[note: the tone of this post is intended to be light-hearted, which might not be easily conveyed]
Whelp! After being near-models of financial efficiency my parents just gone and done something stupid! After 43 (?) years they paid off the remaining 6 years of their mortgage in one lump sum, despite having a sub-3% fixed rate. The horror! The personal disgrace! Not only did I pay off my own super-low-rate mortgage when we sold our home (and moved into a rental), but now my parents nixed theirs voluntarily.
It all started about a year ago when my parents tried for another cash ReFi to pull out some equity. They were shocked and a big angry when they were denied, despite having credit scores north of 800 and some $2MM in liquid assets. The sole reason? No income (both retired in the last five years). To the lenders it was as simple as that, never-mind my mother’s pension and father’s SS exceed the mortgage payment by a large multiple.
“Oh well” they said, “we’ll just continue paying as normal for the next 6 years until it goes away”.
So what changed? A stupid financial planning session with their (fee-based) financial advisor, and of course Covid (because everything in the world seems to have been impacted by Covid). You see, in 2020 my parents had planned a family reunion for their 50th and a great big extravagant trip, which were canceled (because: Covid). Their monthly expenses also plummeted as they weren’t eating out or visiting their grandkids or, well, anything. Meanwhile, their assets have gone way up along with the market. So they had this large chunk of cash sitting unused. Which the advisor saw towards the end of a tiring session about their assets and he was like “oh, this cash here would cover most of oyur mortgage balance, let’s just nix that entirely.’ My parents weakly objected but he was all enthusiastic about the idea and so they did it, and it’s gone, and if the recent lending experience is any indication they’ll never take out another fixed-rate loan in their lives.
Honestly, they are fine either way. More than fine. Waaay more than fine, as they both ‘overshot’ their retirement plans. But I am kinda sad somehow that their steadfast adherence to holding a fixed, low-rate mortgage has disappeared. Ironically, they still have their “mortgage sinking fund” which is several times greater than their origional mortgage. The dividends pay off the property taxes, but the account keeps growing. I guess they are talking about donating that in one lump sum in a few years, once they figure what life without a mortgage feels like.
…honestly, I don’t know why you folks keep letting me post in this thread
;-)