Author Topic: DONT Payoff your Mortgage Club  (Read 660988 times)

dragoncar

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Re: DONT Payoff your Mortgage Club
« Reply #3100 on: March 01, 2022, 11:34:55 AM »
Oh, you are so right, nereo!

I keep hearing bullshit ads about how inflation is going to destroy your nest egg. Well, sure it will if you're a dumbass and don't keep your money invested.  For those of us who have followed mustachian principles and continue to, there is no need to fear. We're in far more danger from the likes of Putin than inflation.

The biggest downside to inflation with taxable invested FIRE assets is that you pay taxes on phantom gains (so if inflation continues to run 7% PA, and you sell your stocks for a 100% inflation gain 10 years later, your effective investment return will be reduced by 10-20% long term capital gains).  I might have messed up those exact numbers but you get the idea

Yes, having a fixed mortgage probably offsets this downside

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #3101 on: March 01, 2022, 11:49:36 AM »
Oh, you are so right, nereo!

I keep hearing bullshit ads about how inflation is going to destroy your nest egg. Well, sure it will if you're a dumbass and don't keep your money invested.  For those of us who have followed mustachian principles and continue to, there is no need to fear. We're in far more danger from the likes of Putin than inflation.

The biggest downside to inflation with taxable invested FIRE assets is that you pay taxes on phantom gains (so if inflation continues to run 7% PA, and you sell your stocks for a 100% inflation gain 10 years later, your effective investment return will be reduced by 10-20% long term capital gains).  I might have messed up those exact numbers but you get the idea

Yes, having a fixed mortgage probably offsets this downside

Good point. For us the mortgage exclusion ($500k on gains for married filing jointly) on primary residences (2 of previous 5 years occupancy) will more than cover any “phantom gains”. Our entire home is well under the $500k cap. But for others in HCOL regions (like my sister in the SF Bay Area) they can easily exceed the exemption after a decade or two of living there.

Note, though that it doesn’t change if you pay off your mortgage early or not. Appreciation are gains which occur regardless of whether it’s your money invested or the banks. Given the choice I have, I’m going to invest the banks money.

dragoncar

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Re: DONT Payoff your Mortgage Club
« Reply #3102 on: March 01, 2022, 03:57:03 PM »
Oh, you are so right, nereo!

I keep hearing bullshit ads about how inflation is going to destroy your nest egg. Well, sure it will if you're a dumbass and don't keep your money invested.  For those of us who have followed mustachian principles and continue to, there is no need to fear. We're in far more danger from the likes of Putin than inflation.

The biggest downside to inflation with taxable invested FIRE assets is that you pay taxes on phantom gains (so if inflation continues to run 7% PA, and you sell your stocks for a 100% inflation gain 10 years later, your effective investment return will be reduced by 10-20% long term capital gains).  I might have messed up those exact numbers but you get the idea

Yes, having a fixed mortgage probably offsets this downside

Good point. For us the mortgage exclusion ($500k on gains for married filing jointly) on primary residences (2 of previous 5 years occupancy) will more than cover any “phantom gains”. Our entire home is well under the $500k cap. But for others in HCOL regions (like my sister in the SF Bay Area) they can easily exceed the exemption after a decade or two of living there.

Note, though that it doesn’t change if you pay off your mortgage early or not. Appreciation are gains which occur regardless of whether it’s your money invested or the banks. Given the choice I have, I’m going to invest the banks money.

True on the DPYM calculus

And yeah I’m already over the 500k exclusion in under a decade at this house.  Been thinking about tricky ways to step up my basis (sale to parent, return sale.. just pay transfer tax and escrow, but doesn’t work with a mortgage) Poor me right?  But I do believe most tax values (exemptions, AMT caps, etc) should be inflation adjusted. On the other hand, not inflation adjusting that stuff is just a lazy way for lawmakers to phaseout/sunset which is possibly intentional

Holocene

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Re: DONT Payoff your Mortgage Club
« Reply #3103 on: March 01, 2022, 07:38:47 PM »
I was talking to my coworker last week who was proudly paying down his 2.75% 20 year mortgage and only had 6 years left. I was like "yeah right I'm keeping my 2.75% 30 year, it's losing 7% of its value every year and in 6 years at this rate the monthly payment will be cheaper than my power bill, and I'm only slightly joking."

PG&E?
Hahaha! Our PG&E bill was $715 in January and we keep our heat at 65.
Wait, seriously?!? For just your own single family house?  That seems ridiculously high.  That really is more than my mortgage.  In the highest month, my combined electric/gas costs were around $175.  And that's to heat up a house and myself in the frozen tundra.  Natural gas costs are up around 33% for me this year, but my electric rates are pretty much steady.  I honestly can't fathom a $700 electric bill.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #3104 on: March 01, 2022, 10:23:50 PM »
I was talking to my coworker last week who was proudly paying down his 2.75% 20 year mortgage and only had 6 years left. I was like "yeah right I'm keeping my 2.75% 30 year, it's losing 7% of its value every year and in 6 years at this rate the monthly payment will be cheaper than my power bill, and I'm only slightly joking."

PG&E?
Hahaha! Our PG&E bill was $715 in January and we keep our heat at 65.
Wait, seriously?!? For just your own single family house?  That seems ridiculously high.  That really is more than my mortgage.  In the highest month, my combined electric/gas costs were around $175.  And that's to heat up a house and myself in the frozen tundra.  Natural gas costs are up around 33% for me this year, but my electric rates are pretty much steady.  I honestly can't fathom a $700 electric bill.
Neither can we. Our house is energy efficient, built in 2006. Energy efficient windows, additional insulation, blah x3. We also have a higher Tier 1 Baseline allotment than average, due to the use of c-paps. Oh, and it's about 2600sf, so large, but not a McMansion.

The following month it dropped to "only" about $450. Gah! Fortunately,  the same damn redwoods that prevent us from being good candidates for solar have allowed us to use the A/C for an average of only five days per year since we've owned the house. So we breeze through the summer months, but get killed during the winter. Imagine if it was actually cold here in NorCal.

We have no mortgage, so it's definitely higher, which is why I posted. People think their costs will vanish when they "kill" their mortgage. Others of us know (ouch) that it ain't necessarily so.

Holocene

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Re: DONT Payoff your Mortgage Club
« Reply #3105 on: March 02, 2022, 07:18:41 PM »
Neither can we. Our house is energy efficient, built in 2006. Energy efficient windows, additional insulation, blah x3. We also have a higher Tier 1 Baseline allotment than average, due to the use of c-paps. Oh, and it's about 2600sf, so large, but not a McMansion.

The following month it dropped to "only" about $450. Gah! Fortunately,  the same damn redwoods that prevent us from being good candidates for solar have allowed us to use the A/C for an average of only five days per year since we've owned the house. So we breeze through the summer months, but get killed during the winter. Imagine if it was actually cold here in NorCal.

We have no mortgage, so it's definitely higher, which is why I posted. People think their costs will vanish when they "kill" their mortgage. Others of us know (ouch) that it ain't necessarily so.
Has this year been an anomaly or is this a normal winter electric bill for you?  I mean I knew CA was expensive, but this seems ridiculous!  If this is mostly for heating, have you considered other ways to heat?  How do you heat now?  I hear good things about heat pumps.  I think your climate would be warm enough for them to work well.  I mean at $700, it might be cheaper to literally light dollar bills on fire for heat :)

I was going to recommend looking into solar but guess that's a no go.  I love redwoods so wouldn't be too upset about that though.  And to get back on topic, you have lots of mortgages for your rentals so I guess you can afford to pay ridiculous energy bills!  Yay for the DPOYM club!

Radagast

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Re: DONT Payoff your Mortgage Club
« Reply #3106 on: March 02, 2022, 08:17:44 PM »
I was talking to my coworker last week who was proudly paying down his 2.75% 20 year mortgage and only had 6 years left. I was like "yeah right I'm keeping my 2.75% 30 year, it's losing 7% of its value every year and in 6 years at this rate the monthly payment will be cheaper than my power bill, and I'm only slightly joking."

PG&E?
LOL, but no. In reality, inflation will need to be much higher than 7% for it to happen in 6 years.

dragoncar

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Re: DONT Payoff your Mortgage Club
« Reply #3107 on: March 02, 2022, 09:18:43 PM »
This year has been colder than normal in the Bay Area, but gas prices are also like 40% higher.  Combine the two and many people have doubled their bills

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #3108 on: March 02, 2022, 09:19:52 PM »
This year has been colder than normal in the Bay Area, but gas prices are also like 40% higher.  Combine the two and many people have doubled their bills
Yup.

Radagast

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Re: DONT Payoff your Mortgage Club
« Reply #3109 on: March 02, 2022, 10:55:21 PM »
Now a common narrative is how inescapable inflation is, and how it’s certainly much higher than the “bogus” headline numbers released each month. Ironically some the loudest complainers are also the ones continue to rush to pay off low-interest fixed debt. In multiple active threads mustachians who comment about how inflation hasn’t had a large impact on their finances because they did X, Y & Z years ago are told they are just plain lucky or shouted down as not understanding their own finances.

The same can be said for mitigating inflation. If you assume it’ll never happen and then wait until we’re six months in there’s not a ton you can easily do to have immediate impacts. But start early and you can blunt the worst of it, and be one of those that don’t really notice increased prices.
I have definitely noticed that those in a rush to pay off their mortgage are mostly those who complain about inflation. Which is a self consistent world view I guess. But if the world doesn't match your world view, it seems better to change your actions to match the world, instead of complaining while you act in a way which makes you worse off. But also, the same crowd seems to have a harder time changing world views in general even contrary to all evidence and at times to their own detriment.

Not being prepared for financial events in advance is something I see as a general weakness for many people. If something financially crazy happens and you aren't prepared for it in advance, it's already too late. That goes for personal finances as well as investing in markets.

JenniferW

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Re: DONT Payoff your Mortgage Club
« Reply #3110 on: March 02, 2022, 11:02:39 PM »
Now a common narrative is how inescapable inflation is, and how it’s certainly much higher than the “bogus” headline numbers released each month. Ironically some the loudest complainers are also the ones continue to rush to pay off low-interest fixed debt. In multiple active threads mustachians who comment about how inflation hasn’t had a large impact on their finances because they did X, Y & Z years ago are told they are just plain lucky or shouted down as not understanding their own finances.

The same can be said for mitigating inflation. If you assume it’ll never happen and then wait until we’re six months in there’s not a ton you can easily do to have immediate impacts. But start early and you can blunt the worst of it, and be one of those that don’t really notice increased prices.
I have definitely noticed that those in a rush to pay off their mortgage are mostly those who complain about inflation. Which is a self consistent world view I guess. But if the world doesn't match your world view, it seems better to change your actions to match the world, instead of complaining while you act in a way which makes you worse off. But also, the same crowd seems to have a harder time changing world views in general even contrary to all evidence and at times to their own detriment.

Not being prepared for financial events in advance is something I see as a general weakness for many people. If something financially crazy happens and you aren't prepared for it in advance, it's already too late. That goes for personal finances as well as investing in markets.

I'm rushed to payoff mortage because I am terried of the stock market right now.. with all the buy backs and very high P/E ratios.

Radagast

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Re: DONT Payoff your Mortgage Club
« Reply #3111 on: March 02, 2022, 11:53:43 PM »
Now a common narrative is how inescapable inflation is, and how it’s certainly much higher than the “bogus” headline numbers released each month. Ironically some the loudest complainers are also the ones continue to rush to pay off low-interest fixed debt. In multiple active threads mustachians who comment about how inflation hasn’t had a large impact on their finances because they did X, Y & Z years ago are told they are just plain lucky or shouted down as not understanding their own finances.

The same can be said for mitigating inflation. If you assume it’ll never happen and then wait until we’re six months in there’s not a ton you can easily do to have immediate impacts. But start early and you can blunt the worst of it, and be one of those that don’t really notice increased prices.
I have definitely noticed that those in a rush to pay off their mortgage are mostly those who complain about inflation. Which is a self consistent world view I guess. But if the world doesn't match your world view, it seems better to change your actions to match the world, instead of complaining while you act in a way which makes you worse off. But also, the same crowd seems to have a harder time changing world views in general even contrary to all evidence and at times to their own detriment.

Not being prepared for financial events in advance is something I see as a general weakness for many people. If something financially crazy happens and you aren't prepared for it in advance, it's already too late. That goes for personal finances as well as investing in markets.

I'm rushed to payoff mortage because I am terried of the stock market right now.. with all the buy backs and very high P/E ratios.
I'm investing in 50/50 US and international stocks. International does not have high P/E ratios :). I also have a small bond allocation. Particularly, savings bonds yield 7+% and there is zero chance they lose to a 2.75% mortgage, so I would and do buy as many of those as I could the past few months.

RWD

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Re: DONT Payoff your Mortgage Club
« Reply #3112 on: March 03, 2022, 06:47:22 AM »
Now a common narrative is how inescapable inflation is, and how it’s certainly much higher than the “bogus” headline numbers released each month. Ironically some the loudest complainers are also the ones continue to rush to pay off low-interest fixed debt. In multiple active threads mustachians who comment about how inflation hasn’t had a large impact on their finances because they did X, Y & Z years ago are told they are just plain lucky or shouted down as not understanding their own finances.

The same can be said for mitigating inflation. If you assume it’ll never happen and then wait until we’re six months in there’s not a ton you can easily do to have immediate impacts. But start early and you can blunt the worst of it, and be one of those that don’t really notice increased prices.
I have definitely noticed that those in a rush to pay off their mortgage are mostly those who complain about inflation. Which is a self consistent world view I guess. But if the world doesn't match your world view, it seems better to change your actions to match the world, instead of complaining while you act in a way which makes you worse off. But also, the same crowd seems to have a harder time changing world views in general even contrary to all evidence and at times to their own detriment.

Not being prepared for financial events in advance is something I see as a general weakness for many people. If something financially crazy happens and you aren't prepared for it in advance, it's already too late. That goes for personal finances as well as investing in markets.

I'm rushed to payoff mortage because I am terried of the stock market right now.. with all the buy backs and very high P/E ratios.
I'm investing in 50/50 US and international stocks. International does not have high P/E ratios :). I also have a small bond allocation. Particularly, savings bonds yield 7+% and there is zero chance they lose to a 2.75% mortgage, so I would and do buy as many of those as I could the past few months.
And even within US equity if P/E ratios are a sticking point you could look at small and mid-cap funds.
https://www.morningstar.com/etfs/arcx/vbr/portfolio
https://www.morningstar.com/etfs/arcx/voe/portfolio
https://twitter.com/Rick_Ferri/status/1496498306276601857

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #3113 on: March 03, 2022, 07:14:16 AM »
I'm rushed to payoff mortage because I am terried of the stock market right now.. with all the buy backs and very high P/E ratios.
I'm trying to figure out exactly what you meant by "terried". Do you mean "terrified"? Interesting that the missing letters are "fi".

This thread was created as a counterpoint to the many mortgage payoff threads around the forum. If you can honestly say you have read through enough of the DPOYM material to be crystal clear on this counterintuitive concept and still desire to pay yours off early, you may be in the wrong place, unless you're looking to be talked out of your panic...

The DPOYM Club was created when inflation was almost nothing. Now that it's roared back, carrying a cheap, affordable mortgage is a smarter move than ever. Brilliant, in fact.


SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #3114 on: March 03, 2022, 08:37:42 AM »
I'm rushed to payoff mortage because I am terried of the stock market right now.. with all the buy backs and very high P/E ratios.
I'm trying to figure out exactly what you meant by "terried". Do you mean "terrified"? Interesting that the missing letters are "fi".

Damn, but that was witty!

Quote
This thread was created as a counterpoint to the many mortgage payoff threads around the forum. If you can honestly say you have read through enough of the DPOYM material to be crystal clear on this counterintuitive concept and still desire to pay yours off early, you may be in the wrong place, unless you're looking to be talked out of your panic...

The DPOYM Club was created when inflation was almost nothing. Now that it's roared back, carrying a cheap, affordable mortgage is a smarter move than ever. Brilliant, in fact.

To be precise, carrying a cheap, affordable mortgage WHILE SENSIBLY INVESTING THE EXTRA YOU WOULD HAVE USED TO PAY IT OFF EARLY is a smarter move than ever.

sonofsven

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Re: DONT Payoff your Mortgage Club
« Reply #3115 on: March 03, 2022, 08:40:49 AM »
I'm rushed to payoff mortage because I am terried of the stock market right now.. with all the buy backs and very high P/E ratios.
I'm trying to figure out exactly what you meant by "terried". Do you mean "terrified"? Interesting that the missing letters are "fi".

This thread was created as a counterpoint to the many mortgage payoff threads around the forum. If you can honestly say you have read through enough of the DPOYM material to be crystal clear on this counterintuitive concept and still desire to pay yours off early, you may be in the wrong place, unless you're looking to be talked out of your panic...

The DPOYM Club was created when inflation was almost nothing. Now that it's roared back, carrying a cheap, affordable mortgage is a smarter move than ever. Brilliant, in fact.

Yes, this is where we brag on low rates and long payoffs.
I'm at 2.75% with "only" 354 monthly payments to go, fixing my monthly payment @$901 (sans tax and insurance). That's a good feeling.

Weisass

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Re: DONT Payoff your Mortgage Club
« Reply #3116 on: March 03, 2022, 08:43:58 AM »
I'm rushed to payoff mortage because I am terried of the stock market right now.. with all the buy backs and very high P/E ratios.
I'm trying to figure out exactly what you meant by "terried". Do you mean "terrified"? Interesting that the missing letters are "fi".

This thread was created as a counterpoint to the many mortgage payoff threads around the forum. If you can honestly say you have read through enough of the DPOYM material to be crystal clear on this counterintuitive concept and still desire to pay yours off early, you may be in the wrong place, unless you're looking to be talked out of your panic...

The DPOYM Club was created when inflation was almost nothing. Now that it's roared back, carrying a cheap, affordable mortgage is a smarter move than ever. Brilliant, in fact.

Yes, this is where we brag on low rates and long payoffs.
I'm at 2.75% with "only" 354 monthly payments to go, fixing my monthly payment @$901 (sans tax and insurance). That's a good feeling.

Same here. Locked in 2.25% last year, and I can't imagine ever paying it off early.

Tyson

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Re: DONT Payoff your Mortgage Club
« Reply #3117 on: March 03, 2022, 09:12:34 AM »
This thread was created as a counterpoint to the many mortgage payoff threads around the forum. If you can honestly say you have read through enough of the DPOYM material to be crystal clear on this counterintuitive concept and still desire to pay yours off early, you may be in the wrong place, unless you're looking to be talked out of your panic...

The DPOYM Club was created when inflation was almost nothing. Now that it's roared back, carrying a cheap, affordable mortgage is a smarter move than ever. Brilliant, in fact.

To be precise, carrying a cheap, affordable mortgage WHILE SENSIBLY INVESTING THE EXTRA YOU WOULD HAVE USED TO PAY IT OFF EARLY is a smarter move than ever.

There was a calculator earlier in the thread that showed how much $$ you would end up with if you didn't pay of the mortgage and simply saved/invested instead.  For me the difference was several hundred thousand dollars.  Well that was enough to convince me that paying off the mortgage was a bad idea. 

The other thing I liked about saving/investing the money is that it gives me more flexibility.  At a certain point, you have enough saved up that you 'could' pay off the mortgage any time you want.  I like having that flexibility.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #3118 on: March 03, 2022, 09:30:00 AM »
I'm rushed to payoff mortage because I am terried of the stock market right now.. with all the buy backs and very high P/E ratios.
I'm trying to figure out exactly what you meant by "terried". Do you mean "terrified"? Interesting that the missing letters are "fi".

This thread was created as a counterpoint to the many mortgage payoff threads around the forum. If you can honestly say you have read through enough of the DPOYM material to be crystal clear on this counterintuitive concept and still desire to pay yours off early, you may be in the wrong place, unless you're looking to be talked out of your panic...

The DPOYM Club was created when inflation was almost nothing. Now that it's roared back, carrying a cheap, affordable mortgage is a smarter move than ever. Brilliant, in fact.

Yes, this is where we brag on low rates and long payoffs.
I'm at 2.75% with "only" 354 monthly payments to go, fixing my monthly payment @$901 (sans tax and insurance). That's a good feeling.

Same here. Locked in 2.25% last year, and I can't imagine ever paying it off early.

Listening to Jerome Powell speak yesterday we had the realization that there may be a very real possibility that we will be able to buy secure bonds which have a higher yield than our mortgage.  My parents had a similar situation for much of their 42 years they held a mortgage.
As we transition to an 80/20 AA I'm thankful that opportunity may exist.

JenniferW

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Re: DONT Payoff your Mortgage Club
« Reply #3119 on: March 03, 2022, 09:54:58 AM »
I'm rushed to payoff mortage because I am terried of the stock market right now.. with all the buy backs and very high P/E ratios.
I'm trying to figure out exactly what you meant by "terried". Do you mean "terrified"? Interesting that the missing letters are "fi".

This thread was created as a counterpoint to the many mortgage payoff threads around the forum. If you can honestly say you have read through enough of the DPOYM material to be crystal clear on this counterintuitive concept and still desire to pay yours off early, you may be in the wrong place, unless you're looking to be talked out of your panic...

The DPOYM Club was created when inflation was almost nothing. Now that it's roared back, carrying a cheap, affordable mortgage is a smarter move than ever. Brilliant, in fact.

I applaud you in your ability to decipher a typo; I'm actually trying to think of another word of could of been and none come to mind.  It could be argued the letters missing were "if" not "fi", but regardless, no it wasn't intentional. 

I was replying to a comment and explaining inflation had nothing to do with my reasoning for paying off my mortage debt.  I don't want my money sitting in bank account doing nothing and I'm not about to put it into a stock market with how inflated it is currently.
« Last Edit: March 03, 2022, 10:02:02 AM by JenniferW »

mckaylabaloney

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Re: DONT Payoff your Mortgage Club
« Reply #3120 on: March 03, 2022, 10:28:45 AM »
I'm not about to put it into a stock market with how inflated it is currently.

Okay. And how will you know when it's not inflated anymore?

@RWD are you the one who keeps that list of years of posts exactly like this?

JenniferW

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Re: DONT Payoff your Mortgage Club
« Reply #3121 on: March 03, 2022, 10:38:28 AM »
I'm not about to put it into a stock market with how inflated it is currently.

Okay. And how will you know when it's not inflated anymore?

@RWD are you the one who keeps that list of years of posts exactly like this?

When it doesn't look like this:  (I'm older though at 50, so that plays into my decision more than it perhaps would for someone who say is 30.)

« Last Edit: March 03, 2022, 10:43:56 AM by JenniferW »

Tyson

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Re: DONT Payoff your Mortgage Club
« Reply #3122 on: March 03, 2022, 11:13:17 AM »
I'm not about to put it into a stock market with how inflated it is currently.

Okay. And how will you know when it's not inflated anymore?

@RWD are you the one who keeps that list of years of posts exactly like this?

When it doesn't look like this:  (I'm older though at 50, so that plays into my decision more than it perhaps would for someone who say is 30.)



There's a good chance that the PE ratio is simply higher now than it was in the past and this is the new normal.  If that's the case, then the market will keep up with it's gains like it's been doing for the last 20 years and you'll miss out on all of that because there's never a 'good time' to get back into the market.  The best time to get into the market was yesterday.  The 2nd best time to get into the market is today. 

Here's the problem (IMO) of using the PE ratio as a basis for staying out of the market.  If you look at the last 20 years, ONLY in 2010 was the PE at historically 'normal' levels.   So if you'd used this chart as a reason to stay out of the market, you'd have missed out of all the gains in the market over the last 20 years, which would be a giant missed opportunity. 

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #3123 on: March 03, 2022, 11:34:43 AM »
I see everyone celebrating that our mortgages protect us from inflation. I'll sign on to that, but we have to experience the increase in nominal income alongside the increse in costs for it to really work. So go get that 7% raise while you keep making those minimum payments.

JenniferW

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Re: DONT Payoff your Mortgage Club
« Reply #3124 on: March 03, 2022, 11:41:46 AM »
I see everyone celebrating that our mortgages protect us from inflation. I'll sign on to that, but we have to experience the increase in nominal income alongside the increse in costs for it to really work. So go get that 7% raise while you keep making those minimum payments.

It's so sad, my brother who is a machinist programmer, didn't get a dime increase in wage this year. 

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Re: DONT Payoff your Mortgage Club
« Reply #3125 on: March 03, 2022, 12:10:21 PM »
I'm not about to put it into a stock market with how inflated it is currently.

Okay. And how will you know when it's not inflated anymore?

@RWD are you the one who keeps that list of years of posts exactly like this?

When it doesn't look like this:  (I'm older though at 50, so that plays into my decision more than it perhaps would for someone who say is 30.)



This is how I look at it:  If you started investing $100/month in the stock market back in say, 1998 when the P/E ratio was similar to now, you'd have $145,000 today.   

Here's why I mention it.   Morgan Housel points out that about 95% of Warren Buffet's net worth came after the age of 65--and that doesn't include the portion he gave away!   Buffet of course was a great investor, but BRK's returns have been pretty meh for a couple decades.   The key is Buffet straight up lived a long time.  He became ultra wealthy due to the power of compound interest. 

Continuing my example, let's say the person who wound up with $145,000 today, is 50 years old and lives to 85.   At 80, that $145,000 could easily turn into $1.3 million without adding another dime.   That's enough to move the needle.  At age 85, it would be more like $2 million.  Compounding again.   

In my own investing history, initially it seem to take forever to save anything.  Finally compounding started to kick in and it has been like a rocketship.   The rates of return haven't really changed much, but dollar amounts sure have. 

In the DPOYM Club I think sometimes we are too harsh on the mind of people who get satisfaction from not having a mortgage.  I get it.   If spending money that way makes you feel better, that's probably a legit reason to pay off the mortgage.   But that's different from the financial argument.  Keep in mind, if you leave your green soldiers on the battlefield long enough they will become the Incredible Hulk, even if it seems like they occasionally take a decade off.  Even in bad times, I just keep sending in the reinforcements.   

JenniferW

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Re: DONT Payoff your Mortgage Club
« Reply #3126 on: March 03, 2022, 01:16:40 PM »
I totally understand taking 30 years to pay off a home loan for 2.5%; it makes sense.  That's less than inflation even.   I realize the average return is 7 something % over the past 100 years with stock market; I read JL Collins book and appreciated it.

I started paying off this mortgage with excess payments since I moved in, before I knew about MMM and JL Collins and investing properly.   I guess I am just continuing what I started out doing and plus my interest rate is like 4.63% .. was higher in 2013 than now.  And plus I'm like 50 and I dunno if I'll even live another 15 years.
« Last Edit: March 03, 2022, 01:18:33 PM by JenniferW »

JenniferW

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Re: DONT Payoff your Mortgage Club
« Reply #3127 on: March 03, 2022, 01:21:57 PM »
Additionally I recall reading a blog post MMM put out regarding the Schiller P/E ratio.  He was concerned then and it's worse now.  If I recall correctly, he suggested perhaps putting some more money towards mortage payment; especially you were more near retirement age.

MMM is where I first heard about Schiller P/E ratio btw.

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Re: DONT Payoff your Mortgage Club
« Reply #3128 on: March 03, 2022, 01:24:20 PM »
I totally understand taking 30 years to pay off a home loan for 2.5%; it makes sense.  That's less than inflation even.   I realize the average return is 7 something % over the past 100 years with stock market; I read JL Collins book and appreciated it.

I started paying off this mortgage with excess payments since I moved in, before I knew about MMM and JL Collins and investing properly.   I guess I am just continuing what I started out doing and plus my interest rate is like 4.63% .. was higher in 2013 than now.  And plus I'm like 50 and I dunno if I'll even live another 15 years.
Why not do a ReFi to a lower rate? Multiple people here have done so and gotten no closing costs to make the switch. If you aren't planning on moving you would be the perfect candidate.

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Re: DONT Payoff your Mortgage Club
« Reply #3129 on: March 03, 2022, 01:43:32 PM »
I totally understand taking 30 years to pay off a home loan for 2.5%; it makes sense.  That's less than inflation even.   I realize the average return is 7 something % over the past 100 years with stock market; I read JL Collins book and appreciated it.

I started paying off this mortgage with excess payments since I moved in, before I knew about MMM and JL Collins and investing properly.   I guess I am just continuing what I started out doing and plus my interest rate is like 4.63% .. was higher in 2013 than now.  And plus I'm like 50 and I dunno if I'll even live another 15 years.
Why not do a ReFi to a lower rate? Multiple people here have done so and gotten no closing costs to make the switch. If you aren't planning on moving you would be the perfect candidate.

At this point I only owe $40,700.  Just gonna finish it.   The original loan amount was only for $76k.

Surprised you can get a refinance without closign costs.  My credit union is great and if I recall they even wanted like $3k for the refinance.

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Re: DONT Payoff your Mortgage Club
« Reply #3130 on: March 03, 2022, 01:53:28 PM »
I'm not about to put it into a stock market with how inflated it is currently.

Okay. And how will you know when it's not inflated anymore?

@RWD are you the one who keeps that list of years of posts exactly like this?

I am. It's the last link in my signature.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #3131 on: March 03, 2022, 02:05:31 PM »
I totally understand taking 30 years to pay off a home loan for 2.5%; it makes sense.  That's less than inflation even.   I realize the average return is 7 something % over the past 100 years with stock market; I read JL Collins book and appreciated it.

I started paying off this mortgage with excess payments since I moved in, before I knew about MMM and JL Collins and investing properly.   I guess I am just continuing what I started out doing and plus my interest rate is like 4.63% .. was higher in 2013 than now.  And plus I'm like 50 and I dunno if I'll even live another 15 years.
Why not do a ReFi to a lower rate? Multiple people here have done so and gotten no closing costs to make the switch. If you aren't planning on moving you would be the perfect candidate.

At this point I only owe $40,700.  Just gonna finish it.   The original loan amount was only for $76k.

Surprised you can get a refinance without closign costs.  My credit union is great and if I recall they even wanted like $3k for the refinance.

I'm not quite sure why you are posting in this thread then.
With $40k left and a rate of 4.63% some back-of-the-envelop math shows you're going to pay about $4k more in interest than if you refinanced. Your credit union is not a great deal if they still want to charge $3k for a ReFi in this current market. Even if you accept the $3k refinancing charge you are ultimately going to pay more to keep your current mortgage.

If nothing else you could use the lower monthly payments to accelerate your payoff schedule without increasing how much you contribute each month, hitting your "paid-off" date even earlier.

Of course what many (myself included) here would to do a cash-out ReFi which would likely both lower your payments and result in several $k to divest.

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Re: DONT Payoff your Mortgage Club
« Reply #3132 on: March 03, 2022, 02:18:24 PM »
Additionally I recall reading a blog post MMM put out regarding the Schiller P/E ratio.  He was concerned then and it's worse now.  If I recall correctly, he suggested perhaps putting some more money towards mortage payment; especially you were more near retirement age.

MMM is where I first heard about Schiller P/E ratio btw.

I didn't see that post, but Schiller himself has warned against using the Schiller ratio (AKA CAPE) as a market timing tool many times.   CAPE has no predictive value in the short term, moderate predictive value over 10-year horizons, and zero predictive value for 30-year horizons.   Since my investing horizon is longer than ten years, I don't worry about it. 


Telecaster

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Re: DONT Payoff your Mortgage Club
« Reply #3133 on: March 03, 2022, 02:21:34 PM »
I'm not quite sure why you are posting in this thread then.
With $40k left and a rate of 4.63% some back-of-the-envelop math shows you're going to pay about $4k more in interest than if you refinanced. Your credit union is not a great deal if they still want to charge $3k for a ReFi in this current market. Even if you accept the $3k refinancing charge you are ultimately going to pay more to keep your current mortgage.

Banks don't like to deal with re-fi's less than about $150K.  Your options go down quickly below that amount. 

JenniferW

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Re: DONT Payoff your Mortgage Club
« Reply #3134 on: March 03, 2022, 02:25:40 PM »
I totally understand taking 30 years to pay off a home loan for 2.5%; it makes sense.  That's less than inflation even.   I realize the average return is 7 something % over the past 100 years with stock market; I read JL Collins book and appreciated it.

I started paying off this mortgage with excess payments since I moved in, before I knew about MMM and JL Collins and investing properly.   I guess I am just continuing what I started out doing and plus my interest rate is like 4.63% .. was higher in 2013 than now.  And plus I'm like 50 and I dunno if I'll even live another 15 years.
Why not do a ReFi to a lower rate? Multiple people here have done so and gotten no closing costs to make the switch. If you aren't planning on moving you would be the perfect candidate.

At this point I only owe $40,700.  Just gonna finish it.   The original loan amount was only for $76k.

Surprised you can get a refinance without closign costs.  My credit union is great and if I recall they even wanted like $3k for the refinance.

I'm not quite sure why you are posting in this thread then.
With $40k left and a rate of 4.63% some back-of-the-envelop math shows you're going to pay about $4k more in interest than if you refinanced. Your credit union is not a great deal if they still want to charge $3k for a ReFi in this current market. Even if you accept the $3k refinancing charge you are ultimately going to pay more to keep your current mortgage.

If nothing else you could use the lower monthly payments to accelerate your payoff schedule without increasing how much you contribute each month, hitting your "paid-off" date even earlier.

Of course what many (myself included) here would to do a cash-out ReFi which would likely both lower your payments and result in several $k to divest.

I already explained why I posted.  It was in response to what another said.

I know exacty how much more inerest I'll pay on this home and it's $2500.  Because I am paying it off in 2.5 years.  (Less than the refinance fee..  it's been a few years so I don't know if the credit union has a lower refinance fee or not.. and maybe it was $2k back then and not 3K I forget.)

After I pay the mortgage off, I'll have $1800 per month I can put into VTI.  I'll get an guaranteed 4.63% return for the next 2.5 years.. and by that time perhaps the stocks might be more affordable.. but I could be wrong.. or they could go up 4.63% I am not sure.   But I like my chances better with the home since it is guaranteed return instead of potential say 30% loss.
« Last Edit: March 03, 2022, 02:28:07 PM by JenniferW »

JenniferW

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Re: DONT Payoff your Mortgage Club
« Reply #3135 on: March 03, 2022, 02:35:02 PM »
Anyways, sorry for rubbing you guys the wrong way.  I won't bother posting here in this thread anymore since I seem to upset.

mckaylabaloney

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Re: DONT Payoff your Mortgage Club
« Reply #3136 on: March 03, 2022, 02:57:19 PM »
I'm not about to put it into a stock market with how inflated it is currently.

Okay. And how will you know when it's not inflated anymore?

@RWD are you the one who keeps that list of years of posts exactly like this?

I am. It's the last link in my signature.

Handy! Thanks.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #3137 on: March 03, 2022, 03:39:24 PM »
I'm rushed to payoff mortage because I am terried of the stock market right now.. with all the buy backs and very high P/E ratios.
I'm trying to figure out exactly what you meant by "terried". Do you mean "terrified"? Interesting that the missing letters are "fi".

This thread was created as a counterpoint to the many mortgage payoff threads around the forum. If you can honestly say you have read through enough of the DPOYM material to be crystal clear on this counterintuitive concept and still desire to pay yours off early, you may be in the wrong place, unless you're looking to be talked out of your panic...

The DPOYM Club was created when inflation was almost nothing. Now that it's roared back, carrying a cheap, affordable mortgage is a smarter move than ever. Brilliant, in fact.

I applaud you in your ability to decipher a typo; I'm actually trying to think of another word of could of been and none come to mind.  It could be argued the letters missing were "if" not "fi", but regardless, no it wasn't intentional. 

I was replying to a comment and explaining inflation had nothing to do with my reasoning for paying off my mortage debt.  I don't want my money sitting in bank account doing nothing and I'm not about to put it into a stock market with how inflated it is currently.
T-e-r-r-i-FI-e-d is how I figured it. I was just using humor to make a point gently. To reiterate, this is not the thread where we debate or abet accelerated mortgage payoff. This is the single MMM Forum thread where we share and celebrate the magical power of smart mortgages, when used judiciously. [Dicey waves to @SwordGuy.] To be more blunt still,  DPOYM believers are not allowed to post anything educational contrarian on any of the many mortgage payoff threads. It's okay to ask others to give this space the same courtesy.

JenniferW

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Re: DONT Payoff your Mortgage Club
« Reply #3138 on: March 03, 2022, 03:41:44 PM »
I'm rushed to payoff mortage because I am terried of the stock market right now.. with all the buy backs and very high P/E ratios.
I'm trying to figure out exactly what you meant by "terried". Do you mean "terrified"? Interesting that the missing letters are "fi".

This thread was created as a counterpoint to the many mortgage payoff threads around the forum. If you can honestly say you have read through enough of the DPOYM material to be crystal clear on this counterintuitive concept and still desire to pay yours off early, you may be in the wrong place, unless you're looking to be talked out of your panic...

The DPOYM Club was created when inflation was almost nothing. Now that it's roared back, carrying a cheap, affordable mortgage is a smarter move than ever. Brilliant, in fact.

I applaud you in your ability to decipher a typo; I'm actually trying to think of another word of could of been and none come to mind.  It could be argued the letters missing were "if" not "fi", but regardless, no it wasn't intentional. 

I was replying to a comment and explaining inflation had nothing to do with my reasoning for paying off my mortage debt.  I don't want my money sitting in bank account doing nothing and I'm not about to put it into a stock market with how inflated it is currently.
T-e-r-r-i-FI-e-d is how I figured it. I was just using humor to make a point gently. To reiterate, this is not the thread where we debate or abet accelerated mortgage payoff. This is the single MMM Forum thread where we share and celebrate the magical power of smart mortgages, when used judiciously. [Dicey waves to @SwordGuy.] To be more blunt still,  DPOYM believers are not allowed to post anything educational contrarian on any of the many mortgage payoff threads. It's okay to ask others to give this space the same courtesy.

Like I said I won't post here anymore.  I respect the thread.  I don't like upsetting people.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #3139 on: March 03, 2022, 07:46:22 PM »
I wrote ^^that response^^, hit "Send", then left the house. When I returned, I discovered it hadn't gone through, so I hit "Send" again without reading the new replies. I can understand how it seems I was piling on, which was not my intention.

The topic of DPOYM is rather proscribed here; I hope it's clear why we feel the need to defend this space.

I'm happy to see you've followed through elsewhere.

Holocene

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Re: DONT Payoff your Mortgage Club
« Reply #3140 on: March 03, 2022, 08:32:59 PM »
I'm not quite sure why you are posting in this thread then.
With $40k left and a rate of 4.63% some back-of-the-envelop math shows you're going to pay about $4k more in interest than if you refinanced. Your credit union is not a great deal if they still want to charge $3k for a ReFi in this current market. Even if you accept the $3k refinancing charge you are ultimately going to pay more to keep your current mortgage.

Banks don't like to deal with re-fi's less than about $150K.  Your options go down quickly below that amount.

Yep.  It's a lot harder to get competitive low/no cost refinances at lower balances.  I think people forget that the lender credits (negative points) are usually a percentage of the loan amount.  And a lot of closing costs are fixed.  So for lower balances, you still have the same fixed fees to refinance (mainly title and recording fees) but your credits are much lower.  So basically, you need to take a higher rate to get no closing cost.  It can still make sense.  I did one at $113k and another cash-out at $142k.  I'm still only at 3% so not into the 2s that many are posting.  Then again, my mortgage is $600/mo and I got $2k out of the deal so I'm not complaining.

At $40k, there's no way I'd bother with a refinance unless it was to take cash out.

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Re: DONT Payoff your Mortgage Club
« Reply #3141 on: March 04, 2022, 12:35:26 AM »

Like I said I won't post here anymore.  I respect the thread.  I don't like upsetting people.

FWIW I don’t think anyone was upset, more confused.  But I could be wrong… seems like a silly thing to get upset about as you obviously weren’t being antagonistic.  Maybe Because I don’t spend time in other threads where I’d get in trouble for following the superior science and sublime art of DPOYM

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Re: DONT Payoff your Mortgage Club
« Reply #3142 on: March 04, 2022, 02:14:51 AM »
I see everyone celebrating that our mortgages protect us from inflation. I'll sign on to that, but we have to experience the increase in nominal income alongside the increse in costs for it to really work. So go get that 7% raise while you keep making those minimum payments.

It's so sad, my brother who is a machinist programmer, didn't get a dime increase in wage this year.

I see this argument used a lot now that inflation is a thing again. But it's a silly one: Everyone across the board is not going to get a X% raise. But lots of people are going to change jobs and get a X+Y% or X+Z% raise, which will mean that salaries as a whole will probably follow inflation, maybe with some delay.

If you're not one of those getting a raise that matches inflation, it's probably time to do something about it (assuming your job doesn't have other aspects that outweigh a sub-inflation salary development).

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #3143 on: March 04, 2022, 11:22:24 AM »
I see everyone celebrating that our mortgages protect us from inflation. I'll sign on to that, but we have to experience the increase in nominal income alongside the increse in costs for it to really work. So go get that 7% raise while you keep making those minimum payments.

It's so sad, my brother who is a machinist programmer, didn't get a dime increase in wage this year.

Thank you for sharing this, as well as your own position. I realize that inflation might fall differently on your and your brother.

This morning, the BLS released their monthly Employment Situation, which spoke to many thousands of people having success finding jobs, although average wages do appear to have fallen behind inflation over the past year.

I still think my own choices in the past will work out, but I have to be honest that watching the headline inflation number by itself doesn't guarantee I'm gaining at this moment from my big mortgage. Here's wishing that average times will come soon!

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Re: DONT Payoff your Mortgage Club
« Reply #3144 on: March 15, 2022, 08:01:22 AM »
So I used to be on the pay off the mortgage early mindset (before reading this thread). I have about $11k in extra payments applied to the mortgage since 2017. Has anyone ever done a recast? Chase offers this for free and it should lower my monthly payment by $100 or so. I don't see a downside in doing this.

Some info on my mortgage: 3.5%, $89k remaining balance ($140k purchase price in 2017)

Totally makes sense to recast in your situation.

Wanted to follow up on this. Went through with the recast. Painless and no fees through Chase. Required payment drops by a little over $100! I'll definitely be investing the difference

Freedom2016

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Re: DONT Payoff your Mortgage Club
« Reply #3145 on: March 17, 2022, 01:16:34 PM »
We refinanced to a 2.0% jumbo mortgage; we paid points to get a rock bottom rate, since we plan to live here 4evah. Only 349 more payments to go!!!

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #3146 on: March 17, 2022, 01:21:28 PM »
excellent rate!

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Re: DONT Payoff your Mortgage Club
« Reply #3147 on: March 17, 2022, 06:43:20 PM »
Seems this would be a good place to ask about an idea/question I've had. Guessing it's been discussed elsewhere but don't know really what it's called or where?

I've currently got a 1 year old ~$330K 30 year mortgage at 2.75% that I'm not planning to pay off early (anymore.......)

I'm not on a super early FIRE path but am anticipating retiring in about 14 years at age 55. ~2/3 of our Spendy-pants lifestyle should be funded by my DW"s defined benefit pension.

In theory I'd like another $30-40K a year (taxes/health care obviously being  a bit of unknowns). If we round it to an even $40K I'd need basically a million with the 4% rule and I'm projecting only having like $700-800K (sitting around $200K now contributing about $20K a year).

What I'm trying to figure out is if I could do a cash out refi just before quitting and take like $150-200K out to bridge me from 55-62 when I could take social security and leave the stash invested to grow more and create a FATTER retirement rather then start drawing down on it right away or draw out very little at least??

I'm trying to figure out how I'd even calculate the difference and show that to myself and more so my wife. It sounds good in theory but the whole "need to be debt free before retirement " thing is pretty ingrained in our psyche.

I'm debating the following options-

Option 1-

Mortgage balance in 2035 = $200K - Leave it alone and pay off by 2050

Start drawing off my $750K right away - say $40k per year

Option 2 -

Cash out another $200K to a total $400K 30 year mortgage

Leave the $750K invested ~7 years (until the $200K runs out)

Which of these leaves me with more money overall in my 60's/70's beyond?

I feel like between my home equity, DW's pension, our stash, 1 Ok Social Security and 1 pretty beefy Social Security we'll be Ok either way. Just trying to think which would optimize and give me a better chance of "retire first, then get rich" I'm assuming it'd be option 2 but trying to be sure.

Not sure if I'm explaining it right or crazy.  Thanks for any thoughts/feedback :)

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #3148 on: March 18, 2022, 03:30:14 AM »
There are a lot of unknowns - too many this far out for any firm planning

For starters, no one knows what the interest rates will be in 14 years. Could be 3%, or 12%+. Depending on those a case out ReFi may or may not be a good idea

Second, your “anticipated stache” of ~$700k could be slightly less of a lot more, depending on market returns.

Finally a good chunk of your plan relies on SS and a defined pension. Despite terms like “guaranteed benefits” they can and have been changed in the past. 14 years out I would treat both with a touch of caution.

Oh, and of course there is the unknowns of “life”. You might find you need much more due to [insert hardship here] or realize you can be comfortable on much less. The place you live now with a mortgage may not be where you want to live in 2037. Your home equitymay be much more or much less than you anticipate. Who knows.

I’d simply keep this strategy as “one possible option” and revisit 3-5 years before you retire to see where the numbers land.

One last thing, DONT wait until you retire to attempt a ReFi. Banks don’t like to see people with no income, even if they have seven figures in assets. My parents faced this first-world problem when they tried to do exactly this ReFi at least six months before you give notice at your jobs.

Tyson

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Re: DONT Payoff your Mortgage Club
« Reply #3149 on: March 18, 2022, 11:37:53 AM »
BTW, I kept my house in the divorce, refinanced the $350k as a new 2.5% mortgage (3.5 years ago), and all my retirement savings (and all other cash/saving) went to the ex as part of the separation. 

I kept on with the DPotM philosophy and just started shoving every spare cent into savings while continuing to pay the minimum on the mortgage every month.  Net result?  I now have $215k in my retirement funds, still around $330k on my mortgage, but my house value has gone from $710k to $1m.  So yeah, that was a good decision.

And a lot of it was thanks to this thread.  If I hadn't seen the clear math (spreadsheet) many pages ago on this thread I would have never been able to optimize things the way that I have.  So thank you DPotM thread!!