Author Topic: Mortgage Payoff Club!!  (Read 340042 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.
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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!

pdxmonkey

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Re: Mortgage Payoff Club!!
« Reply #1363 on: October 05, 2017, 07:31:50 PM »
Down to....one cent. Super annoying. I can't pay it off through their site because they require certified funds for the last cent + the fees.

You know....probably so the interest doesn't accrue/get out of whack on my 1 cent during the delay to confirm my non-certified cent has cleared.

birdman2003

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Re: Mortgage Payoff Club!!
« Reply #1364 on: October 06, 2017, 10:36:08 AM »
Down to....one cent. Super annoying. I can't pay it off through their site because they require certified funds for the last cent + the fees.

You know....probably so the interest doesn't accrue/get out of whack on my 1 cent during the delay to confirm my non-certified cent has cleared.

I just had a visual of somebody at the payment processing company opening an envelope to find a penny inside.

talltexan

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Re: Mortgage Payoff Club!!
« Reply #1365 on: October 09, 2017, 07:03:14 AM »
You could let that one cent grow and compound until...your original mortgage has completely regenerated!

Zombie mortgage ftw!

pdxmonkey

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Re: Mortgage Payoff Club!!
« Reply #1366 on: October 10, 2017, 07:24:34 PM »
Too late for that. It is DONE!

Next month will be there first month with no payment at which point I'll get to celebrate again. And at some point before or after I'll get the paperwork.  2 celebrations to go.

Blindsquirrel

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Re: Mortgage Payoff Club!!
« Reply #1367 on: October 10, 2017, 07:53:13 PM »
  Good for you! Losing debt is freeing!
Even a blind squirrel finds a nut once in awhile.

wauske

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Re: Mortgage Payoff Club!!
« Reply #1368 on: October 12, 2017, 12:21:22 PM »
11k plus legt, bank is being annoying by requiring me to contact them every time I want to pay down extra in stead of the tried and true method of sending them extra by regular bank transfer.
So I called them this week and asked them to shorten the remaining term to 15 months. This means we are done by January 2019 unless we pay down more (which we will definitely do!).

Our mortgage started in 2012, being done next year was a bit later than planned but surely better than the full 27 years!
Everything I say is my personal opinion which is based on my subjective experience.

indentured4now

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Re: Mortgage Payoff Club!!
« Reply #1369 on: October 14, 2017, 05:20:20 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.

boarder42

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Re: Mortgage Payoff Club!!
« Reply #1370 on: October 14, 2017, 05:47:18 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.

It's staggering to me that you think you're making the best financial decision paying down a low fixed interest loan when it's not the best way to use your dollars. Now your coworkers are likely normal people and spending their extra but not paying down a mortgage and investing the extra capital shows a true understanding of finances.

My property and state taxes max out the standard deduction and all of our mortgage interest is then tax deductible. But the size of the interest paid is not relevant. It's the return that money could be making vs the interest rate on your loan.
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KBecks

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Re: Mortgage Payoff Club!!
« Reply #1371 on: October 14, 2017, 07:18:46 AM »
I have been losing some momentum on the pay down, just putting a couple hundred extra the last few months.  My husband's summer income was on the low side, but now in the Fall it's high.  We have some home improvements that we would like to do and so we may funnel some cash into making our home a little nicer.  I am reluctant to spend money but it's OK when there is good value for what we spend.

Our balance is about $56k, so soon we should graduate into the balances under $50k club.  That's something too look forward to.


Debts_of_Despair

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Re: Mortgage Payoff Club!!
« Reply #1372 on: October 15, 2017, 01:13:57 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!


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.

It's staggering to me that you think you're making the best financial decision paying down a low fixed interest loan when it's not the best way to use your dollars. Now your coworkers are likely normal people and spending their extra but not paying down a mortgage and investing the extra capital shows a true understanding of finances.

My property and state taxes max out the standard deduction and all of our mortgage interest is then tax deductible. But the size of the interest paid is not relevant. It's the return that money could be making vs the interest rate on your loan.

It's staggering to me that you think you will never have to face unemployment and/or have to keep a large emergency fund to keep making mtg payments the event of unemployment. 

I paid off my mtg in about a year.  I wake up everyday with a more confident future.  That mortgage payment now goes into tax advantaged retirement accounts.  Zero regrets.

bender

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Re: Mortgage Payoff Club!!
« Reply #1373 on: October 15, 2017, 10:02:43 PM »
For younger folks just getting started with investing it may make a lot of sense to use the low interest mortgage as leverage to buy into stocks.  As your portfolio becomes established with high 6-to-7 figures invested in stocks, the mortgage leverage strategy creates a smaller potential benefit.

Everyone is different - for me I decided to focus on eliminating the mortgage when my investments reached about half of my FI number.

farmecologist

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Re: Mortgage Payoff Club!!
« Reply #1374 on: October 16, 2017, 10:01:49 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.

It's staggering to me that you think you're making the best financial decision paying down a low fixed interest loan when it's not the best way to use your dollars. Now your coworkers are likely normal people and spending their extra but not paying down a mortgage and investing the extra capital shows a true understanding of finances.

My property and state taxes max out the standard deduction and all of our mortgage interest is then tax deductible. But the size of the interest paid is not relevant. It's the return that money could be making vs the interest rate on your loan.

It's staggering to me that you think you will never have to face unemployment and/or have to keep a large emergency fund to keep making mtg payments the event of unemployment. 

I paid off my mtg in about a year.  I wake up everyday with a more confident future.  That mortgage payment now goes into tax advantaged retirement accounts.  Zero regrets.

Dang..I knew 'boarder' would eventually infest this thread.  Just ignore the guy..he obviously thinks he is the supreme authority on 'finances'.  It's no use arguing with him.

Boarder...look, I think we all understand your points...but do not agree with them.  Just let the mortgage payoff crowd have this ONE thread of peace from your condescending attitude...ok?
« Last Edit: October 16, 2017, 10:06:04 AM by farmecologist »

Debts_of_Despair

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Re: Mortgage Payoff Club!!
« Reply #1375 on: October 16, 2017, 10:13:09 AM »
Yeah, we definitely all get the math behind it.  There is however more to life than just the math.

boarder42

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Re: Mortgage Payoff Club!!
« Reply #1376 on: October 16, 2017, 10:40:00 AM »
Yeah, we definitely all get the math behind it.  There is however more to life than just the math.

i dont agree that everyone here understands the math behind it. i think some do but for the most part i think many just see this giant thread here dedicated to it and fail to understand the math, b/c MMM paid his down - which made sense at the time b/c of a different lending environment than we currently have.
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Quint

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Re: Mortgage Payoff Club!!
« Reply #1377 on: October 16, 2017, 11:32:28 AM »
It's a little presumptuous to say that people in this thread don't understand the math.  There are countless threads on the forum and elsewhere that explain it if they'd like to investigate.  They don't have to spend their money the way you believe is best.  Maybe just be happy they are paying down their mortgage instead of being consumer clowns.  We're all here on the forums for the same reason and there are many paths to take to the finish line.

BlueHouse

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Re: Mortgage Payoff Club!!
« Reply #1378 on: October 16, 2017, 11:39:50 AM »
Yeah, we definitely all get the math behind it.  There is however more to life than just the math.

i dont agree that everyone here understands the math behind it. i think some do but for the most part i think many just see this giant thread here dedicated to it and fail to understand the math, b/c MMM paid his down - which made sense at the time b/c of a different lending environment than we currently have.
Boarder42, I thought you had already agreed to stay out of this thread?  You set up your own thread elsewhere and you've been doing a great job dismissively patronizing people who have risk tolerance different from yours.  Go enjoy your own superiority in your own thread, but please let people who are making very sound financial decisions rejoice in their accomplishments.  Stop trying to rain on everyone's parade. 
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pdxmonkey

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Re: Mortgage Payoff Club!!
« Reply #1379 on: October 17, 2017, 06:05:14 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!


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.

It's staggering to me that you think you're making the best financial decision paying down a low fixed interest loan when it's not the best way to use your dollars. Now your coworkers are likely normal people and spending their extra but not paying down a mortgage and investing the extra capital shows a true understanding of finances.

My property and state taxes max out the standard deduction and all of our mortgage interest is then tax deductible. But the size of the interest paid is not relevant. It's the return that money could be making vs the interest rate on your loan.

It's staggering what a 🍆 you are and how you pay without reading my prior comments in the thread which recognize the fact the mathematical best option in theory/statistically is not paying things down. It's also staggering that you aren't 100% in Bitcoin given its statistical history.

K-ice

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Re: Mortgage Payoff Club!!
« Reply #1380 on: October 22, 2017, 01:33:20 PM »
Yeah, we definitely all get the math behind it.  There is however more to life than just the math.

I get the math too. But my partner is so risk adverse they will only save in a savings account or pay down the mortgage. I have put a relatively small amount aside in index funds, but the best way for us to "invest" together is to throw our extra stash at the mortgage.

Once the mortgage is paid in full I hope I can convince them that index funds are the next best way.

In the mean time, I don't think anyone will argue a huge savings account is better than paying your mortgage.

Lmoot

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Re: Mortgage Payoff Club!!
« Reply #1381 on: October 25, 2017, 05:02:40 AM »
@boarder42

Reasons why people pay off/down their mortgage:

1) Simplicity - believe it or not, not everyone wants to have a bunch of investment balls in the air; an IRA/ROTH and 401K, HSA, a few bonds, etc....is sufficient for them.

2) More options. When you have a mortgage, you are still bound by rules from the lender, for what you can and cannot do with your own property. Some lenders force you to have a certain amount of insurance coverage (even if it's more than what you want/need...I'm not talking about PMI...I was forced to pay for higher insurance b/c my bank didn't feel "safe" enough with the original option I chose). By definition, a mortgage is a LIEN on a property. Want to bulid an addition? Or otherwise alter the space or function? You need to clear it through your lien-holder.

3) You (and your ilk) give big talk about being above emotional decisions. What's more emotional than chasing maximum return...just because. If someone has determined that they have enough in investments to support their chosen lifestyle and future, and this is a preference they can afford to make...you still cannot let it go. The concept of someone having "enough" seems inconceivable. Yes, the math may show possibility of more, but that's all it records...less or more. It's not going to say if it's a enough; that's a highly personal decision that can only be made by a sentient being. Who's the boss? You or the math?

4) We all have different goals. There is nothing wrong with chasing max returns, but it's just simply not important for some people. This website espouses retiring early...not making the most money. And yes, there is a distinction. If that were the case, then we'd all just work until our 70's. After a certain point, more money doesn't mean you can retire any earlier...it just means you may have more money later in life, and after death.

5) Sometimes paying off a mortgage fits their life goals better. They might see that paying off a mortgage could affect their quality of life sooner than putting it all in the market and waiting and watching. Maybe they want to reduce how much they have to work, sooner rather than later, and perhaps the balance on their mortgage may be low enough that it wouldn't pay out enough in dividends to allow one to make decisions like quitting a job....but but paying off a mortgage balance would increase their cash flow instantaneously, and predictably.

6) To get you in a waddle
« Last Edit: October 25, 2017, 09:06:07 AM by Lmoot »

smileyface

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Re: Mortgage Payoff Club!!
« Reply #1382 on: October 25, 2017, 07:52:05 AM »
I'm new to the MMM forums, but I wanted to share our mortgage payoff story.  We are a somewhat Mustachian family of four in a HCOL area, and we paid ours off nearly five years ago.  I CAN'T TELL YOU what a game-changer it has been for us.  Life is different when you don't have this major expense hanging over you.  We didn't inflate our lifestyle at all-- we just funnel the extra money into savings and investments.  But when your expenses don't include a hefty mortgage or rent payment, you have a freedom and flexibility that most people simply don't.  I stayed home with our kids for years, and I only work part-time now--  honestly, we really don't need my part-time income, but to me it's a great way to optimize my time when the kids are both at school.  We don't worry about what we'd do if DH lost his job and was out of work for a while, or if he had to take a pay cut--  without the mortgage, these situations are totally manageable. 

Was paying off the mortgage the best investment of our money?  From a rate-of-return perspective, probably not.  From a psychological-freedom perspective, it's been the greatest money move we ever made.

talltexan

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Re: Mortgage Payoff Club!!
« Reply #1383 on: October 25, 2017, 08:15:27 AM »
The debate with Boarder42 means I should reveal myself as an active participant in the "DON'T Pay off Your Mortgage" board as well. Although I personally follow a path more like that one, I follow this thread because of the energy here and to help celebrate the achievement of you badass folks who are working toward a mortgage-free life.

I'm posting because I believe LMoot's list requires one additional item: many of us have to coordinate financial goals with a spouse, and it is often easier to convince that spouse to devote extra effort to clearing debt--like a mortgage--than it is to a vague goal like "Stuff the 401K".


farmecologist

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Re: Mortgage Payoff Club!!
« Reply #1384 on: October 25, 2017, 09:49:10 AM »
I'm posting because I believe LMoot's list requires one additional item: many of us have to coordinate financial goals with a spouse, and it is often easier to convince that spouse to devote extra effort to clearing debt--like a mortgage--than it is to a vague goal like "Stuff the 401K".

Absolutely true.  Thanks for the input.  There is often more to life then 'the math'. 

I feel a bit bad for instigating some of the debate here.  However, I really do feel like THIS thread exists to celebrate those that have made the decision to pay down their mortgage...even though that may be 'bad' in some peoples view.  Seems silly to be constantly arguing about it when most here have already made the decision.


SwordGuy

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Re: Mortgage Payoff Club!!
« Reply #1385 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 #1386 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 #1387 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 #1388 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 #1389 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 #1390 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 #1391 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 #1392 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 #1393 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 #1394 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 #1395 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 75 and a yearly recurring 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 550,- 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.

allsummerlong

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Re: Mortgage Payoff Club!!
« Reply #1396 on: November 01, 2017, 10:14:22 AM »
Jan'15 - $139k
Feb'16 - $108k
Jul'16  - $99k
Apr'17 - $79k
Sept'17 - $69k

Nov 1 '17 - $63,400... goal is to be in the high 50s by Dec 31. Total Payoff May/June 2019. 

channtheman

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Re: Mortgage Payoff Club!!
« Reply #1397 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 #1398 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 #1399 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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