Author Topic: Mortgage Payoff Club!!  (Read 303041 times)

Nora

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Re: Mortgage Payoff Club!!
« Reply #50 on: October 31, 2013, 07:04:03 AM »
 I am in. Intending to pay it all off in four years or less. This one is a big $600000 and 5.2% interest.

cdub

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Re: Mortgage Payoff Club!!
« Reply #51 on: November 05, 2013, 11:03:33 AM »
New blog post:

http://mortgage-payoff-club.com/2013/11/05/i-love-ynab-i-adore-chromebooks-heres-how-to-install-ynab-on-a-chromebook/

How to get the awesome budgeting app YNAB installed on the awesome low budget and did I say AWESOME and EASY TO USE Chromebook.

This will get ANY windows app working on a Chrombeook btw - it allows you to run Linux at the same time as Chrome OS and uses WINE to run Windows apps. :)
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jrhampt

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Re: Mortgage Payoff Club!!
« Reply #52 on: November 05, 2013, 11:19:44 AM »
I'm in, too.  We've been paying extra for a while, but started doubling our payments on our 15-year mortgage this summer.  At current payment levels, our payoff date is in 4 years.  I think we can improve on that, though, if we choose.

cdub

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Re: Mortgage Payoff Club!!
« Reply #53 on: November 05, 2013, 01:59:34 PM »
I'm in, too.  We've been paying extra for a while, but started doubling our payments on our 15-year mortgage this summer.  At current payment levels, our payoff date is in 4 years.  I think we can improve on that, though, if we choose.

Nice! - At our current rate we should be done in 11 years but once my wife goes back to work we should be able to get that down to 4 as well.
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OOBER

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Re: Mortgage Payoff Club!!
« Reply #54 on: November 09, 2013, 06:35:42 AM »
Good job OP, every bit helps.

I'm in.

We bought our house ~3 years ago, and bought about 1/2 the home that we could have "afforded" according to the bank. With two incomes and no kids (yet), we currently stand at 75% paid off and hope to be fully paid off in the next 12-24 months. My original goal starting out was <5 years, and it looks like we will beat it.

I have personal issues with investing in things that I am unable to control (at least somewhat) and hate owing people/businesses money. My aim is the KISS method. The less time I have to spend dealing with things that could just be "done" the more I can get done otherwise.

I plan to have my own small business going sometime soon and there is something to be said for not having a house payment. It is relatively easy to come up with just property taxes/insurance/utilities/groceries month to month especially with the Mustacian lifestyle.


*Don't get me wrong, I still have a 401K like everybody else which will be maxed out as soon as the house is paid off. But, I don't lose any sleep at night over the extra couple non-guaranteed % return that I am losing by not having it all in the market.

Moomingirl

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Re: Mortgage Payoff Club!!
« Reply #55 on: November 09, 2013, 08:18:03 PM »
I'm in too!

We have been working hard to pay off the mortgage, and any spare money has gone to this. We are on a fixed rate of 4.95% (living in New Zealand), and can only make one extra payment on the mortgage per year. Last year was $30,000, this year $25,000. We're only at the beginning of our mortgage year too.  :)

Next year the mortgage comes off the fixed rate, and interest rates are going up here now. The best fixed rates I have seen recently have been 5.65%. I think the banks only let you fix if you have a minimum of $200,000 and we are now down to $165,000. I can't make any more paydowns now, so I will be saving hard for the next year, then paying off as much as we can as soon as the fixed rate comes off.


wauske

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Re: Mortgage Payoff Club!!
« Reply #56 on: December 05, 2013, 06:54:36 AM »
Nice topic! I'm in as well :)

Starting mortgage: 28-years 120k
Current mortgage: 26-years left 90k
Interest rate: 4% (3 years fixed left)

Total reduction per month: 1k

This does not seem like much but literally half my net income is used to reduce it ASAP :D

Additionaly, if I were to invest the same amount my sweet little government would claim 1.2% as taxable returns so the stock market would have to generate at least 5.2% to keep up. As this is unlikely we chose to remove our mortgage ASAP.
Everything I say is my personal opinion which is based on my subjective experience.

shusherstache

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Re: Mortgage Payoff Club!!
« Reply #57 on: December 05, 2013, 08:08:01 AM »
I'm in.

Starting mortgage: 180,000 30-year @ 5.0% fixed 02/2011
Refinanced: 167,000 15-year @3.25% fixed 03/2012
Currently: 62,850 12/2013
Payoff date goal: March 2015

Curent house value: 270,000

My husband and I want to pay it off so we can pursue our other goals: adoption and new careers outside of our current sector (tech). Before we met, we both experienced extreme job loss in our families which severely impacted family structures and so don't want that mortgage payment hanging over our heads.

cdub

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Re: Mortgage Payoff Club!!
« Reply #58 on: December 05, 2013, 10:21:13 AM »
I'm in.

Starting mortgage: 180,000 30-year @ 5.0% fixed 02/2011
Refinanced: 167,000 15-year @3.25% fixed 03/2012
Currently: 62,850 12/2013
Payoff date goal: March 2015

Curent house value: 270,000

My husband and I want to pay it off so we can pursue our other goals: adoption and new careers outside of our current sector (tech). Before we met, we both experienced extreme job loss in our families which severely impacted family structures and so don't want that mortgage payment hanging over our heads.

Wow - almost 100k paid off already in 21 months. That's great! That's almost $5k a month you've been throwing at it Awesome!
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jrhampt

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Re: Mortgage Payoff Club!!
« Reply #59 on: December 05, 2013, 11:22:53 AM »
I'm in.

Starting mortgage: 180,000 30-year @ 5.0% fixed 02/2011
Refinanced: 167,000 15-year @3.25% fixed 03/2012
Currently: 62,850 12/2013
Payoff date goal: March 2015

Curent house value: 270,000

My husband and I want to pay it off so we can pursue our other goals: adoption and new careers outside of our current sector (tech). Before we met, we both experienced extreme job loss in our families which severely impacted family structures and so don't want that mortgage payment hanging over our heads.

Great job so far!  We're at $178k currently with a similar home value and hoping for March 2016 as a payoff date, so a year behind you.  Trying to get down to $100k by this time next year.  Our reasons for paying off the mortgage early are similar to yours.

shusherstache

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Re: Mortgage Payoff Club!!
« Reply #60 on: December 05, 2013, 12:26:32 PM »
I'm in.

Starting mortgage: 180,000 30-year @ 5.0% fixed 02/2011
Refinanced: 167,000 15-year @3.25% fixed 03/2012
Currently: 62,850 12/2013
Payoff date goal: March 2015

Curent house value: 270,000

My husband and I want to pay it off so we can pursue our other goals: adoption and new careers outside of our current sector (tech). Before we met, we both experienced extreme job loss in our families which severely impacted family structures and so don't want that mortgage payment hanging over our heads.

Wow - almost 100k paid off already in 21 months. That's great! That's almost $5k a month you've been throwing at it Awesome!

Thanks!  We had a couple of one-off windfalls to throw at it outside of our salaries.  We average 4K a month plus bonuses, etc. toward it and are trying to keep up the momentum.

Strawberrykiwi75

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Re: Mortgage Payoff Club!!
« Reply #61 on: December 08, 2013, 02:54:44 AM »
I'm in too!

We have been working hard to pay off the mortgage, and any spare money has gone to this. We are on a fixed rate of 4.95% (living in New Zealand), and can only make one extra payment on the mortgage per year. Last year was $30,000, this year $25,000. We're only at the beginning of our mortgage year too.  :)

Next year the mortgage comes off the fixed rate, and interest rates are going up here now. The best fixed rates I have seen recently have been 5.65%. I think the banks only let you fix if you have a minimum of $200,000 and we are now down to $165,000. I can't make any more paydowns now, so I will be saving hard for the next year, then paying off as much as we can as soon as the fixed rate comes off.

What makes you think you can't fix it? I would check on that, the bank I work at certainly doesn't! I've done top-up fixed loans for 10k. With interest rates hiking up, it would be worthwhile fixing. And also check about re-documenting it if you want to still have some floating, and they can split it into 2 or more loans, so that you can spread your risk. Also if you have equity of 40% or more I'd ask for a discount- you'll more than likely get it at the moment!

wauske

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Re: Mortgage Payoff Club!!
« Reply #62 on: December 08, 2013, 08:54:19 AM »
@Moomingirl:
It might also be interesting to see what the variable rates are like? Depening on that you might pocket the interest difference between your current fixed rate and the variable rate and use it as extra payment for the next run!
Everything I say is my personal opinion which is based on my subjective experience.

Moomingirl

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Re: Mortgage Payoff Club!!
« Reply #63 on: December 10, 2013, 12:21:58 AM »
Thanks Strawberrykiwi. Which bank do you work for (if you don't want to post in public you could message me...)?
I am pretty sure that when we fixed our mortgage with ANZ just over a year ago, that is what were told. Maybe I misunderstood.  I will of course be checking that out when we come off the fixed rate in October next year.

@ wauske - I will see what happens next October, hopefully we will have so much saved ready for the next paydown, that the rates won't make too much difference.  :)

Maltipoomoney

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Re: Mortgage Payoff Club!!
« Reply #64 on: December 10, 2013, 11:41:06 AM »

We are in also!

Why? To decrease our monthly expenses after FIRE in 4 years. Then I will just work a little here and there to pay for college for the kids and take long 2-3 month breaks in between gigs. Yay!! So I want low monthly carrying costs.  My property tax in the midwest is pretty low.

Once I pad my Emergency Fund, I am throwing all $$ at the mortgage for 2 years and will be done, projected date to Payoff Mortgage is 6/2016. Likely it will be earlier.

Then amass larger amounts of cash to either (1) invest in stocks some more (2) buy rental properties for cash.



medinaj2160

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Re: Mortgage Payoff Club!!
« Reply #65 on: December 11, 2013, 04:42:23 PM »
We are in as well :)

Me 28 and my wife 29 purchased our first and last home June 2012.

Value of our home according to Zillow 180K. We only paid 126K since it was a foreclosure and have a 30 year mortgage at 3.75%.
 
As of today we own $64,385.

Payoff goal: March 2015

My reason for paying the house fast is peace of mind because you never know what the future will hold.
« Last Edit: December 11, 2013, 04:48:25 PM by medinaj2160 »

secondcor521

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Re: Mortgage Payoff Club!!
« Reply #66 on: December 11, 2013, 06:41:49 PM »
I'm vacillating.

I have roughly $48K left on my mortgage and would like to have it paid off by my 45th birthday, which is in May 2014.  That's a pretty aggressive payoff rate, and I don't know if I'll make it or not.  We'll see.
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Charlotte

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Re: Mortgage Payoff Club!!
« Reply #67 on: December 12, 2013, 04:46:52 AM »
I have a similar dilemma Secondcor -- I would like to be debt free by my husband's 45th birthday (April 2014), but that is a fair amount of money to come up with in 5 months. (although not 48k....)

How about we both make a run for it and see what happens? I will definitely make it before he turns 46, so he will be able to say "I am 45 years old and debt free!"

cdub

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Re: Mortgage Payoff Club!!
« Reply #68 on: December 12, 2013, 08:02:18 AM »
New post:

http://mortgage-payoff-club.com/2013/12/12/just-bought-a-shiny-new-ppo-health-care-plan-from-the-ca-health-exchange-for-870/

And only was able to pay $800 extra in November. :( December should be half that. Both due to holidays. It should pick up steam in the new year.
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secondcor521

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Re: Mortgage Payoff Club!!
« Reply #69 on: December 12, 2013, 05:42:22 PM »
I have a similar dilemma Secondcor -- I would like to be debt free by my husband's 45th birthday (April 2014), but that is a fair amount of money to come up with in 5 months. (although not 48k....)

How about we both make a run for it and see what happens? I will definitely make it before he turns 46, so he will be able to say "I am 45 years old and debt free!"

Deal.  Although I have an extra month :-)
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Charlotte

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Re: Mortgage Payoff Club!!
« Reply #70 on: December 13, 2013, 04:50:18 AM »
You do have an extra month, but my debt is only $19,000 --- so I have less far to go!  ;-)

secondcor521

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Re: Mortgage Payoff Club!!
« Reply #71 on: December 17, 2013, 12:49:50 PM »
Scheduled an extra payment today.

Remaining balance:  $47,324.28.
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secondcor521

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Re: Mortgage Payoff Club!!
« Reply #72 on: December 17, 2013, 06:46:06 PM »
Figured I can live with a smaller emergency fund.

New balance:  $37,324.28.

Will probably make one more extra payment after Christmas depending on how things go.

Will make an extra payment in February depending on stock options vesting.

Will probably make extra monthly payments each month with extra cash flow.

Will throw the tax refund if any at the mortgage also.

Will make regular monthly payments as well.

Want it gone.
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secondcor521

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Re: Mortgage Payoff Club!!
« Reply #73 on: December 26, 2013, 07:08:00 PM »
Made two post-Christmas payments, plus updated Quicken for the regular January payment.

New balance:  $31,071.28.
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Empire Business

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Re: Mortgage Payoff Club!!
« Reply #74 on: December 26, 2013, 08:10:03 PM »
I haven't been paying mine early.  Nonetheless, I am excited because my balance just went below $30,000.

wauske

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Re: Mortgage Payoff Club!!
« Reply #75 on: December 30, 2013, 12:48:24 PM »
Made two post-Christmas payments, plus updated Quicken for the regular January payment.

New balance:  $31,071.28.
Sheesh, you make me feel inadequate :D
Current balance: 78k (plus change) which is a reduction of about 23k (about half was emergency fund).

Goal for next year: 16k reduction!
Everything I say is my personal opinion which is based on my subjective experience.

shusherstache

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Re: Mortgage Payoff Club!!
« Reply #76 on: December 30, 2013, 01:08:20 PM »
We're on hold until we see if I get laid off in the new year.  (The joys of the tech industry...)  In the meantime, we're saving the money in our allocated mortgage account and paying the regular payment.

basd

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Re: Mortgage Payoff Club!!
« Reply #77 on: December 31, 2013, 01:21:33 AM »
I'm in as well, the wife seems to be on board finally as well.. All amounts in euros.

Original mortgage 238.500, 20 year fixed at 5.4%
Remaining 238.500 (we've only paid interest so far)

If we stick to the original schedule we will have paid off only 41.500 after those 20 years. However, I'd like to be mortgage-free by then (I'm 33 now), if not before. It's going to be an interesting challenge, but with our current savings rates I think we should be able to make it.

Bring it on.

mamagoose

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Re: Mortgage Payoff Club!!
« Reply #78 on: December 31, 2013, 09:51:12 AM »
We did it! 169,900 @ 3.75% paid in 2.5 years. Had a head start with a 50k down payment and saved about 44k interest by paying off early. We also chose 15 year term. Wooo!
The person who says it cannot be done should not interrupt the person doing it.

basd

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Re: Mortgage Payoff Club!!
« Reply #79 on: December 31, 2013, 11:26:06 AM »
Wow, well done mamagoose, that's some pretty impressive paying off, and a great way to start 2014!

Rural

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Re: Mortgage Payoff Club!!
« Reply #80 on: December 31, 2013, 05:40:55 PM »
Congrats!

secondcor521

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Re: Mortgage Payoff Club!!
« Reply #81 on: January 07, 2014, 08:14:38 PM »
Scheduled an extra January payment today.

Passed two little milestones:  If I just make my regular payments, I'll finish paying off my house before I finish all my child support payments.  Also, starting in February I'll be paying less than $100 per month in mortgage interest.

New balance:  $29,374.28

Hopefully will have a little bit to throw at it in early February, and then a larger payment hopefully towards the end of February, plus the regular payment.
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FrozenBits

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Re: Mortgage Payoff Club!!
« Reply #82 on: January 08, 2014, 01:32:30 PM »
We did it! 169,900 @ 3.75% paid in 2.5 years. Had a head start with a 50k down payment and saved about 44k interest by paying off early. We also chose 15 year term. Wooo!

Awesome! Must feel amazing. :)

medinaj2160

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Re: Mortgage Payoff Club!!
« Reply #83 on: January 09, 2014, 11:13:37 AM »
We are in as well :)

Me 28 and my wife 29 purchased our first and last home June 2012.

Value of our home according to Zillow 180K. We only paid 126K since it was a foreclosure and have a 30 year mortgage at 3.75%.
 
As of today we own $64,385.

Payoff goal: March 2015

My reason for paying the house fast is peace of mind because you never know what the future will hold.

New balance: $59,980

I miss judged my tax withholdings so I am not going to be able to pay as much on my mortgage next month :/

mamagoose

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Re: Mortgage Payoff Club!!
« Reply #84 on: January 09, 2014, 12:25:38 PM »
We did it! 169,900 @ 3.75% paid in 2.5 years. Had a head start with a 50k down payment and saved about 44k interest by paying off early. We also chose 15 year term. Wooo!

Awesome! Must feel amazing. :)

Thanks! It sure does, being that much closer to FIRE is great, and it's comforting to know our family will always have a place to live :)
The person who says it cannot be done should not interrupt the person doing it.

mikaty

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Re: Mortgage Payoff Club!!
« Reply #85 on: January 10, 2014, 07:42:37 AM »
This is my goal for 2014

Of all the things I want to face-punch my past self for this is the one I have to live in!!  Our housing market didn't suffer as much but 5 years (and an expensive bathroom remodel) later it's worth exactly what I paid for it.  And trends show the average price of properties like mine declining in my immediate area at the moment.  And for some reason rental returns are really poor for our area.  I don't even want to consider what this has cost me in interest so far ($65k with floating interest that has varied between 13% and 6% - it's on the lower side now so I was paying massive interest on the bigger balance)

It's a small flat and we'll have to upgrade eventually if we want to start a family.  Once we pay off this place we'll start saving so we can make a huge downpayment (savings + sale of the flat) on our next home.


mamagoose

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Re: Mortgage Payoff Club!!
« Reply #86 on: January 10, 2014, 10:57:46 AM »
You might be surprised at how little extra space you need for that first little one. We're in a 4/3 (2000 sf) and it feels like a mega mansion with one baby. Reason is the baby sleeps in our room, we hardly ever go in her nursery. No plans to move her into her own room for a while since nursing is easier when you don't go across the house to fetch the baby. My cousin had her son sleep in her room until he was 2.
The person who says it cannot be done should not interrupt the person doing it.

cdub

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Re: Mortgage Payoff Club!!
« Reply #87 on: January 11, 2014, 04:22:51 PM »
New blog post:

http://mortgage-payoff-club.com/2014/01/11/only-599-78-extra-paid-in-december-due-to-holidays-and-no-extra-payment-going-to-be-made-in-january-due-to-family-emergency/

Only just under $600 paid extra in December... and none being able to be made this month due to a family emergency forcing me to take off most or all of January.

But the "good" thing is - thanks to YNAB... this break from work and income isn't stressing me one bit. Not one bit. Amazing. A little bummed that I might have to rebuild my buffer - but that's about it.
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Gray Matter

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Re: Mortgage Payoff Club!!
« Reply #88 on: January 12, 2014, 06:22:08 AM »
I'm in.

Starting mortgage: 180,000 30-year @ 5.0% fixed 02/2011
Refinanced: 167,000 15-year @3.25% fixed 03/2012
Currently: 62,850 12/2013
Payoff date goal: March 2015

Curent house value: 270,000

My husband and I want to pay it off so we can pursue our other goals: adoption and new careers outside of our current sector (tech). Before we met, we both experienced extreme job loss in our families which severely impacted family structures and so don't want that mortgage payment hanging over our heads.

Just want to say I find your other goals worthy and am rooting for you.  We have an adopted daughter--what a wonderful experience!  I also find it exciting to be thinking of mid-career changes.

iris lily

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Re: Mortgage Payoff Club!!
« Reply #89 on: January 12, 2014, 10:50:07 AM »
C'mon guys.  Let's apply some perspective here. 

It doesn't matter if keeping a mortgage and investing the balance can make you more money over the long haul.  Paying off a mortgage, if that's what someone wants to do, is an awesome accomplishment and deserves praise rather than criticism. 

Save the face punches for people who really need them!  I'm borderline on dishing out a few for being so focused on maximizing returns that we neglect to value and recognize tremendous savings accomplishments.

Agreed. Being free of mortgage is a huge emotional plus.

I look at interest as The Enemy. I never want to feed The Enemy. I don't think we've paid interest on anything since I sold my first (and last) mortgaged house in 1989. Our next house that we bought was a gut rehab, we moved in when electrical was installed only in 1/3 of the house, we had plywood floors for 15 years, kitchen cabinets built over a  year period, a construction staircase with no railings for 23 years and etc. But never a mortgage, don't feed The Enemy.

Now the local Nanny G wouldn't issue an occupancy permit for us to live in this house in the state is was in 25 years ago and that is too bad. Really too bad because it eliminates an opportunity for building sweat equity and Mustachean lifestyle.


tomsang

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Re: Mortgage Payoff Club!!
« Reply #90 on: January 12, 2014, 11:15:57 PM »

Agreed. Being free of mortgage is a huge emotional plus.


My posts were to highlight this sentiment. Paying off your mortgage when you have a sub 4% mortgage is purely emotional. There is no logical reason to do this if you plan on retiring with a 4% safe withdrawal rate. Over the course of history, the stock market has outperformed these levels over a 30 year period every single time. By putting emotional connotations towards financial concepts then your logic is clouded. Paying interest is not evil, it is not bad, it does not hurt you; it is strictly a business transaction. If the government is trying to stimulate the economy by artifically keeping rates low then you are mustachian to take advantage of this environment.

I see Mustachian behavior as that of making logical choices that put you closer to financial independence. Paying off your mortgage does not do that when your mortgage is sub 4%.  When people talk about the interest they saved they should also figure out the return that they are missing out by not investing in the stock market. Over the past 10 years I am at 8.8%+, last year was 28%+, and the past three years I have averaged 18%+ in my investment accounts.  To save 4%, I would have pushed my retirement date out a few years.

wauske

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Re: Mortgage Payoff Club!!
« Reply #91 on: January 13, 2014, 09:31:02 AM »
@Tomsang: I disagree with it being purely emotional. Currently we are paying down our mortgage by about 1k per month with approx. 275 in interest. If I was only saving/investing I'd have to cover an annual spending amount of 17k whereas without a mortgage I only need 12k. With every additional payment my montly fixed expenses lower slightly.
When the mortgage is payed off I have 2 advantages: my current 5k stash will last me nearly 8 months in case of an emergency (F-you I quit) whereas with my current expenses it would only last me less than 4.
Second advantage is i can devote 75% of income to saving and investing as opposed to less than 50% now.

The lack of compounding is likely negated by the lack of stash I need to build in total...
Everything I say is my personal opinion which is based on my subjective experience.

tomsang

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Re: Mortgage Payoff Club!!
« Reply #92 on: January 13, 2014, 11:54:24 AM »
@Tomsang: I disagree with it being purely emotional. Currently we are paying down our mortgage by about 1k per month with approx. 275 in interest. If I was only saving/investing I'd have to cover an annual spending amount of 17k whereas without a mortgage I only need 12k. With every additional payment my montly fixed expenses lower slightly.
When the mortgage is payed off I have 2 advantages: my current 5k stash will last me nearly 8 months in case of an emergency (F-you I quit) whereas with my current expenses it would only last me less than 4.
Second advantage is i can devote 75% of income to saving and investing as opposed to less than 50% now.

The lack of compounding is likely negated by the lack of stash I need to build in total...

I think you are missing the math!  Do two side by side calculations.  One with the $1,000 going to pay down a 4% mortgage and one going into an investment account that averages 8% over a 30 year mortgage term.  I think you can see logically that earning 8% and foregoing paying down a 4% mortgage is going to be the better financial answer.  There has never been a time where the market has not performed greater than 4% since records have been kept.  When you talk about compounding you have to take into account that your investments are compounding.  If it all hits the fan, you don't just have the $5,000 that is in your emergency fund.  You also have all the months and returns that you have been saving vs. paying down your mortgage. 

So if in two years something hits the fan you have the 24 months at $1,000 savings plus the returns on those savings.  So you have like $29k + your $5k emergency fund.  So your numbers would be figuring out how long could you support yourself with $34k in the bank. So you would have 2 years saved up vs.  4 months that you currently have saved ($5,000 emergency fund/ $17k per year to live and make payments).  You are much safer having your assets liquid vs. having them tied up in your house in a crisis. 

If you are half way done paying off the mortgage and you can't make the next payment, you can't just call the bank and say you prepaid the past two years.  They will say you are out of contract and make the payment or face foreclosure.  If you were investing the $1,000, then you could liquidate investments to pay the mortgage and support your family until you get back on your feet.  You would have two years to get on your feet vs. a 4 month buffer with the $5k. 

Mathematically it is pretty simple to see that earning 6 to 8 percent in investments is a better call than paying down a sub 4% loan.  To take the emotion out, calculate the loss of portfolio gain by paying down the 4% mortgage.  If the market returns anything greater than 4% you are better off investing.  If you think the market is going to earn less than 4% over the next 30 years then make sure that your safe withdrawal rate is 1% or closer to your life expectancy as all the models are based on historical performance.  We have never seen a sub 4% return on investments over a 30 year period of time.  If you think that we are going to see those low returns you should also sell your house as the economy is going to be crashing and your house is going to lose significant value.  You would be better off renting when we are in a deflationary time.

In an earlier post on page one I do the side by side analysis of paying off debt or investing.  Again, mathematically if you think we are going to average over 4% you are better off investing. 

wauske

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Re: Mortgage Payoff Club!!
« Reply #93 on: January 13, 2014, 01:27:22 PM »
Sorry if some comments are a bit blunt, but thanks for triggering me to calculate it. It feels good to review the numbers further in stead of just the feeling I've been operating on so far.

Doing the math:
Current mortgage payment minimum: 400 (interest/principal on an annuity based mortgage with 26 years left @4% for 2 years after which it is variable but i'll use the 4%)

Investable remains: approximatly 850/mo
Mortgage payed at the end: 124k
Investments returned (based on Excel 8 runs of random annual result between 2 and 8%):  450k/550k

Result when continuing current payment scheme:
Downpayment finished in approx. May 1 2020 (based on mortgage payment every 30 days with 4% fixed interest) for ease of calculation, total sum payed:  67k
This results in a loss of investments for 5.5 years or 56k in principle compared to the first scheme.
Investments starts now at 1250/mo for another 20 years (same runs as above):  291k/336k

So in principle you are correct. Even with the difference split the investment option returns a lot more.

However, in the last 20 years there have been some major crashes and major uplifts. If you factor in those risks (and I'm not good enough to use Excel for that) I think that the end result may be a lot more variable depending on the end-point measurement. Regarding your investments-as-safety (for a rainy day) you are not factoring in potential market loss. Depending on actual stock value my 24k saved might actually be 12k when I needed it most as well as 36k because the market is soaring. This scares me away from depending too much on this for income replacement (even in eventual retirement).

For my personal situation my current payoff scheme is financially viable (even though it is not optimal) because I do not expect to exceed the 4%. When I start building a stash my scheme does not weigh on 100% stocks/indexes (more like 30% stocks, 50% long-term savings at fixed interest and 20% short term/cash savings) so the overall returns will be lower than the projected 4-8% and thus the gap shortens somewhat. Also, my country taxes equity above 40k (except home-value) at 1.2% anually so returns will be lower still. In the end I think for me personally it does not make that big of a difference except the mortgage downpayment being certain whereas the market is not, this was always my main reason to kill the mortgage firts. It does not mean I don't invest though that is currently only play money (to see how my tax-forms need to be filled out next year).
When something does hit the fan my country also has several safety nets, so I'd have to be out of work for several years before the 5k actually come into play (unless I quit on principle, but I won't unless I've got 20k+ in investments/savings which would then last me 2 years easily :P)...

Last point: when my mortgage is payed off it does not matter whether the house loses value because so would most other houses in the same price-range. Prices have been dropping since 2009 with a staggering total of 20%. The housing market is subsidized by a hefty tax-refund by the govt (about 40-50% returned from payed interest) so any market implosion would have effect but not nearly as extravagant as 40% drops in 1 year like some stories I heard in the US :)
Everything I say is my personal opinion which is based on my subjective experience.

medinaj2160

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Re: Mortgage Payoff Club!!
« Reply #94 on: February 03, 2014, 05:09:36 PM »
We are in as well :)

Me 28 and my wife 29 purchased our first and last home June 2012.

Value of our home according to Zillow 180K. We only paid 126K since it was a foreclosure and have a 30 year mortgage at 3.75%.
 
As of today we own $64,385.

Payoff goal: March 2015

My reason for paying the house fast is peace of mind because you never know what the future will hold.

New balance: $59,980

I miss judged my tax withholdings so I am not going to be able to pay as much on my mortgage next month :/

New balance: $55,556

little by little

reginna

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Re: Mortgage Payoff Club!!
« Reply #95 on: February 03, 2014, 05:18:11 PM »
We did it! 169,900 @ 3.75% paid in 2.5 years. Had a head start with a 50k down payment and saved about 44k interest by paying off early. We also chose 15 year term. Wooo!

So impressed with you and your badassity! Congratulations

secondcor521

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Re: Mortgage Payoff Club!!
« Reply #96 on: February 03, 2014, 10:32:00 PM »
Made most of the larger February payment about a week early just because I am itchy.  Will reimburse my emergency fund when the check arrives in about a week.  Also recorded the regular February payment.

New balance:  $23,933.04

The other number I'm looking at is what I could throw at it if I reduced my emergency fund to 6 months and accounting for the fact that my emergency fund can be somewhat smaller if I don't have a mortgage payment.  If I get that close I'll be sorely tempted to pull the trigger and pay it the rest of the way off.

After this not too many big payments will be likely until May or so.
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FunkyStickman

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Re: Mortgage Payoff Club!!
« Reply #97 on: February 04, 2014, 05:24:37 AM »
I'm in. I've looked at the numbers, and in my situation, paying the mortgage is the way to go.

I live in a mobile home, with 6.25% interest rate for 30 years. The House won't be worth anything in 30 years, its worth is steadily declining. We probably can't refinance it, either. Had a hard enough time getting any loan at all for it.

However, things are looking up since I started being Mustachian. I'm 5 years into it, and I've still got $72,000 left to pay on the principal... but $85K more just in interest if I keep going.

So, tax return (about $3900) is going on the mortgage, and I'm putting down an extra $500 a month. At this rate, we'll have it paid off (and not have paid an extra $85K) by 2020, if not sooner. Then we'll have $1200+ extra a month to invest.
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wauske

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Re: Mortgage Payoff Club!!
« Reply #98 on: February 05, 2014, 06:57:06 AM »
I'm in. I've looked at the numbers, and in my situation, paying the mortgage is the way to go.

I live in a mobile home, with 6.25% interest rate for 30 years. The House won't be worth anything in 30 years, its worth is steadily declining. We probably can't refinance it, either. Had a hard enough time getting any loan at all for it.

However, things are looking up since I started being Mustachian. I'm 5 years into it, and I've still got $72,000 left to pay on the principal... but $85K more just in interest if I keep going.

So, tax return (about $3900) is going on the mortgage, and I'm putting down an extra $500 a month. At this rate, we'll have it paid off (and not have paid an extra $85K) by 2020, if not sooner. Then we'll have $1200+ extra a month to invest.

Way to go! 6.25% is nothing to sneeze at and keeping most of 85k in your pocket most be a good feeling :)
Everything I say is my personal opinion which is based on my subjective experience.

shusherstache

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Re: Mortgage Payoff Club!!
« Reply #99 on: February 05, 2014, 12:44:50 PM »
I think I survived a layoff (woo!) but I'm interviewing for a job next week for 20-25% less money (boo).  It's time to throw in the cards with current company - if my health isn't there than there's not much use in having a paid-for home.  Plus, this new place is reliable, has free transpotation (no commuting costs!) and insurance and will pay for my continued education.

This isn't to say we aren't attacking the mortgage - we sent a 7.5k check this last month - but it may be more slow-going than we expected.  Health/wellness above all else especially as we move towards starting a family.

Current balance is roughly 50,500.
« Last Edit: February 05, 2014, 12:46:44 PM by shusherstache »