Author Topic: DONT Payoff your Mortgage Club  (Read 167315 times)

RWD

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Re: DONT Payoff your Mortgage Club
« Reply #1200 on: March 04, 2019, 08:11:37 AM »
Another month of minimum payments. About three years left on the car (1.69%) and twelve years left on the house (3.125%). Taxable brokerage account is at 116% of the mortgage balance.
Doesn't that feel amazing? People talk about how good it will feel when they "kill" their mortgage. If only they could somehow know how much better it feels to be in your position. The most shockingly unexpected thing it gave me was a pure, unbridled sense of power. And oh, the possibilities...endless!

3.125%? Wow!

Yep. It's crazy to think I could just go out and buy a brand new Acura NSX with cash and leave our retirement accounts untouched. Unfortunately I am a [mostly] sensible person...

We were able to get the 3.125% loan because we opted for the 15 year mortgage. Based on how long we expect to stay in our current location I believe that was the correct choice. I believe a 30-year mortgage would have been 3.875%.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #1201 on: March 04, 2019, 08:19:13 AM »

Yep. It's crazy to think I could just go out and buy a brand new Acura NSX with cash and leave our retirement accounts untouched. Unfortunately I am a [mostly] sensible person...
I know little about luxury sports cars, so I decided to google reviews of the Acura NSX to see what it was all about.  This one popped up from the late Warren Brown (car reviewer for WaPo)
Quote
"I was seeking solitary pleasure, the movement of bodies -- the car's and mine -- over distance and time at speed. But the NSX-T was too pretty. It called meddlesome attention to itself wherever it went, which meant it spent more time parked and guarded than on the highway. That left me with feelings I hadn't felt since Marguerite Poitier in the eighth grade. I took her to a party at Holy Redeemer School in New Orleans or, rather, she took me. Marguerite was so spectacularly beautiful, she attracted boys like ants to wet sugar on a summer sidewalk. I danced with her once and spent the remainder of the party wishing I had come with someone else.
...
Complaints: The NSX is too precious for its own good unless you're shopping for a museum piece instead of a car.

Praise: A Ferrari with manners; a Lamborghini with class. I love the car but can't live with it."


RWD

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Re: DONT Payoff your Mortgage Club
« Reply #1202 on: March 04, 2019, 08:30:37 AM »

Yep. It's crazy to think I could just go out and buy a brand new Acura NSX with cash and leave our retirement accounts untouched. Unfortunately I am a [mostly] sensible person...
I know little about luxury sports cars, so I decided to google reviews of the Acura NSX to see what it was all about.  This one popped up from the late Warren Brown (car reviewer for WaPo)
Quote
"I was seeking solitary pleasure, the movement of bodies -- the car's and mine -- over distance and time at speed. But the NSX-T was too pretty. It called meddlesome attention to itself wherever it went, which meant it spent more time parked and guarded than on the highway. That left me with feelings I hadn't felt since Marguerite Poitier in the eighth grade. I took her to a party at Holy Redeemer School in New Orleans or, rather, she took me. Marguerite was so spectacularly beautiful, she attracted boys like ants to wet sugar on a summer sidewalk. I danced with her once and spent the remainder of the party wishing I had come with someone else.
...
Complaints: The NSX is too precious for its own good unless you're shopping for a museum piece instead of a car.

Praise: A Ferrari with manners; a Lamborghini with class. I love the car but can't live with it."

That review is for the original NSX. The actual owners of those cars probably disagree strongly with the statement about it being a museum piece. There are some cars that have over 200k miles now and at least one with over 300k miles. Buying an NSX today is probably a good investment (as far as cars go) as they have started appreciating in value, have low operating costs, and the capital acquisition costs are relatively low (for now). Depending on year/mileage I think you can get a good one for $40k-90k.

The NSX I was referring to was the 2017+ model years. Those are currently being sold new for $160k. I imagine they will depreciate a lot though from that price in the short term.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #1203 on: March 04, 2019, 08:34:52 AM »
ok!  like I said, I know nothing about luxury sports cars.  They do look pretty - I just don't like being the center of attention while driving.  Or ever.  I'm sure they are fun as hell though.

RWD

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Re: DONT Payoff your Mortgage Club
« Reply #1204 on: March 04, 2019, 08:50:30 AM »
ok!  like I said, I know nothing about luxury sports cars.  They do look pretty - I just don't like being the center of attention while driving.  Or ever.  I'm sure they are fun as hell though.

Yeah, I understand that. I prefer not attracting too much attention too. The original NSX is old enough now and has restrained styling such that most people that don't know cars wouldn't really notice it. Our Porsche doesn't seem too bad either as they are pretty common. But I've heard it can be a real problem with more exotic vehicles (like the new NSX) as people will try to take pictures of your car while driving or try to race you and stuff.

Maya

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Re: DONT Payoff your Mortgage Club
« Reply #1205 on: March 04, 2019, 06:55:36 PM »
Not only are we not paying off our mortgage, we are buying a second place and not paying that off either! Lol

We currently own a small townhouse, which we will be renting out and buying an even smaller apartment to move into.

The townhouse is nearly fully mortgaged, but once it has a chunk of equity, we will likely refinance again to max the tax deduction from the interest.

That said, due to years of student debt repayment, it will be several years before we are able to max out our tax-advantaged account space because we've got a few hundred thousand in space to catch up on, so contemplating taxable vs mortgage pay off just isn't relevant any time soon.

Once we're at a point to contemplate taxable, we'll be at Lean-FIRE already and will drop down to coast-Fat-FIRE, so it may never be relevant.

Annually, our new mortgage is only 3.5% of our gross income, so it's pretty insignificant either way.

And depending where you are in catching up in your RRSP contributions and plan to sell one of the properties you can move that money into that space basically tax free. Obviously if you hold the properties long term you'll have your RRSPs maxed out by then.

Oh and hi! I haven't been active enough around here but have missed you at the other place.

Malkynn

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Re: DONT Payoff your Mortgage Club
« Reply #1206 on: March 05, 2019, 05:11:07 AM »
Not only are we not paying off our mortgage, we are buying a second place and not paying that off either! Lol

We currently own a small townhouse, which we will be renting out and buying an even smaller apartment to move into.

The townhouse is nearly fully mortgaged, but once it has a chunk of equity, we will likely refinance again to max the tax deduction from the interest.

That said, due to years of student debt repayment, it will be several years before we are able to max out our tax-advantaged account space because we've got a few hundred thousand in space to catch up on, so contemplating taxable vs mortgage pay off just isn't relevant any time soon.

Once we're at a point to contemplate taxable, we'll be at Lean-FIRE already and will drop down to coast-Fat-FIRE, so it may never be relevant.

Annually, our new mortgage is only 3.5% of our gross income, so it's pretty insignificant either way.

And depending where you are in catching up in your RRSP contributions and plan to sell one of the properties you can move that money into that space basically tax free. Obviously if you hold the properties long term you'll have your RRSPs maxed out by then.

Oh and hi! I haven't been active enough around here but have missed you at the other place.

Hi!!!
I miss you guys, it's been an adjustment :(

I'll probably hold onto the properties well past maxing out the RRSPs, DH's space is eaten up by his pension, but it will be some time before all of the TFSA room is tackled as well.

Granted, by "some time" I mean that it will take about 3 years once the student debt is gone. So not tremendously long, but we'll reach FI just a year or two after that.
« Last Edit: March 05, 2019, 05:13:22 AM by Malkynn »

FIreDrill

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Re: DONT Payoff your Mortgage Club
« Reply #1207 on: March 09, 2019, 11:02:23 AM »
Man, I missed last weeks payday... Well, here it is...  I think I'm going to start tracking my total investment portfolio here as well.

Payday! - 3/1/19
1,211 to 401k
269 to HSA


Investment Tracking
2/15/19   - $372,432
3/1/19     - $377,098


Investments are expected to go down by 50k this month due to selling some in order to refinance from 4.75% to 3.875%.


Mr. Metal Mustache

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Re: DONT Payoff your Mortgage Club
« Reply #1208 on: March 10, 2019, 08:32:46 PM »
@FIreDrill Are you refinancing into a 15 year? Otherwise 3.875% is a great rate for a 30 right now!! I'm currently at your same 4.75.

FIreDrill

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Re: DONT Payoff your Mortgage Club
« Reply #1209 on: March 10, 2019, 09:05:43 PM »
@FIreDrill Are you refinancing into a 15 year? Otherwise 3.875% is a great rate for a 30 right now!! I'm currently at your same 4.75.
Right now my rate lock is for a 30 year which is the best I've seen for a while.  I'm just hoping everything goes smoothly on the refi. :)

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Re: DONT Payoff your Mortgage Club
« Reply #1210 on: March 10, 2019, 09:47:14 PM »
I paid an extra 15.03 on my 15 YR fixed @ 2.625% so that I could get down to $99,999.99 with my most recent payment...please face punch me, it was all about the figures.


SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #1211 on: March 10, 2019, 09:52:41 PM »
I paid an extra 15.03 on my 15 YR fixed @ 2.625% so that I could get down to $99,999.99 with my most recent payment...please face punch me, it was all about the figures.

I'm paying an extra ~$143 so the principal goes down $1000 a month.   It's silly but it works for me.  No stones cast from me!

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #1212 on: March 11, 2019, 05:18:35 AM »
I paid an extra 15.03 on my 15 YR fixed @ 2.625% so that I could get down to $99,999.99 with my most recent payment...please face punch me, it was all about the figures.

Write out: "I will not pay extra on a 2.625% fixed rate loan" 50 times before you post here again. :-P

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #1213 on: March 11, 2019, 07:03:26 AM »
I paid an extra 15.03 on my 15 YR fixed @ 2.625% so that I could get down to $99,999.99 with my most recent payment...please face punch me, it was all about the figures.

We don't have to face-punch you...by the time we're reading this, bank has already tacked on enough interest to get you back into the six-digit balance.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #1214 on: March 11, 2019, 07:08:06 AM »
My wife and I are contemplating a move within our city. Can I just say it is frustrating as hell to realize that we have $100,000 that is basically trapped in our current house? Thanks to saving, there is other money available; the thought of simultaneously moving money and stuff as part of the largest transaction of our lives sure makes me glad I am in this DNPYM club.

CorpRaider

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Re: DONT Payoff your Mortgage Club
« Reply #1215 on: March 11, 2019, 07:09:07 AM »
"Paid extra on my .625% (real) 15 year fixed interest rate loan (also paying more principal versus a 30 year amortization schedule)."
« Last Edit: March 11, 2019, 08:31:56 AM by CorpRaider »

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #1216 on: March 11, 2019, 07:21:00 AM »
My wife and I are contemplating a move within our city. Can I just say it is frustrating as hell to realize that we have $100,000 that is basically trapped in our current house? Thanks to saving, there is other money available; the thought of simultaneously moving money and stuff as part of the largest transaction of our lives sure makes me glad I am in this DNPYM club.
I feel your pain/frustration.
We're currently moving while our previous home is on the market. Like you we have a similar amount tied up in its equity. I don't really want to sell investments to have 20% to put down on a new home, and I look forward to the day when we can take most of that equity from home#1 and plow it back into the market.

Brother Esau

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Re: DONT Payoff your Mortgage Club
« Reply #1217 on: March 11, 2019, 07:30:11 AM »
Really enjoying reading some of the recent March posts so thought I would share:

We have 13 years left on a 3.25% mortgage with a balance of $116,000. Taxable brokerage accounts are about double the mortgage balance. The tax deferred accounts (457b, HSA & IRA) will be maxed out in about 2 years. Once they are maxed out, we probably still won't pay extra to the mortgage. As others have said, yes, it feels amazing! 

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #1218 on: March 11, 2019, 09:05:01 AM »
My wife and I are contemplating a move within our city. Can I just say it is frustrating as hell to realize that we have $100,000 that is basically trapped in our current house? Thanks to saving, there is other money available; the thought of simultaneously moving money and stuff as part of the largest transaction of our lives sure makes me glad I am in this DNPYM club.
I feel your pain/frustration.
We're currently moving while our previous home is on the market. Like you we have a similar amount tied up in its equity. I don't really want to sell investments to have 20% to put down on a new home, and I look forward to the day when we can take most of that equity from home#1 and plow it back into the market.
We have several rentals in a 55+ community. One of our tenants owned their home outright, but needed cash to live on. They had to sell their house, then rent the same floor plan from us. I never, ever want to find myself in their position.

Another tenant owned a home in a posh Country Club community. The dues skyrocketed over the years. He finally sold (at a loss, because of the high dues) and rents a similar sized house from us. They love it. The kicker? Their entire monthly rent is less than their HOA dues were at their old house. And our place is updated, spotless and has two golf courses. They're pay-as-you-play, so the fees are low, and unlike a Country Club, if you don't play, you don't pay. No restaurant minimums either. It still sucks that they had to move.

These are just a couple of reaons why keeping the fixed rate mortgage on your affordable house until you have a big, fat-ass 'stache is the smarter way to go. It makes a huge difference at the end, when you're drawing down your assets . By then, your course is set and it's mostly too late to change.

Fomerly known as something

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Re: DONT Payoff your Mortgage Club
« Reply #1219 on: March 12, 2019, 05:23:20 AM »
I paid an extra 15.03 on my 15 YR fixed @ 2.625% so that I could get down to $99,999.99 with my most recent payment...please face punch me, it was all about the figures.

I'm paying an extra ~$143 so the principal goes down $1000 a month.   It's silly but it works for me.  No stones cast from me!

I pay an extra 136.09 so my payment is an even $1,500 and i pay more to principle instead of interest.  Will drop it to $1,400 in a few years.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #1220 on: March 12, 2019, 06:29:32 AM »
In 2013, I convinced my wife to get a 5/1 ARM on the house we were buying by promising to overpay our payments enough that--even with rate resets--the mortgage payment would never exceed $1,252. We ultimately paid about $6,000 extra toward a mortgage that we still have while the SP500 was below 1,600; I'm grateful that we eventually stopped this lunacy.

It's close to 2,800 today. I was chastened by this committed group on this thread, and now I only make minimum payments.


Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #1221 on: March 12, 2019, 07:50:45 AM »
I paid an extra 15.03 on my 15 YR fixed @ 2.625% so that I could get down to $99,999.99 with my most recent payment...please face punch me, it was all about the figures.

I'm paying an extra ~$143 so the principal goes down $1000 a month.   It's silly but it works for me.  No stones cast from me!
I pay an extra 136.09 so my payment is an even $1,500 and i pay more to principle instead of interest.  Will drop it to $1,400 in a few years.
$15.03 is not much more than a rounding error. $143 and $136 are not. You're both diverting over $1500 a year from equities. Unless you are fully maximizing every single retirement saving option available to you, this is sub-optimal.

SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #1222 on: March 12, 2019, 10:07:48 AM »
I paid an extra 15.03 on my 15 YR fixed @ 2.625% so that I could get down to $99,999.99 with my most recent payment...please face punch me, it was all about the figures.

I'm paying an extra ~$143 so the principal goes down $1000 a month.   It's silly but it works for me.  No stones cast from me!
I pay an extra 136.09 so my payment is an even $1,500 and i pay more to principle instead of interest.  Will drop it to $1,400 in a few years.
$15.03 is not much more than a rounding error. $143 and $136 are not. You're both diverting over $1500 a year from equities. Unless you are fully maximizing every single retirement saving option available to you, this is sub-optimal.

Yep, it is sub-optimal for retirement savings.   

With non-stock passive income making up $72,000 of our projected $75,000 annual spend, that means I've got a 0.27% withdrawal rate from our portfolio in a normal year.  Sometime in the next year or two I'll pick up another rental property and take our withdrawal rate down to 0%.

So, since I'm retired already, I'm more interested in optimizing that $143 for happiness and not for investment earnings. :)

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #1223 on: March 12, 2019, 10:21:48 AM »
I paid an extra 15.03 on my 15 YR fixed @ 2.625% so that I could get down to $99,999.99 with my most recent payment...please face punch me, it was all about the figures.

I'm paying an extra ~$143 so the principal goes down $1000 a month.   It's silly but it works for me.  No stones cast from me!
I pay an extra 136.09 so my payment is an even $1,500 and i pay more to principle instead of interest.  Will drop it to $1,400 in a few years.
$15.03 is not much more than a rounding error. $143 and $136 are not. You're both diverting over $1500 a year from equities. Unless you are fully maximizing every single retirement saving option available to you, this is sub-optimal.

Yep, it is sub-optimal for retirement savings.   

With non-stock passive income making up $72,000 of our projected $75,000 annual spend, that means I've got a 0.27% withdrawal rate from our portfolio in a normal year.  Sometime in the next year or two I'll pick up another rental property and take our withdrawal rate down to 0%.

So, since I'm retired already, I'm more interested in optimizing that $143 for happiness and not for investment earnings. :)
@SwordGuy, you're killing it! You get a free pass and a shiny gold star from me! Maybe you could share how amazing it felt when your 'stache exceeded your mortgage balance.

TexasRunner

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Re: DONT Payoff your Mortgage Club
« Reply #1224 on: March 12, 2019, 10:26:37 AM »
I paid an extra 15.03 on my 15 YR fixed @ 2.625% so that I could get down to $99,999.99 with my most recent payment...please face punch me, it was all about the figures.

I'm paying an extra ~$143 so the principal goes down $1000 a month.   It's silly but it works for me.  No stones cast from me!
I pay an extra 136.09 so my payment is an even $1,500 and i pay more to principle instead of interest.  Will drop it to $1,400 in a few years.
$15.03 is not much more than a rounding error. $143 and $136 are not. You're both diverting over $1500 a year from equities. Unless you are fully maximizing every single retirement saving option available to you, this is sub-optimal.

Yep, it is sub-optimal for retirement savings.   

With non-stock passive income making up $72,000 of our projected $75,000 annual spend, that means I've got a 0.27% withdrawal rate from our portfolio in a normal year.  Sometime in the next year or two I'll pick up another rental property and take our withdrawal rate down to 0%.

So, since I'm retired already, I'm more interested in optimizing that $143 for happiness and not for investment earnings. :)
@SwordGuy, you're killing it! You get a free pass and a shiny gold star from me! Maybe you could share how amazing it felt when your 'stache exceeded your mortgage balance.

@SwordGuy, If anybody gets a pass its you...!  :)

The real point of this thread is paying a fixed-rate mortgage early in your earnings timeline, especially before tax-differed accounts, is the biggest deal.  I myself have encouraged (some) to pay off their mortgage in the months reaching FIRE.  It makes sense in some circumstances.  However, when your 28 and making bank is not the time to skip 401k to knock out the mortgage.  ;)

Overall, well done!

couponvan

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Re: DONT Payoff your Mortgage Club
« Reply #1225 on: March 12, 2019, 10:59:04 AM »
15 year or 30 year? High income family.  $650K house.  We plan to be there 5-10 years before going condo/FIRE. Real estate wasn't a great investment between 2005-2018 for us either (essentially sold for what we paid), other than for the tax deductions. We have a "cheap" paid off FIRE house in a LCOL, as well as a "cheap" paid off 55+ retirement condo in a HCOL area once a parent kicks the bucket (so hopefully not for at least another 15-20 years).

With the $24K MFJ amount, I'm leaning towards a 30 year and the interest being tax deductible since we'd have over $24K of interest/state property/income tax deductions.  All our charity deductions would "count" again - and I'd be more incented to give to charities.

$4K payment on a 15 year at 3.625%, $2.8K payment on a 30 year at 4.2%. I'm pretty sure you will all say take the 30 year $ and the mental breathing room that payment gives us.  :-)  It's still cheaper than renting a high-end apartment.




nereo

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Re: DONT Payoff your Mortgage Club
« Reply #1226 on: March 12, 2019, 11:11:17 AM »
15 year or 30 year? High income family.  $650K house.  We plan to be there 5-10 years before going condo/FIRE. Real estate wasn't a great investment between 2005-2018 for us either (essentially sold for what we paid), other than for the tax deductions. We have a "cheap" paid off FIRE house in a LCOL, as well as a "cheap" paid off 55+ retirement condo in a HCOL area once a parent kicks the bucket (so hopefully not for at least another 15-20 years).

With the $24K MFJ amount, I'm leaning towards a 30 year and the interest being tax deductible since we'd have over $24K of interest/state property/income tax deductions.  All our charity deductions would "count" again - and I'd be more incented to give to charities.

$4K payment on a 15 year at 3.625%, $2.8K payment on a 30 year at 4.2%. I'm pretty sure you will all say take the 30 year $ and the mental breathing room that payment gives us.  :-)  It's still cheaper than renting a high-end apartment.

More than the mortgage interest deduction, I suspect that additional $1.8k/month in cashflow from going with a 30y could be utilized toward reducing your taxable burden.  That assumes such options are available to you (for example: 401(k) and/or HSA contributions).  If you have access to those, and you are not already maxing them out, it's a very easy decision - take the 30y.

SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #1227 on: March 12, 2019, 11:25:32 AM »
I paid an extra 15.03 on my 15 YR fixed @ 2.625% so that I could get down to $99,999.99 with my most recent payment...please face punch me, it was all about the figures.

I'm paying an extra ~$143 so the principal goes down $1000 a month.   It's silly but it works for me.  No stones cast from me!
I pay an extra 136.09 so my payment is an even $1,500 and i pay more to principle instead of interest.  Will drop it to $1,400 in a few years.
$15.03 is not much more than a rounding error. $143 and $136 are not. You're both diverting over $1500 a year from equities. Unless you are fully maximizing every single retirement saving option available to you, this is sub-optimal.

Yep, it is sub-optimal for retirement savings.   

With non-stock passive income making up $72,000 of our projected $75,000 annual spend, that means I've got a 0.27% withdrawal rate from our portfolio in a normal year.  Sometime in the next year or two I'll pick up another rental property and take our withdrawal rate down to 0%.

So, since I'm retired already, I'm more interested in optimizing that $143 for happiness and not for investment earnings. :)
@SwordGuy, you're killing it! You get a free pass and a shiny gold star from me! Maybe you could share how amazing it felt when your 'stache exceeded your mortgage balance.

@SwordGuy, If anybody gets a pass its you...!  :)

The real point of this thread is paying a fixed-rate mortgage early in your earnings timeline, especially before tax-differed accounts, is the biggest deal.  I myself have encouraged (some) to pay off their mortgage in the months reaching FIRE.  It makes sense in some circumstances.  However, when your 28 and making bank is not the time to skip 401k to knock out the mortgage.  ;)

Overall, well done!
@TexasRunner , I agree, there's a time and a place for many different strategies.  And for most people in the accumulation stage, with a low fixed rate mortgage, paying extra is not the best financial choice.

It's not even the best financial choice in my circumstances!  But it makes me happy and I can afford a little luxury that's merely sub-optimal financially.  Certainly more than other things that make me happy and are more expensive! :)

couponvan

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Re: DONT Payoff your Mortgage Club
« Reply #1228 on: March 12, 2019, 11:51:30 AM »
15 year or 30 year? High income family.  $650K house.  We plan to be there 5-10 years before going condo/FIRE. Real estate wasn't a great investment between 2005-2018 for us either (essentially sold for what we paid), other than for the tax deductions. We have a "cheap" paid off FIRE house in a LCOL, as well as a "cheap" paid off 55+ retirement condo in a HCOL area once a parent kicks the bucket (so hopefully not for at least another 15-20 years).

With the $24K MFJ amount, I'm leaning towards a 30 year and the interest being tax deductible since we'd have over $24K of interest/state property/income tax deductions.  All our charity deductions would "count" again - and I'd be more incented to give to charities.

$4K payment on a 15 year at 3.625%, $2.8K payment on a 30 year at 4.2%. I'm pretty sure you will all say take the 30 year $ and the mental breathing room that payment gives us.  :-)  It's still cheaper than renting a high-end apartment.

More than the mortgage interest deduction, I suspect that additional $1.8k/month in cashflow from going with a 30y could be utilized toward reducing your taxable burden.  That assumes such options are available to you (for example: 401(k) and/or HSA contributions).  If you have access to those, and you are not already maxing them out, it's a very easy decision - take the 30y.

Those are already maxed out, but I think the cash flow wiggle will feel much better to my inner bag lady.  I just need to work on DH to "invest" the difference of the 15 year vs spend the cash flow.  There's one person on team couponvan that is a saver, and one that is a spender.  Pay yourself first is the only way it has worked for us in the accumulation phase of FI.  If he sees it, he spends it....he acknowledges that too BTW.  I think I will propose that we can take the extra and put it in 529 plans for the state income tax deduction.

RWD

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Re: DONT Payoff your Mortgage Club
« Reply #1229 on: March 12, 2019, 11:58:05 AM »
15 year or 30 year? High income family.  $650K house.  We plan to be there 5-10 years before going condo/FIRE. Real estate wasn't a great investment between 2005-2018 for us either (essentially sold for what we paid), other than for the tax deductions. We have a "cheap" paid off FIRE house in a LCOL, as well as a "cheap" paid off 55+ retirement condo in a HCOL area once a parent kicks the bucket (so hopefully not for at least another 15-20 years).

With the $24K MFJ amount, I'm leaning towards a 30 year and the interest being tax deductible since we'd have over $24K of interest/state property/income tax deductions.  All our charity deductions would "count" again - and I'd be more incented to give to charities.

$4K payment on a 15 year at 3.625%, $2.8K payment on a 30 year at 4.2%. I'm pretty sure you will all say take the 30 year $ and the mental breathing room that payment gives us.  :-)  It's still cheaper than renting a high-end apartment.

More than the mortgage interest deduction, I suspect that additional $1.8k/month in cashflow from going with a 30y could be utilized toward reducing your taxable burden.  That assumes such options are available to you (for example: 401(k) and/or HSA contributions).  If you have access to those, and you are not already maxing them out, it's a very easy decision - take the 30y.

Those are already maxed out, but I think the cash flow wiggle will feel much better to my inner bag lady.  I just need to work on DH to "invest" the difference of the 15 year vs spend the cash flow.  There's one person on team couponvan that is a saver, and one that is a spender.  Pay yourself first is the only way it has worked for us in the accumulation phase of FI.  If he sees it, he spends it....he acknowledges that too BTW.  I think I will propose that we can take the extra and put it in 529 plans for the state income tax deduction.

For only 5-10 years a 15 year loan is usually a better deal.

brute

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Re: DONT Payoff your Mortgage Club
« Reply #1230 on: March 12, 2019, 12:48:51 PM »
About to jump into a mortgage and it's killing me. I HATE seeing that money disappear from my accounts and vanish into (an albiet glorious) pile of wood and concrete.

Our taxable accounts have more than enough to buy the house in cash, but I'll keep it earning instead of locking it up in a thing. Still.. debt. It's a visceral fear. I figure in a few months I'll get over it, but it's going to be rough for a bit.

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Re: DONT Payoff your Mortgage Club
« Reply #1231 on: March 12, 2019, 01:17:07 PM »
About to jump into a mortgage and it's killing me. I HATE seeing that money disappear from my accounts and vanish into (an albiet glorious) pile of wood and concrete.

Our taxable accounts have more than enough to buy the house in cash, but I'll keep it earning instead of locking it up in a thing. Still.. debt. It's a visceral fear. I figure in a few months I'll get over it, but it's going to be rough for a bit.

Debt is an irritation, no question.   Not paying off the mortgage is the hardest early on because it seems like you get less bang for your buck.  You drop a grand on the mortgage, and boom!  Less irritation.   But you drop a grand in an investment account and some months and even some years it barely seems to grow.   But when the account gets big having not paid down the mortgage becomes a joy.   Even small upward movements in the market makes for big total dollar gains.   Delightful to watch. 

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Re: DONT Payoff your Mortgage Club
« Reply #1232 on: March 12, 2019, 01:42:11 PM »
Couponvan-
have you asked for a quote on a 5/1 ARM? If you can get a lower rate there than for the 30-year fixed (the spreads between these two often fluctuate), you might save money.

If you're concerned about the interest rate risk, you can get the 5/1 ARM, but pay what the 15-year fixed payments would have been so that you have a lower balance by the time the reset gets here.

It sounds like your plans involve only staying in this house for a few years, which is why I'm suggesting this.

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Re: DONT Payoff your Mortgage Club
« Reply #1233 on: March 12, 2019, 02:56:19 PM »
I paid an extra 15.03 on my 15 YR fixed @ 2.625% so that I could get down to $99,999.99 with my most recent payment...please face punch me, it was all about the figures.

I'm paying an extra ~$143 so the principal goes down $1000 a month.   It's silly but it works for me.  No stones cast from me!
I pay an extra 136.09 so my payment is an even $1,500 and i pay more to principle instead of interest.  Will drop it to $1,400 in a few years.
$15.03 is not much more than a rounding error. $143 and $136 are not. You're both diverting over $1500 a year from equities. Unless you are fully maximizing every single retirement saving option available to you, this is sub-optimal.

Dicey, in my case I am.  I fully fund my TSP, a ROTH (conversion), my HSA and put a significant amount into a taxable account.  I go back and forth on the extra $100 but it is less then I spend on my cats a month so it is a rounding error to me honestly.

couponvan

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Re: DONT Payoff your Mortgage Club
« Reply #1234 on: March 12, 2019, 04:03:48 PM »
Couponvan-
have you asked for a quote on a 5/1 ARM? If you can get a lower rate there than for the 30-year fixed (the spreads between these two often fluctuate), you might save money.

If you're concerned about the interest rate risk, you can get the 5/1 ARM, but pay what the 15-year fixed payments would have been so that you have a lower balance by the time the reset gets here.

It sounds like your plans involve only staying in this house for a few years, which is why I'm suggesting this.

That's a definite possibility, but DH would not go for variable rates....even if we only plan on staying a few years. 

FIreDrill

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Re: DONT Payoff your Mortgage Club
« Reply #1235 on: March 12, 2019, 05:20:16 PM »
Couponvan-
have you asked for a quote on a 5/1 ARM? If you can get a lower rate there than for the 30-year fixed (the spreads between these two often fluctuate), you might save money.

If you're concerned about the interest rate risk, you can get the 5/1 ARM, but pay what the 15-year fixed payments would have been so that you have a lower balance by the time the reset gets here.

It sounds like your plans involve only staying in this house for a few years, which is why I'm suggesting this.

That's a definite possibility, but DH would not go for variable rates....even if we only plan on staying a few years.
Do you plan on renting it out after you move or is this strictly short term housing?  If it short term housing I would suggest doing a rent/buy comparison.  Depending on the spread renting may be a better option for you over the next 5 years.

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Re: DONT Payoff your Mortgage Club
« Reply #1236 on: March 12, 2019, 10:31:29 PM »
Ok y'all convinced me. I have been paying an extra $50/month on my 4.5% fixed 30y since we signed the thing in 2015. It felt like a responsible move at the time. I will cancel that extra payment, and move that money into my 401(k) since I have not been maxing that out (just doing enough for the full ER contribution). The nice thing is I can boost my 401(k) by about $57/m since it's now pre-tax -- and it will feel the same. One small step!

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Re: DONT Payoff your Mortgage Club
« Reply #1237 on: March 13, 2019, 05:31:52 AM »
Ok y'all convinced me. I have been paying an extra $50/month on my 4.5% fixed 30y since we signed the thing in 2015. It felt like a responsible move at the time. I will cancel that extra payment, and move that money into my 401(k) since I have not been maxing that out (just doing enough for the full ER contribution). The nice thing is I can boost my 401(k) by about $57/m since it's now pre-tax -- and it will feel the same. One small step!
Woot!

EngagedToFIRE

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Re: DONT Payoff your Mortgage Club
« Reply #1238 on: March 13, 2019, 06:26:58 AM »
About to jump into a mortgage and it's killing me. I HATE seeing that money disappear from my accounts and vanish into (an albiet glorious) pile of wood and concrete.

Our taxable accounts have more than enough to buy the house in cash, but I'll keep it earning instead of locking it up in a thing. Still.. debt. It's a visceral fear. I figure in a few months I'll get over it, but it's going to be rough for a bit.

Reading through this, I do wonder about the timing.  Buy low, sell high.

The market is hot right now and seemingly past due for a hit.  Could it possibly be a good strategy to pull money out of the taxable accounts, that are probably way up, and pay off a mortgage?  Then start dollar cost averaging back in to the market?

I have one mortgage, and paid off another.  My real estate was up so much in value, without corresponding rent increases.  I loaded up after the crash 10 years ago.  The taxes were shooting up but rents were not.  So my ROI on the rentals was getting worse.  2% - 5% based on the sell value of the properties.  I decided to sell off my rentals for a huge profit.  I ended up with about $700k late last year.  Instead of dumping $700k at once in to a massive bull market, I thought it made more sense to take the guaranteed 4.5% return on my morgage and eliminate that debt.  And now without the mortgage debt, I'm putting what would have been my mortgage payment (and a lot more) in to the market every month.  Dollar cost averaging back in slower.  I'm not 100% sure that was the best move, but it seems to make sense.

Curious about the thoughts from some of the people here.  I do also have a 2nd home with a $200k mortgage that I'm not going to pay off even though I have the funds to do so.  Mostly because I am far too invested in real estate and don't want to drain my taxable accounts anymore.

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Re: DONT Payoff your Mortgage Club
« Reply #1239 on: March 13, 2019, 06:51:00 AM »

The market is hot right now and seemingly past due for a hit.  Could it possibly be a good strategy to pull money out of the taxable accounts, that are probably way up, and pay off a mortgage?  Then start dollar cost averaging back in to the market?


I wish I had $1 for every time a poster here talked about the markets being too "hot" and that a selloff was imminent.

If you pay off the mortgage you lose all future benefit. As the most common mortgages in the us are fixed and many in the 3-4.x% range the real (ie inflation adjusted) amount you pay each month steadily decreases, making it a fantastic inflation hedge.  What you are proposing is market timing followed by DCAing back into it.  Besides going against one of the central beliefs here ("don't try to time the market") the time frame involved will make it even more unlikely for you to come out ahead. 

For example, suppose you are paying $2k/month on a mortgage with $125k left.  If you decided to gut your taxable accounts to get rid of the mortgage it would take you over 5 years to pay it back with the $24k/year you "saved" from not having a mortgage.  You might even get really, really, really lucky and sell right before a big drop.  But five years later where is the market when you are still trying to buy your way back in? In most cases way above where it was when you started this whole exercise, even if you look at doing this just before a correction or recession.

Time in the market is much more important than timing the market.

brute

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Re: DONT Payoff your Mortgage Club
« Reply #1240 on: March 13, 2019, 07:08:45 AM »

The market is hot right now and seemingly past due for a hit.  Could it possibly be a good strategy to pull money out of the taxable accounts, that are probably way up, and pay off a mortgage?  Then start dollar cost averaging back in to the market?


I wish I had $1 for every time a poster here talked about the markets being too "hot" and that a selloff was imminent.

If you pay off the mortgage you lose all future benefit. As the most common mortgages in the us are fixed and many in the 3-4.x% range the real (ie inflation adjusted) amount you pay each month steadily decreases, making it a fantastic inflation hedge.  What you are proposing is market timing followed by DCAing back into it.  Besides going against one of the central beliefs here ("don't try to time the market") the time frame involved will make it even more unlikely for you to come out ahead. 

For example, suppose you are paying $2k/month on a mortgage with $125k left.  If you decided to gut your taxable accounts to get rid of the mortgage it would take you over 5 years to pay it back with the $24k/year you "saved" from not having a mortgage.  You might even get really, really, really lucky and sell right before a big drop.  But five years later where is the market when you are still trying to buy your way back in? In most cases way above where it was when you started this whole exercise, even if you look at doing this just before a correction or recession.

Time in the market is much more important than timing the market.

True dat. I'll probably be living in this thread for the first 6 months to remind myself that investing is the right way to go. Also, that I don't need to throw it all back into the low interest money market account that I'd been using for the past year to hold the down payment. It's hard seeing that go to zero, but I have plenty of other cushion in ETFs, a good income, and excellent credit that I can borrow against if the need were to arise and I couldn't move money around fast enough. It will be fine. I just want to see that big scrooge mcduckian pile of money at my fingertips. Emotions are dumb sometimes.

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Re: DONT Payoff your Mortgage Club
« Reply #1241 on: March 13, 2019, 07:31:56 AM »
I paid an extra 15.03 on my 15 YR fixed @ 2.625% so that I could get down to $99,999.99 with my most recent payment...please face punch me, it was all about the figures.

I'm paying an extra ~$143 so the principal goes down $1000 a month.   It's silly but it works for me.  No stones cast from me!
I pay an extra 136.09 so my payment is an even $1,500 and i pay more to principle instead of interest.  Will drop it to $1,400 in a few years.
$15.03 is not much more than a rounding error. $143 and $136 are not. You're both diverting over $1500 a year from equities. Unless you are fully maximizing every single retirement saving option available to you, this is sub-optimal.

Dicey, in my case I am.  I fully fund my TSP, a ROTH (conversion), my HSA and put a significant amount into a taxable account.  I go back and forth on the extra $100 but it is less then I spend on my cats a month so it is a rounding error to me honestly.
Good for you! You're doing it in the right order. Congratulations, @Formerly known as something.

Malkynn

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Re: DONT Payoff your Mortgage Club
« Reply #1242 on: March 13, 2019, 07:38:59 AM »

The market is hot right now and seemingly past due for a hit.  Could it possibly be a good strategy to pull money out of the taxable accounts, that are probably way up, and pay off a mortgage?  Then start dollar cost averaging back in to the market?


I wish I had $1 for every time a poster here talked about the markets being too "hot" and that a selloff was imminent.

If you pay off the mortgage you lose all future benefit. As the most common mortgages in the us are fixed and many in the 3-4.x% range the real (ie inflation adjusted) amount you pay each month steadily decreases, making it a fantastic inflation hedge.  What you are proposing is market timing followed by DCAing back into it.  Besides going against one of the central beliefs here ("don't try to time the market") the time frame involved will make it even more unlikely for you to come out ahead. 

For example, suppose you are paying $2k/month on a mortgage with $125k left.  If you decided to gut your taxable accounts to get rid of the mortgage it would take you over 5 years to pay it back with the $24k/year you "saved" from not having a mortgage.  You might even get really, really, really lucky and sell right before a big drop.  But five years later where is the market when you are still trying to buy your way back in? In most cases way above where it was when you started this whole exercise, even if you look at doing this just before a correction or recession.

Time in the market is much more important than timing the market.

A-fucken-men to that.

Plus, the less cash you have in your house, the easier it is to weather the economic crashes, possible job losses, provides more capital to jump on the many opportunities that crop up in crashes, etc, etc.

In a major crash, it's not like everything always just stays exactly the same and life chugs on like normal until recovery. The whole world gets all whacky and things can shift significantly in individual industries and regions. In a major crash, you want to be as flexible as possible in order to come out with the best outcome.

In fact, if everything did just stay the same and chug along until recovery, then leaving everything as-is is by far the best option.

Either way, if market timing was predictable, then we would have thousands of threads about all of the various approaches to market timing with countless of the local mathy-types posting endlessly about different statistical models, etc, etc.

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Re: DONT Payoff your Mortgage Club
« Reply #1243 on: March 13, 2019, 08:17:57 AM »
The market is hot right now and seemingly past due for a hit.

Were you not paying attention? The market already took the hit back in December. It still hasn't even recovered to the peak from over a year ago (Jan 2018) and you're calling the market hot right now?

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Re: DONT Payoff your Mortgage Club
« Reply #1244 on: March 13, 2019, 08:36:20 AM »
The market is hot right now and seemingly past due for a hit.

Were you not paying attention? The market already took the hit back in December. It still hasn't even recovered to the peak from over a year ago (Jan 2018) and you're calling the market hot right now?
Which market? Real Estate and the Stock Market don't necessarily move in tandem.

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Re: DONT Payoff your Mortgage Club
« Reply #1245 on: March 13, 2019, 08:38:35 AM »
The market is hot right now and seemingly past due for a hit.

Were you not paying attention? The market already took the hit back in December. It still hasn't even recovered to the peak from over a year ago (Jan 2018) and you're calling the market hot right now?
Which market? Real Estate and the Stock Market don't necessarily move in tandem.
I believe they are referring to the total us stock market, or VTSAX.

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EngagedToFIRE

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Re: DONT Payoff your Mortgage Club
« Reply #1246 on: March 13, 2019, 08:50:08 AM »

The market is hot right now and seemingly past due for a hit.  Could it possibly be a good strategy to pull money out of the taxable accounts, that are probably way up, and pay off a mortgage?  Then start dollar cost averaging back in to the market?


I wish I had $1 for every time a poster here talked about the markets being too "hot" and that a selloff was imminent.

If you pay off the mortgage you lose all future benefit. As the most common mortgages in the us are fixed and many in the 3-4.x% range the real (ie inflation adjusted) amount you pay each month steadily decreases, making it a fantastic inflation hedge.  What you are proposing is market timing followed by DCAing back into it.  Besides going against one of the central beliefs here ("don't try to time the market") the time frame involved will make it even more unlikely for you to come out ahead. 

For example, suppose you are paying $2k/month on a mortgage with $125k left.  If you decided to gut your taxable accounts to get rid of the mortgage it would take you over 5 years to pay it back with the $24k/year you "saved" from not having a mortgage.  You might even get really, really, really lucky and sell right before a big drop.  But five years later where is the market when you are still trying to buy your way back in? In most cases way above where it was when you started this whole exercise, even if you look at doing this just before a correction or recession.

Time in the market is much more important than timing the market.

If there was a big drop, over 5 years you would have bought your way back in at a substantially discounted cost.  The gains would be much higher than if I put all of the funds in right now.  Instead of waiting years for the funds to come back after the drop, I'd see substantial gains by having a lower cost basis.  It seems if there was a drop, you would come out ahead paying off the mortgage then buying back in on the drop by cost averaging over a few years.

I understand the idea here is simply time in market and no timing at all.  That would have been a miss on my real estate which was getting exponentially worse returns.  Selling off and converting was a great strategy.  I'm not entirely convinced dropping $700k in at current levels instead of DCA would have been better.  Are you arguing against DCA then?

EngagedToFIRE

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Re: DONT Payoff your Mortgage Club
« Reply #1247 on: March 13, 2019, 08:55:02 AM »

The market is hot right now and seemingly past due for a hit.  Could it possibly be a good strategy to pull money out of the taxable accounts, that are probably way up, and pay off a mortgage?  Then start dollar cost averaging back in to the market?


I wish I had $1 for every time a poster here talked about the markets being too "hot" and that a selloff was imminent.

If you pay off the mortgage you lose all future benefit. As the most common mortgages in the us are fixed and many in the 3-4.x% range the real (ie inflation adjusted) amount you pay each month steadily decreases, making it a fantastic inflation hedge.  What you are proposing is market timing followed by DCAing back into it.  Besides going against one of the central beliefs here ("don't try to time the market") the time frame involved will make it even more unlikely for you to come out ahead. 

For example, suppose you are paying $2k/month on a mortgage with $125k left.  If you decided to gut your taxable accounts to get rid of the mortgage it would take you over 5 years to pay it back with the $24k/year you "saved" from not having a mortgage.  You might even get really, really, really lucky and sell right before a big drop.  But five years later where is the market when you are still trying to buy your way back in? In most cases way above where it was when you started this whole exercise, even if you look at doing this just before a correction or recession.

Time in the market is much more important than timing the market.

A-fucken-men to that.

Plus, the less cash you have in your house, the easier it is to weather the economic crashes, possible job losses, provides more capital to jump on the many opportunities that crop up in crashes, etc, etc.

In a major crash, it's not like everything always just stays exactly the same and life chugs on like normal until recovery. The whole world gets all whacky and things can shift significantly in individual industries and regions. In a major crash, you want to be as flexible as possible in order to come out with the best outcome.

In fact, if everything did just stay the same and chug along until recovery, then leaving everything as-is is by far the best option.

Either way, if market timing was predictable, then we would have thousands of threads about all of the various approaches to market timing with countless of the local mathy-types posting endlessly about different statistical models, etc, etc.

Couldn't you argue that not having a mortgage and substantially lower monthly bills also helps weather economic crashes?  I'm not opposed to mortgages.  I see the value in the uber low interest rates currently offered.  I have a mortgage on one of my houses that I plan to keep.  I'm just questioning a lump sum option.  And I think it's more of a DCA question.  Could you be better off in a bull market paying off the house then DCA back in?

RWD

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Re: DONT Payoff your Mortgage Club
« Reply #1248 on: March 13, 2019, 09:44:39 AM »
The market is hot right now and seemingly past due for a hit.

Were you not paying attention? The market already took the hit back in December. It still hasn't even recovered to the peak from over a year ago (Jan 2018) and you're calling the market hot right now?
Which market? Real Estate and the Stock Market don't necessarily move in tandem.
I believe they are referring to the total us stock market, or VTSAX.
Correct. EngagedToFIRE was talking about the stock market being overpriced as justification for selling equities to pay down the mortgage. So I pointed out the recent 20% correction in the SP500 as a counterpoint.

RWD

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Re: DONT Payoff your Mortgage Club
« Reply #1249 on: March 13, 2019, 09:47:50 AM »
Couldn't you argue that not having a mortgage and substantially lower monthly bills also helps weather economic crashes?  I'm not opposed to mortgages.  I see the value in the uber low interest rates currently offered.  I have a mortgage on one of my houses that I plan to keep.  I'm just questioning a lump sum option.  And I think it's more of a DCA question.  Could you be better off in a bull market paying off the house then DCA back in?
It's only better if you actually completely pay off your house and don't lose your job. If you have only partly paid off your house your mortgage payments don't get smaller. And if you lose your job you'll have no cushion to pay your bills. Having liquid assets is much more flexible.

On DCA:
https://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/