Author Topic: DONT Payoff your Mortgage Club  (Read 80714 times)

Blahhhh456

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Re: DONT Payoff your Mortgage Club
« Reply #650 on: June 29, 2018, 06:58:59 PM »
PMI is gone after 5 years (yes, bought a house with 10% down and went FHA - NOT doing that again)!! Hello paying my mortgage with no extra. Going straight to the market!

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #651 on: June 29, 2018, 07:38:30 PM »
PMI is gone after 5 years (yes, bought a house with 10% down and went FHA - NOT doing that again)!! Hello paying my mortgage with no extra. Going straight to the market!
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Malkynn

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Re: DONT Payoff your Mortgage Club
« Reply #652 on: June 30, 2018, 07:04:25 AM »
We’re in Canada, so no long mortgage and no tax deductions (no point in Smith Maneuvre yet, we’re nowhere near maxing our tax advantages accounts).

Current mortgage is just under 200K at 2.45% for the next 4.5 years, townhouse value is ~221K in a rapidly gentrifying area where a smaller condo just 8 blocks away is close to 1M. We are a small rough neighborhood that was previously culturally isolated, and surrounded on 3 sides by the most expensive neighbourhoods in the city. A Maserati dealership just opened up across the street...two blocks from a crack house. The area is in serious flux.

As long as the rates stay sane, I can’t see ever paying this thing off. In 4.5 years when it’s up for renewal, we’re going to look into a manulife one type mortgage where the whole balance is an LOC and we can just literally never pay it off without having to refinance, but also have a convenient place to store lump sums when needed.

tyort1

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Re: DONT Payoff your Mortgage Club
« Reply #653 on: June 30, 2018, 10:37:55 AM »
I'm getting divorced so we'll be selling our home soon.  We've been lucky and the house appreciated in value a lot during our 4 years here.  Around $160k each when all is said and done.  I'll use $100k of mine as a downpayment on a new house (20% down) and finance to a low interest 30 year loan.  The rest I'll put in to a separate account for spousal/child support payments.

My wife, on the other hand, wants to take all of her $160k and put the entire thing as a downpayment on a house "so that I'll have smaller monthly payments".  When I point out that keeping as much $$ as possible in cash (or invested) will actually give her a lot more safety and flexibility it just doesn't seem to register.  And I think it's especially important in her case because she's still getting her real estate business going, so her income is very lumpy right now (and will likely continue to be in the near future), and thus having the cash in the bank instead of in the house will buy her time during those down months. It really does make me want to bang my head on the nearest desk.

On the other hand, she is very smart and is capable of processing new information well.  My personal thoughts are that she's just not able to take advice "from me" and it'll stand a better chance of being heard if it comes from a different person.
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Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #654 on: June 30, 2018, 10:57:47 AM »
I'm getting divorced so we'll be selling our home soon.  We've been lucky and the house appreciated in value a lot during our 4 years here.  Around $160k each when all is said and done.  I'll use $100k of mine as a downpayment on a new house (20% down) and finance to a low interest 30 year loan.  The rest I'll put in to a separate account for spousal/child support payments.

My wife, on the other hand, wants to take all of her $160k and put the entire thing as a downpayment on a house "so that I'll have smaller monthly payments".  When I point out that keeping as much $$ as possible in cash (or invested) will actually give her a lot more safety and flexibility it just doesn't seem to register.  And I think it's especially important in her case because she's still getting her real estate business going, so her income is very lumpy right now (and will likely continue to be in the near future), and thus having the cash in the bank instead of in the house will buy her time during those down months. It really does make me want to bang my head on the nearest desk.

On the other hand, she is very smart and is capable of processing new information well.  My personal thoughts are that she's just not able to take advice "from me" and it'll stand a better chance of being heard if it comes from a different person.
There's a book, "Ordinary People, Extraordinary Wealth" which has the clearest explanation of this concept I've ever seen. The first chapter (the only one you need to read, IMO) was literally life-changing for me. It is my Ah-Ha! moment on the path to FIRE. I used to believe that killing the mortgage was the gold standard. My SO tried valiantly to explain why putting more than 20% down and prepaying the mortgage was woefully sub-optimal, but I wasn't having any of it.

Some years later, I stumbled upon this book in the library. What a game changer! It's old now, but the concept is still rock-solid and presented in an easy to read and understand way. It's written by Ric Edelman. He's a financial planner with a radio show, which I know isn't Mustachian, but it is if you get the book at the library. Excellent advice that you don't have to pay for, for the win. Even if you pay full retail and only read the one chapter, it's well worth it.
I did it! I have a journal!
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And hell yes, I am still moving confidently in the direction of my dreams...

tyort1

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Re: DONT Payoff your Mortgage Club
« Reply #655 on: June 30, 2018, 11:58:33 AM »
I'm getting divorced so we'll be selling our home soon.  We've been lucky and the house appreciated in value a lot during our 4 years here.  Around $160k each when all is said and done.  I'll use $100k of mine as a downpayment on a new house (20% down) and finance to a low interest 30 year loan.  The rest I'll put in to a separate account for spousal/child support payments.

My wife, on the other hand, wants to take all of her $160k and put the entire thing as a downpayment on a house "so that I'll have smaller monthly payments".  When I point out that keeping as much $$ as possible in cash (or invested) will actually give her a lot more safety and flexibility it just doesn't seem to register.  And I think it's especially important in her case because she's still getting her real estate business going, so her income is very lumpy right now (and will likely continue to be in the near future), and thus having the cash in the bank instead of in the house will buy her time during those down months. It really does make me want to bang my head on the nearest desk.

On the other hand, she is very smart and is capable of processing new information well.  My personal thoughts are that she's just not able to take advice "from me" and it'll stand a better chance of being heard if it comes from a different person.
There's a book, "Ordinary People, Extraordinary Wealth" which has the clearest explanation of this concept I've ever seen. The first chapter (the only one you need to read, IMO) was literally life-changing for me. It is my Ah-Ha! moment on the path to FIRE. I used to believe that killing the mortgage was the gold standard. My SO tried valiantly to explain why putting more than 20% down and prepaying the mortgage was woefully sub-optimal, but I wasn't having any of it.

Some years later, I stumbled upon this book in the library. What a game changer! It's old now, but the concept is still rock-solid and presented in an easy to read and understand way. It's written by Ric Edelman. He's a financial planner with a radio show, which I know isn't Mustachian, but it is if you get the book at the library. Excellent advice that you don't have to pay for, for the win. Even if you pay full retail and only read the one chapter, it's well worth it.

Thanks!  I have 2 library memberships (Denver and High Plains), Denver didn't have it on Overdrive but High Plains has it as an eBook on Hoopla.  Just downloaded it and am reading it now. 
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talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #656 on: July 02, 2018, 08:15:32 AM »
It sounds as though each of you is now single and buying a $500,000 house. We would be remiss as MMM'ers were we not to suggest a simple way of lowering your monthly payments: buy a $400,000 house instead. Improves cash flow by $400/month.

tyort1

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Re: DONT Payoff your Mortgage Club
« Reply #657 on: July 02, 2018, 10:59:38 AM »
It sounds as though each of you is now single and buying a $500,000 house. We would be remiss as MMM'ers were we not to suggest a simple way of lowering your monthly payments: buy a $400,000 house instead. Improves cash flow by $400/month.

In Denver there's a big, big difference in quality for a $400k home and a $500k home.  I can afford it and still save a ton of money every month (even with paying spousal support).  For me it won't actually be $400 extra a month since the payments will be roughly the same as the payments on our current home, which I've been paying by myself for over 4 years (along with all other household expenses). 

My main point is this - I have a steady job in an established career so my income is consistent from month to month.  For her those things are not true (although spousal support will help a lot).  Until she has regular, substantial income from her real estate job, she's better off keeping the cash as a buffer for slow/down months. 

On the other hand I can see her point.  In the 4 years we lived in this current house, it went from $455k to about $715k.  That's how things are all over here and it's still happening at a fast clip.  So if she rents for a while, she's right that housing prices will just get more out of reach, so best to buy now & own it while prices go up.  At some point they will flatten, but we're definitely not there yet. 
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boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #658 on: July 03, 2018, 07:18:15 AM »
Just did some fun testing with CFIRESim and perpetual mortgages appear to eliminate SORR in most cases.  i expanded on @Retire-Canada  's post if you scroll down you'll see my testing metrics
https://forum.mrmoneymustache.com/investor-alley/stop-worrying-about-the-4-rule/msg2058297/#msg2058297

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Canadian Ben

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Re: DONT Payoff your Mortgage Club
« Reply #659 on: July 03, 2018, 07:36:57 AM »
It sounds as though each of you is now single and buying a $500,000 house. We would be remiss as MMM'ers were we not to suggest a simple way of lowering your monthly payments: buy a $400,000 house instead. Improves cash flow by $400/month.

In Denver there's a big, big difference in quality for a $400k home and a $500k home. I can afford it and still save a ton of money every month (even with paying spousal support).  For me it won't actually be $400 extra a month since the payments will be roughly the same as the payments on our current home, which I've been paying by myself for over 4 years (along with all other household expenses). 

there yet.

Out of curiosity, where is there not a difference between two homes that have a spread of 100k? Adding 100k of house is pretty huge...

TexasRunner

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Re: DONT Payoff your Mortgage Club
« Reply #660 on: July 03, 2018, 09:55:53 AM »
It sounds as though each of you is now single and buying a $500,000 house. We would be remiss as MMM'ers were we not to suggest a simple way of lowering your monthly payments: buy a $400,000 house instead. Improves cash flow by $400/month.

In Denver there's a big, big difference in quality for a $400k home and a $500k home. I can afford it and still save a ton of money every month (even with paying spousal support).  For me it won't actually be $400 extra a month since the payments will be roughly the same as the payments on our current home, which I've been paying by myself for over 4 years (along with all other household expenses). 

there yet.

Out of curiosity, where is there not a difference between two homes that have a spread of 100k? Adding 100k of house is pretty huge...

I take their comment to mean "there is a disproportionate spread of an additional 100k once you hit the 500k mark".

It is the same thing around here.  120K will buy you a crack house with rats while an additional 35k will buy a middle-suburban, very nice house (at 155k).  There is much more than 35k worth of materials / improvements in that last (relatively small) step.


Now, if FIRE is really anyone's goal, than they need to go the method of Jacob at ERE.  Otherwise, its all fluff (MMM included).
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Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #661 on: July 03, 2018, 10:56:00 AM »
...Now, if FIRE is really anyone's goal, than they need to go the method of Jacob at ERE.  Otherwise, its all fluff (MMM included).
I totally call Bullshit on this total non-sequiter.  This thread is dedicated to learning how to use the power of leverage (i.e. mortgages) to hasten the path to FIRE, which is anything but fluff.

Jacob lived in an RV, which he presumably bought used and paid cash for. He split expenses with his wife, only reporting his half. I found his message helpful in my Pre-FIRE days, especially before Pete started MMM. I have great respect for Jacob's ERE, but this forum is much more interactive. Questions can be asked, experiences shared, advice given. Minds and lives can be changed. That is powerful mojo. Go take a look at @Silverback761's new journal. His turnaround has been swift and amazing.  The input from our community has been anything but fluffy.

If what you're saying is that MMM's too fluffy for you, fine, see ya. But others are being helped every day, and there ain't nothin' fluffy about that.

And while I'm gently ranting, I'll add that It's a helluva lot easier to hit FIRE when you can buy the deluxe version of a basic home for only $155k. Try doing that when the median home price is five or six times higher. Yet there are plenty of HCOLA mustachians who have done or are in the process of doing just that. And there's nary a jar of Kraft Jet-Puffed Marshmallow Creme in sight.
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TexasRunner

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Re: DONT Payoff your Mortgage Club
« Reply #662 on: July 03, 2018, 03:09:04 PM »
...Now, if FIRE is really anyone's goal, than they need to go the method of Jacob at ERE.  Otherwise, its all fluff (MMM included).
I totally call Bullshit on this total non-sequiter.  This thread is dedicated to learning how to use the power of leverage (i.e. mortgages) to hasten the path to FIRE, which is anything but fluff.

Jacob lived in an RV, which he presumably bought used and paid cash for. He split expenses with his wife, only reporting his half. I found his message helpful in my Pre-FIRE days, especially before Pete started MMM. I have great respect for Jacob's ERE, but this forum is much more interactive. Questions can be asked, experiences shared, advice given. Minds and lives can be changed. That is powerful mojo. Go take a look at @Silverback761's new journal. His turnaround has been swift and amazing.  The input from our community has been anything but fluffy.

If what you're saying is that MMM's too fluffy for you, fine, see ya. But others are being helped every day, and there ain't nothin' fluffy about that.

And while I'm gently ranting, I'll add that It's a helluva lot easier to hit FIRE when you can buy the deluxe version of a basic home for only $155k. Try doing that when the median home price is five or six times higher. Yet there are plenty of HCOLA mustachians who have done or are in the process of doing just that. And there's nary a jar of Kraft Jet-Puffed Marshmallow Creme in sight.


Dang Dicey, those bus tires hurt going across my back... lol!

I was mainly trying to agree and point out that there are tiers in real estate that don't make much sense in value terms, and going to that 'plateau' is more cost-effective.  I'm not saying that you can't FIRE and have a mortgage (since my goal is to FIRE and have a mortgage.....), but you have to agree that math is math and a 500k purchase (and it is a purchase) along the way to or after FIRE does make an impact.  Considering solid, well built housing is environmentally neutral and likely necessary worldwide for humanity to reach some sort of perpetual stability, I am not saying it is a bad thing to have a nice house, but rather trying to point out that an additional 35k (or 100k) of house that buys double that in value terms is worth consideration since all of it is 'excessive' in the absolute strictest FIRE terms.  (IE, don't make a huge purchase and you will FIRE faster).

I can see how my last statement was easily misconstrued, however.


---
Which remind me, I need to make another minimum payment on my mortgage.  ;)
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Mr. Metal Mustache

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Re: DONT Payoff your Mortgage Club
« Reply #663 on: July 04, 2018, 07:56:42 AM »
Is it still beneficial to make the minimum payment on the mortgage on a 30yr with a 4.75% rate? Or at this point would I be better off on a 15 @ 4.375%

135k loan 10% down......(I know it should be 20% but...stuff happens.)

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #664 on: July 04, 2018, 08:02:47 AM »
Is it still beneficial to make the minimum payment on the mortgage on a 30yr with a 4.75% rate? Or at this point would I be better off on a 15 @ 4.375%

135k loan 10% down......(I know it should be 20% but...stuff happens.)

Depends on how long you plan to stay. If you stay over 7 years the 30 year will likley come out ahead. Less the 15 year.
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Mr. Metal Mustache

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Re: DONT Payoff your Mortgage Club
« Reply #665 on: July 04, 2018, 09:00:47 AM »
Planning on forever. Wife and I are committed to the area. Of course life does and can change but the plan is to stay there and not relocate.

protostache

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Re: DONT Payoff your Mortgage Club
« Reply #666 on: July 04, 2018, 12:17:17 PM »
There's a book, "Ordinary People, Extraordinary Wealth" which has the clearest explanation of this concept I've ever seen. The first chapter (the only one you need to read, IMO) was literally life-changing for me. It is my Ah-Ha! moment on the path to FIRE. I used to believe that killing the mortgage was the gold standard. My SO tried valiantly to explain why putting more than 20% down and prepaying the mortgage was woefully sub-optimal, but I wasn't having any of it.

Some years later, I stumbled upon this book in the library. What a game changer! It's old now, but the concept is still rock-solid and presented in an easy to read and understand way. It's written by Ric Edelman. He's a financial planner with a radio show, which I know isn't Mustachian, but it is if you get the book at the library. Excellent advice that you don't have to pay for, for the win. Even if you pay full retail and only read the one chapter, it's well worth it.

I read this the other day on your recommendation (on Hoopla, which I had never tried before but is actually pretty solid) and just recommended it on reddit to someone in /r/pf. Gonna try to get my wife to read it, although I'm pretty sure she's not going to care. She doesn't have an opinion about our finances past "don't lose the money".

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #667 on: July 04, 2018, 12:23:17 PM »
There's a book, "Ordinary People, Extraordinary Wealth" which has the clearest explanation of this concept I've ever seen. The first chapter (the only one you need to read, IMO) was literally life-changing for me. It is my Ah-Ha! moment on the path to FIRE. I used to believe that killing the mortgage was the gold standard. My SO tried valiantly to explain why putting more than 20% down and prepaying the mortgage was woefully sub-optimal, but I wasn't having any of it.

Some years later, I stumbled upon this book in the library. What a game changer! It's old now, but the concept is still rock-solid and presented in an easy to read and understand way. It's written by Ric Edelman. He's a financial planner with a radio show, which I know isn't Mustachian, but it is if you get the book at the library. Excellent advice that you don't have to pay for, for the win. Even if you pay full retail and only read the one chapter, it's well worth it.

I read this the other day on your recommendation (on Hoopla, which I had never tried before but is actually pretty solid) and just recommended it on reddit to someone in /r/pf. Gonna try to get my wife to read it, although I'm pretty sure she's not going to care. She doesn't have an opinion about our finances past "don't lose the money".
You know it's a fast read. Try offering her $100 to read it. Might be the best money you ever spent.
I did it! I have a journal!
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protostache

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Re: DONT Payoff your Mortgage Club
« Reply #668 on: July 04, 2018, 04:37:43 PM »
There's a book, "Ordinary People, Extraordinary Wealth" which has the clearest explanation of this concept I've ever seen. The first chapter (the only one you need to read, IMO) was literally life-changing for me. It is my Ah-Ha! moment on the path to FIRE. I used to believe that killing the mortgage was the gold standard. My SO tried valiantly to explain why putting more than 20% down and prepaying the mortgage was woefully sub-optimal, but I wasn't having any of it.

Some years later, I stumbled upon this book in the library. What a game changer! It's old now, but the concept is still rock-solid and presented in an easy to read and understand way. It's written by Ric Edelman. He's a financial planner with a radio show, which I know isn't Mustachian, but it is if you get the book at the library. Excellent advice that you don't have to pay for, for the win. Even if you pay full retail and only read the one chapter, it's well worth it.

I read this the other day on your recommendation (on Hoopla, which I had never tried before but is actually pretty solid) and just recommended it on reddit to someone in /r/pf. Gonna try to get my wife to read it, although I'm pretty sure she's not going to care. She doesn't have an opinion about our finances past "don't lose the money".
You know it's a fast read. Try offering her $100 to read it. Might be the best money you ever spent.

Huh. Well, she read it. Turns out she’s been on team “don’t pay off the mortgage” forever, we just hadn’t really discussed it in those terms. She’s skeptical of the author’s 7-8% returns but I think I can build on this.

Oh and all she required was foot rubs.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #669 on: July 04, 2018, 11:16:19 PM »
There's a book, "Ordinary People, Extraordinary Wealth" which has the clearest explanation of this concept I've ever seen. The first chapter (the only one you need to read, IMO) was literally life-changing for me. It is my Ah-Ha! moment on the path to FIRE. I used to believe that killing the mortgage was the gold standard. My SO tried valiantly to explain why putting more than 20% down and prepaying the mortgage was woefully sub-optimal, but I wasn't having any of it.

Some years later, I stumbled upon this book in the library. What a game changer! It's old now, but the concept is still rock-solid and presented in an easy to read and understand way. It's written by Ric Edelman. He's a financial planner with a radio show, which I know isn't Mustachian, but it is if you get the book at the library. Excellent advice that you don't have to pay for, for the win. Even if you pay full retail and only read the one chapter, it's well worth it.

I read this the other day on your recommendation (on Hoopla, which I had never tried before but is actually pretty solid) and just recommended it on reddit to someone in /r/pf. Gonna try to get my wife to read it, although I'm pretty sure she's not going to care. She doesn't have an opinion about our finances past "don't lose the money".
You know it's a fast read. Try offering her $100 to read it. Might be the best money you ever spent.

Huh. Well, she read it. Turns out she’s been on team “don’t pay off the mortgage” forever, we just hadn’t really discussed it in those terms. She’s skeptical of the author’s 7-8% returns but I think I can build on this.

Oh and all she required was foot rubs.
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talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #670 on: July 05, 2018, 08:40:16 AM »
There's a book, "Ordinary People, Extraordinary Wealth" which has the clearest explanation of this concept I've ever seen. The first chapter (the only one you need to read, IMO) was literally life-changing for me. It is my Ah-Ha! moment on the path to FIRE. I used to believe that killing the mortgage was the gold standard. My SO tried valiantly to explain why putting more than 20% down and prepaying the mortgage was woefully sub-optimal, but I wasn't having any of it.

Some years later, I stumbled upon this book in the library. What a game changer! It's old now, but the concept is still rock-solid and presented in an easy to read and understand way. It's written by Ric Edelman. He's a financial planner with a radio show, which I know isn't Mustachian, but it is if you get the book at the library. Excellent advice that you don't have to pay for, for the win. Even if you pay full retail and only read the one chapter, it's well worth it.

I read this the other day on your recommendation (on Hoopla, which I had never tried before but is actually pretty solid) and just recommended it on reddit to someone in /r/pf. Gonna try to get my wife to read it, although I'm pretty sure she's not going to care. She doesn't have an opinion about our finances past "don't lose the money".
You know it's a fast read. Try offering her $100 to read it. Might be the best money you ever spent.

Huh. Well, she read it. Turns out she’s been on team “don’t pay off the mortgage” forever, we just hadn’t really discussed it in those terms. She’s skeptical of the author’s 7-8% returns but I think I can build on this.

Oh and all she required was foot rubs.

It would be a great value to start building a list of service providers who will accept foot rubs in place of $100. (It also wouldn't be on the topic of this discussion)

tyort1

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Re: DONT Payoff your Mortgage Club
« Reply #671 on: July 05, 2018, 11:14:35 AM »
There's a book, "Ordinary People, Extraordinary Wealth" which has the clearest explanation of this concept I've ever seen. The first chapter (the only one you need to read, IMO) was literally life-changing for me. It is my Ah-Ha! moment on the path to FIRE. I used to believe that killing the mortgage was the gold standard. My SO tried valiantly to explain why putting more than 20% down and prepaying the mortgage was woefully sub-optimal, but I wasn't having any of it.

Some years later, I stumbled upon this book in the library. What a game changer! It's old now, but the concept is still rock-solid and presented in an easy to read and understand way. It's written by Ric Edelman. He's a financial planner with a radio show, which I know isn't Mustachian, but it is if you get the book at the library. Excellent advice that you don't have to pay for, for the win. Even if you pay full retail and only read the one chapter, it's well worth it.

I read this the other day on your recommendation (on Hoopla, which I had never tried before but is actually pretty solid) and just recommended it on reddit to someone in /r/pf. Gonna try to get my wife to read it, although I'm pretty sure she's not going to care. She doesn't have an opinion about our finances past "don't lose the money".
You know it's a fast read. Try offering her $100 to read it. Might be the best money you ever spent.

Huh. Well, she read it. Turns out she’s been on team “don’t pay off the mortgage” forever, we just hadn’t really discussed it in those terms. She’s skeptical of the author’s 7-8% returns but I think I can build on this.

Oh and all she required was foot rubs.

It would be a great value to start building a list of service providers who will accept foot rubs in place of $100. (It also wouldn't be on the topic of this discussion)

Careful, foot massages are pretty dangerous territory - https://www.youtube.com/watch?v=KCO-SBPTF5E
Frugalite in training.

moonpalace

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Re: DONT Payoff your Mortgage Club
« Reply #672 on: July 09, 2018, 03:02:19 PM »
I'm all in on not paying my mortgage early (15-year fixed at 2.75%, with ~13 years to go).

But I am starting to wobble on some of my law-school loans. It's a group of loans, all at adjustable rates. The weighted average rate been as low as 3.6% but is now at about 5.1%.

Total balance is $11k but that includes a bunch of small loans, so I could pay off one or more of the constituent loans (i.e. the ones with the highest interest rates) and reduce my monthly payment.

Question for the group is: at what interest rate should I start doing that?

Telecaster

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Re: DONT Payoff your Mortgage Club
« Reply #673 on: July 09, 2018, 04:04:02 PM »
I don't know if there is a hard-fast rule, but I think once you get above around 10-year Treasury plus 3%-ish it is a good idea to get rid of the debt. 

The fact it is variable makes it more attractive to retire it. 

tomsang

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Re: DONT Payoff your Mortgage Club
« Reply #674 on: July 09, 2018, 04:55:36 PM »
I'm all in on not paying my mortgage early (15-year fixed at 2.75%, with ~13 years to go).

But I am starting to wobble on some of my law-school loans. It's a group of loans, all at adjustable rates. The weighted average rate been as low as 3.6% but is now at about 5.1%.

Total balance is $11k but that includes a bunch of small loans, so I could pay off one or more of the constituent loans (i.e. the ones with the highest interest rates) and reduce my monthly payment.

Question for the group is: at what interest rate should I start doing that?

I think you are there.  Short term, variable and non dischargeable debt in this range is fine to pay down.  Rates are going up in the near future for these loans.  The whole value of the 30 year or in your case 15 year fixed rate mortgages is that they are fixed, if you have a few bad years of returns, you still have plenty of time for the market to turn, and they were at historic lows.  Mortgages are still incredibly cheap, but when the government was giving out a 30 year fixed rate loan for 3%, that was crazy.

Blahhhh456

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Re: DONT Payoff your Mortgage Club
« Reply #675 on: July 09, 2018, 07:09:05 PM »
Question for the group - is there ever a good reason to pay points?? We are looking at a house and the lender has offered 4.625% with no points and credits to the closing so we would pay $1K total (not including DP) or pay points and no closing credit for $10K down. The rate would then be 4.000% for 30 years. Trying to justify the $4550 points payment for dropping the rate 625 basis points. (I am also asking if they have any credits for the 4.000% too.) If I stay there for 30 years and just pay the mortgage every month the $4550 will save us over $37K in interest. The savings crossover for the $4550 is just under 4 years. Thoughts? I feel like I am going crazy number crunching here and I need my sanity straightened out. 

*edited for interest calculation.
« Last Edit: July 09, 2018, 07:15:40 PM by Blahhhh456 »

moonpalace

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Re: DONT Payoff your Mortgage Club
« Reply #676 on: July 09, 2018, 07:20:09 PM »
I think you are there.  Short term, variable and non dischargeable debt in this range is fine to pay down.  Rates are going up in the near future for these loans.

Thanks a lot for the thoughts. I think I'll start paying down some of those small loans soon and do a bit of a snowball on the others with the extra payment I avoid every month. Exciting!

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #677 on: July 09, 2018, 07:41:30 PM »
Question for the group - is there ever a good reason to pay points?? We are looking at a house and the lender has offered 4.625% with no points and credits to the closing so we would pay $1K total (not including DP) or pay points and no closing credit for $10K down. The rate would then be 4.000% for 30 years. Trying to justify the $4550 points payment for dropping the rate 625 basis points. (I am also asking if they have any credits for the 4.000% too.) If I stay there for 30 years and just pay the mortgage every month the $4550 will save us over $37K in interest. The savings crossover for the $4550 is just under 4 years. Thoughts? I feel like I am going crazy number crunching here and I need my sanity straightened out. 

*edited for interest calculation.

With the current rising rate environment I'd take the 4 year break even gamble. But I'm seeing a difference of 9k. Not 4550 unless I'm missing how youre calcing this. Also you should be compounding your savings at 5-6% annually. I use 7 some think that's high. You also should at the same time compound the 9k extra now annually. This difference is likely longer than 4 years. Would need to know the mortgage amount to do this calc better.
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Blahhhh456

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Re: DONT Payoff your Mortgage Club
« Reply #678 on: July 09, 2018, 08:59:41 PM »
Question for the group - is there ever a good reason to pay points?? We are looking at a house and the lender has offered 4.625% with no points and credits to the closing so we would pay $1K total (not including DP) or pay points and no closing credit for $10K down. The rate would then be 4.000% for 30 years. Trying to justify the $4550 points payment for dropping the rate 625 basis points. (I am also asking if they have any credits for the 4.000% too.) If I stay there for 30 years and just pay the mortgage every month the $4550 will save us over $37K in interest. The savings crossover for the $4550 is just under 4 years. Thoughts? I feel like I am going crazy number crunching here and I need my sanity straightened out. 

*edited for interest calculation.

With the current rising rate environment I'd take the 4 year break even gamble. But I'm seeing a difference of 9k. Not 4550 unless I'm missing how youre calcing this. Also you should be compounding your savings at 5-6% annually. I use 7 some think that's high. You also should at the same time compound the 9k extra now annually. This difference is likely longer than 4 years. Would need to know the mortgage amount to do this calc better.

Purchase Price $350K - Down Payment of $70K for loan of $280K. Yes, the $9K is actually the bank not providing any credits. If I take the 4.625% the bank gives me $3.5K credits, so I just have to bring $1k to close. If I take the 4.000% rate, there are $0 credits, so essentially it is a difference of $9K. I am asking the bank to consider credits for the 4.000% so I can compare apples to apples for the points (the points are listed as $4550 on the quote), but if I am not successful, do you suggest comparing at the $9K level of funds to pay into the loan? I usually use 4% for compounding - super conservative over here :).

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #679 on: July 10, 2018, 04:28:47 AM »
It's about a 12 year break even. You should use nominal returns here at 10% and 9k difference to invest today. I probably wouldn't buy those points.
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Blahhhh456

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Re: DONT Payoff your Mortgage Club
« Reply #680 on: July 10, 2018, 08:20:09 AM »
It's about a 12 year break even. You should use nominal returns here at 10% and 9k difference to invest today. I probably wouldn't buy those points.

Thanks - this is helpful. I do also have an option from the lender for no points but I pay all the closing costs of $4148 and the rate is 4.375%. I think I am going to lean more to this as I have the money to pay the closing costs and really don't want the bank to give a credit for a higher rate.

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #681 on: July 10, 2018, 09:17:57 AM »
It's about a 12 year break even. You should use nominal returns here at 10% and 9k difference to invest today. I probably wouldn't buy those points.

Thanks - this is helpful. I do also have an option from the lender for no points but I pay all the closing costs of $4148 and the rate is 4.375%. I think I am going to lean more to this as I have the money to pay the closing costs and really don't want the bank to give a credit for a higher rate.

this is actually worse its a 15 year payback - i'd jsut take the 4.625 assuming you will invest the 4148 and if you're not maxing tax advantaged accounts then definitely take the higher rate and funnel all that money into the accounts. 
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Blahhhh456

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Re: DONT Payoff your Mortgage Club
« Reply #682 on: July 10, 2018, 11:27:01 AM »
It's about a 12 year break even. You should use nominal returns here at 10% and 9k difference to invest today. I probably wouldn't buy those points.

Thanks - this is helpful. I do also have an option from the lender for no points but I pay all the closing costs of $4148 and the rate is 4.375%. I think I am going to lean more to this as I have the money to pay the closing costs and really don't want the bank to give a credit for a higher rate.

this is actually worse its a 15 year payback - i'd jsut take the 4.625 assuming you will invest the 4148 and if you're not maxing tax advantaged accounts then definitely take the higher rate and funnel all that money into the accounts.

Thanks - I still have to pay $1k for the 4.625, so the payback is not quite 15 years. Yes, I max all the tax advantage accounts including dependent care :) and put another 10-20k towards an investment account. The extra $3k would likely just be paid toward moving costs as I am really cash light as I invest as much as possible.

I really appreciate your feedback. This has been very helpful.

Slee_stack

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Re: DONT Payoff your Mortgage Club
« Reply #683 on: July 10, 2018, 02:19:43 PM »
I screwed up and paid my mortgage off.

OK, so I had no choice because I sold the house.   Boy do I miss that sweet low rate!  Didn't need the property any longer though.   

If/when the next house purchase comes up..hopefully nice long, low rates will still be there.

tralfamadorian

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Re: DONT Payoff your Mortgage Club
« Reply #684 on: July 10, 2018, 03:06:40 PM »
Wow! Trollish behavior in here today!

Still paying off the mortgages as slowly as possible.

I think this guy is just another crystal ball gazer but wouldn't sub 3% rates a la europe be amazing? There's still some room before I hit my fannie/freddie loan limits:
https://www.realwealthnetwork.com/learn/interest-rates-predictions-bruce-norris/
« Last Edit: July 10, 2018, 03:11:11 PM by tralfamadorian »

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #685 on: July 10, 2018, 08:50:08 PM »
I believe we were politely asked to leave that thread alone, @boarder42, not the entire site, lol.

Like you, it pains me that a thread like that one exists, with no neutral place for balanced explanation/discussion. It's almost as if someone started a "Let's Celebrate Our New Monster Trucks" thread, and then complained they were getting too many face punches, and the mods agreed with them. Even this thread isn't the best solution, because people dead-set on killing.all.the.debt are never going to even open this thread. They just beeline to the Payoff Party.

I suppose we can take comfort that a small, but growing number of mustachians have been open to learning before they make a decision, and have made the choice that best suits their situation, hooray!

I hang around here to help make the path to FIRE easier for other people. I'm happy that I'm able to contribute to the discussion, and that has to be enough. Finally, b42, I admire the shit out of your tenacity. You never give up. But maybe we have to admit that we just can't save 'em all, much as we'd really, really like to.

Dicey

P.S, I wrote this immediately after b42's post at 10:50 this morning, but it didn't post. I'm going to leave it and send as written, because I stand by it, no matter what the cross chat has been in the interim.
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mrmoonymartian

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Re: DONT Payoff your Mortgage Club
« Reply #686 on: July 11, 2018, 06:09:18 AM »
Looks like a bad time to step in here, but maybe I can offer a different perspective that could show this is not a black and white thing for everyone.

I'm on the other thread despite my instinctive desire to be here, because that is what makes the most mathematical sense for me. In Australia, things are different...

  • We never had your really low interest rates - no great recession or QE here.
  • Our mortgage rates are mostly variable and the banks put up the rates whenever they want (you can pay higher rates to fix them for a few years).
  • There is no tax deduction for mortgage interest.
  • There is high tax on investment income and moderate tax on realised capital gains (home excluded), while saving on mortgage interest is tax free.
  • Homes are not included in asset tests for various things like welfare, so as long as you have a paid off house you're set for life no matter what.
  • There are caps on low-tax retirement funds and we have no backdoor options to access them before the age of 60 (except in extreme circumstances).
  • Our stock market returns are not as high as the US, and returns from international stocks are taxed at a higher rate.
  • Redrawing on extra loan payments is free and easy, so it's not like the money is locked up in the event of emergencies.
  • Inflation is kept reasonably low.

I really wanted to get started on investing in full-tax accounts but had to reluctantly conclude it wasn't the right move for me to make. I max out my low-tax account concessional contributions and throw everything else at the mortgage. I have about 18 months left on it.

My main consolation is that if the market crashes then it may become worthwhile to 'rebalance' into discounted stocks at some stage regardless of these points. I consider the home equity to be similar to holding cash in that regard, only with a much better return.

Anyway, I hope everyone is able to analyse their circumstances rationally and take actions in their long-term best interests... even if it sometimes seems too boring or volatile, as the case may be.
« Last Edit: July 11, 2018, 06:16:06 AM by mrmoonymartian »

Malkynn

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Re: DONT Payoff your Mortgage Club
« Reply #687 on: July 11, 2018, 06:39:40 AM »
Finally, b42, I admire the shit out of your tenacity. You never give up.

Amen to that.

B42 may be like the neighbour’s pitbull that barks fucking incessantly at fucking everything, but at the end of the day, he keeps the house safer.

B42 frequently cites that there are new people coming to this forum all the time and that they need to hear this stuff. He’s not saying it for any of us who have heard it before, he’s saying it for every new member who feels the pressure to pay off their mortgage and who have been convinced that it’s an aspirational goal that’s fundamental to FI.

I’m one of those new members.
I’ve only been here for about 6 months and in those 6 months I have drastically altered my relationship with debt, sped up my time to FI, and am much much happier with my path than I was before I got here and it’s ALL thanks to B42 putting me in my place firmly and swiftly in a different thread within weeks of me joining.

I considered myself pretty well informed and quite good with math, and I wasn’t exactly wrong in terms of how I was conceptualizing what I was saying, given the factors that I was perceiving. However, B42 came from a fundamentally different perspective than everything else I had ever heard and did it with such intensity that I was forced to re-examine the drives behind my own perspectives.

My old plan was solid, but my new plan is SOOOOO much better for me and caters to my personal risk tolerance so much better.

It was like I was stuck with a set of presuppositions that simply weren’t compatible with my actual internal values and someone finally yelled at me “stop thinking that way! It’s stupid and wrong!” and I initially thought “what an asshole” and then I was like “fucking hell! He’s right!!”

So I am eternally grateful to B42 for his unrelenting pitbull fixation on this and I’m so happy there’s a loud, well informed, unrelenting voice that all newcomers can hear so that they can have their presuppositions challenged and perspectives broadened.

As for the rest of us who have already heard it, and for those who are sick of it: his message isn’t for us. He may use us as an example, he may piss us off, but it isn’t for us, it’s for someone who has never heard it before. Like or hate his style, it truly is a public service. Even if it helps someone feel good about paying off their mortgage because they know it’s emotional, that person is still making a more informed decision.

MOD NOTE: Deleted some stupid posts and issued a temporary ban. Stop bickering with each other over stupid stuff.

Leaving this note here--despite no issues with this post in particular--because it's the bottom post, and I don't want to reply and have this junk in my replied topics posts.

As always, report anything that breaks forum rules. And just be nice to each other, doggonit!

Cheers!
« Last Edit: July 11, 2018, 06:47:18 AM by arebelspy »

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #688 on: July 11, 2018, 06:47:52 AM »
Looks like a bad time to step in here, but maybe I can offer a different perspective that could show this is not a black and white thing for everyone.

I'm on the other thread despite my instinctive desire to be here, because that is what makes the most mathematical sense for me. In Australia, things are different...

  • We never had your really low interest rates - no great recession or QE here.
  • Our mortgage rates are mostly variable and the banks put up the rates whenever they want (you can pay higher rates to fix them for a few years).
  • There is no tax deduction for mortgage interest.
  • There is high tax on investment income and moderate tax on realised capital gains (home excluded), while saving on mortgage interest is tax free.
  • Homes are not included in asset tests for various things like welfare, so as long as you have a paid off house you're set for life no matter what.
  • There are caps on low-tax retirement funds and we have no backdoor options to access them before the age of 60 (except in extreme circumstances).
  • Our stock market returns are not as high as the US, and returns from international stocks are taxed at a higher rate.
  • Redrawing on extra loan payments is free and easy, so it's not like the money is locked up in the event of emergencies.
  • Inflation is kept reasonably low.

I really wanted to get started on investing in full-tax accounts but had to reluctantly conclude it wasn't the right move for me to make. I max out my low-tax account concessional contributions and throw everything else at the mortgage. I have about 18 months left on it.

My main consolation is that if the market crashes then it may become worthwhile to 'rebalance' into discounted stocks at some stage regardless of these points. I consider the home equity to be similar to holding cash in that regard, only with a much better return.

Anyway, I hope everyone is able to analyse their circumstances rationally and take actions in their long-term best interests... even if it sometimes seems too boring or volatile, as the case may be.

correct this has nothing to do with you - you're not an american you dont have low fixed rates - we understand these counterpoints - we dont blindly support not paying down mortgages. We support them when they make sense. 
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FIreDrill

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Re: DONT Payoff your Mortgage Club
« Reply #689 on: July 14, 2018, 10:01:07 PM »
Just threw 1k into vanguard and I became 401k eligible at my new job this month.  Really excited to start throwing money towards investments now that we've settled in down here to a certain extent.  Time to get back on it! :D

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