Author Topic: DONT Payoff your Mortgage Club  (Read 59953 times)

Snowman99

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Re: DONT Payoff your Mortgage Club
« Reply #550 on: April 11, 2018, 12:27:49 AM »
For those lingerers on this thread, it is also important to note that the "Best Case Scenario" that has the opportunity to make you a literal shit-ton of money is a 30-year fixed, low rate, first mortgage.  Anything beyond that and it may be worth paying down the mortgage in lieu of holding on to it.  The whole point of the thread is that one needs to do the math and make an educated decision instead of just saying "Debt is bad, I must kill it!"

The biggest example of potential pay-it-down-ASAP mortgages are the Adjustable Rate Mortgages or any with a high interest rate, specifically like those found in the UK or Canada, or the (fewer) ARM's available in the US.  And even then it should be after tax-deferred and tax-advantaged accounts are maximized.
The biggest example of potential NEVER-pay-it-down mortgages are the aforementioned holy grail of mortgages, long-term low-rate fixed mortgages with (basically) no risk and high margins over the market (long term).

Just thought I should reiterate that...

So are you saying I shouldn't prepay my 30 year fixed at 3.25% :)?

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #551 on: April 11, 2018, 01:09:11 AM »
Mortgage balance is $345K, and have around $2M investment balance.  Plan on staying another 4-5 years but that is up for grabs.  If zillow/redfin estimates are correct, we are quickly approaching the $500K tax free capital gains limit in house value...so that might influence our decision to move sooner.
Now that's an interesting wrinkle... It seems you have lots of choices, which is a beautiful thing. Have you made significant improvements to the property or just riding the market appreciation tidal wave?

What does this mean and why is it good? (Not sarcastic, I actually don't know). We have a house that is riding the market appreciation tidal wave.
From IRS.gov:

Topic Number 701 - Sale of Your Home
If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home, provides rules and worksheets. Topic No. 409 covers general capital gain and loss information.

https://www.irs.gov/taxtopics/tc701
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Basenji

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Re: DONT Payoff your Mortgage Club
« Reply #552 on: April 11, 2018, 06:13:41 AM »
we are quickly approaching the $500K tax free capital gains limit in house value...so that might influence our decision to move sooner.
Now that's an interesting wrinkle... It seems you have lots of choices, which is a beautiful thing. Have you made significant improvements to the property or just riding the market appreciation tidal wave?

What does this mean and why is it good? (Not sarcastic, I actually don't know). We have a house that is riding the market appreciation tidal wave.
From IRS.gov:

Topic Number 701 - Sale of Your Home
If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home, provides rules and worksheets. Topic No. 409 covers general capital gain and loss information.

https://www.irs.gov/taxtopics/tc701

Merci. That was my question. Has this rule changed in the past? Has it changed depending on administrations? Or is it one of those long-time rules that one may expect to be around for a while?

couponvan

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Re: DONT Payoff your Mortgage Club
« Reply #553 on: April 11, 2018, 06:49:44 AM »
we are quickly approaching the $500K tax free capital gains limit in house value...so that might influence our decision to move sooner.
Now that's an interesting wrinkle... It seems you have lots of choices, which is a beautiful thing. Have you made significant improvements to the property or just riding the market appreciation tidal wave?

What does this mean and why is it good? (Not sarcastic, I actually don't know). We have a house that is riding the market appreciation tidal wave.
From IRS.gov:

Topic Number 701 - Sale of Your Home
If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home, provides rules and worksheets. Topic No. 409 covers general capital gain and loss information.

https://www.irs.gov/taxtopics/tc701

Merci. That was my question. Has this rule changed in the past? Has it changed depending on administrations? Or is it one of those long-time rules that one may expect to be around for a while?

That's a "new" rule (1997 Tax Relief Act I believe) and all tax rules are subject to change.....
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Wile E. Coyote

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Re: DONT Payoff your Mortgage Club
« Reply #554 on: April 11, 2018, 07:01:12 AM »
we are quickly approaching the $500K tax free capital gains limit in house value...so that might influence our decision to move sooner.
Now that's an interesting wrinkle... It seems you have lots of choices, which is a beautiful thing. Have you made significant improvements to the property or just riding the market appreciation tidal wave?

What does this mean and why is it good? (Not sarcastic, I actually don't know). We have a house that is riding the market appreciation tidal wave.
From IRS.gov:

Topic Number 701 - Sale of Your Home
If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home, provides rules and worksheets. Topic No. 409 covers general capital gain and loss information.

https://www.irs.gov/taxtopics/tc701

Merci. That was my question. Has this rule changed in the past? Has it changed depending on administrations? Or is it one of those long-time rules that one may expect to be around for a while?

That's a "new" rule (1997 Tax Relief Act I believe) and all tax rules are subject to change.....
.

Both the House and the Senate proposed changes to this rule as part of the 2017 tax reform process, including increasing the number of years you had to reside in the home, and phasing out the benefit for high income taxpayers.   The final version did not change the rule, but it shows that there was some desire to change this rule, and that could resurface in the future.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #555 on: April 11, 2018, 08:39:26 AM »
we are quickly approaching the $500K tax free capital gains limit in house value...so that might influence our decision to move sooner.
Now that's an interesting wrinkle... It seems you have lots of choices, which is a beautiful thing. Have you made significant improvements to the property or just riding the market appreciation tidal wave?

What does this mean and why is it good? (Not sarcastic, I actually don't know). We have a house that is riding the market appreciation tidal wave.
From IRS.gov:

Topic Number 701 - Sale of Your Home
If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home, provides rules and worksheets. Topic No. 409 covers general capital gain and loss information.

https://www.irs.gov/taxtopics/tc701

Merci. That was my question. Has this rule changed in the past? Has it changed depending on administrations? Or is it one of those long-time rules that one may expect to be around for a while?

That's a "new" rule (1997 Tax Relief Act I believe) and all tax rules are subject to change.....
.

Both the House and the Senate proposed changes to this rule as part of the 2017 tax reform process, including increasing the number of years you had to reside in the home, and phasing out the benefit for high income taxpayers.   The final version did not change the rule, but it shows that there was some desire to change this rule, and that could resurface in the future.
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talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #556 on: April 11, 2018, 11:48:49 AM »
checking in. My 1040 reported $5,500 of dividends from taxable investment accounts, in addition to positive capital gains.

I paid $4,800 in mortgage interest on my primary residence; this figure may increase in 2019 when my ARM starts adjusting. Hopefully the dividend income goes up, too.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #557 on: April 11, 2018, 11:51:18 AM »
checking in. My 1040 reported $5,500 of dividends from taxable investment accounts, in addition to positive capital gains.

I paid $4,800 in mortgage interest on my primary residence; this figure may increase in 2019 when my ARM starts adjusting. Hopefully the dividend income goes up, too.
Nice!
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A Lot Like This
And hell yes, I am still moving confidently in the direction of my dreams...

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #558 on: April 13, 2018, 09:15:10 AM »
I should be open with the fact that my mortgage balance is $182,000 (total of all debt is about $220,000), while the sum of value of those taxable investment accounts is in excess of $300,000. Crank it up!

Basenji

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Re: DONT Payoff your Mortgage Club
« Reply #559 on: April 13, 2018, 09:34:41 AM »
Have spent way too much time trying to find an old thread here on mortgages from maybe three years ago where it was posited that once you get into 5 years or less on a 30-year, low-interest mortgage, it might hit a crossover point where it would make sense to pay it off. I believe the idea was (a) assuming you plan to pay off the mortgage once and done (and not remortgage like a boss), (b) assuming you have the funds and won't take too bad a tax hit, and (c) that the risk of hitting a recession/downturn within 5 years (rather than over 30) could make finishing it off a reasonable strategy. Anyone else remember this?

Or, for example, should a person with a $500k, 30-year fixed, 2.85% mortgage always just let it ride to the bitter end? Again assuming there's no strong AA impetus to remortgage/reset.

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #560 on: April 13, 2018, 10:03:13 AM »
Have spent way too much time trying to find an old thread here on mortgages from maybe three years ago where it was posited that once you get into 5 years or less on a 30-year, low-interest mortgage, it might hit a crossover point where it would make sense to pay it off. I believe the idea was (a) assuming you plan to pay off the mortgage once and done (and not remortgage like a boss), (b) assuming you have the funds and won't take too bad a tax hit, and (c) that the risk of hitting a recession/downturn within 5 years (rather than over 30) could make finishing it off a reasonable strategy. Anyone else remember this?

Or, for example, should a person with a $500k, 30-year fixed, 2.85% mortgage always just let it ride to the bitter end? Again assuming there's no strong AA impetus to remortgage/reset.

as you get closer to the end of a loan if a REFI is not available the likelihood of the market variablity being worse is higher but this seems like a martket timing play to me vs. just making a plan and sticking to it.

Basenji

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Re: DONT Payoff your Mortgage Club
« Reply #561 on: April 13, 2018, 10:23:20 AM »
Gotcha, makes sense. We'll see how we feel in 20 years ; )

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #562 on: April 13, 2018, 11:47:12 AM »
Gotcha, makes sense. We'll see how we feel in 20 years ; )

yeah no one knows what the tax structure would look like then and thats really where i see something like this possibly changing that could make sense for a paydown lump sum - but as i've always said i'm not against paying down a mortgage if it makes mathematical sense but rarely can you make that case in the current US mortgage climate.

dacalo

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Re: DONT Payoff your Mortgage Club
« Reply #563 on: April 13, 2018, 05:50:01 PM »
Just bought our home for $850k last September with $623k remaining now at 3.875%. It already appreciated $100k, the housing market in the bay area is nuts.

We are going to take our sweet time, that's a lot of debt to pay off lol.