Author Topic: Mortgage Payoff Club!!  (Read 429404 times)

Threshkin

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Re: Mortgage Payoff Club!!
« Reply #450 on: September 22, 2015, 10:11:20 AM »
I'be been onboard with this challenge for four years now. We started with our mortgage in 2008 with $230k owing. When our first child was born in 2011, we went down to one income and a deep desire to get rid of the debt. After contributing to superannuation (Australia), we've been throwing all our extra savings and surpluses into this sucker.

Balance today is $19200, and I CAN'T WAIT to make that final payment !! We're aiming for January 2016 free and clear- what a way to start the new year!! I love reading this thread, there's just no one in real life to discuss this with (we're 33 and 38).



Great job!

I could not agree more on the bolded part... I really appreciate the support & stories from this thread :)

So true!  The topic of mortgages came up the other day with friends.  I didn't dare mention where I'm at. ☺

I hear you on this.  It seems to be a badge of honor to have the biggest mortgage with the most dismal prospects of paying it off.

rjbf65

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Re: Mortgage Payoff Club!!
« Reply #451 on: September 22, 2015, 10:22:54 AM »
I'be been onboard with this challenge for four years now. We started with our mortgage in 2008 with $230k owing. When our first child was born in 2011, we went down to one income and a deep desire to get rid of the debt. After contributing to superannuation (Australia), we've been throwing all our extra savings and surpluses into this sucker.

Balance today is $19200, and I CAN'T WAIT to make that final payment !! We're aiming for January 2016 free and clear- what a way to start the new year!! I love reading this thread, there's just no one in real life to discuss this with (we're 33 and 38).



Great job!

I could not agree more on the bolded part... I really appreciate the support & stories from this thread :)

So true!  The topic of mortgages came up the other day with friends.  I didn't dare mention where I'm at. ☺

I hear you on this.  It seems to be a badge of honor to have the biggest mortgage with the most dismal prospects of paying it off.


My wife and I would like to upgrade in home at some point.. but it's going to be a tough decision to go back into debt to do it.  Maybe we can put it off a few years, but it's going to happen at some point.  I can't wait to pay my current one off.  I'm just a few months away from having a greater amount of cash in the bank versus mortgage balance.  Once that happens, and I have a $10K buffer, I'm pulling the trigger.

K-ice

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Re: Mortgage Payoff Club!!
« Reply #452 on: September 22, 2015, 12:24:33 PM »
Here is my mortgage payoff story.  Our mortgage was paid off within the past year. Of course I want to brag, don’t we all ;). But I also want to show what is possible. We were able to do this on a combined income between $85K and $150K depending on the year. In addition to that, one year we cashed out $40K in stocks as a one-time extra payment.  We did very little other savings and focused every extra penny on the mortgage. (Yeah, Yeah invest vs mtg is a whole other debate.) We had a blended mtg HELOC so every payment added to our “squishy debt” fund. This actually gave us more confidence to pay larger lumps.
 
Here is the breakdown starting with $326,500. 25y at 4% pmt about $1700,  max extra lump sums allowed per year $48K

Y1 $326,500   extra pmt $45,000 (Good year at new job)
Y2 $273,500   extra pmt $30,000 (Had a baby.)
Y3 $233,000   extra pmt $0  :(  (Work was unstable. We still stashed some cash.)
Y4 $221,000   extra pmt $48,000  (Yeah! We hit the max lump sum.)
Y5 $160,000   extra pmt $57,500 (This included double down of  $1700 extra for 6 months)

Balance on renewal about $90,000 (We were pissed at the bank and didn’t want to renew.)
“What do you mean you won’t renew, what bank are you transferring to?”

SO now has $45,000 extra
I had $30,000 extra
Argghhhh not quite enough.

I took out a LOC for remaining $15,000  (Mortgage officially paid off but no Champaign yet. SO doing their own dance of joy.)
LOC paid off within 6 months.  (Cork popped!)
Time to pay 5y 6 months

Total interest paid about $45,000 (This still seems like a lot considering how hard we hit the M0F**ing extra payments)
Total interest we would have paid if we took the scheduled 25y  $189,000 

indentured4now

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Re: Mortgage Payoff Club!!
« Reply #453 on: September 23, 2015, 06:57:36 PM »
Niiiice K-ice!   

Putting an extra grand towards our $238K beast this month after actually getting $400 for a surfboard I'd inherited and saving other shekels so down to $236K...   Mulling over putting a chunk before end of year so your payoff results are tempting me...   


The knitter

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Re: Mortgage Payoff Club!!
« Reply #454 on: September 26, 2015, 06:28:06 AM »
PMI Update. I received wrong information again from the 2nd person. Now they say that I do need to be at 78% since I don't have 24 months of payment history. If I were at 80% and had the 2 years of payment history I'd be fine. So even though I've paid off 10% in just about a year, they really need that extra 2%. I won't have the 5k for a few months so I'm super frustrated. They're basically milking me for a few hundred dollars of PMI. I let them know that when I refinance, there's literally no chance that I'll work with this bank. It shouldn't be this hard to remove PMI.

Well, that's a bummer.  You know, we were right at 2 years of payments when we got to 80% so I have no idea if that was an issue at our bank.

The plot thickens. Our contract says that we have to have no late payments within 2 years. We don't! It doesn't say "for" to years, so they're misinterpreting it. I'm going to be calling them again today and getting ready to escalate as needed since they're in breach of the contract.

My husband and I bought our home in 2013. We were told PMI at this point no longer automatically comes off at 80% equity. (New rule that says it is with you for the life of the loan, which is outrageous.) Our plan has been to refinance to a new loan. We are a couple weeks away (finishing up a project before our re-assessment).

Is it possible we were misinformed? I'd much rather have the PMI come off by itself. We have a good interest rate now and we are worried we will miss the window before the fed increases the rates.

Neustache

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Re: Mortgage Payoff Club!!
« Reply #455 on: September 26, 2015, 11:25:03 AM »
The knitter -

FHA loans (to the best of my knowledge) do keep PMI for the life of the loan.  We have a conventional loan.  You might look into refinancing if you have enough equity now and the rate would be better.

The knitter

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Re: Mortgage Payoff Club!!
« Reply #456 on: September 27, 2015, 09:01:55 PM »
Ah, thanks Neustache. After I posted I did some searching around and saw some articles about conventional loans that allowed for smaller down payments.

We were first time home buyers and didn't know that was an option. We were told our only option was an FHA loan. It may have been true at the time, but we probably should have researched more.

Here's hoping we can refinance before interest rates go up!

mom22boys

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Re: Mortgage Payoff Club!!
« Reply #457 on: September 28, 2015, 07:32:23 PM »
I just started the refinance ball rolling today. I bought my house less than a year ago, and decided I wanted to move from a 30yr at 4.125 to a 15yr mortgage. Got locked in for 3.375 with only around $400 closing costs (in total). My goal is still to pay it off within 10 years, but I first want to pay off the darn specials.... much higher interest rate... then start plugging extra payments to the mortgage. Just the refinance alone with no extra payments will save me over 22k. Can't wait to get this mortgage gone!

Faraday

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Re: Mortgage Payoff Club!!
« Reply #458 on: September 28, 2015, 08:17:46 PM »
I'm in. Why?

- I can "sell" mortgage paydown to DW. I can't "sell" investment vs. paydown in a down equities market.
- I have an obligation to DW in case I'm hit by a bus.
- In the "hit by a bus" scenario, investments have to be managed. A paid off mortgage is clear and simple.
- refi objective in January 2016 will make the house "as cheap as a double wide"
- My timeframe to FIRE is 5 years, not 30 years.
- While I do enjoy buying more value in this down market, I'm using a kind of "blended" approach by paying some against the mortgage. That means my total YTD returns are still beating the S&P while I'm simultaneously lowering risk.
- I'm building in solar hot water heat, solar PV panels, more efficient heat pump and the lot has an almost endless supply of hardwood for burning. That means my home is NOT a fungible asset.

I like the comments above in the thread about relative risk. I got wiped out in Thermo* stocks when the principals set a honeypot and then obliterated the stock value. It wasn't on the scale and visibility of an Enron, but it had a similar effect on me. No one can decide one day your house is worthless - although they can take it from you if it's not paid off free and clear.

FIRE in 2020.

Neustache

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Re: Mortgage Payoff Club!!
« Reply #459 on: September 29, 2015, 05:52:25 AM »
^ Yep, mefla...that's kind of where we are.  Hubby wants to pay down the mortgage - I've got him talked into doing t. IRA contributions though, to decrease taxes, but after that any extra goes to mortgage pay down.

plainjane

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Re: Mortgage Payoff Club!!
« Reply #460 on: September 30, 2015, 07:05:44 AM »
It was painful to wait until 9am to see the numbers flip over this morning, but we're officially below $20k.
Using procrastination to my advantage since 2001.

CM*TO Is a thing!! We have a few bunks left - join us in September.

cheddarpie

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Re: Mortgage Payoff Club!!
« Reply #461 on: September 30, 2015, 12:06:31 PM »
That way, if the bear comes and takes all my porridge, I can still live comfortably working whatever job I can find and I don't have to worry about living in my car or moving.

This. It's not about maximizing financial gains, it's about peace of mind and almost-guaranteed long-term stability.

I'll have my $250+k mortgage paid off in less than five years from inception. I'm fully funding my retirement accounts and have a hefty emergency fund in the meantime and A-OK missing out on any potential gains (and losses!) in my liquid stash as I work on my mortgage payoff goal. Mortgage first, stash next, then FIRE with no ongoing payment or debt obligations other than utilities and taxes.

Faraday

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Re: Mortgage Payoff Club!!
« Reply #462 on: September 30, 2015, 02:08:31 PM »
That way, if the bear comes and takes all my porridge, I can still live comfortably working whatever job I can find and I don't have to worry about living in my car or moving.

This. It's not about maximizing financial gains, it's about peace of mind and almost-guaranteed long-term stability.

I'll have my $250+k mortgage paid off in less than five years from inception. I'm fully funding my retirement accounts and have a hefty emergency fund in the meantime and A-OK missing out on any potential gains (and losses!) in my liquid stash as I work on my mortgage payoff goal. Mortgage first, stash next, then FIRE with no ongoing payment or debt obligations other than utilities and taxes.

cheddarpie, I am doing almost the same thing. I put the stash first and mortgage second, but that's only because I pay the mortgage with post-tax money and stash using the pre-tax sheltering that the 401k's provide. (I have a Roth IRA but the yearly limits on that keep it a distant third.) Like you, I can't wait to get to only utilities and taxes as ongoing financial obligations. If I'm still working, I'll be ramming cash in the stash with prejudice.

Accidental Miser was hilarious and true with that quote. See, that's the crucial thing here: you can lose the house and all you've invested in it if you lose the ability to make the payments via job loss or sickness. What started me on this path is that I projected forward about 15 years and realized we have a high probability of losing the house should we run the mortgage to maturity because the mortgage becomes a cash flow problem in 5 years.

I've seen talk of the mortgage being a great hedge against inflation, but there's no hedge against having the note called by the bank and I KNOW people who've had that experience. (granted, they were consuma suckkas) So a paid-off home is an even more effective hedge against inflation and job loss. While a low interest rate might seem like some kind of wonderful, magic money (and I am getting the lowest I possibly can),  if you lose your job or get sick and can't make the payments, the lowest interest rates in the world aren't gonna help you then.
« Last Edit: September 30, 2015, 02:20:40 PM by mefla »
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cheddarpie

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Re: Mortgage Payoff Club!!
« Reply #463 on: September 30, 2015, 03:11:00 PM »
I put the stash first and mortgage second, but that's only because I pay the mortgage with post-tax money and stash using the pre-tax sheltering that the 401k's provide. (I have a Roth IRA but the yearly limits on that keep it a distant third.) Like you, I can't wait to get to only utilities and taxes as ongoing financial obligations. If I'm still working, I'll be ramming cash in the stash with prejudice.


Mefla, that's great! I think we're doing the same thing, I just didn't explain it as well ... I also max out my 401k and Roth every year, then focus on mortgage after that. What I call my "stash" is the money to cover the ~30 years between now and when I intend to start drawing on the retirement accounts. There's not much in it yet. :)

Faraday

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Re: Mortgage Payoff Club!!
« Reply #464 on: September 30, 2015, 05:22:42 PM »
Mefla, that's great! I think we're doing the same thing, I just didn't explain it as well ... I also max out my 401k and Roth every year, then focus on mortgage after that. What I call my "stash" is the money to cover the ~30 years between now and when I intend to start drawing on the retirement accounts. There's not much in it yet. :)

That's OK if there's not much in the post-tax stash: you're still in your 30's and have plenty of time for it to grow. DW and I are in our 50's so it won't be very long before we can get the 401k money and I expect we aren't going to see any appreciable market-based growth. So Roth is the only post-tax stash I have. 

BTW: that's probably the most crucial fact about why I'm prepaying the mortgage: all the arguments against presuppose floating your money in the stock market for 30 years. We have nowhere near that - I'm just desperately trying to make things happen before our 60's. I believe I have about 5 more "good years" to stash money, so I'm maxing pre-tax and paying the rest against the house.

BTW: I'm eagerly making my 401k contributions in this down market we're having, but the contributions to my "Home Mortgage Bond" give me yields that beat the market. Although my 401k is all S&P 500 Index, my rate of return is about 2% higher due to the positive effect of paying the mortgage.  House is maintaining value, so I'm not losing anything there either.

I'm hoping for very low interest rates in January (they traditionally are very low then) and I'll refi into a 10 year (at least).
FIRE in 2020.

Faraday

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Re: Mortgage Payoff Club!!
« Reply #465 on: September 30, 2015, 05:32:20 PM »
"Letting it Ride", A Cautionary Tale

I don't know if anyone here is old enough to remember higher mortgage interest rates, but my last home carried a 30 year mortgage at 5.25% and on the financial advice I had been given at the time, I "let it ride" because it was "good debt". (There was a home equity loan in there too, but that's a story for another day...). We didn't expect to carry the loan to term as we thought we would "upgrade" within five years.

The five year upgrade didn't happen and we were in the house 18 years into a 30 year loan. We got a little appreciation, but I was shocked at how small of a dent we made in the principal: even though the house appreciated, we walked away with only a net profit on the sale of $10k after paying realtor, legal fees and various costs the seller pays. That was a really, really hard lesson to learn and it seemed to make perfect sense until we sold, when we then saw the insanity of it.

I did refinance at one point. (That's how we got to 5.25% - the original loan was higher) In fact, the credit union was glad to "help me save some money" and push the interest rate down a point. Problem is, I didn't shop around - other people were getting better rates and I didn't know you could do such a thing as shop the mortgage. Plus, I got no breaks on the refi and paid the full suite of fees just to do so.

Now, to my credit, I did ask about and check into a 15 year loan. But I followed the advice that I could "turn a 30 into a 15 by paying ahead, and if you needed the cash, you could just stop the double payments".

See the evil here? Prepayments pay both principal and interest, when you should only be paying against the principal. And there wasn't a soul in the world, and certainly not at the credit union, who was gonna tell me that little information gem!

That damned 30 year credit union loan is the biggest reason we got such a late start on our savings toward FI. It made me physically sick to look at the amortization tables when we were done. Of course, that's when I learned the importance of the amortization table in truly understanding a mortgage loan.

Now: You could argue that I shouldn't have bought the house at all and should have rented. Nice try, but wrong. We live in a moderate-to-high COL area and our payments on that house were less than a 3 bedroom apartment. In other words, yes, the loan was an inflation hedge and we DID get back some money after the sale of the house. But it still kept us "house poor" for no good reason other than to pay interest to the credit union.

Now, I don't mean to come across like a complainypants whineybaby. That house was the best we could afford in the best neighborhood we could afford. Our boys spent all their growing up years in a safe and positive and fun environment. We got tremendous benefit out of that house and it did a great job for the time we needed it.

But calling a mortgage "good debt" and saying you should let it go to term is, like most financial lies, mostly based in truth. But it gets down to what your personal situation and goals are, how old you are, and how much income you have and how stable that income is. True, there is a good argument for investing instead of paydown, but if you are in the house already and you don't have a 30 year time window to let your investments grow, then you're on the track of paying the banker his interest and there's no point in that.

If I Had A Do-Over: what would I do differently?

1)  I'd shop mortgages and after 5 years, refi into a 15 or 10 year mortgage.
2) Drive a far more fuel efficient vehicle.
3) Cut costs of things like television, cellphone and utilities.
4) Pump everything I've got into 401k to cut tax burden.
5) Pump all the rest into the mortgage as hard as I could go until payoff.

That's exactly what I'm doing today with the second home.
« Last Edit: September 30, 2015, 06:25:46 PM by mefla »
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ozbeach

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Re: Mortgage Payoff Club!!
« Reply #466 on: October 01, 2015, 12:02:36 AM »
It was painful to wait until 9am to see the numbers flip over this morning, but we're officially below $20k.

On my last payment, I was still a few hundred dollars short. I literally raided the piggy bank and took a huge bag of coins to the bank just to get me over the line!
FIREd @ 52

ozbeach

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Re: Mortgage Payoff Club!!
« Reply #467 on: October 01, 2015, 12:06:32 AM »
"Letting it Ride", A Cautionary Tale

I don't know if anyone here is old enough to remember higher mortgage interest rates, but my last home carried a 30 year mortgage at 5.25%

They got to 17% in Australia during the early 90s. Can you imagine the trouble people would be in if that happened today!
FIREd @ 52

marty998

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Re: Mortgage Payoff Club!!
« Reply #468 on: October 01, 2015, 01:49:29 AM »
Hmm.. I forgot to post here, but I suppose I joined the Paid Off Club on the 16th.

"Letting it Ride", A Cautionary Tale

I don't know if anyone here is old enough to remember higher mortgage interest rates, but my last home carried a 30 year mortgage at 5.25%

They got to 17% in Australia during the early 90s. Can you imagine the trouble people would be in if that happened today!

It won't happen (anytime soon). The economy would burn long before that happened, negating the need for rates to go that far.

The level of indebtedness is so high that minor movements in rates upwards will have a dramatically higher impact on households than historically.

I'm of the view that the Great Deleveraging* has to happen eventually. Whether it will be quick and painful or long drawn out and painful remains to be seen.

* My phrase, it's not a recognised economic term...yet :)

Comar

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Re: Mortgage Payoff Club!!
« Reply #469 on: October 01, 2015, 03:17:08 AM »
I'm joining in.

I have a house in Iceland. Bought it for 123k dollars (16.5 million icelandic crowns) in 2012. Started making extra payments early last year and am now down to 88.4k dollars. Currently I throw about 560 dollars at it each month. I have also thrown some extra cash at the mortage, such as tax repayments and such.

From the start I have used the strategy of adding to the payments each month. Each downpayment reduces the monthly mortage payment so for the next downpayment I have added the extra dollars the mortage payment has been reduced. Call it a snowball strategy?

My goal is to KO the mortage in 5 years. I'm turning 30 this month and want it finished before I turn 35.
87.5 k left. Paid 562 extra this month.
Payed 1500$ this month which is larger than my average amount. Felt good. The 1st of each month is probably my favorite time of the month.

mom22boys

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Re: Mortgage Payoff Club!!
« Reply #470 on: October 01, 2015, 10:56:21 AM »
Ok, I think I'm going to make the leap and join in the club.  I originally was convinced with the 'invest it' and make more to pay off the mortgage later, but I just hate having this debt. I'm still going to take a hybrid approach though, similar to mefla and cheddarpie. I'm maxing out my 401k, HSA, rIRA (too high income for tIRA deduction benefit, so I do a tIRA and role over into a rIRA). Plus, so far this year I've even done 14k into my Mega backdoor 401K, which I'll roll over soon into a Roth.  I could do another 6K on the Mega backdoor, but I decided to switch gears and put that toward the house instead.

Mortgage info:
Oct 2105      156k

Goal:
Paid off in 5 years

NoraLenderbee

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Re: Mortgage Payoff Club!!
« Reply #471 on: October 01, 2015, 11:39:00 AM »
I'm interested in hearing everyone's stories. I understand the "invest it" argument, but if we paid off the mortgage, that would lower my living expenses by $900 per month. We're in our 50s and, like mefla, don't have a lot of time.

Faraday

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Re: Mortgage Payoff Club!!
« Reply #472 on: October 01, 2015, 11:40:34 AM »
Ok, I think I'm going to make the leap and join in the club.  I originally was convinced with the 'invest it' and make more to pay off the mortgage later, but I just hate having this debt. I'm still going to take a hybrid approach though, similar to mefla and cheddarpie. I'm maxing out my 401k, HSA, rIRA (too high income for tIRA deduction benefit, so I do a tIRA and role over into a rIRA). Plus, so far this year I've even done 14k into my Mega backdoor 401K, which I'll roll over soon into a Roth.  I could do another 6K on the Mega backdoor, but I decided to switch gears and put that toward the house instead.

Mortgage info:
Oct 2105      156k

Goal:
Paid off in 5 years

mom22 and nora, keep in mind, I get zero benefit from "selling" this idea to anyone. If it works for you, I'm thrilled. If it doesn't, well, plenty of people here have already called me stupid and that's A-OK by me.

In case this applies any to you, I can summarize my situation this way:

I'm 53 and my stash is about $200k, remaining mortgage principal is $100k.

With mortgage, I would need $1M stash to FIRE and make the mortgage payment at 4% SWR.
(That means I or the market would have to generate $800k.)

With no mortgage, I can FIRE whenever I reach $480k at 4% SWR.
(That means I would have to generate $100k, THEN I and the market would generate $280k, total of $380k to FIRE.

So you see where this goes? Maybe the market returns will produce more money than mortgage prepayment over 30 years, but I don't have that kind of time. If I don't prepay the mortgage, then I'm COMMITTED to the idea that my job plus the market will get me $800k in about however many years it takes. The other way, I reach FIRE poorer, but in a shorter time. I'll be able to FIRE with another $380k in about 5 years.
« Last Edit: October 01, 2015, 11:44:11 AM by mefla »
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mom22boys

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Re: Mortgage Payoff Club!!
« Reply #473 on: October 01, 2015, 12:11:53 PM »
Thanks mefla.  I've read many threads on this topic, and I see benefit in BOTH approaches.  I just came to a point where I needed to draw a line in the sand, and decide on an approach. As we all know, we are all doing way better than most non-MMMers so I look at it as a win/win.



plainjane

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Re: Mortgage Payoff Club!!
« Reply #474 on: October 01, 2015, 12:27:35 PM »
Hmm.. I forgot to post here, but I suppose I joined the Paid Off Club on the 16th.

Congratulations!
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Neustache

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Re: Mortgage Payoff Club!!
« Reply #475 on: October 01, 2015, 12:33:20 PM »
mefla - I'm of the pay it down variety, myself, but you are over saving if you are trying to saving your annual mortgage payments times 25.   But I'm with you, I'm paying off the mortgage before FIRE and I have a lower rate than you (4.25).  I could spend some money and refi to a lower rate, but my husband doesn't want to, he just wants it paid off.  I for one will relish in the warm-fuzzy secure feelings I get when we own our home outright, even if we miss some returns.

Faraday

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Re: Mortgage Payoff Club!!
« Reply #476 on: October 01, 2015, 02:13:19 PM »
mefla - I'm of the pay it down variety, myself, but you are over saving if you are trying to saving your annual mortgage payments times 25.   But I'm with you, I'm paying off the mortgage before FIRE and I have a lower rate than you (4.25).  I could spend some money and refi to a lower rate, but my husband doesn't want to, he just wants it paid off.  I for one will relish in the warm-fuzzy secure feelings I get when we own our home outright, even if we miss some returns.

Neustache, you are right...if I had 30 years to save. There's another thread where boarder42 is trying to beat me up for the same reason (and he's not being as nice as you about it....). I don't have the cash flow it would take to "oversave", although it's a really nice thought. Before I found MMM, I was already hacking on the mortgage for the historical reasons I mention above in this thread, when I got my ass handed to me by my sweet little local credit union.

I'm on a 5 year plan to FIRE and taking a "blended" approach, because I can kill a $100k-remaining mortgage faster than I can save the extra cash I need to stash in order to generate a monthly mortgage payment of $1700.

What all the "don't pay down your mortgage, stupid!" people mean is that it makes sense over a 30 year window. But I'm hot on fire to FIRE because I'm already in my 50's. So I'm looking for the fastest possible route to FIRE.

What none of those folks can tell you is, how soon you'll be able to overtake the mortgage with payments from your stash. Some believe it's 14-16 years into a 30 year mortgage, but most don't know. cFIREsim doesn't predict that.

And all I have is 5 years. so I take the approach I take.
FIRE in 2020.

YoungGranny

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Re: Mortgage Payoff Club!!
« Reply #477 on: October 02, 2015, 10:42:34 AM »
Been lurking here for a while but figured I'd finally make an account! I also am trying to pay off my mortgage (before I'm 30 ideally)... I bought my house 1.5 years ago with a PMI on it (dumb yes - but i believed it was a good time to buy). Finally paid my balance to 79.8% and they said the PMI won't drop off without an appraisal until it is originally scheduled to reach 78% (ie 7 more years!). Long story short I figured if I was going to pay for an appraisal I might as well re-finance to go from a 4.75% rate to 3.25%. That should be done next month and I just got the appraisal back and my home has gained $20k!! Excited now that it seems like my re-finance will happen with no issues and I'll have that nasty $80 PMI GONE! Sharing here since none of my real-life friends would think it's terribly exciting :)
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cheddarpie

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Re: Mortgage Payoff Club!!
« Reply #478 on: October 02, 2015, 10:58:18 AM »
YoungGranny, congrats!! It's SO AWESOME that you are thinking about all of these things and doing all of these things and educating yourself about all of these things when you are still in your 20s. I'm sure I am not alone in saying I wish I had been as on top of it as you are! :D

NoraLenderbee

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Re: Mortgage Payoff Club!!
« Reply #479 on: October 02, 2015, 11:51:44 AM »


mom22 and nora, keep in mind, I get zero benefit from "selling" this idea to anyone. If it works for you, I'm thrilled. If it doesn't, well, plenty of people here have already called me stupid and that's A-OK by me.



Mefla, I now you're not selling anything and I certainly am not calling you stupid. I violently agree with you, actually. I'm 52 and we refinanced a few years ago. I definitely don't want to be paying a mortgage for the next 25 years.

It's likely that I will get an inheritance in the next year or two that will be more than enough to pay it off, and I plan to do it despite the investing-vs-debt argument. (Thank you Mom and Dad for being good with money.)

YoungGranny

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Re: Mortgage Payoff Club!!
« Reply #480 on: October 02, 2015, 12:19:54 PM »
Thank you cheddarpie! It can be discouraging to see everyone on here leaps and bounds ahead of me but I try to use it as motivation to get my butt in gear!
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Faraday

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Re: Mortgage Payoff Club!!
« Reply #481 on: October 02, 2015, 03:43:18 PM »
mom22 and nora, keep in mind, I get zero benefit from "selling" this idea to anyone. If it works for you, I'm thrilled. If it doesn't, well, plenty of people here have already called me stupid and that's A-OK by me.

Mefla, I now you're not selling anything and I certainly am not calling you stupid. I violently agree with you, actually. I'm 52 and we refinanced a few years ago. I definitely don't want to be paying a mortgage for the next 25 years.

It's likely that I will get an inheritance in the next year or two that will be more than enough to pay it off, and I plan to do it despite the investing-vs-debt argument. (Thank you Mom and Dad for being good with money.)

I just wanted to make sure you know "I come in peace". :-) There be an awful lot o' hot air on this subject in these here parts. I'm a pre-payer but I maximize pre-tax stashing. My post-tax money goes into my "real estate bond". :-)

And please, by all means, violently agree with me anytime. :-) :-) :-)
FIRE in 2020.

dabears847

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Re: Mortgage Payoff Club!!
« Reply #482 on: October 05, 2015, 07:32:23 PM »
"Letting it Ride", A Cautionary Tale

I don't know if anyone here is old enough to remember higher mortgage interest rates, but my last home carried a 30 year mortgage at 5.25% and on the financial advice I had been given at the time, I "let it ride" because it was "good debt". (There was a home equity loan in there too, but that's a story for another day...). We didn't expect to carry the loan to term as we thought we would "upgrade" within five years.

The five year upgrade didn't happen and we were in the house 18 years into a 30 year loan. We got a little appreciation, but I was shocked at how small of a dent we made in the principal: even though the house appreciated, we walked away with only a net profit on the sale of $10k after paying realtor, legal fees and various costs the seller pays. That was a really, really hard lesson to learn and it seemed to make perfect sense until we sold, when we then saw the insanity of it.

I did refinance at one point. (That's how we got to 5.25% - the original loan was higher) In fact, the credit union was glad to "help me save some money" and push the interest rate down a point. Problem is, I didn't shop around - other people were getting better rates and I didn't know you could do such a thing as shop the mortgage. Plus, I got no breaks on the refi and paid the full suite of fees just to do so.

Now, to my credit, I did ask about and check into a 15 year loan. But I followed the advice that I could "turn a 30 into a 15 by paying ahead, and if you needed the cash, you could just stop the double payments".

See the evil here? Prepayments pay both principal and interest, when you should only be paying against the principal. And there wasn't a soul in the world, and certainly not at the credit union, who was gonna tell me that little information gem!

That damned 30 year credit union loan is the biggest reason we got such a late start on our savings toward FI. It made me physically sick to look at the amortization tables when we were done. Of course, that's when I learned the importance of the amortization table in truly understanding a mortgage loan.

Now: You could argue that I shouldn't have bought the house at all and should have rented. Nice try, but wrong. We live in a moderate-to-high COL area and our payments on that house were less than a 3 bedroom apartment. In other words, yes, the loan was an inflation hedge and we DID get back some money after the sale of the house. But it still kept us "house poor" for no good reason other than to pay interest to the credit union.

Now, I don't mean to come across like a complainypants whineybaby. That house was the best we could afford in the best neighborhood we could afford. Our boys spent all their growing up years in a safe and positive and fun environment. We got tremendous benefit out of that house and it did a great job for the time we needed it.

But calling a mortgage "good debt" and saying you should let it go to term is, like most financial lies, mostly based in truth. But it gets down to what your personal situation and goals are, how old you are, and how much income you have and how stable that income is. True, there is a good argument for investing instead of paydown, but if you are in the house already and you don't have a 30 year time window to let your investments grow, then you're on the track of paying the banker his interest and there's no point in that.

If I Had A Do-Over: what would I do differently?

1)  I'd shop mortgages and after 5 years, refi into a 15 or 10 year mortgage.
2) Drive a far more fuel efficient vehicle.
3) Cut costs of things like television, cellphone and utilities.
4) Pump everything I've got into 401k to cut tax burden.
5) Pump all the rest into the mortgage as hard as I could go until payoff.

That's exactly what I'm doing today with the second home.

[I don't think you paid the full interest amount on principle payments. The interest plan should adjust after each payment or each extra principal payment. If you did a 30 year and then refinanced to another 30 year then yes, but each extra payment would reset the amortization schedule.]

Faraday

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Re: Mortgage Payoff Club!!
« Reply #483 on: October 05, 2015, 11:34:22 PM »
....stuff was here...
[I don't think you paid the full interest amount on principle payments. The interest plan should adjust after each payment or each extra principal payment. If you did a 30 year and then refinanced to another 30 year then yes, but each extra payment would reset the amortization schedule.]

Principal. And yes, you are correct, the loan re-amortizes with principal abatement. I take advantage of that principle regularly on the current 15 year mortgage. The next one will be 10 years.

I've avoided paying well over $100,000 in interest as-compared to the initial 30 year loan. I'm too lazy to look up the exact number right now but I think from my original documents it was somewhere around $163,000 if I had never refinanced nor prepaid.  I paid fees to refinance the first time, but I've gotten paid ever since.
FIRE in 2020.

Debts_of_Despair

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Re: Mortgage Payoff Club!!
« Reply #484 on: October 07, 2015, 09:04:51 AM »
38.2k.

Burgeoning school tax bill due this month.  Went up 6% from last year.  WTF?! This should be my last major expense that gets in my way of payoff.  Also, I just finished paying into my employer's pension plan so that effectively is a 3% raise.  I don't need to tell you guys where that money is now going...

rjbf65

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Re: Mortgage Payoff Club!!
« Reply #485 on: October 07, 2015, 11:21:55 AM »
I'll join.

Started June 2014 at 71k.

It's currently $55k.  Goal is to finish it off by next June.   Have 20k in cash that would finish it off by then.  We are currently investing 15% as well.   Basically doing the Dave Ramsey plan.

Currently down to $51,500.  Hoping to get under $50K a month from today.

Down to $49660.  Was able to throw an extra $1555 at it this time.  Budgeting to be able to throw an extra $2500 next month.

$46,950 -- a $2,710 reduction this month.  October should be a little better with the magic of the 3 paychecks for me this month.  Should be under $40K by end of the year.

Faraday

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Re: Mortgage Payoff Club!!
« Reply #486 on: October 07, 2015, 01:45:24 PM »
I never thought I'd be saying this... but...please don't beat me up too badly:

I'm vectoring a little bit of money toward the market that I would otherwise have put toward the mortgage. I've not maxed my Roth IRA and this seems to be the right time to do that. So I'm pulling money originally earmarked for principal abatement and pushing it toward the market. About $1k, this week.

As has been mentioned, we've got three paydays this month and my mortgage payment already drafted, so I'll have money later to continue with mortgage abatement. I just hope the market doesn't turn into an even better bargain then.....
FIRE in 2020.

Threshkin

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Re: Mortgage Payoff Club!!
« Reply #487 on: October 07, 2015, 02:05:10 PM »
No beating from me!

My sequence of priority for money is:
  • Current expenses (utilities, food, gas, regular mortgage payment, etc.)
  • Tax advantaged retirement accounts (401k, IRA, or equivalent - until maxed out!)
  • Additional mortgage payment
  • Ordinary savings

This presupposes you have a fully funded emergency fund.  Otherwise it is #2.

I never thought I'd be saying this... but...please don't beat me up too badly:

I'm vectoring a little bit of money toward the market that I would otherwise have put toward the mortgage. I've not maxed my Roth IRA and this seems to be the right time to do that. So I'm pulling money originally earmarked for principal abatement and pushing it toward the market. About $1k, this week.

As has been mentioned, we've got three paydays this month and my mortgage payment already drafted, so I'll have money later to continue with mortgage abatement. I just hope the market doesn't turn into an even better bargain then.....

Faraday

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Re: Mortgage Payoff Club!!
« Reply #488 on: October 07, 2015, 02:57:11 PM »
(I'll top-comment since Threshkin did...)
I like your sequence, Threshkin. That's close to what I do, but where you have "Ordinary Savings", I have "Vanguard Roth IRA". Normally, any extra dough goes to the house but I also make sure I max out the Roth IRA to the yearly allowed maximum. I'm still under that, so I need to do something about that, and now's a great time. I was going to wait for December profit-taking, but I think now's not a bad time to kick some $$ that way.

And BTW: while I'm confessing, I DO have a "January Objective" I have to make - I need to get my principal to 50% of original in January so I can refi to a number I want. So while I'm pushing $1k toward the market right now, that doesn't change my January Objective - I still have to make that because I still believe interest rates will be AWESOME in January. And if interest rates AREN'T awesome in January, I'll just keep prepaying the current mortgage as-is until I reach a point where it makes sense to do something.

I always come down on the side of the mortgage prepayers in these discussions, in general.  Not because I'm a believer in vectoring after-tax cash toward the mortgage, but because I disbelieve it's an either-or proposition.  There's no law saying we can't take advantage of a market downturn to get a little more investment lovin'.

No beating from me!

My sequence of priority for money is:
  • Current expenses (utilities, food, gas, regular mortgage payment, etc.)
  • Tax advantaged retirement accounts (401k, IRA, or equivalent - until maxed out!)
  • Additional mortgage payment
  • Ordinary savings

This presupposes you have a fully funded emergency fund.  Otherwise it is #2.

I never thought I'd be saying this... but...please don't beat me up too badly:

I'm vectoring a little bit of money toward the market that I would otherwise have put toward the mortgage. I've not maxed my Roth IRA and this seems to be the right time to do that. So I'm pulling money originally earmarked for principal abatement and pushing it toward the market. About $1k, this week.

As has been mentioned, we've got three paydays this month and my mortgage payment already drafted, so I'll have money later to continue with mortgage abatement. I just hope the market doesn't turn into an even better bargain then.....
FIRE in 2020.

Threshkin

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Re: Mortgage Payoff Club!!
« Reply #489 on: October 07, 2015, 03:22:49 PM »
I consider Roth IRAs to be tax advantaged savings. and put them in #2. 

Full disclaimers 1) I joined the Mortgage Payoff club two years ago.  2) I have always maxed my 401k accounts since they were first available to me.  3) I did not always prioritize additional mortgage payments over ordinary savings on a monthly basis but instead would put some in each of the two.  Then, as the ordinary savings grew I would intermittently make a 5 figure payment on the mortgage from savings.

(I'll top-comment since Threshkin did...)
I like your sequence, Threshkin. That's close to what I do, but where you have "Ordinary Savings", I have "Vanguard Roth IRA". Normally, any extra dough goes to the house but I also make sure I max out the Roth IRA to the yearly allowed maximum. I'm still under that, so I need to do something about that, and now's a great time. I was going to wait for December profit-taking, but I think now's not a bad time to kick some $$ that way.

And BTW: while I'm confessing, I DO have a "January Objective" I have to make - I need to get my principal to 50% of original in January so I can refi to a number I want. So while I'm pushing $1k toward the market right now, that doesn't change my January Objective - I still have to make that because I still believe interest rates will be AWESOME in January. And if interest rates AREN'T awesome in January, I'll just keep prepaying the current mortgage as-is until I reach a point where it makes sense to do something.

I always come down on the side of the mortgage prepayers in these discussions, in general.  Not because I'm a believer in vectoring after-tax cash toward the mortgage, but because I disbelieve it's an either-or proposition.  There's no law saying we can't take advantage of a market downturn to get a little more investment lovin'.

No beating from me!

My sequence of priority for money is:
  • Current expenses (utilities, food, gas, regular mortgage payment, etc.)
  • Tax advantaged retirement accounts (401k, IRA, or equivalent - until maxed out!)
  • Additional mortgage payment
  • Ordinary savings

This presupposes you have a fully funded emergency fund.  Otherwise it is #2.

I never thought I'd be saying this... but...please don't beat me up too badly:

I'm vectoring a little bit of money toward the market that I would otherwise have put toward the mortgage. I've not maxed my Roth IRA and this seems to be the right time to do that. So I'm pulling money originally earmarked for principal abatement and pushing it toward the market. About $1k, this week.

As has been mentioned, we've got three paydays this month and my mortgage payment already drafted, so I'll have money later to continue with mortgage abatement. I just hope the market doesn't turn into an even better bargain then.....

mies

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Re: Mortgage Payoff Club!!
« Reply #490 on: October 07, 2015, 04:12:05 PM »
I'm joining too. My goal is to have it paid off by June of 2018

We just refinanced over the summer from a 30 year 6.24% loan to a 10 year 3.39% mortgage. We paid off enough on the old loan to make the monthly payment about the same on the new loan (Old loan: $821/month New loan: $816/month). We'll now be paying substantially more in principal than interest every month. The last old mortgage payment we paid $453 in interest. The first payment on the new loan we only paid $234.

We also just threw an extra $3500 at the principal on the new loan after making the first payment (The bank wouldn't let us make a principal payment before the first regular payment was due). I'm hoping to throw an extra $1000 a month at the principal for the next few years. About 6 months before I want the mortgage to be over, I will dip into my savings and make a large payment. I will stop making extra payments at that point and just make the regular payment. We'll barely be paying any interest at that point anyway. I will use that time to start replenishing my savings and prepare for any taxes we might owe.

I would like to throw a larger sum at the mortgage now, but I don't feel comfortable dipping too deeply in to my emergency funds. My wife and I have pretty stable jobs, but I don't take anything for granted. At least with our new loan, we will be making a nice dent in the principal each month even without an additional principal payment :)
Less is more.

Faraday

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Re: Mortgage Payoff Club!!
« Reply #491 on: October 07, 2015, 04:32:48 PM »
I'm joining too. My goal is to have it paid off by June of 2018

We just refinanced over the summer from a 30 year 6.24% loan to a 10 year 3.39% mortgage. We paid off enough on the old loan to make the monthly payment about the same on the new loan (Old loan: $821/month New loan: $816/month). We'll now be paying substantially more in principal than interest every month. The last old mortgage payment we paid $453 in interest. The first payment on the new loan we only paid $234.

mies: congrats on your refinance and your mortgage progress! You are designating your payments for mortgage abatement only, right?

Quote
I will stop making extra payments at that point and just make the regular payment. We'll barely be paying any interest at that point anyway. I will use that time to start replenishing my savings and prepare for any taxes we might owe.

I would like to throw a larger sum at the mortgage now, but I don't feel comfortable dipping too deeply in to my emergency funds. My wife and I have pretty stable jobs, but I don't take anything for granted. At least with our new loan, we will be making a nice dent in the principal each month even without an additional principal payment :)

Good ideas, what you are talking about. I have sacrificed some from the emergency fund to make an early mortgage abatement payment, but only when I know I can replenish it within a month or so.

You talk about stopping making extra payments whenever you are barely paying any interest. Do you have any feel for what percentages you are looking for? I was thinking of doing that about the time I started paying 95% principal and 5% interest.

What say ye? Are there any others in this thread who have reached that far end of the compound interest curve and have STOPPED prepaying for that reason?

And: does anyone think I am asking the wrong question above? I've seen people get to a point where they pay it off in a lump sum just to close the books on it as quickly as possible. So asking "do you let it ride at any point" would be counter to that.
« Last Edit: October 07, 2015, 04:49:14 PM by mefla »
FIRE in 2020.

mies

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Re: Mortgage Payoff Club!!
« Reply #492 on: October 07, 2015, 04:56:46 PM »
I'm joining too. My goal is to have it paid off by June of 2018

We just refinanced over the summer from a 30 year 6.24% loan to a 10 year 3.39% mortgage. We paid off enough on the old loan to make the monthly payment about the same on the new loan (Old loan: $821/month New loan: $816/month). We'll now be paying substantially more in principal than interest every month. The last old mortgage payment we paid $453 in interest. The first payment on the new loan we only paid $234.

mies: congrats on your refinance and your mortgage progress! You are designating your payments for mortgage abatement only, right?

Quote
I will stop making extra payments at that point and just make the regular payment. We'll barely be paying any interest at that point anyway. I will use that time to start replenishing my savings and prepare for any taxes we might owe.

I would like to throw a larger sum at the mortgage now, but I don't feel comfortable dipping too deeply in to my emergency funds. My wife and I have pretty stable jobs, but I don't take anything for granted. At least with our new loan, we will be making a nice dent in the principal each month even without an additional principal payment :)

Good ideas, what you are talking about. I have sacrificed some from the emergency fund to make an early mortgage abatement payment, but only when I know I can replenish it within a month or so.

You talk about stopping making extra payments whenever you are barely paying any interest. Do you have any feel for what percentages you are looking for? I was thinking of doing that about the time I started paying 95% capital and 5% interest.

What say ye? Are there any others in this thread who have reached that "far end of the compound interest curve" and have STOPPED prepaying for that reason?

Thanks mefla! Yes. The extra payments we make are principal only. I can do the payments online and click the checkbox for principal only which is nice. I don't have to be at the mercy of whoever processes a check noticing that it is meant to be principal only.

I haven't actually looked at any percentages. After examining my amortization schedule, paying the large sum 6-7 months before I wanted to end the mortgage seemed like the safest way to get the mortgage paid off quickly without compromising my emergency fund. I never had principal vs. interest percentage in mind.
Less is more.

Mrwannabemmm

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Re: Mortgage Payoff Club!!
« Reply #493 on: October 07, 2015, 09:50:12 PM »
Hi i am still on the fence , i am bit of conservative side ..actully a lot on conservative side always.I have 330 k in mortgage now ( paid off 160 k recently as lump sum off the original 490 ). I have 270 k in cash which i can either invest in real estate or pay off mortgage ...but that will delay my investing by 3 more years I think to collect down payment on house again . please advice...

mortgage 330 k
cash saving 270 k
401 k maxing out
no other debt

ahoy

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Re: Mortgage Payoff Club!!
« Reply #494 on: October 08, 2015, 02:36:35 AM »
So glad my DH and I got rid of our mortgage, we only had one for about 3 years.  We had a huge deposit, small mortgage.  It was a fantastic 4 bed house.  Sold it during the peak (2006) moved countries and downsized.   I hated our current house for about 5 years and about 2 yrs ago realized it was the best thing.  We would never go back to paying a mortgage every month on our principle residence. 

 

nora

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Re: Mortgage Payoff Club!!
« Reply #495 on: October 08, 2015, 05:21:16 AM »
Ours just dropped below 100000. Fantastic. I paid a bit extra to get it to 99997 or some such. Of course then the exchange rate changed (house is in NZ and we are in Oz)  and when I came to show the accounts to DH it was back over 100000! But I think we are on the home straight now, no pun intended.

K-ice

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Re: Mortgage Payoff Club!!
« Reply #496 on: October 08, 2015, 10:08:16 AM »
Hi i am still on the fence , i am bit of conservative side ..actully a lot on conservative side always.I have 330 k in mortgage now ( paid off 160 k recently as lump sum off the original 490 ). I have 270 k in cash which i can either invest in real estate or pay off mortgage ...but that will delay my investing by 3 more years I think to collect down payment on house again . please advice...

mortgage 330 k
cash saving 270 k
401 k maxing out
no other debt

What are your interest rates on the mortgage vs savings?

Congrats on the large chunk of cash!

You can find many debates on the pay mtg vs invest.
Obviously on this thread, most are focusing on mortgage payoff.
Mathamatically investing in balanced ETFs should pay off better in the long run than rushing to pay your mortgage.

But saving does not equal investing. It appears that you are saving not investing.

If you are too conservative to invest I would pay off the mortgage first.
For the ultra conservative investor that is what you should do.

That is what I did with my primary residence. Now I am starting to invest in Vanguard and plan to slowly pay the mtg on a rental property.

Since you have a large chunk of cash you may want to "invest" a bit.

1) keep a good emergency fund ~20K (3-6 months spending, this should be your only cash savings)
2) pay a large chunk of the mortgage ~150-240K (how much can you prepay without being hit with penalty fees?)
3) start investing with a comfortable amount, for you this may be 10-100K. Research your low fee options & Max out your tax advantaged accounts.

If you are not quite sure about how to split your money in 2 & 3 hang on to more cash and decide what to do with it in 3-6 months.

Don't listen to anyone who says invest it all today. That is mathamatically correct but you mentioned you are very conservative and probably need to learn a lot more before throwing all that cash into investments.



Faraday

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Re: Mortgage Payoff Club!!
« Reply #497 on: October 08, 2015, 10:52:12 AM »
+1 to what K-ice said. Good advice.
FIRE in 2020.

ozbeach

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Re: Mortgage Payoff Club!!
« Reply #498 on: October 09, 2015, 01:19:00 PM »
Ours just dropped below 100000. Fantastic. I paid a bit extra to get it to 99997 or some such. Of course then the exchange rate changed (house is in NZ and we are in Oz)  and when I came to show the accounts to DH it was back over 100000! But I think we are on the home straight now, no pun intended.

I've had two mortgages, and both times it was when they dropped below $100K that I really started to see the payments making a difference. Above that, and it seems that most of your payment is going on interest; below $100K every payment seems to attack principal and it just seems to melt away. Keep hitting it hard and it will be gone before you know it!
FIREd @ 52

Bellatrix

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Re: Mortgage Payoff Club!!
« Reply #499 on: October 09, 2015, 04:49:09 PM »
I can't wait to pay off my mortgage. It feels like it will take forever though.   

Started with 400k at 3.25%.
Now at about 285k. 
Goal payoff date: Dec 2018.

I have an amortization schedule hanging on my fridge.  I look at it all the time and just need this mortgage to go away.