 60k miles Ends 1/31/2018
2. Delta Platinum - 70k miles - Ends 1/31/2018

Delta Business Gold - Ends 1/31/2018

Join Personal Capital - We each get 20 bucks!!
 https://www.talkable.com/x/StjGrn

OurTown

  • Pencil Stache
  • ****
  • Posts: 534
  • Age: 48
  • Location: Tennessee
Re: DONT Payoff your Mortgage Club
« Reply #445 on: October 27, 2017, 12:52:13 PM »
Okay, in the immortal words of the Monkees, now I'm a believer.

https://www.youtube.com/watch?v=wB9YIsKIEbA

Awesome and welcome its so hard to get over the mental hurdles of debt is bad and how can it be not in my best interest to pay this down.

I'm four years into a 15 year at 3 3/8 %.  Balance is around $140k.  Let it ride, baby.

Peter Parker

  • Stubble
  • **
  • Posts: 162
Re: DONT Payoff your Mortgage Club
« Reply #446 on: October 27, 2017, 06:24:59 PM »
Okay, in the immortal words of the Monkees, now I'm a believer.

https://www.youtube.com/watch?v=wB9YIsKIEbA

I believe Neil Diamond wrote that song :-)

boarder42

  • Walrus Stache
  • *******
  • Posts: 6038
Re: DONT Payoff your Mortgage Club
« Reply #447 on: November 15, 2017, 12:00:53 PM »
bought some more VTSAX today!
Best super bonuses on Credit cards right now - ask me how to Mfg spend to meet the sign up bonus

1. Delta Gold 60k miles Ends 1/31/2018
2. Delta Platinum - 70k miles - Ends 1/31/2018

Delta Business Gold - Ends 1/31/2018

Join Personal Capital - We each get 20 bucks!!
 https://www.talkable.com/x/StjGrn

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1168
Re: DONT Payoff your Mortgage Club
« Reply #448 on: November 15, 2017, 02:19:39 PM »
It sounds a little contrarian, but I actually moved about $10,000 in bonds back into stocks last week. Tired of that stuff slowing me down when there's money to be made!!

boarder42

  • Walrus Stache
  • *******
  • Posts: 6038
Re: DONT Payoff your Mortgage Club
« Reply #449 on: November 15, 2017, 02:39:26 PM »
It sounds a little contrarian, but I actually moved about $10,000 in bonds back into stocks last week. Tired of that stuff slowing me down when there's money to be made!!

good work every green soldier working!

now when will we have a crash.  Being a post 2008 really big investor i'd like to see my portfolio lose 200k so i can feel that pinch.
Best super bonuses on Credit cards right now - ask me how to Mfg spend to meet the sign up bonus

1. Delta Gold 60k miles Ends 1/31/2018
2. Delta Platinum - 70k miles - Ends 1/31/2018

Delta Business Gold - Ends 1/31/2018

Join Personal Capital - We each get 20 bucks!!
 https://www.talkable.com/x/StjGrn