Author Topic: Mortgage Payoff Club!!  (Read 225762 times)

REAL WORLD EXPAT

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Re: Mortgage Payoff Club!!
« Reply #350 on: April 05, 2015, 07:21:00 AM »
Finding this thread a little late but I'm in, I only have 2 more payments left and it will be paid off in just under 11 years since we bought it. I hear all the arguments against paying it off and investing but I was able to invest too and considered the additional payments as safe returns (eventually), had my E-fund, maxed retirements accounts each year so paying it off made sense to me.

Plus the feeling of owning my home will be great! Still the nearly $10k in taxes are a kicker but once we get to FIRE we'll move.
« Last Edit: April 05, 2015, 07:33:49 AM by RW-Expat »

dabears847

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Re: Mortgage Payoff Club!!
« Reply #351 on: April 05, 2015, 09:28:35 AM »
Quote
Quote from: MrMurphy on April 15, 2013, 02:13:45 pm
Quote
In 188 months your mortgage would be 0 if you made extra payments of $1,500  per month or it would be $367,000 if you paid $0 extra.

And after 188 months you would be "saving" about $2000-$3000/month by not having a mortgage payment..plus the extra $1500/month extra you were paying.. Shouldn't that count for something???

No, because the math already takes this into account. If your portfolio was averaging greater than 3.5%, then your portfolio would be so big that you could liquidate a part of it, pay off the mortgage and have a sizable chunk left over. In an early chart I show the net benefit at various investment returns. At 8% you would be ahead by $151,000. If you can earn more than 3.5% then you are better off keeping the mortgage. If you can't earn 3.5%, then your safe withdrawal rate would be 1% or less based on age as you most likely will not be exceeding inflation.

I understand the psychological effect of paying down the mortgage, but mathematically it is a worse answer if you can hit 4% or more in your portfolio.

The government is giving away free money to jump start the economy. This is a once in the lifetime event. Those who pay it down faster are giving back the free money. If the choices are pay down the mortgage or blow your money, then obviously pay down the mortgage. If you are disciplined then invest in Vanguard and statistically you will be ahead.

Oh, Ok, i get it, because 188months is 15.5 yrs.. So, if you then invested the $3,500 for 14.5yrs after paying it off (total 30yrs) you'd still be ahead of investing $1500 for 30yr.. because that is the argument/misconception is that after it's paid off you'll have $xx extra to invest/catch up.

Is there a time frame, say if you could payit off in 2 yrs or 5yrs vs 15.5.. Would that make a diff?? Or does the interest rate make a diff?

I'm not trying to be an ass, i'm just trying to learn. I don't have a mortgage but big student loans.

Or you can see my situation here:
http://www.mrmoneymustache.com/forum/ask-a-mustachian/should-we-change-sl-repayment-plans/

I'd love any advice!!
Take a look at this updated worksheet. I worked  on Tomsang's sheet and found two primary concerns. I was seriously considering cutting back on mortgage pay down now that I'm under $100,000 balance but now I'm not so certain anymore. If I'm wrong, I'll probably shift more to Vanguard but I'm not seeing the risk reward.

1. Future Cash Flow is not calculated accurately for the accelerated Payoff club, not including the normal payment and extra payment once paid off.
2. The Investment rate is not applied to extra cash once the mortgage is paid off.

I added columns to the math and input sheet to show the differences. Notice the big swing in the compounding at the end of the cashflow. We went from lossing money paying off the house early of by 1.9Million and now we are making $550,000 by compounding the future cash flow.

D - C   Compounding Future Cash Flow         
   with Mortgage Paid Off         
Benefit (Loss)   7% Future Cash Flow 7038.56, year 6         
Investing vs.   Without Tax Gain Holdings         
Paying Down             
Mortgage   Neg Loss with Payoff, Positive Gain Compounding Future Cash flow         
 $669.26     $(904.81)   12   Tax Difference   
 $20,829.02     $(27,784.76)   60   Tax Difference   
 $245,687.97     $(97,661.48)   120   Tax and Compounding   
 $550,993.38     $(160,632.72)   180   Tax and Compounding   
 $925,475.73     $52,826.56    240   Tax and Compounding   
 $1,391,028.37     $203,111.20    300   Tax and Compounding   
 $1,977,557.12     $505,474.90    360   Tax and Compounding   

FIRE me

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Re: Mortgage Payoff Club!!
« Reply #352 on: April 06, 2015, 02:16:39 AM »
Finding this thread a little late but I'm in, I only have 2 more payments left and it will be paid off in just under 11 years since we bought it. I hear all the arguments against paying it off and investing but I was able to invest too and considered the additional payments as safe returns (eventually), had my E-fund, maxed retirements accounts each year so paying it off made sense to me.

Plus the feeling of owning my home will be great! Still the nearly $10k in taxes are a kicker but once we get to FIRE we'll move.

Paid mine off in 7 years. Now my savings rate is 70%.

Those are some awful property taxes, mine is less than 1K annual.
FIRE'd on January 4, 2017

tomsang

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Re: Mortgage Payoff Club!!
« Reply #353 on: April 06, 2015, 09:36:08 AM »
Quote
Quote from: MrMurphy on April 15, 2013, 02:13:45 pm
Quote
In 188 months your mortgage would be 0 if you made extra payments of $1,500  per month or it would be $367,000 if you paid $0 extra.

And after 188 months you would be "saving" about $2000-$3000/month by not having a mortgage payment..plus the extra $1500/month extra you were paying.. Shouldn't that count for something???

No, because the math already takes this into account. If your portfolio was averaging greater than 3.5%, then your portfolio would be so big that you could liquidate a part of it, pay off the mortgage and have a sizable chunk left over. In an early chart I show the net benefit at various investment returns. At 8% you would be ahead by $151,000. If you can earn more than 3.5% then you are better off keeping the mortgage. If you can't earn 3.5%, then your safe withdrawal rate would be 1% or less based on age as you most likely will not be exceeding inflation.

I understand the psychological effect of paying down the mortgage, but mathematically it is a worse answer if you can hit 4% or more in your portfolio.

The government is giving away free money to jump start the economy. This is a once in the lifetime event. Those who pay it down faster are giving back the free money. If the choices are pay down the mortgage or blow your money, then obviously pay down the mortgage. If you are disciplined then invest in Vanguard and statistically you will be ahead.

Oh, Ok, i get it, because 188months is 15.5 yrs.. So, if you then invested the $3,500 for 14.5yrs after paying it off (total 30yrs) you'd still be ahead of investing $1500 for 30yr.. because that is the argument/misconception is that after it's paid off you'll have $xx extra to invest/catch up.

Is there a time frame, say if you could payit off in 2 yrs or 5yrs vs 15.5.. Would that make a diff?? Or does the interest rate make a diff?

I'm not trying to be an ass, i'm just trying to learn. I don't have a mortgage but big student loans.

Or you can see my situation here:
http://www.mrmoneymustache.com/forum/ask-a-mustachian/should-we-change-sl-repayment-plans/

I'd love any advice!!
Take a look at this updated worksheet. I worked  on Tomsang's sheet and found two primary concerns. I was seriously considering cutting back on mortgage pay down now that I'm under $100,000 balance but now I'm not so certain anymore. If I'm wrong, I'll probably shift more to Vanguard but I'm not seeing the risk reward.

1. Future Cash Flow is not calculated accurately for the accelerated Payoff club, not including the normal payment and extra payment once paid off.
2. The Investment rate is not applied to extra cash once the mortgage is paid off.

I added columns to the math and input sheet to show the differences. Notice the big swing in the compounding at the end of the cashflow. We went from lossing money paying off the house early of by 1.9Million and now we are making $550,000 by compounding the future cash flow.

D - C   Compounding Future Cash Flow         
   with Mortgage Paid Off         
Benefit (Loss)   7% Future Cash Flow 7038.56, year 6         
Investing vs.   Without Tax Gain Holdings         
Paying Down             
Mortgage   Neg Loss with Payoff, Positive Gain Compounding Future Cash flow         
 $669.26     $(904.81)   12   Tax Difference   
 $20,829.02     $(27,784.76)   60   Tax Difference   
 $245,687.97     $(97,661.48)   120   Tax and Compounding   
 $550,993.38     $(160,632.72)   180   Tax and Compounding   
 $925,475.73     $52,826.56    240   Tax and Compounding   
 $1,391,028.37     $203,111.20    300   Tax and Compounding   
 $1,977,557.12     $505,474.90    360   Tax and Compounding

Here is the updated workbook.  I placed it here 

Since I believe you posted a modified workbook that doubles up the mortgage returns, I wanted to post the correct one here as well.  Check it out and let me know if anything needs to be updated.

Neustache

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Re: Mortgage Payoff Club!!
« Reply #354 on: April 06, 2015, 10:16:52 AM »
This is all super duper interesting....and I want to discuss....shall I start a new thread for it?  That way we can high five over here for mortgage payoff progress....and discuss the particulars elsewhere?  'Cause I just ran some rough numbers, and it looks like it's close to a wash for me, personally, which I find very interesting.  But I wonder, too, if it's very specific to numbers in a case by case basis?  Basically, our FI is not extended by much because I still need extra income to pay for my mortgage if I don't pay it off first.  I'm talking...work a few months extra to make up the difference. 

tomsang

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Re: Mortgage Payoff Club!!
« Reply #355 on: April 06, 2015, 10:43:59 AM »
This is all super duper interesting....and I want to discuss....shall I start a new thread for it?  That way we can high five over here for mortgage payoff progress....and discuss the particulars elsewhere?  'Cause I just ran some rough numbers, and it looks like it's close to a wash for me, personally, which I find very interesting.  But I wonder, too, if it's very specific to numbers in a case by case basis?  Basically, our FI is not extended by much because I still need extra income to pay for my mortgage if I don't pay it off first.  I'm talking...work a few months extra to make up the difference.

I would be interested in hearing about your situation and agree about clogging up the High Five page.  I just posted the calculator as I feel like the calculator that was by posted by dabears847 of my calc was not calculating correctly. 

We are discussing lots of mortgage related topics over on this thread:
http://forum.mrmoneymustache.com/investor-alley/paying-off-mortgage-early-how-bad-is-it-for-your-fi-date/

dabears847

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Re: Mortgage Payoff Club!!
« Reply #356 on: April 06, 2015, 04:12:03 PM »
I'll check out the other thread and maybe we need a new thread to reflect all the new information gathered. Also, I've checked the numbers on all three sheets posted and the greatest concern is missing the key elements I posted recently about future cash flow and applying the investment rate to future earnings.   

Balance on the House $75,900 and two rentals next.

tomsang

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Re: Mortgage Payoff Club!!
« Reply #357 on: April 06, 2015, 04:52:10 PM »
I'll check out the other thread and maybe we need a new thread to reflect all the new information gathered. Also, I've checked the numbers on all three sheets posted and the greatest concern is missing the key elements I posted recently about future cash flow and applying the investment rate to future earnings.   

Balance on the House $75,900 and two rentals next.

All the cash flows and investment rates are working properly in the updated worksheet.  I think you are not following how the calculator works.  It calculates a mortgage to term, it calculates it with a loan pay down(switching to investing when the loan is paid off), and it calculates a pure investment account.  It then figures out the benefit of investing vs. paying off the mortgage by month.  The summary page is just capturing different years. 

You are better off keeping your mortgage if your investment returns exceed your mortgage rate.  IE if you are getting 7% by investing or saving 4% by paying off your mortgage, you will be better off from month one through the 30 years by keeping the mortgage.  Let's take further discussions to the other thread.  I just wanted to clear that up that the calculator is taking into account the current and future cash flows or balances.

asauer

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Re: Mortgage Payoff Club!!
« Reply #358 on: April 07, 2015, 07:37:39 AM »
Awesome!  Think of all that $ you can save now.  Can't wait to be in your shoes soon.
Chapter closed for us!

I've been a long term reader of these forums.  We just paid off our mortgage, it didn't seem real until the letter from the mortgagee came in stating that the loan was closed paid in full.  A couple years ago I envisioned framing this letter when it arrived but now that the time has come it just went in a file with other documents.  It's still listed as a loan in good standing on Credit Karma, but I'm fine with this as long as it shows good standing.  We literally don't have any other debt to show on the credit report other than paid in full every month revolving balances on our credit cards.

Keep up the good work everyone, for me the self set 'milestones' in the mortgage payoff process made the progress seem tangible.  The investment accounts are getting a huge bump every month now, the next goal is FIRE.

indentured4now

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Re: Mortgage Payoff Club!!
« Reply #359 on: April 11, 2015, 12:50:11 PM »
Mrs. Indentured and I have the goal of payoff in 5 years on a $249k mortgage without gutting our current stash. 

Under $210K by year-end or bust!
Ugh, took a hit on $1K net tax bill that slowed progress.   The tax benefit of our mortgage coincidentally is just $1K per year for the privilege of throwing away another $6k net in interest.   New balance as of April 1 is $244880...   Hoping a bonus will knock $5k off that to get to the $230-ish range.   Also sold another $500 of junk towards the cause recently and have another $1k in clutter for sale to beef up the emergency/maintenance fund as well.   

hdatontodo

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Re: Mortgage Payoff Club!!
« Reply #360 on: April 11, 2015, 07:01:11 PM »
Update on trying to pay off the $99K mortgage balance this year.

I used bonus money, motorcycle sale proceeds, OT, $8K from the Mrs, money from selling a cabinet full of expendables from certain outdoor sport, and monthly extra principal payments, to reduce the balance to about $40K. Not bad for a little more than four months.

We will send about $2K extra each month ($18K). I have two 3-check months ($6K). I have about $500+ per month extra ($5K). I will have some OT this year.

I am a bit impatient thinking about the 150-some workdays left to get it done.

I will be 55 this year and might get laid off next year when a contract is over. My wife's salary can cover most of our expenses if our 15-year mortgage is gone.

Side note. She seldom spends money on clothes, jewelry, hair, etc but just bought a $3K mountain bike. Ouch.


Neustache

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Re: Mortgage Payoff Club!!
« Reply #361 on: April 12, 2015, 06:36:54 AM »
@hdatontodo - SO CLOSE!!  Rooting for ya! (and for everyone else!)

Emerald

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Re: Mortgage Payoff Club!!
« Reply #362 on: April 15, 2015, 12:18:45 PM »
Compared to y'all, I'm moving a little slower.  I just crossed the 50% mark, so now I officially own more of my house than the bank does.  I'm on track to pay it off completely by the end of 2017.

sequim

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Re: Mortgage Payoff Club!!
« Reply #363 on: April 17, 2015, 02:51:28 PM »
Our home listed for sale today and we are hoping in this market we can accept an offer and closed before the end of May.  Once our mortgage gets paid off from the proceeds, we will be headed to Salt Lake where we just bought a home for cash.  And then we'll be officially FIREd (or free to do what we want) and mortgage-free.  Can't believe I first posted only once almost exactly one year ago with hopes of becoming a mustachian but the "plan" wasn't in place quite yet.  And here we are a year later with that plan having been mostly executed.  Feels like sliding into home base...

Such a good feeling yet it seemed so overwhelming to contemplate in the beginning.  Will love having more time to read this forum and connect with like-minded people.

Frugalite

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Re: Mortgage Payoff Club!!
« Reply #364 on: April 18, 2015, 02:02:56 PM »
I have been a long time lurker, but am not quite cool enough to join the group yet, LOL. In January hubby and I paid off the last of our student loans, and now are working diligently at the last bit of a car loan we have. Projecting having it paid off by July and then we are going to begin chipping away at our modest mortgage of about $115,000. :) Looking forward to joining you all soon- in the meanwhile, good luck and keep soldiering on!

KBecks2

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Re: Mortgage Payoff Club!!
« Reply #365 on: April 20, 2015, 06:15:21 AM »
I have started sucking at this a little bit.  But I have been working on putting more into our kids' college savings.  Where is the balance? I'm not that sure.  But I paid an extra $300 this month, an extra $513 in March, and an extra $1,500 in January.

Our mortgage balance is currently at $115,000. 

I might make small swipes at this for a while. I am also debating investing vs. paying down mortgage, and I may try to split our contributions between the two.  I think no mortgage will be a huge emotional load off my husband though, moreso than an investment total.  However, I expect our investments can / will gain 7+% annually at a minimum.

allsummerlong

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Re: Mortgage Payoff Club!!
« Reply #366 on: April 20, 2015, 02:14:31 PM »
Down to $139k (!!!)

Goal for 2015 is to have it down to $105k by year's end. I feel we can do this, while still stashing in other accounts as well. Like to keep it balanced.


Down to $131,600
:)

Adjusting our year-end goal to <$110,000. Decided to put a little extra into the RRSPs this year.
« Last Edit: April 20, 2015, 02:18:50 PM by allsummerlong »

Able was I ERE

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Re: Mortgage Payoff Club!!
« Reply #367 on: April 25, 2015, 11:35:18 PM »
Just got a "Satisfaction of Mortgage" in the mail today!   After almost 11 years from purchase, and 2 rates-can-never-go-lower refinances, it's finally completely paid off.   
Part of the 2020 FIRE Cohort.

boarder42

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Re: Mortgage Payoff Club!!
« Reply #368 on: April 26, 2015, 07:55:58 PM »
Those who have paid their mortgages off should consider cash out refi at today's rates.  Its a great inflation hedge. Plus u will make more investing than the interest
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Debts_of_Despair

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Re: Mortgage Payoff Club!!
« Reply #369 on: April 27, 2015, 05:32:19 PM »
I just registered to get in on this action!

Since I've been a homeowner, 2015 was the first year where we didn't have any car loans or student loans between us.  Now it's time to get serious about ridding ourselves of the mortgage!  Started out with 92k when I bought the house eight years ago.   When I made my first principal-only payment in March I was at 77k.  I'm already down to 67k.  In a good month without any unexpected expenses, I can throw 4k in principal at it.  When I get down to 20k, I'll be pulling that amount from my rainy day fund to make one final balloon payment.  I hope to be completely done with it in a little over a year.

Anyway, I was pretty excited when I realized I could make this happen and this thread is good motivation to keep me going.  I will be posting update!
« Last Edit: May 05, 2015, 04:58:01 PM by Debts_of_Despair »

Debts_of_Despair

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Re: Mortgage Payoff Club!!
« Reply #370 on: May 07, 2015, 05:22:59 PM »
Pay week!  Down to 65.3k.

Neustache

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Re: Mortgage Payoff Club!!
« Reply #371 on: May 08, 2015, 10:43:56 AM »

Starting Mortgage:  123K
Current Balance: 122K



Just made my first extra payment of $1300...new mortgage balance is $119,800.00

Ahem....back on topic.

Made my August extra payment...new balance is........ $117,719.00   Woot!  Sent $1900 to the mortgage, plus Augusts regular payment.  Goal is to hit 80% LTV by my birthday in January. We shall see.


Okay, so not going to hit my original goal - had to pay cash for a roof replacement for our rental, plus my husband took up hunting ($$$) hopefully we can really be serious about this going forward.  And my hubby owes me..oh...like 10 deer before he can give up his new hobby. 

Current principal:  $113,199.00

Not terrible for having to shell out almost six grand in unplanned expenses.  My revised goal is to get this down to 80% by my next birthday, Jan 2016.  We have to pay for some foundation repairs to our current house, also, that's why I'm almost a year off of my original goal.

Current amount:  $111,523

Pretty sure I'll reach our goal of 104K by Jan 2016 if not before - although I am changing up strategies a bit and maxing out IRAs for tax savings and then throwing additional towards the mortgage.  Will make the mortgage payoff slower, but the tax savings and investing earnings will be worth it!

boarder42

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Re: Mortgage Payoff Club!!
« Reply #372 on: May 11, 2015, 11:15:40 AM »

Starting Mortgage:  123K
Current Balance: 122K


i really hope you're maxing out all tax advantaged account before dumping money into a mortgage


Just made my first extra payment of $1300...new mortgage balance is $119,800.00

Ahem....back on topic.

Made my August extra payment...new balance is........ $117,719.00   Woot!  Sent $1900 to the mortgage, plus Augusts regular payment.  Goal is to hit 80% LTV by my birthday in January. We shall see.


Okay, so not going to hit my original goal - had to pay cash for a roof replacement for our rental, plus my husband took up hunting ($$$) hopefully we can really be serious about this going forward.  And my hubby owes me..oh...like 10 deer before he can give up his new hobby. 

Current principal:  $113,199.00

Not terrible for having to shell out almost six grand in unplanned expenses.  My revised goal is to get this down to 80% by my next birthday, Jan 2016.  We have to pay for some foundation repairs to our current house, also, that's why I'm almost a year off of my original goal.

Current amount:  $111,523

Pretty sure I'll reach our goal of 104K by Jan 2016 if not before - although I am changing up strategies a bit and maxing out IRAs for tax savings and then throwing additional towards the mortgage.  Will make the mortgage payoff slower, but the tax savings and investing earnings will be worth it!
PM me about how to save 6% on your annual grocery Bill!

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hdatontodo

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Re: Mortgage Payoff Club!!
« Reply #373 on: May 11, 2015, 11:43:08 AM »
Current amount:  $111,523...Pretty sure I'll reach our goal of 104K by Jan 2016 if not before...

I don't know if you get paid on this schedule, but a number of people will get 3 pays in December since January 1 is a Friday and becomes a December pay for some (like me, which should be part of our final mortgage payment in January.)

dandypandys

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Re: Mortgage Payoff Club!!
« Reply #374 on: May 11, 2015, 12:16:03 PM »
i 'think' I'm in too. my rate is 5.9% and 86k to go.
since i am crap at stocks, and don't know anything about it, although i am learning right now on this forum (thanks!) is this not a wise decision?

birdman2003

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Re: Mortgage Payoff Club!!
« Reply #375 on: May 11, 2015, 12:31:13 PM »
i 'think' I'm in too. my rate is 5.9% and 86k to go.
since i am crap at stocks, and don't know anything about it, although i am learning right now on this forum (thanks!) is this not a wise decision?

You could always open a taxable investment account, add money and grow it until it surpasses the 86k mortgage balance.  Then you liquidate the account, pay taxes on your gains, and then "retire" your mortgage.

Otherwise you could send in extra principal payments as you accumulate cash, and get a "guaranteed" 5.9% rate of return (which is close to the historical average for the stock market).

dandypandys

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Re: Mortgage Payoff Club!!
« Reply #376 on: May 11, 2015, 12:36:34 PM »
i 'think' I'm in too. my rate is 5.9% and 86k to go.
since i am crap at stocks, and don't know anything about it, although i am learning right now on this forum (thanks!) is this not a wise decision?

You could always open a taxable investment account, add money and grow it until it surpasses the 86k mortgage balance.  Then you liquidate the account, pay taxes on your gains, and then "retire" your mortgage.

Otherwise you could send in extra principal payments as you accumulate cash, and get a "guaranteed" 5.9% rate of return (which is close to the historical average for the stock market).
Thank you bird man! i have a Q.. if i have a 403b with transamerica through my work, should i do it with them since i can see those Vanguard stocks i have some already, or do a separate thing with Vanguard where it is not coming straight off my paycheck tax free? Not sure if Transamerica 403b account lets me set up other things like this.. thought i can ask them too. I know nothing! learning much! Also, can you put money in to Vanguard and then get it out any time you like?
« Last Edit: May 11, 2015, 02:37:08 PM by dandypandys »

Neustache

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Re: Mortgage Payoff Club!!
« Reply #377 on: May 11, 2015, 04:13:07 PM »
Current amount:  $111,523...Pretty sure I'll reach our goal of 104K by Jan 2016 if not before...

I don't know if you get paid on this schedule, but a number of people will get 3 pays in December since January 1 is a Friday and becomes a December pay for some (like me, which should be part of our final mortgage payment in January.)


We get an extra paycheck in May and October - but the October one usually gets eaten up with property taxes (about $700 - thank goodness this will keep going down each year as our cars age!) Christmas ($500) and other normal budget stuff (food/giving/sitar lessons).  But yes, I should still, even with all of that, have about $900 extra to throw at either the mortgage or maxing out our IRAs.  Woot!  Love three paycheck months, but especially the one I get in May as the only odd thing that comes out of that is our life insurance which is about $500 and then the rest goes to our current goal.

ACLR8R

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Re: Mortgage Payoff Club!!
« Reply #378 on: May 11, 2015, 04:41:33 PM »
Just found this thread, so I thought I would toss my numbers in as well.

Trying to become more mustachian since I found MMM about 8 months ago. Luckily we bought our house at the bottom of the recession and only owed $121k. I refi'd last year to a 15yr at 2.75%, then I sold my FF Cobra, and my C6 Corvette and have dropped 70k or so and we are down do 50k left. Hoping to have it paid off by June 2016!

I know for most the math doesn't work out, when comparing it to investing but I always wondered, what if the house then becomes a rental property. Do the numbers get better?

Our plan is to pay this house off and then buy another and rent this one out. Yes we will have another mortgage, but the rent from our current house will pay for the mortgage on the next plus $3-400 per month. So we would still have our mortgage paid for, essentially, but increase our income by $3-400 per month.

I feel like that is a pretty good return on our money, especially when you factor in the house appreciating in value by 3-10% each year as well. (this house has already gone from 161k to 240k in value in 4 years due to the housing market recovering).

I know we got lucky in our timing, but I figure that has to be on par with investing the $121k, or is there a hole in my thinking somewhere?

boarder42

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Re: Mortgage Payoff Club!!
« Reply #379 on: May 12, 2015, 06:10:50 AM »
Just found this thread, so I thought I would toss my numbers in as well.

Trying to become more mustachian since I found MMM about 8 months ago. Luckily we bought our house at the bottom of the recession and only owed $121k. I refi'd last year to a 15yr at 2.75%, then I sold my FF Cobra, and my C6 Corvette and have dropped 70k or so and we are down do 50k left. Hoping to have it paid off by June 2016!

I know for most the math doesn't work out, when comparing it to investing but I always wondered, what if the house then becomes a rental property. Do the numbers get better?

Our plan is to pay this house off and then buy another and rent this one out. Yes we will have another mortgage, but the rent from our current house will pay for the mortgage on the next plus $3-400 per month. So we would still have our mortgage paid for, essentially, but increase our income by $3-400 per month.

I feel like that is a pretty good return on our money, especially when you factor in the house appreciating in value by 3-10% each year as well. (this house has already gone from 161k to 240k in value in 4 years due to the housing market recovering).

I know we got lucky in our timing, but I figure that has to be on par with investing the $121k, or is there a hole in my thinking somewhere?

If the math doesnt work out for it not being a rental it still doesnt work out when it is a rental.  Essentially at a 2.75% rate you're just burning money putting it in your mortgage as your rate is under the avg inflation rate. 
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ACLR8R

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Re: Mortgage Payoff Club!!
« Reply #380 on: May 12, 2015, 10:27:08 AM »
Just found this thread, so I thought I would toss my numbers in as well.

Trying to become more mustachian since I found MMM about 8 months ago. Luckily we bought our house at the bottom of the recession and only owed $121k. I refi'd last year to a 15yr at 2.75%, then I sold my FF Cobra, and my C6 Corvette and have dropped 70k or so and we are down do 50k left. Hoping to have it paid off by June 2016!

I know for most the math doesn't work out, when comparing it to investing but I always wondered, what if the house then becomes a rental property. Do the numbers get better?

Our plan is to pay this house off and then buy another and rent this one out. Yes we will have another mortgage, but the rent from our current house will pay for the mortgage on the next plus $3-400 per month. So we would still have our mortgage paid for, essentially, but increase our income by $3-400 per month.

I feel like that is a pretty good return on our money, especially when you factor in the house appreciating in value by 3-10% each year as well. (this house has already gone from 161k to 240k in value in 4 years due to the housing market recovering).

I know we got lucky in our timing, but I figure that has to be on par with investing the $121k, or is there a hole in my thinking somewhere?

If the math doesnt work out for it not being a rental it still doesnt work out when it is a rental.  Essentially at a 2.75% rate you're just burning money putting it in your mortgage as your rate is under the avg inflation rate.

My thinking (again could be flawed), but once the house is rented and it is bringing in around $1400 per month that's 16,800 per year. Which using the $121k payoff amount is almost 14% per year. Now I know you have to account for taxes and a month or two every couple of years that it isn't rented ( I have another property that was vacant two months in the past 3 years). But I would say a conservative 7-9% annually, and that still isn't factoring in appreciation of the home itself which has been almost 50% over the last 4 years (I know that wont continue, but home prices in Gilbert have been recovering very well).

What am I missing?

dandypandys

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Re: Mortgage Payoff Club!!
« Reply #381 on: May 12, 2015, 10:38:46 AM »
I've decided I'm in! yay! Gonna send a huge check to them this week :) take me down to 68k owed. Then we are going to put an extra 1000 towards it every month. yippee.
We want to sell it in a few years maybe 3, once we have it paid off and have cash for a downpayment on another house.

birdman2003

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Re: Mortgage Payoff Club!!
« Reply #382 on: May 12, 2015, 03:52:06 PM »
I've decided I'm in! yay! Gonna send a huge check to them this week :) take me down to 68k owed. Then we are going to put an extra 1000 towards it every month. yippee.
We want to sell it in a few years maybe 3, once we have it paid off and have cash for a downpayment on another house.

Sounds like a good plan.  If you did want to open an account with Vanguard (or any other broker) it would be separate from any other retirement plans offered through your work.  You would link it to your bank and transfer money to your Vanguard account which can then be used to buy your favorite funds.  You can sell them at any time, but most of the funds have a minimum required balance (if your account is at $5000 and you decide you need to pull out $4000 for an emergency, you can't sell $4000 worth of funds unless the minimum balance for that fund is $1000. Most of the funds have a minimum of $3000).  When you sell funds and transfer the money back to your bank, you'll pay taxes on the gains at tax time.  So don't spend it all. *smile*

But yeah, I would probably do what you describe and just send in an extra $1000 principal payment to your mortgage owner every month.
« Last Edit: May 12, 2015, 03:56:26 PM by birdman2003 »

dandypandys

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Re: Mortgage Payoff Club!!
« Reply #383 on: May 12, 2015, 04:22:41 PM »
I've decided I'm in! yay! Gonna send a huge check to them this week :) take me down to 68k owed. Then we are going to put an extra 1000 towards it every month. yippee.
We want to sell it in a few years maybe 3, once we have it paid off and have cash for a downpayment on another house.

Sounds like a good plan.  If you did want to open an account with Vanguard (or any other broker) it would be separate from any other retirement plans offered through your work.  You would link it to your bank and transfer money to your Vanguard account which can then be used to buy your favorite funds.  You can sell them at any time, but most of the funds have a minimum required balance (if your account is at $5000 and you decide you need to pull out $4000 for an emergency, you can't sell $4000 worth of funds unless the minimum balance for that fund is $1000. Most of the funds have a minimum of $3000).  When you sell funds and transfer the money back to your bank, you'll pay taxes on the gains at tax time.  So don't spend it all. *smile*

But yeah, I would probably do what you describe and just send in an extra $1000 principal payment to your mortgage owner every month.
Thanks! You just answered all my Q's i had swilling in my head and on another thread :)

boarder42

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Re: Mortgage Payoff Club!!
« Reply #384 on: May 13, 2015, 06:17:29 AM »
Just found this thread, so I thought I would toss my numbers in as well.

Trying to become more mustachian since I found MMM about 8 months ago. Luckily we bought our house at the bottom of the recession and only owed $121k. I refi'd last year to a 15yr at 2.75%, then I sold my FF Cobra, and my C6 Corvette and have dropped 70k or so and we are down do 50k left. Hoping to have it paid off by June 2016!

I know for most the math doesn't work out, when comparing it to investing but I always wondered, what if the house then becomes a rental property. Do the numbers get better?

Our plan is to pay this house off and then buy another and rent this one out. Yes we will have another mortgage, but the rent from our current house will pay for the mortgage on the next plus $3-400 per month. So we would still have our mortgage paid for, essentially, but increase our income by $3-400 per month.

I feel like that is a pretty good return on our money, especially when you factor in the house appreciating in value by 3-10% each year as well. (this house has already gone from 161k to 240k in value in 4 years due to the housing market recovering).

I know we got lucky in our timing, but I figure that has to be on par with investing the $121k, or is there a hole in my thinking somewhere?

If the math doesnt work out for it not being a rental it still doesnt work out when it is a rental.  Essentially at a 2.75% rate you're just burning money putting it in your mortgage as your rate is under the avg inflation rate.

My thinking (again could be flawed), but once the house is rented and it is bringing in around $1400 per month that's 16,800 per year. Which using the $121k payoff amount is almost 14% per year. Now I know you have to account for taxes and a month or two every couple of years that it isn't rented ( I have another property that was vacant two months in the past 3 years). But I would say a conservative 7-9% annually, and that still isn't factoring in appreciation of the home itself which has been almost 50% over the last 4 years (I know that wont continue, but home prices in Gilbert have been recovering very well).

What am I missing?

your thinking is extremely flawed.  its not just the pay off amount ROI you need to look at its the entire value of the home.  Meaning what you could sell it for.  if your home is worth anymore than 70k which it is... it doesnt even meet the 2% rule of renting.  at 1400 a month.  Not to mention just the amount of capital you're tossing in the trash paying it off any faster than minimum payments and investing the rest in other properties or the stock market.  Home appreciation typically keeps up with inflation.  you bought at a bottom so it has been higher.  but you will come out miles ahead selling that house and putting it into a smarter investment.  and also by not paying it down.  Paying down ALL debt is probably one of the biggest flaws of people on this site.  A mortgage at your rate is costing you 2-3 years of FIRE by paying it down vs investing the money in more property or stock investments.   And your house is not currently rentable its worth way too much for the rent you would bring in.   

post actual numbers

Home value - ???
assumed rental income - 1400
what you owe is not relevant.  only the rate which we already have.
what is your expected FIRE annual income
what do you currently have in savings

i can do the math and show you how bad an idea you're currently contemplating.  assuming that you bought it for around 140-150 and it has appreciated like you say ... you should not be renting this place even based on original purchase price. 
« Last Edit: May 13, 2015, 06:21:34 AM by boarder42 »
PM me about how to save 6% on your annual grocery Bill!

There is a 35k starwood bonus right now as well. PM me for the info.

ACLR8R

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Re: Mortgage Payoff Club!!
« Reply #385 on: May 13, 2015, 10:40:05 AM »
Just found this thread, so I thought I would toss my numbers in as well.

Trying to become more mustachian since I found MMM about 8 months ago. Luckily we bought our house at the bottom of the recession and only owed $121k. I refi'd last year to a 15yr at 2.75%, then I sold my FF Cobra, and my C6 Corvette and have dropped 70k or so and we are down do 50k left. Hoping to have it paid off by June 2016!

I know for most the math doesn't work out, when comparing it to investing but I always wondered, what if the house then becomes a rental property. Do the numbers get better?

Our plan is to pay this house off and then buy another and rent this one out. Yes we will have another mortgage, but the rent from our current house will pay for the mortgage on the next plus $3-400 per month. So we would still have our mortgage paid for, essentially, but increase our income by $3-400 per month.

I feel like that is a pretty good return on our money, especially when you factor in the house appreciating in value by 3-10% each year as well. (this house has already gone from 161k to 240k in value in 4 years due to the housing market recovering).

I know we got lucky in our timing, but I figure that has to be on par with investing the $121k, or is there a hole in my thinking somewhere?

If the math doesnt work out for it not being a rental it still doesnt work out when it is a rental.  Essentially at a 2.75% rate you're just burning money putting it in your mortgage as your rate is under the avg inflation rate.

My thinking (again could be flawed), but once the house is rented and it is bringing in around $1400 per month that's 16,800 per year. Which using the $121k payoff amount is almost 14% per year. Now I know you have to account for taxes and a month or two every couple of years that it isn't rented ( I have another property that was vacant two months in the past 3 years). But I would say a conservative 7-9% annually, and that still isn't factoring in appreciation of the home itself which has been almost 50% over the last 4 years (I know that wont continue, but home prices in Gilbert have been recovering very well).

What am I missing?

your thinking is extremely flawed.  its not just the pay off amount ROI you need to look at its the entire value of the home.  Meaning what you could sell it for.  if your home is worth anymore than 70k which it is... it doesnt even meet the 2% rule of renting.  at 1400 a month.  Not to mention just the amount of capital you're tossing in the trash paying it off any faster than minimum payments and investing the rest in other properties or the stock market.  Home appreciation typically keeps up with inflation.  you bought at a bottom so it has been higher.  but you will come out miles ahead selling that house and putting it into a smarter investment.  and also by not paying it down.  Paying down ALL debt is probably one of the biggest flaws of people on this site.  A mortgage at your rate is costing you 2-3 years of FIRE by paying it down vs investing the money in more property or stock investments.   And your house is not currently rentable its worth way too much for the rent you would bring in.   

post actual numbers

Home value - ???
assumed rental income - 1400
what you owe is not relevant.  only the rate which we already have.
what is your expected FIRE annual income
what do you currently have in savings

i can do the math and show you how bad an idea you're currently contemplating.  assuming that you bought it for around 140-150 and it has appreciated like you say ... you should not be renting this place even based on original purchase price.

Lo, I think throwing it in the trash might be a tad extreme, but here are my numbers.

Home value - $240,000
assumed rental income - 1400
what you owe is not relevant.  only the rate which we already have.
what is your expected FIRE annual income- Shooting for 30-50k, but wife and I will still be working part time at hobbies we enjoy. Only need about 20k in investment income.
what do you currently have in savings- $30k in cash in the bank, but approx $200k (not including equity in primary residence) , between 403b, Precious Metals, Roth, IRA, equity in other rental property, and State retirement (both teachers).

Ages 32, and 27.

I have a feeling this is going to hurt :)

Not planning to pay the rental off early, that is at 2.375%

boarder42

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Re: Mortgage Payoff Club!!
« Reply #386 on: May 13, 2015, 12:31:32 PM »
that home is worth 240000 ... meaning if you sold the home vs renting.  you would have 240k to invest in a good investment.  This home renting at 1400 is not that investment.  lets just use the annual market returns which can grow tax sheltered til you withdraw.  and lets pull out inflation so lets say 7% annual returns. that gives you 16,800.  you may say its the same as the house ... yes but you're not accounting for the fact that a good rule of thumb for rentals is to assume 50% goes to other things.  so you're making half that on you rental.  and you have to worry about tennants and working on the house and fixing it up each time and managing your property.  all to get less than half the return of just sitting it in a taxable account and putting it in VTSAX. 

Most people follow a 2% rule (most successful real estate investors)  you arent even at a 1% rule on this house.  Go read bigger pockets forum and you can learn alot about owning rentals.
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ACLR8R

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Re: Mortgage Payoff Club!!
« Reply #387 on: May 13, 2015, 03:17:42 PM »
that home is worth 240000 ... meaning if you sold the home vs renting.  you would have 240k to invest in a good investment.  This home renting at 1400 is not that investment.  lets just use the annual market returns which can grow tax sheltered til you withdraw.  and lets pull out inflation so lets say 7% annual returns. that gives you 16,800.  you may say its the same as the house ... yes but you're not accounting for the fact that a good rule of thumb for rentals is to assume 50% goes to other things.  so you're making half that on you rental.  and you have to worry about tennants and working on the house and fixing it up each time and managing your property.  all to get less than half the return of just sitting it in a taxable account and putting it in VTSAX. 

Most people follow a 2% rule (most successful real estate investors)  you arent even at a 1% rule on this house.  Go read bigger pockets forum and you can learn alot about owning rentals.

OK, I see one of the major differences in our thinking. I am looking at the investment I have made in the house of $121k, and you are looking at the value of the home $240k.

I do manage my properties and luckily in that last 4-5 years of doing it I have been no where near the 50% rule, probably no even 10%. Could be luck or doing my due diligence in the application process. I honestly spend less than 10 hrs per year managing.

I appreciate your perspective.

boarder42

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Re: Mortgage Payoff Club!!
« Reply #388 on: May 15, 2015, 08:46:12 AM »
selling that house and buying a house that costs less and has higher return to value is your 100% best option.  Doing what you're doing you are better off investing in vtsax.  its not a prespective its simple math
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ACLR8R

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Re: Mortgage Payoff Club!!
« Reply #389 on: May 15, 2015, 11:15:59 AM »
selling that house and buying a house that costs less and has higher return to value is your 100% best option.  Doing what you're doing you are better off investing in vtsax.  its not a prespective its simple math

Thanks I'll keep that in mind, there really aren't any less expensive houses in my area so I will just continue on my path. Might not be the absolute best way to do it, but being mortgage free by 33 isn't the end of the world either :)

I appreciate your input, even if it did seem a bit condescending.

boarder42

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Re: Mortgage Payoff Club!!
« Reply #390 on: May 15, 2015, 02:08:48 PM »
selling that house and buying a house that costs less and has higher return to value is your 100% best option.  Doing what you're doing you are better off investing in vtsax.  its not a prespective its simple math

Thanks I'll keep that in mind, there really aren't any less expensive houses in my area so I will just continue on my path. Might not be the absolute best way to do it, but being mortgage free by 33 isn't the end of the world either :)

I appreciate your input, even if it did seem a bit condescending.
+

then why ask the question if you just wanted a yes man .
PM me about how to save 6% on your annual grocery Bill!

There is a 35k starwood bonus right now as well. PM me for the info.

hdatontodo

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Re: Mortgage Payoff Club!!
« Reply #391 on: June 02, 2015, 08:47:23 PM »
[January] $99K mortgage balance...
[April] balance ... $40K. ...

June 1, $31.6K. Need to increase the next 7 payments by $25 to finish in January 2016.

asauer

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Re: Mortgage Payoff Club!!
« Reply #392 on: June 04, 2015, 07:09:19 AM »
Was able to throw another couple grand at the mortgage this month.  Down to 131K!

hdatontodo

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Re: Mortgage Payoff Club!!
« Reply #393 on: June 04, 2015, 08:40:22 AM »
[January] $99K mortgage balance...
[April] balance ... $40K. ...

June 1, $31.6K. Need to increase the next 7 payments by $25 to finish in January 2016.

Quite impressive, you already got all the cash sitting still in another account or you just pull a NFL paycheck?

I read posts here once in a while and figure that some of you throw on your mortgage more than our gross familial income. The special thing about you guys is not to repay the morgage fast but to dont follow the royal lifestyle (including housing) that your collaterals probably run.
The Mrs and I can just afford to scrape together the $5K payment from our paychecks. Only one of my 2 monthly checks had been needed prior. Getting OT @40/hr take-home covers a dinner out that was not in the budget. I have nil in savings but she has some. I plan to replenish savings next year.

At the peak of the market, the Mrs had gotten this house for $285K with a 30 year mortgage by herself before I came along. She had been renting out a room. My coming into the picture initially led to refi to a 15 year loan with some extra principal on top. It was about a year ago that I started really making big extra payments on the principal (after we finished the prepaid MD 529 for the kid.)
« Last Edit: June 04, 2015, 09:07:30 AM by hdatontodo »

latetotheparty1977

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Re: Mortgage Payoff Club!!
« Reply #394 on: June 05, 2015, 10:23:09 AM »
I've decided I'm in! yay! Gonna send a huge check to them this week :) take me down to 68k owed. Then we are going to put an extra 1000 towards it every month. yippee.
We want to sell it in a few years maybe 3, once we have it paid off and have cash for a downpayment on another house.

Sounds like a good plan.  If you did want to open an account with Vanguard (or any other broker) it would be separate from any other retirement plans offered through your work.  You would link it to your bank and transfer money to your Vanguard account which can then be used to buy your favorite funds.  You can sell them at any time, but most of the funds have a minimum required balance (if your account is at $5000 and you decide you need to pull out $4000 for an emergency, you can't sell $4000 worth of funds unless the minimum balance for that fund is $1000. Most of the funds have a minimum of $3000).  When you sell funds and transfer the money back to your bank, you'll pay taxes on the gains at tax time.  So don't spend it all. *smile*

But yeah, I would probably do what you describe and just send in an extra $1000 principal payment to your mortgage owner every month.
Thanks! You just answered all my Q's i had swilling in my head and on another thread :)

Forgive me, beginner question here: but what do you do if you do want to get your full amount of money out of the Vanguard brokerage account? You would get no gains on the money that is below the $3k minimum?

Debts_of_Despair

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Re: Mortgage Payoff Club!!
« Reply #395 on: June 07, 2015, 04:51:59 PM »
Pay week!  Down to 65.3k.

61k at time of this post.

birdman2003

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Re: Mortgage Payoff Club!!
« Reply #396 on: June 08, 2015, 01:12:31 PM »
I've decided I'm in! yay! Gonna send a huge check to them this week :) take me down to 68k owed. Then we are going to put an extra 1000 towards it every month. yippee.
We want to sell it in a few years maybe 3, once we have it paid off and have cash for a downpayment on another house.

Sounds like a good plan.  If you did want to open an account with Vanguard (or any other broker) it would be separate from any other retirement plans offered through your work.  You would link it to your bank and transfer money to your Vanguard account which can then be used to buy your favorite funds.  You can sell them at any time, but most of the funds have a minimum required balance (if your account is at $5000 and you decide you need to pull out $4000 for an emergency, you can't sell $4000 worth of funds unless the minimum balance for that fund is $1000. Most of the funds have a minimum of $3000).  When you sell funds and transfer the money back to your bank, you'll pay taxes on the gains at tax time.  So don't spend it all. *smile*

But yeah, I would probably do what you describe and just send in an extra $1000 principal payment to your mortgage owner every month.
Thanks! You just answered all my Q's i had swilling in my head and on another thread :)

Forgive me, beginner question here: but what do you do if you do want to get your full amount of money out of the Vanguard brokerage account? You would get no gains on the money that is below the $3k minimum?

If you had $2900 and the fund minimum is $3000, your money would be sitting around idle until you transfer another $100 to meet the fund minimum investment.  Once you have $3000 in your account, you can buy $3000 worth of shares.  For example, if the mutual fund was worth $44 a share, you could buy $3000 worth of that fund and have 68.182 shares in your account (68.182*44 = 3000).  Then a few months later, the fund price has increased from $44 per share to $49 per share.  Now your 68.182 shares are worth $3340.92 (68.182*49 = 3340.92).  You can't pull out more than $340.92 from this mutual fund or else your balance would be below the required minimum of $3000.  If you had an urgent need for $500, you would need to sell all your shares of the mutual fund.  That's why you shouldn't put money into a mutual fund unless you can leave it alone and let it grow.

birdman2003

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Re: Mortgage Payoff Club!!
« Reply #397 on: June 08, 2015, 01:13:12 PM »
More on topic, I am now below $60k left on my mortgage!

Heckler

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Re: Mortgage Payoff Club!!
« Reply #398 on: June 08, 2015, 01:28:59 PM »
$27,610 remaining. 8 months to go!

indentured4now

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Re: Mortgage Payoff Club!!
« Reply #399 on: June 14, 2015, 02:42:06 PM »
Mrs. Indentured and I have the goal of payoff in 5 years on a $249k mortgage without gutting our current stash. 

Under $210K by year-end or bust!

Slow and steady...  Threw the bonus at the mortgage (but decided to beef up the kid's 529 plans to cushion us from the college years instead of just paying down principal now at an unsustainable rate later)...   Now $239,500 half way through the year...   Putting passive income into it and the paydowns are starting to make notable positive momentum to the tune of $30 a month or so since we started accelerating a year ago...   So tracking to be around $225K by year end.    Sounds silly, but also as a Trekkie, I'm keeping Frugal Toque's "Jean Luc Picard" post on mortgage freedom bookmarked on my phone for inspiration.