Author Topic: Mortgage Payoff Club!!  (Read 294076 times)

channtheman

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Re: Mortgage Payoff Club!!
« Reply #1350 on: September 15, 2017, 05:17:00 AM »
After reading/skimming through the entire thread I'd like to post my situation as well and officially join the club!

My wife and I bought our first (and hopefully last) home for 267k.
10% down and 4.875% rate. 

Rate is high because I went with lender credits to pay for the closing costs.  The plan has been to pay down as much as possible and refinance somewhere around 200k in January at hopefully a 4% or less rate.  I want my income to easily cover all of our expenses as my wife will be going part time when our first child is born in April 2018. 

We are currently at 213k owed and putting about 3k extra per month.  Factor in the "bonus" 3rd checks we both get in October this year and another bonus check I have from getting a certification at work and we should easily be sub 200k when we refinance.  After we refi, I hope we can continue to put about $1000 extra per month with a final payoff in July 2027 when I turn 36.  I think we will be able to find ways to do it faster, but that's the plan. 

Now, why pay off mortgage instead of invest?  Easy answer.  DW has to be on board with the plan and she is very risk averse.  Probably more than most people.  She's not particularly happy about the 401k but understands the company match is free money.  In this situation, paying down the mortgage is the best possible use of our money and it is also risk free savings on interest.  My wife is happy, and I'm happy that she's happy.  Is it the most optimal, no.  But not everything is about the most optimal case.  Emotions and "sleeping at night" play a large role in everyone's decisions.  It's funny how investment advice always says to use an investment strategy that plays to your individual risk tolerance but then automatically ignores it when it comes to paying down a mortgage.   In our situation, when the house is paid off, my wife will not have to work at all if we don't want her to.  We plan an having 4-5 children and will value her being at home raising them.

Also, a note about the mortgage interest deduction.  For us it doesn't do a dang thing.  Even if we calculate the years interest at the highest amount we ever paid (appx $900 in one month), our yearly total is only $10800 (it's actually lower than this, and after the refinance will be even less in subsequent years).  The standard deduction for us as a married couple is $12,600.  So, unless we have a couple thousand more dollars to itemize, we're better off taking the standard deduction.

indentured4now

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Re: Mortgage Payoff Club!!
« Reply #1351 on: September 18, 2017, 06:09:35 PM »
End of August...  5 digit club at last!   $99.9K.   

Yay!! Congrats! It feels like it shrinks very quickly after this point, in my experience.

Thanks @allsummerlong and everyone for the kind words!   Let it be written... so let it be done!!

bender

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Re: Mortgage Payoff Club!!
« Reply #1352 on: September 20, 2017, 11:21:38 AM »
...

Also, a note about the mortgage interest deduction.  For us it doesn't do a dang thing.  Even if we calculate the years interest at the highest amount we ever paid (appx $900 in one month), our yearly total is only $10800 (it's actually lower than this, and after the refinance will be even less in subsequent years).  The standard deduction for us as a married couple is $12,600.  So, unless we have a couple thousand more dollars to itemize, we're better off taking the standard deduction.

You get to deduct your property taxes as well.  In most places that will have you itemizing based on the stated home value.

channtheman

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Re: Mortgage Payoff Club!!
« Reply #1353 on: September 21, 2017, 10:00:09 AM »
...

Also, a note about the mortgage interest deduction.  For us it doesn't do a dang thing.  Even if we calculate the years interest at the highest amount we ever paid (appx $900 in one month), our yearly total is only $10800 (it's actually lower than this, and after the refinance will be even less in subsequent years).  The standard deduction for us as a married couple is $12,600.  So, unless we have a couple thousand more dollars to itemize, we're better off taking the standard deduction.

You get to deduct your property taxes as well.  In most places that will have you itemizing based on the stated home value.

Good to know.  Ours are pretty cheap (about 1300 this year), but maybe with our charitable giving we can itemize for a couple of years.

farmecologist

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Re: Mortgage Payoff Club!!
« Reply #1354 on: September 21, 2017, 02:21:39 PM »
...

Also, a note about the mortgage interest deduction.  For us it doesn't do a dang thing.  Even if we calculate the years interest at the highest amount we ever paid (appx $900 in one month), our yearly total is only $10800 (it's actually lower than this, and after the refinance will be even less in subsequent years).  The standard deduction for us as a married couple is $12,600.  So, unless we have a couple thousand more dollars to itemize, we're better off taking the standard deduction.

You get to deduct your property taxes as well.  In most places that will have you itemizing based on the stated home value.

Good to know.  Ours are pretty cheap (about 1300 this year), but maybe with our charitable giving we can itemize for a couple of years.


I kind of chuckle when people get excited about the mortgage interest deduction.  Yes, you 'get to' deduct it.  However, most folks that 'get to' deduct it are also paying staggering amounts of interest to the bank...only receive a small chunk back in the form of a deduction.  That's not exactly 'good' in my book. 

I found this article to be interesting :  http://www.thetruthaboutmortgage.com/why-are-mortgage-payments-mostly-interest/

If you plan to keep your loan full term...then the math does work.  However, for the general population, that's usually not how it works.  People tend to move, etc..and a new loan 'resets the clock'....and you are back to continually paying staggering amounts of interest to the bank.  And continually thinking the mortgage interest deduction is a 'good thing'.

Now I have good faith that the population here knows better.  However, it is really quite disturbing the number of people that fall into this loop...and never end up paying down their mortgage.  Yet another reason why paying it down *can* be a good thing, depending on your situation.

« Last Edit: September 21, 2017, 02:26:39 PM by farmecologist »

pdxmonkey

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Re: Mortgage Payoff Club!!
« Reply #1355 on: September 21, 2017, 04:22:49 PM »
People also pretend they get the whole deduction as a discount when only the difference between the standard deduction and the itemized deductions matters. $13000 in deduction vs $12300 standard. Great you just got 700 in extras deductions. In the 25% bracket you just spent $13k on taxes and interest to save yourself $175...

Debts_of_Despair

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Re: Mortgage Payoff Club!!
« Reply #1356 on: September 21, 2017, 04:53:50 PM »
People also pretend they get the whole deduction as a discount when only the difference between the standard deduction and the itemized deductions matters. $13000 in deduction vs $12300 standard. Great you just got 700 in extras deductions. In the 25% bracket you just spent $13k on taxes and interest to save yourself $175...

LOL, so true!  I occasionally talk to people who don't do their own taxes (or otherwise don't understand them) and they think the "write off" for their mortgage interest is equal to a tax credit.  Think again!
« Last Edit: September 21, 2017, 04:59:39 PM by Debts_of_Despair »

farmecologist

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Re: Mortgage Payoff Club!!
« Reply #1357 on: September 22, 2017, 09:27:42 AM »
People also pretend they get the whole deduction as a discount when only the difference between the standard deduction and the itemized deductions matters. $13000 in deduction vs $12300 standard. Great you just got 700 in extras deductions. In the 25% bracket you just spent $13k on taxes and interest to save yourself $175...

LOL, so true!  I occasionally talk to people who don't do their own taxes (or otherwise don't understand them) and they think the "write off" for their mortgage interest is equal to a tax credit.  Think again!


Yep, that is spot on...I forgot to add that tidbit.   It is just funny to me when people ( mostly coworkers ) excitedly tell me how much they 'saved' by deducting mortgage interest.  These are obviously people with obscene mortgages.  It goes to show you that even people that are smart and successful in other areas are not necessarily smart with taxes/finances.

Again, I think the crowd here is smarter financially than the 'average joe'...so I hope we all know better....but who knows.
« Last Edit: September 22, 2017, 09:29:30 AM by farmecologist »

plainjane

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Re: Mortgage Payoff Club!!
« Reply #1358 on: September 22, 2017, 09:28:36 AM »
DW has to be on board with the plan and she is very risk averse.  Probably more than most people.  She's not particularly happy about the 401k but understands the company match is free money.  In this situation, paying down the mortgage is the best possible use of our money and it is also risk free savings on interest.  My wife is happy, and I'm happy that she's happy.  Is it the most optimal, no.  But not everything is about the most optimal case.  Emotions and "sleeping at night" play a large role in everyone's decisions.

I think I've mentioned here that my SO was also pretty risk averse. But once we had paid down more of the house, investing felt less risky, because regardless of what happened, we had our home. Now that the house is paid off, all that money plus some is going into investments.
Using procrastination to my advantage since 2001.

farmecologist

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Re: Mortgage Payoff Club!!
« Reply #1359 on: September 22, 2017, 09:30:27 AM »
DW has to be on board with the plan and she is very risk averse.  Probably more than most people.  She's not particularly happy about the 401k but understands the company match is free money.  In this situation, paying down the mortgage is the best possible use of our money and it is also risk free savings on interest.  My wife is happy, and I'm happy that she's happy.  Is it the most optimal, no.  But not everything is about the most optimal case.  Emotions and "sleeping at night" play a large role in everyone's decisions.

I think I've mentioned here that my SO was also pretty risk averse. But once we had paid down more of the house, investing felt less risky, because regardless of what happened, we had our home. Now that the house is paid off, all that money plus some is going into investments.

That is exactly what we did...and it has turned out great!


crispy

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Re: Mortgage Payoff Club!!
« Reply #1360 on: September 22, 2017, 12:50:22 PM »
Mine will be paid officially paid off on October 1st!  I am ridiculous excited!  As a very risk averse person, my mortgage has felt like an albatross around my neck for years.  It feels good to be free!

iluvzbeach

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Re: Mortgage Payoff Club!!
« Reply #1361 on: September 23, 2017, 07:22:18 AM »
Crispy, it's stuff like paying off the mortgage that helps put you in the position to stand up to the office bully. Nicely done!
Planning to be FIREd in 2020!

crispy

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Re: Mortgage Payoff Club!!
« Reply #1362 on: September 23, 2017, 12:57:05 PM »
Crispy, it's stuff like paying off the mortgage that helps put you in the position to stand up to the office bully. Nicely done!

Exactly right!