Author Topic: Mortgage Payoff Club!!  (Read 429685 times)

SwordGuy

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Re: Mortgage Payoff Club!!
« Reply #1350 on: October 25, 2017, 05:10:53 PM »
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 **really** get wanting to have the mortgage paid off.    I've done it once before.  I'll be glad when we pay off our HELOC in the next few months and even more glad when the mortgage on our new house is paid for, too.

So, first of all, congrats to everyone who has already paid off their mortgage!   Bravo!

All the comments by all the posters in this thread about how much better off one's financial situation is once the mortgage is fully paid off are spot on correct.

But...

About that safety issue...

That's where a lot of folks seem to get it wrong.

It's absolutely true that a house that's fully paid for improves one's financial situation compared to one with a mortgage.

What can go wrong between the decision to pay off a mortgage early and **actually** paying it off?

What can go wrong is exactly what you fear.  An extended job loss.  Inability to work due to illness or injury.   The house foreclosed on and taken away from you by the bank and the courts.

Having your house foreclosed on and having to move out are terrible things to have happen.

Everyone is **completely right** in wanting to avoid that scenario!

But is paying extra money on your mortgage every month until it's paid off early the best way to go about it?   That's the question I raise and, obviously, I think it's not the best path.

Let's say I have a 30 year fixed rate mortgage that costs me $1000 a month in principal and interest.  (Taxes and insurance will be with us regardless so we'll ignore them.)

If I had paid on the regular amortization schedule I might owe $170,000, but I've been very aggressive in paying it down quickly and only owe $140,000.  We put in an extra $30,000.

Bad stuff happens.  We lose our jobs and can't find a new one for a goodly while.  It's part of a general economic malaise and home prices have dropped by 30%.   We exhaust our emergency fund.

We can't pay the mortgage payments and bank forecloses.   We have just lost $60,000 that we had invested in the house.   The bank, by the way, is  very happy we paid the house down so quickly.  That will make it much easier for them to sell the house at a break-even point.   It was certainly nice of us to look after the bank's interests so well.

Now, let's instead suppose that we put that extra $30,000 worth of money in the stock market instead of the mortgage.   The stock has grown at the historical average rate of 10% per year for the last 2 years and we reinvested the dividends.   So we have $30,000 + $3,000 + $3,300 or $36,300 in stock when the economy tanks.   Stocks drop 50% and stay that way for a goodly while.  Our $30,000 investment is now worth $18,150 and stays that way for the duration of the depression.  We sell it off at the rate of $1,000 a month.  We're able to hang onto our home for an extra 18 months before it gets foreclosed on.   We have an extra 18 months to land a job that will cover the mortgage.  So, in this horrible scenario we lost $11,850 of the $30,000 we invested but we saved the other $30,000 we had already put into the house, for a net gain of a keeping a roof over our heads and $22,150 over the pay-into-the-mortgage scenario.

Of course, if we lost our jobs due to illness instead of an economic collapse, our stock would not have lost value.  In that case, we would have had over 36 months worth of payments out of our stock investment before the house was foreclosed on.  And, since we're only pulling it out at the rate of $1000 a month, the remainder will keep growing in value.  It turns out we would have about 44 months of safety margin, not 36!

Now, once the stock value is high enough to pay off the mortgage, then we can sell the stock and pay off the mortgage early, if that's what we value.   If the market happens to be down at that point in time, we wait a bit until the market recovers, then sell.  Either way, we pay off the mortgage and get that freedom form it that we want.

Now, it turns out that the Australians have come up with a banking product that's an awesome compromise between the pay-extra-as-you-go and the invest-up-until-full-payoff-possible scenarios.
They have what's called an "offset account" at the bank with the mortgage.  If they pay extra into the offset account, it offsets (reduces) the principal balance when the amount of interest is due.  However, they can withdraw that cash at any time.   This has the benefit of reducing the amount of interest due but also preserving the flexibility to keep that cash available in true emergencies.

I bring up this example to all the bankers I talk to, hoping they'll introduce this product in the US.

Debts_of_Despair

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Re: Mortgage Payoff Club!!
« Reply #1351 on: October 25, 2017, 06:34:33 PM »
That is why you have an emergency fund before you start paying off your mortgage.  I don't think anyone on this forum is worried about foreclosure.

SwordGuy

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Re: Mortgage Payoff Club!!
« Reply #1352 on: October 25, 2017, 07:32:17 PM »
That is why you have an emergency fund before you start paying off your mortgage.  I don't think anyone on this forum is worried about foreclosure.

Then why do so many people worry about paying down the mortgage quickly, as they go, as being safer?  Safer than what?

SwordGuy

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Re: Mortgage Payoff Club!!
« Reply #1353 on: October 25, 2017, 07:46:29 PM »
And speaking of challenges, our HELOC on our old house (our primary home when we got it) was $55,000 24 months ago.   We're down to $15,500 now.  In a week or so, it will be down to $7,500.

After that, progress will be a bit slower, but we'll be done within 6 months!

pdxmonkey

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Re: Mortgage Payoff Club!!
« Reply #1354 on: October 25, 2017, 07:56:48 PM »
That is why you have an emergency fund before you start paying off your mortgage.  I don't think anyone on this forum is worried about foreclosure.

Then why do so many people worry about paying down the mortgage quickly, as they go, as being safer?  Safer than what?

Safer than a 100% equities portfolio similar to the way people say adding bonds makes things safer. Paying off a mortgage is not unlike buying a bond...and bond rates are currently lower than mortgage rates. And while maybe not entirely as liquid as a bond you CAN get your equity back out via HELOC...moving... or other mechanism if you really really for some reason want the money.

channtheman

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Re: Mortgage Payoff Club!!
« Reply #1355 on: October 27, 2017, 12:50:27 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 **really** get wanting to have the mortgage paid off.    I've done it once before.  I'll be glad when we pay off our HELOC in the next few months and even more glad when the mortgage on our new house is paid for, too.


I've often pondered "paying" that money towards the mortgage into another account and then when the balance is enough to pay the mortgage off, doing so in one final sweep.  Perhaps, I can swing that idea by DW and we can agree on something.  Some of the high yield bank accounts offer $200 bonuses for depositing $10,000 and then 1.3% interest or so.  Not great, but better than nothing.   I'm not sure how the math works out to if the 1.3% interest balances out the loss on not paying down the balance sooner.    In other words, does the interest I gain from the bank account cancel out the extra interest I will have paid on the mortgage due to not paying down the balance faster? 

Anyone know of an easy way to figure this? 

Regardless, at least for the next couple of months, we are still paying down aggressively so we can refinance at the end of December.   After that, I need to decide what is best for us.

birdman2003

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Re: Mortgage Payoff Club!!
« Reply #1356 on: October 27, 2017, 03:05:29 PM »
In other words, does the interest I gain from the bank account cancel out the extra interest I will have paid on the mortgage due to not paying down the balance faster? 

Anyone know of an easy way to figure this?

You need to compare interest rates.  If your bank pays 1.5% and you are paying 3% to the mortgage holder, you should pay extra towards the principal balance on your mortgage instead of putting it in a savings account.

Here's an example:

If your mortgage is $100k and you got a 15 year mortgage at 2.5% interest:

Paying nothing extra, your mortgage costs you $20k in interest over 15 years
Paying an extra $100 a month, your mortgage costs you $16.8k in interest over 12 years and 8 months (savings of $3.2k)
Paying an extra $200 a month, your mortgage costs you $14.5k in interest over 11 years and 0 months (savings of $5.5k)
Paying an extra $300 a month, your mortgage costs you $12.7k in interest over 9 years and 8 months (savings of $7.3k)

If you put those extra amounts into a savings account paying you 1.5% interest and wait until you have enough to pay off the remaining balance:
$100 a month: your mortgage costs you $17.8k in interest over 12 years and 10 months (savings of $2.2k)
$200 a month: your mortgage costs you $16.0k in interest over 11 years and 2 months (savings of $4.0k)
$300 a month: your mortgage costs you $14.4k in interest over 9 years and 11 months (savings of $5.6k)

crispy

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Re: Mortgage Payoff Club!!
« Reply #1357 on: October 27, 2017, 08:30:07 PM »
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 **really** get wanting to have the mortgage paid off.    I've done it once before.  I'll be glad when we pay off our HELOC in the next few months and even more glad when the mortgage on our new house is paid for, too.


I've often pondered "paying" that money towards the mortgage into another account and then when the balance is enough to pay the mortgage off, doing so in one final sweep.  Perhaps, I can swing that idea by DW and we can agree on something.  Some of the high yield bank accounts offer $200 bonuses for depositing $10,000 and then 1.3% interest or so.  Not great, but better than nothing.   I'm not sure how the math works out to if the 1.3% interest balances out the loss on not paying down the balance sooner.    In other words, does the interest I gain from the bank account cancel out the extra interest I will have paid on the mortgage due to not paying down the balance faster? 

Anyone know of an easy way to figure this? 

Regardless, at least for the next couple of months, we are still paying down aggressively so we can refinance at the end of December.   After that, I need to decide what is best for us.

That's what we did. When we downsized we had a small mortgage.    We stashed the extra payments and a car acciident settlement into a savings account and just did one big payment. I wouldn't do this for years, but we only had to save for about 18 months.

BeautifulDay

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Re: Mortgage Payoff Club!!
« Reply #1358 on: October 29, 2017, 09:09:33 AM »
Posting to follow and be inspired by your stories. 

Bought a home in April and owe $135,000 on a 30 year loan.  My plan is to decrease this and pay off in 15 years timed to match our retirement schedule. My priority right now is rebuilding the EF, throwing money at investments and paying off a little remaining consumer debt.  Once EF funded and consumer debt are gone I'll make some extra payments to the house.

Long way to go, but I'll get there.  Thanks for the inspiration.
« Last Edit: October 29, 2017, 09:13:07 AM by BeautifulDay »

indentured4now

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Re: Mortgage Payoff Club!!
« Reply #1359 on: October 30, 2017, 07:16:02 PM »
End of August...  5 digit club at last!   $99.9K.   

OK gang, the overly-analytical odyssey continues...  After digesting Dave Ramsey's "Baby Steps" program and further validation and courage re-reading Ron Blue's "Mastering Your Money" book (that explains how free monthly cash flow is so key to building real wealth), we're going to take some money out of the stache from the frothy stock market to pay down half the mortgage and pay off a car note as well.   

The free cash flow will accelerate pay-off of the remainder of the mortgage balance.   Then once the mortgage is gone, that free cash flow goes back to pay ourselves back on the investments dollar cost-averaged pay back into investments.   If the missus and I hadn't changed behavior the past few months, gotten budgeting really seriously and talked this out to focus on this goal, it wouldn't work.   $48K left to remove debt from our life is the goal!   Till then, keepin' on, keepin' on!

wauske

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Re: Mortgage Payoff Club!!
« Reply #1360 on: November 01, 2017, 08:11:35 AM »
@wauske,  Stay strong.   I'd imagine that Dutch bankers would have some quirks to say the least in the banking rules from hundreds of years of being fierce lenders.   The United States is still paying on Dutch loans and/or bonds issued from the 1700s!   

Use their annoying nature to motivate you both to save more... Then smile sweetly when you pay off those parasites.
Oh, not to worry. 15 months and I'm done based on the new agreement with the bank. Everything I pay off extra only shortens the time left!

The fools even sent me a message that my life insurance could be changed to lower my monthly payment on it. I pay around 8 euro per month and since it is linked to the mortgage I can quit it when the mortgage is done. They offered to update the contract but I'd have to pay a one-time fee of Ä 75 and a yearly recurring Ä 25 for "maintenance" but since my mortgage is done in 15 months my total cost without changing is guaranteed to be lower if I don't change it :D

That is why you have an emergency fund before you start paying off your mortgage.  I don't think anyone on this forum is worried about foreclosure.

Then why do so many people worry about paying down the mortgage quickly, as they go, as being safer?  Safer than what?
Paying down the mortgage can be seen as fixed return on investment because it lowers the loan owed and thus the fixed monthly costs. Our Ä550,- reduction (of the original 600) is a very palpable result. Any other form of savings of investments caries at least some risk, even a savings account at the bank. Should my bank go bankrupt their first step would to be subtract my savings from the remaining mortgage balance and then try to sell off my mortgage ASAP.

And yes, having a house is also some form of risk but if you you have a mortgage you have the same risk regardless.
Everything I say is my personal opinion which is based on my subjective experience.

channtheman

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Re: Mortgage Payoff Club!!
« Reply #1361 on: November 03, 2017, 04:13:03 AM »
In other words, does the interest I gain from the bank account cancel out the extra interest I will have paid on the mortgage due to not paying down the balance faster? 

Anyone know of an easy way to figure this?

You need to compare interest rates.  If your bank pays 1.5% and you are paying 3% to the mortgage holder, you should pay extra towards the principal balance on your mortgage instead of putting it in a savings account.

Here's an example:

If your mortgage is $100k and you got a 15 year mortgage at 2.5% interest:

Paying nothing extra, your mortgage costs you $20k in interest over 15 years
Paying an extra $100 a month, your mortgage costs you $16.8k in interest over 12 years and 8 months (savings of $3.2k)
Paying an extra $200 a month, your mortgage costs you $14.5k in interest over 11 years and 0 months (savings of $5.5k)
Paying an extra $300 a month, your mortgage costs you $12.7k in interest over 9 years and 8 months (savings of $7.3k)

If you put those extra amounts into a savings account paying you 1.5% interest and wait until you have enough to pay off the remaining balance:
$100 a month: your mortgage costs you $17.8k in interest over 12 years and 10 months (savings of $2.2k)
$200 a month: your mortgage costs you $16.0k in interest over 11 years and 2 months (savings of $4.0k)
$300 a month: your mortgage costs you $14.4k in interest over 9 years and 11 months (savings of $5.6k)

Thanks for simplifying it for me.  Seems obvious how you did the math now that I see it, but it was escaping me before.  We would most definitely come out ahead paying down the mortgage as opposed to saving it and making one lump payment at the end.  We already have sizeable emergency funds in place so I think actively paying down the mortgage is the way to go.

ACyclist

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Re: Mortgage Payoff Club!!
« Reply #1362 on: November 04, 2017, 09:46:41 AM »
Less than 10K on our primary residence.  4.75% 30 yr loan taken in 08.  Will be paid off in about 10 months, if nothing bad happens. 

We have a rental too. It's been paid off for several years.  That was a 15 yr loan that we paid off in about 10 as well.

Blindsquirrel

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Re: Mortgage Payoff Club!!
« Reply #1363 on: November 05, 2017, 07:36:23 PM »
  Good for you to pay off the rental!  I will not say "Oh another case of math vs. sleeping well at night" as that is the incorrect comparison.  The real estate investors often correctly say to borrow the absolute maximum to get the best leveraged returns. Leverage magnifies returns but it magnifies risk also. See real estate bubble and foreclosures for the nasty consequences at the other end of that leverage "Lever".
Paid off rental property is a very nice way to provide another source income at relatively low risk. Diversifying your income stream away from your job lowers risk greatly.

   Also, the stock return rate vs. mortgage rate is not the correct comparison at all. The correct comparison is mortgage rate vs. risk free return rate. Many of the folks on this thread know this at least in their hearts but there is actually solid math behind it. Once you have a well funded start on your stash there is nothing wrong with reducing your amount of risk. If you are at or near FI it is not necessary to take that risk when you have already won the game. It is not needed and having a mortgage increases your vulnerability to sequence of return risk.  This is a post that sums it up very well and I have no relation to the astute fellow who wrote it.
 
https://saveinvestbecomefree.com/2016/06/09/pay-off-the-mortgage-or-invest-in-stocks-wrong-question/#more-352
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birdman2003

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Re: Mortgage Payoff Club!!
« Reply #1364 on: November 05, 2017, 08:20:36 PM »
In other words, does the interest I gain from the bank account cancel out the extra interest I will have paid on the mortgage due to not paying down the balance faster? 

Anyone know of an easy way to figure this?

You need to compare interest rates.  If your bank pays 1.5% and you are paying 3% to the mortgage holder, you should pay extra towards the principal balance on your mortgage instead of putting it in a savings account.

Here's an example:

If your mortgage is $100k and you got a 15 year mortgage at 2.5% interest:

Paying nothing extra, your mortgage costs you $20k in interest over 15 years
Paying an extra $100 a month, your mortgage costs you $16.8k in interest over 12 years and 8 months (savings of $3.2k)
Paying an extra $200 a month, your mortgage costs you $14.5k in interest over 11 years and 0 months (savings of $5.5k)
Paying an extra $300 a month, your mortgage costs you $12.7k in interest over 9 years and 8 months (savings of $7.3k)

If you put those extra amounts into a savings account paying you 1.5% interest and wait until you have enough to pay off the remaining balance:
$100 a month: your mortgage costs you $17.8k in interest over 12 years and 10 months (savings of $2.2k)
$200 a month: your mortgage costs you $16.0k in interest over 11 years and 2 months (savings of $4.0k)
$300 a month: your mortgage costs you $14.4k in interest over 9 years and 11 months (savings of $5.6k)

Thanks for simplifying it for me.  Seems obvious how you did the math now that I see it, but it was escaping me before.  We would most definitely come out ahead paying down the mortgage as opposed to saving it and making one lump payment at the end.  We already have sizeable emergency funds in place so I think actively paying down the mortgage is the way to go.

You are welcome!  You are right - by putting your monthly amounts directly at the principal instead of waiting to pay it off in one lump sum, you will not only save extra money, you will pay off your mortgage a few months earlier in each of the three scenarios I calculated out with Excel.

We are going to focus on our mortgage (2.5%) once we finish paying student loans (6.8%).

Eilonwy

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Re: Mortgage Payoff Club!!
« Reply #1365 on: November 05, 2017, 08:29:23 PM »
That's a really useful article; thanks for sharing.

honeyfill

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Re: Mortgage Payoff Club!!
« Reply #1366 on: November 05, 2017, 08:42:13 PM »
https://earlyretirementnow.com/2017/10/11/the-ultimate-guide-to-safe-withdrawal-rates-part-21-mortgage-in-retirement/

Another article about the benefits of paying off your mortgage.  This article  expands on the the "cash flow" advantages of having your mortgage paid off.  Specifically, it argues that By not having to withdraw extra taxable income to make a mortgage payment, it makes it easier to stay under the ACA income limits for subsidies, the income limits for taxable capital gains , etc. 



SwordGuy

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Re: Mortgage Payoff Club!!
« Reply #1367 on: November 05, 2017, 09:09:17 PM »
In other words, does the interest I gain from the bank account cancel out the extra interest I will have paid on the mortgage due to not paying down the balance faster? 

Anyone know of an easy way to figure this?

You need to compare interest rates.  If your bank pays 1.5% and you are paying 3% to the mortgage holder, you should pay extra towards the principal balance on your mortgage instead of putting it in a savings account.

Here's an example:

If your mortgage is $100k and you got a 15 year mortgage at 2.5% interest:

Paying nothing extra, your mortgage costs you $20k in interest over 15 years
Paying an extra $100 a month, your mortgage costs you $16.8k in interest over 12 years and 8 months (savings of $3.2k)
Paying an extra $200 a month, your mortgage costs you $14.5k in interest over 11 years and 0 months (savings of $5.5k)
Paying an extra $300 a month, your mortgage costs you $12.7k in interest over 9 years and 8 months (savings of $7.3k)

If you put those extra amounts into a savings account paying you 1.5% interest and wait until you have enough to pay off the remaining balance:
$100 a month: your mortgage costs you $17.8k in interest over 12 years and 10 months (savings of $2.2k)
$200 a month: your mortgage costs you $16.0k in interest over 11 years and 2 months (savings of $4.0k)
$300 a month: your mortgage costs you $14.4k in interest over 9 years and 11 months (savings of $5.6k)

Thanks for simplifying it for me.  Seems obvious how you did the math now that I see it, but it was escaping me before.  We would most definitely come out ahead paying down the mortgage as opposed to saving it and making one lump payment at the end.  We already have sizeable emergency funds in place so I think actively paying down the mortgage is the way to go.

You are welcome!  You are right - by putting your monthly amounts directly at the principal instead of waiting to pay it off in one lump sum, you will not only save extra money, you will pay off your mortgage a few months earlier in each of the three scenarios I calculated out with Excel.

We are going to focus on our mortgage (2.5%) once we finish paying student loans (6.8%).

That, of course, assumes two things:

1) You invest your money in a savings account that pays less interest than your mortgage (instead of bonds or stocks, for example), and

2) You don't have a long bout of unemployment due to market forces or illness/injury so you don't lose your house.


Eilonwy

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Re: Mortgage Payoff Club!!
« Reply #1368 on: November 06, 2017, 04:22:21 PM »
After reading the piece mentioned above, I got curious and checked out my bond investment. The earnings have been considerably less than my mortgage interest rate. :-(

Blindsquirrel

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Re: Mortgage Payoff Club!!
« Reply #1369 on: November 06, 2017, 04:39:45 PM »
   Welp, you live and learn! When I came across the post I had a grand chunk of cash sitting in a checking account earning 0.01% interest.
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indentured4now

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Re: Mortgage Payoff Club!!
« Reply #1370 on: November 06, 2017, 08:24:47 PM »
After reading the piece mentioned above, I got curious and checked out my bond investment. The earnings have been considerably less than my mortgage interest rate. :-(

And here's an even better idea (if you're a banker)... lock mortgage holders into a premium over government bond rates that already demand a premium over the rate of inflation (ie, 10 year Treasuries).    And oh yeah, also allow bond holders to lose principal on said bonds each time interest rates go up in a steady pace the next 2 years or so until they reach "normal" market level.   Oh yeah, and remember the stock market has been juiced up to all time highs by low or negative bond interest rates the past 8+ years, so it will likely have a "below historical" return in the same interval or longer.    Google search "Jack Bogle Aspen Institute from 2015" for an eye-opening explanation from an investing sage.   

Neustache

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Re: Mortgage Payoff Club!!
« Reply #1371 on: November 10, 2017, 05:51:28 AM »
We owe 10,258 on the mortgage and I have 13K in checking and savings!  Waiting for my mortgage company to pay the year end property taxes out of escrow then I'm paying it off!  Just seems easier for them to send in the check for the real estate taxes.  After that, I guess I need to save about 3500 a year myself for taxes and insurance.  At least I'll make a tiny bit of interest on it!

So...not officially paid off yet, but close!!

talltexan

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Re: Mortgage Payoff Club!!
« Reply #1372 on: November 10, 2017, 07:03:07 AM »
Congrats on being so close Neustache!

indentured4now

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Re: Mortgage Payoff Club!!
« Reply #1373 on: November 11, 2017, 04:09:29 AM »
Way to go Neustache!  Maybe call and ask them to pay the taxes now, then pay it off this month to avoid the Dec interest payment?   Probably just $30 bucks, but it's something.   Either way, you've killed it... Awesome!!

never give up

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Re: Mortgage Payoff Club!!
« Reply #1374 on: November 11, 2017, 05:41:08 AM »
Wow what a great thread. I only signed up to the site a few weeks back. I paid off my mortgage earlier this year but would have enjoyed the encouragement on here over the years while I was overpaying. Wish I'd found it earlier.

I am extremely risk averse and overpaying the mortgage just felt right to me and I couldn't have found any better way of using my money than the goal of being completely debt free. It is a great feeling to be mortgage/debt free and I would just like to extend my encouragement to everyone in here. It doesn't matter what anyone else says or what the maths looks like, if paying your mortgage off early makes you feel warm and fuzzy inside then go for it.

never give up

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Re: Mortgage Payoff Club!!
« Reply #1375 on: November 11, 2017, 09:56:40 AM »
allsummerlong - as I mentioned I am extremely risk averse but since being mortgage free I feel much more confident about piling into index funds so Iím sure your DH will see this too.

SwordGuy

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Re: Mortgage Payoff Club!!
« Reply #1376 on: November 12, 2017, 04:22:52 PM »
Just put the check in the mail tonight to pay off the HELOC on our old house.   We had originally planned to pay it off by 09/01/2018, but we did better than that. :)   $55K in 2 years and 2 months.

Now we just have the mortgage on our new house to pay off, though at 2.75% I'm tempted to invest instead of hurry to pay it off.  We'll make our choice on that in a year or two, when we sell the house we're flipping.

Zola.

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Re: Mortgage Payoff Club!!
« Reply #1377 on: November 13, 2017, 10:06:05 AM »
June 2015 - £131,000
November 2017 - £120,000

We have just started over paying in October, plan to overpay by £1000 every few months. Hoping to shave the time down considerably.

We are 2.5 years into a 25 year mortgage. I want it paid off in as few years as possible.
« Last Edit: November 13, 2017, 10:07:38 AM by Zola. »

talltexan

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Re: Mortgage Payoff Club!!
« Reply #1378 on: November 14, 2017, 08:51:52 AM »
Just put the check in the mail tonight to pay off the HELOC on our old house.   We had originally planned to pay it off by 09/01/2018, but we did better than that. :)   $55K in 2 years and 2 months.

Now we just have the mortgage on our new house to pay off, though at 2.75% I'm tempted to invest instead of hurry to pay it off.  We'll make our choice on that in a year or two, when we sell the house we're flipping.

Heresy! You need to be banished to join the heathens in the Do NOT Pay off your mortgage club... (disclosure: I am also on that thread)

Seriously, Congrats for making such good progress on the HELOC. I wish you continued momentum in achieving your financial goals! (whatever you may choose)

TheWifeHalf

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Re: Mortgage Payoff Club!!
« Reply #1379 on: November 14, 2017, 09:53:34 AM »
Oh how things change!
We bought our house in 1980 when interest rates were 12% and were still going up. We came across a house that was perfect for us and paid 20% down (to not have mortgage ins)
TheHusbandHalf lost his job in 1990 or so but 6 mos later got a better one, that he has now. Interest rates were still 10-11, he got a severance pay from the old, so we just paid off the mortgage.  I'll be honest and say that doing so was the most satisfying, liberating thing we have done. We have not borrowed money since except for a couple of vehicles when we took advantage of the 0% interest rate on car loans.

I suppose I keep that feeling in mind when my oldest son talks about the double payments he makes on his house. We've explained, ONCE, why that might not be the best financially smart thing to do, but he of course is free to do as he pleases. He has his Dd's diy interest and abilities, but also his sticking to his ideas no matter what I say!
His payments are half of what ours were, he makes 4 times what we made then, so I can see him doing this.

talltexan

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Re: Mortgage Payoff Club!!
« Reply #1380 on: November 15, 2017, 07:06:31 AM »
Is he doubling the total payment amount or just doubling the principal?

BBub

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Re: Mortgage Payoff Club!!
« Reply #1381 on: November 17, 2017, 08:49:13 AM »
Currently around $83k.  Paying $1,750/mo, which will eliminate it in about 4yrs.  Will probably freak out at some point between now & then, and just demolish it.

Ok I had my freakout as predicted.  The mortgage is gone.  We are now 100% debt free.  Woot.

Since the beginning of the year, I had paid it down from $83 to $68.  I've also amassed about $40k cash since then, and I had $25k in CD's at low rates as a sort of emergency buffer.  So I cashed those in earlier this week, added a little extra, requested the payoff quote & wired the funds this morning.

100% debt free at 32 & 30 for DW.  Pretty nice.

And to all the haters, I'm not worried about the compound value over 30 years. Just not.  I paid it off in 4 years and also managed to amass $500k liquid on top of the mortgage payoff, using many of the principles and techniques learned on this site.  I just don't think that $100k +/- in debt payoff vs. opportunity cost of investing is going to move the needle for me in a meaningful way over the lifetime.  It's just not a significant enough chunk of cash relative to my earning/savings rate.  The house is now appraised around $250k because we bought it low and made some improvements.  So we've gone from pretty close to $0NW to $750k debt free in about 4-5 years.  Give it another 5 & we should have a solid 7 figure net worth with no debt in our mid 30's.  I'll take that deal every time. 

On the other hand, maybe I'll turn 62 & regret the payoff at 32.  Look back over those last 30 years with a few hundred grand extra & think 'those 30 years of pesky mortgage payments would have been totally worth it.  I wish I wouldn't have had a serene, debt-free existence in my 30's, 40's and 50's raising kids, enjoying vacations and not constantly calculating amortization in my head.'  Doubtful.  The good news is that they're still selling mortgages, so I can always walk down to the bank & get another one if I change my mind!

Anyway, not to make this a negative rant.  It's exciting.  I just wanted to throw up two preemptive middle fingers & offer perspective to the demagogues who advocate against paying off mortgages in all circumstances.  Yes, the spreadsheet may show a larger number in row 30 by carrying the debt, but there's value in living those 30 years without debt too.  And if the debt is small enough relative to the overall financial profile, then the opportunity cost of payoff can actually be worth it.  Kind of like paying for a vacation or experience.  It's not the most optimal allocation of financial resources from an IRR perspective, but it is by no means a foolish thing to do if a person has done the math and decided the opportunity cost is worth the benefit.

never give up

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Re: Mortgage Payoff Club!!
« Reply #1382 on: November 17, 2017, 09:53:17 AM »
Congrats that's great news. I did a similar freak out myself even though my mortgage was less than 2% at the time. All I could think was just get rid of it and move on with my life! You've plenty of time now to invest with the knowledge during any downturns that you own the roof over your head.

Dicey

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Re: Mortgage Payoff Club!!
« Reply #1383 on: November 17, 2017, 10:12:41 AM »
Dear BBub,
Congratulations on your succes!

However, your use of the word "haters" is most troubling...

Would you believe there are people who focus on "killing" the mortgage at the expense of retirement saving? Some don't even save enough to get their employer's full match! The years they choose not to fund every retirement option available to them can never be regained. Some people don't realize the magic of compound interest, understand the power of inflation or the concept of using leverage to create wealth.

At the very heart of Mustachianism is the concept of deploying every green soldier optimally.
The earlier one stocks up the investment accounts, the fewer actual dollars it will take to FIRE. The later one starts, the more soldiers are required. Prioritizing repaying a low-interest, fixed rate mortgage before other savings/investments is sub optimal.

People who endeavor to teach this message are LOVERS, not haters. They want to see all of their fellow mustachians reach their dreams as efficiently as possible. They seek for all to understand that sequencing has a huge impact on FIRE dates, and help them make optimal choices. For some, their COLA-to-income-ratio is low enough that the impact of sub-optimal prioritization is less significant. For others, the effect is far more pronounced. We would consider our work a complete success if people just understood the tradeoffs.

Most people will not really feel the impact of their choices until many years hence. How sad to be old, trapped in a paid-off house, yet live in fear of taxes, utilities and the need for a new roof. Better to assure there is enough to provide well for one's future self now, while the ability to earn, learn and invest is comparatively effortless.

BBub, it looks like you are one of the smart and lucky ones who was able to do both, and for that, you are to be heartily and sincerely congratulated. To the people who think the elation of paying off a mortgage lasts forever, I propose that there is an even better, more lasting love out there. Just wait until you experience the thrill of your investments earning more than you ever did in your career! Imagine getting a paycheck with no effort! That's the everlasting miracle of compound interest.

It can happen for everyone who saves a relatively small amount of money, the earlier the better, investing it well and watching it compound astronomically with time. That, my friends, is the opposite of hate. It is called spreading the Love. We will keep doggedly sharing the message until its benefits are common knowledge to all. ♡♡♡♡♡

Kudos to you, BBub, and everyone else who is willing to learn how to make the best choices on the path to FIRE.
Kindest regards,
Dicey

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BBub

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Re: Mortgage Payoff Club!!
« Reply #1384 on: November 17, 2017, 12:13:41 PM »
Thanks Dicey, i am feeling the love in your post. 

I guess my main point is there is an entirely different perspective that challenges the Dogma of: buy house, get 30yr mortgage, invest the difference.  The "30yr leverage" logic can be applied to buying cars or anything else on long term fixed debt, and I think it enables many people to justify facepunch worthy housing consumption by looking at the future value of their mortgage balance then feeling really smart.

I'd suggest to those with a high COL to Income ratio that they focus on changing that ratio, rather than leveraging up on an expensive house for 30 years then feeling brilliant because of compound interest.   Of course one should not foolishly forego free match money or the many benefits of maxing out qualified accounts.

BBub

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Re: Mortgage Payoff Club!!
« Reply #1385 on: November 17, 2017, 12:17:26 PM »
Congrats that's great news. I did a similar freak out myself even though my mortgage was less than 2% at the time. All I could think was just get rid of it and move on with my life! You've plenty of time now to invest with the knowledge during any downturns that you own the roof over your head.

Thanks never give up!  Good for you - I can relate to being ready to move on.  I am looking forward to the additional cash flow going forward to take advantage of any small dips or large canyons that may appear in the markets!

farmecologist

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Re: Mortgage Payoff Club!!
« Reply #1386 on: November 19, 2017, 10:17:44 AM »
Thanks Dicey, i am feeling the love in your post. 

I guess my main point is there is an entirely different perspective that challenges the Dogma of: buy house, get 30yr mortgage, invest the difference.  The "30yr leverage" logic can be applied to buying cars or anything else on long term fixed debt, and I think it enables many people to justify facepunch worthy housing consumption by looking at the future value of their mortgage balance then feeling really smart.

I'd suggest to those with a high COL to Income ratio that they focus on changing that ratio, rather than leveraging up on an expensive house for 30 years then feeling brilliant because of compound interest.   Of course one should not foolishly forego free match money or the many benefits of maxing out qualified accounts.

Congrats Bbub!  Your views certainly mirror my own ( as we have discussed in this thread may times in the past ).  That is, there is no 'one size fits all' when it comes to the world of finances.  Some abide by 'the math' and some by 'the gut' but I'm happy that we all have the same ultimate goal...to eventually FIRE.

 

talltexan

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Re: Mortgage Payoff Club!!
« Reply #1387 on: November 20, 2017, 08:11:57 AM »
Thanks Dicey, i am feeling the love in your post. 

I guess my main point is there is an entirely different perspective that challenges the Dogma of: buy house, get 30yr mortgage, invest the difference.  The "30yr leverage" logic can be applied to buying cars or anything else on long term fixed debt, and I think it enables many people to justify facepunch worthy housing consumption by looking at the future value of their mortgage balance then feeling really smart.

I'd suggest to those with a high COL to Income ratio that they focus on changing that ratio, rather than leveraging up on an expensive house for 30 years then feeling brilliant because of compound interest.   Of course one should not foolishly forego free match money or the many benefits of maxing out qualified accounts.

I've appreciated you guys engaging in this debate...I've begun to appreciate that there are two kinds of financial decision-makers:

1. Monthly payment people, and
2. Lump Sum people.

I suspect that most spendy-pants people are monthly-payment people. (disclosure: I probably am, as well)

I think that monthly payment people can be more easily seduced by the "leverage the house for long-term investing" plan, because I think they are more willing to take on debt, in general. But I totally accept the argument of the lump sum people out there that...when you try to perceive a deal in lump sum terms, you will spend less.

I have actively worked on myself by trying to train myself to think of every transaction in lump sum terms. While this didn't stop me from financing a vehicle, it has kept me from committing to some other extravagances that are frequently sold to us as being "not that much when you make payments".

protostache

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Re: Mortgage Payoff Club!!
« Reply #1388 on: November 20, 2017, 11:57:42 AM »
is anyone on this thread taking the approach of stuffing all the money he/she can into an SP500 fund, and then--when the balance is equal to the mortgage--selling to pay off the mortgage?

I'd like to revisit this because it doesn't seem to be talked about much (I haven't read the entire thread, though). We're finally going to be at a point early next year where we can take some action on the mortgage and we're weighing our options.

Our plan has been to save up half of the principal and do a recast, but it turns out our mortgage company doesn't allow recasts. It still seems less risky (where "risk" = "risk of ruin", not "volatility") to me to save up the cash and do one big lump at the end, rather than pay extra principal every month.

The only problem is that we probably are not going to want to invest this money. It's going to be building up for about four years while we amass enough to do one lump and I guess I'm conflicted about building up that much cash in a money market account earning a max of 1.5%.

What about brokered CDs? Building up a set of CDs that all mature right before we're projecting mortgage payoff is somewhat attractive and the average interest rate will probably end up being higher than a money market account.

BBub

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Re: Mortgage Payoff Club!!
« Reply #1389 on: November 20, 2017, 01:03:48 PM »
Protostache - this is basically what I did.  Paying the mortgage off this year wasn't really premeditated, but I ended up with adequate cash then just paid it off.  Having the full amount saved/invested is definitely the lowest risk approach.  If you just pay down a large portion but leave a remaining balance, you are still on the hook for the full payment amount if you fall on lean times.

Here's how our payoff worked out:

Mortgage payoff balance was ($68k).

I bought $25k in CD's a few years ago as an emergency buffer.  5yr ladder of $5k each.  The rates were abysmal (weighted average around 1.4% I think).  At the time, I just wanted a little safe money in the portfolio since the overall allocation was very heavily weighted to equities.  My logic was that even if all hell broke loose and we lost jobs & income, we could manage for quite some time on $25k plus oddjob income.  That was just a comfortable number for me.

After maxing retirement accts this year, I started accumulating cash for a promising real estate deal.  The deal didn't pan out, but I had amassed about $40k.

Before then, the finances had just been on autopilot with any surplus taxable money going straight into the equity portfolio established several years back.  It was a great disciplined approach, but i broke the momentum when the real estate thing came up then fell through.  So I was just kind of staring at the cash & waiting around for who knows what.. when I just decided now was the time for the mortgage payoff.  I already had an accelerated payment schedule to pay off the mortgage in 3.5 more years.  So I figured what the hell, bird in hand, let's kill the thing & be done with it.  I requested a payoff quote last Wednesday, cashed in the CD's, combined all the cash & wired it over to the mortgage company on Friday.

As mentioned, we still have just over $500k liquid & a solid savings rate.  Our FI goal is $1.25M plus a paid off house.  At this point, I can just have a single minded focus on increasing the liquid stache.  It will also feel pretty good to know, if we go into a market downturn or my income decreases, that I paid everything off when times were fat.  I can envision my future self being happy with the decision in lean times, but I can't see a future where I am pissed about the missed spread.  The potential sigh of relief outweighs the little bit of extra greed for me.  Don't get me wrong, I can be a greedy bastard too, this payoff just felt like the right thing to do at the right time.

So, that's pretty much it. Starting next month I'll start investing the surplus straight into equity portfolio again.  Hoping the path to FI is straight, short & simple from here on out!  I'm sure we'll still hit a few bumps or curves along the way, but we'll deal with those as they come.

birdman2003

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Re: Mortgage Payoff Club!!
« Reply #1390 on: November 20, 2017, 02:18:52 PM »
It will also feel pretty good to know, if we go into a market downturn or my income decreases, that I paid everything off when times were fat.  I can envision my future self being happy with the decision in lean times, but I can't see a future where I am pissed about the missed spread.  The potential sigh of relief outweighs the little bit of extra greed for me.  Don't get me wrong, I can be a greedy bastard too, this payoff just felt like the right thing to do at the right time.

This is my line of thinking too.

Neustache

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Re: Mortgage Payoff Club!!
« Reply #1391 on: November 26, 2017, 06:37:51 AM »

I'm here!!

Starting Mortgage:  123K
Current Balance: 122K

Mortgage is at 4.25% with PMI, so while I may switch up strategies at some point, right now the goal is to get the PMI off as quickly as possible, hopefully by August 2015 (we only had 5% down).  If we don't switch strategies, goal is to pay this off in the next 3 or 4 years. 


PMI is on my mind as well - pay off all other debt first and then get rid of that pointless $118 fee that goes to waste every month.  I plan to get rid of it by December 2015.  Good luck to you :)

I love seeing everyone else's progress on this thread.
[/quote]


Current principle:  $103,457.43 - PMI is OFF

Now I switch gears to max out IRAs for 2015, then in 2016 we will have to payoff our foundation repairs (currently at 0%), max out IRA's and pay for school for me...so not a lot of progress will happen on the mortgage front.  I'll see you all again sometime in 2017.  I'll still watch and read others make progress towards their goals.  Good luck, everyone!!
[/quote]


It's paid off!  I started this journey in June 2014 and three and a half years later we are done.  We took a selfie and I told my parents and one close friend who is on a similar journey and we are honest about this stuff.  Selling the rental helped us achieve this goal this year, otherwise we would still be a year or two away from it.  Feels good but also kind of anti-climatic.  Next goal is 500K saved in the next 5 years.  We are 37 and 36 now. 

Prairie Gal

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Re: Mortgage Payoff Club!!
« Reply #1392 on: November 26, 2017, 07:10:58 AM »
Quote
It's paid off!  I started this journey in June 2014 and three and a half years later we are done.  We took a selfie and I told my parents and one close friend who is on a similar journey and we are honest about this stuff.  Selling the rental helped us achieve this goal this year, otherwise we would still be a year or two away from it.  Feels good but also kind of anti-climatic.  Next goal is 500K saved in the next 5 years.  We are 37 and 36 now. 

Congratulations! It's a great feeling, isn't it?

iluvzbeach

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Re: Mortgage Payoff Club!!
« Reply #1393 on: November 26, 2017, 07:20:53 AM »
Congrats, Neustache! Welcome to the club.
Planning to be FIREd in 2020!

farmecologist

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Re: Mortgage Payoff Club!!
« Reply #1394 on: November 26, 2017, 07:46:15 AM »
It's paid off!  I started this journey in June 2014 and three and a half years later we are done.  We took a selfie and I told my parents and one close friend who is on a similar journey and we are honest about this stuff.  Selling the rental helped us achieve this goal this year, otherwise we would still be a year or two away from it.  Feels good but also kind of anti-climatic.  Next goal is 500K saved in the next 5 years. We are 37 and 36 now.


I'm sure you will see your savings accelerate tremendously now.  Just remember to invest all of the money you were using to  pay off the mortgage!


Apple_Tango

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Re: Mortgage Payoff Club!!
« Reply #1395 on: November 26, 2017, 08:30:09 AM »
On the other hand, maybe I'll turn 62 & regret the payoff at 32.  Look back over those last 30 years with a few hundred grand extra & think 'those 30 years of pesky mortgage payments would have been totally worth it.  I wish I wouldn't have had a serene, debt-free existence in my 30's, 40's and 50's raising kids, enjoying vacations and not constantly calculating amortization in my head.'  Doubtful.  The good news is that they're still selling mortgages, so I can always walk down to the bank & get another one if I change my mind!

The good news is that if you HATE being debt free and want to pull out equity to play the market(as the DO NOT PAY camp recommends), you can do that. You can always go back into debt if you hate how debt free feels....
It's a lateral freeze down during the melt up.  Soon to be followed by the transverse falling bounce and the transient index inversion short, both of which are also strong sell signals in this buyer's market.

boarder42

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Re: Mortgage Payoff Club!!
« Reply #1396 on: November 26, 2017, 02:36:12 PM »
On the other hand, maybe I'll turn 62 & regret the payoff at 32.  Look back over those last 30 years with a few hundred grand extra & think 'those 30 years of pesky mortgage payments would have been totally worth it.  I wish I wouldn't have had a serene, debt-free existence in my 30's, 40's and 50's raising kids, enjoying vacations and not constantly calculating amortization in my head.'  Doubtful.  The good news is that they're still selling mortgages, so I can always walk down to the bank & get another one if I change my mind!

The good news is that if you HATE being debt free and want to pull out equity to play the market(as the DO NOT PAY camp recommends), you can do that. You can always go back into debt if you hate how debt free feels....

This is wildly incorrect. Mortgage rates fluctuate there is a chance you'll never see the rate you have at the start again. So paying down a 4% or less mortgage now may mean if you find the light and the greatness of the low fixed rate mortgages of our current climate but it's 5 years from now and rates are back around the avg 5-7% it no longer may make sense to leverage a mortgage. We are at a very interesting time in mortgage rate history that we may not see again.
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Apple_Tango

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Re: Mortgage Payoff Club!!
« Reply #1397 on: November 26, 2017, 02:50:32 PM »
You can certainly take on debt regardless of the interest rate. If you hate having a paid off house, get another mortgage on it. It really is that simple. I get your point that you think a sub 4% interest rate is the bees knees...but to me it just sounds crazy. I don't want to pay it! I would be as likely to acquire debt by taking out a second mortgage at 4% as I am at 15%...which is to say not likely at all. But if you love to be in debt, then go right ahead.
It's a lateral freeze down during the melt up.  Soon to be followed by the transverse falling bounce and the transient index inversion short, both of which are also strong sell signals in this buyer's market.

boarder42

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Re: Mortgage Payoff Club!!
« Reply #1398 on: November 26, 2017, 02:59:51 PM »
You can certainly take on debt regardless of the interest rate. If you hate having a paid off house, get another mortgage on it. It really is that simple. I get your point that you think a sub 4% interest rate is the bees knees...but to me it just sounds crazy. I don't want to pay it! I would be as likely to acquire debt by taking out a second mortgage at 4% as I am at 15%...which is to say not likely at all. But if you love to be in debt, then go right ahead.

Not one of the people in the don't pay off your mortgage thread is there because they love debt. It's a math equation. You need to learn alot because you have posted incorrectly in both of those threads and show a clear lack of open mindedness to learn anything against what you Believe or feel. Not a single one of us would advocate for a mortgage at 10% let alone 15. And it's likely closer to 7-8% or less depending on some factors.
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protostache

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Re: Mortgage Payoff Club!!
« Reply #1399 on: November 26, 2017, 06:36:53 PM »
You can certainly take on debt regardless of the interest rate. If you hate having a paid off house, get another mortgage on it. It really is that simple. I get your point that you think a sub 4% interest rate is the bees knees...but to me it just sounds crazy. I don't want to pay it! I would be as likely to acquire debt by taking out a second mortgage at 4% as I am at 15%...which is to say not likely at all. But if you love to be in debt, then go right ahead.

Not one of the people in the don't pay off your mortgage thread is there because they love debt. It's a math equation. You need to learn alot because you have posted incorrectly in both of those threads and show a clear lack of open mindedness to learn anything against what you Believe or feel. Not a single one of us would advocate for a mortgage at 10% let alone 15. And it's likely closer to 7-8% or less depending on some factors.

Youíve made your point in this thread over and over and still, people are paying off their mortgages! Whatís wrong with them?! Could it be that they fully understand the math and just donít care? That they weigh their peace of mind more heavily than an interest arbitrage play?

No, they must not have heard your preaching. That must be it.