Author Topic: Do you regret paying off your mortgage early?  (Read 98067 times)

Daisy

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Re: Do you regret paying off your mortgage early?
« Reply #150 on: January 02, 2016, 11:01:09 PM »
Would it ease the minds of those that don't like to pay off the mortgage if we consider the paid off house as the bond portion of our portfolio? Then we can be more aggressive with our liquid funds and go 100% stock...especially considering that we (well US based people) will get Social Security that is also a form of bond/annuity payment.

Another thing to consider (on the side of not prepaying your mortgage) is that if you are in the last 5-10 years of your mortgage, due to amortization calculations you are hardly paying any interest at the end of your mortgage loan. In that case, it may not make sense to pay off a mortgage as you are really not saving much.

But I did go mortgage-free myself recently when I sold a house and bought a new place. Saving on home insurance is another pro for paying off the mortgage early as I can choose the coverage I want rather than the bank-imposed coverage amounts.

I don't advocate paying off your mortgage in small amounts along the way as you are still stuck with the disadvantages of a mortgage and the bank owning the property. I think I mentioned in this thread earlier that it's best to save and invest outside of the mortgage until you can pay off the balance in one fell swoop. That gives you more flexibility.

v8rx7guy

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Re: Do you regret paying off your mortgage early?
« Reply #151 on: January 02, 2016, 11:49:12 PM »
I think it makes sense for my situation to pay off my mortgage at an accelerated rate to get to about 20% LTV.  This just makes me feel more secure.  At 20% LTV I have an excellent buffer to stay ahead if I need to sell even if the home loses value.  It should be noted that I am super conservative and have a heavily excreting security gland...

brooklynguy

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Re: Do you regret paying off your mortgage early?
« Reply #152 on: January 03, 2016, 06:42:27 AM »
Another thing to consider (on the side of not prepaying your mortgage) is that if you are in the last 5-10 years of your mortgage, due to amortization calculations you are hardly paying any interest at the end of your mortgage loan. In that case, it may not make sense to pay off a mortgage as you are really not saving much.

This doesn't make sense. If you want to keep debt outstanding because its cheap, the less mandatory prepayments of principal there are, the better (meaning that the principal-heavy amortization near the end of a mortgage's life is worse from the perspective of someone who wants to retain the mortgage).  People always get tripped up by the ratcheting mandatory prepayment schedule of a mortgage loan, but the interest you pay never changes -- you're always paying the same rate of interest, calculated on the total outstanding principal balance; it's just that the total outstanding principal balance keeps getting lower as you get closer to maturity because of those forced principal prepayments (which, again, you'd rather not be making, if you want to keep the debt outstanding).

What does happen as you get closer to final maturity, though, is your time horizon shrinks (the weighted average remaining life to maturity of your mortgage loan gets shorter and shorter), which weighs in favor of the other direction -- as your time horizon gets shorter, paying off the loan starts to become a better idea (assuming then-prevailing interest rates are no longer favorable -- if they are, you can refinance into a new loan with an extended maturity).

Neustache

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Re: Do you regret paying off your mortgage early?
« Reply #153 on: January 03, 2016, 07:10:32 AM »
I haven't done this yet, but I know one other person has on the forum - I'm doing a recast next year to lower our payment.  A recast is where you put down a large chunk on the principal and then the bank re-amortizes the loan based on the new principal balance. It costs us $250 and we need 10K to put towards the mortgage principal. 

This makes sense for us because we paid down almost 20K in the past two years to get rid of PMI (I was an idiot and forgot about PMI when we did our loan).  Also, my husband wants the house paid off, and while I'm fine with not paying it off, he brings in all the money so we are compromising and investing in the tax advantaged accounts and using the rest to pay off the mortgage over the next 5 years. 

When we recast next year (or late this year) we will drop our mortgage payment down by about $200 to $700 per month due to all of the previous prepayments we made to get rid of PMI. 

I could see eventually doing another recast in the future, and then not payoff our mortgage early if my husband is okay with it.  If we could get our monthly PITI payments down to around $600 I think he'd be fine not paying it off and investing all of our money.  Taxes and Insurance is about $300 of our payment now.

Anyways, just throwing it out there.  I think it's a decent compromise.  I get the added security of lower payments, we also are paying the mortgage down but it's possible we'll stop at some point when the monthly payment is low enough. 


brooklynguy

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Re: Do you regret paying off your mortgage early?
« Reply #154 on: January 03, 2016, 08:14:42 AM »
Sure but if she's planning on using the four percent rule to retire and suddenly she has only 12.5 times her expenses after ten years rather than the planned 25x (as would have been the case in the 2008 recession), the numbers say she's gotta keep working. 

Of course with a paid off house her income needs may be halved so she may still be on track.

That was mathlete's point (he or she was talking about the scenario where the 2008 early retiree had been investing in lieu of prepaying).

Quote
In addition you can live on less income, pay less in income taxes, and get more in ACA subsidies.

But keep in mind that, contrary to many people's impression, required mortgage payments do not translate into a need for additional income on a dollar-for-dollar basis (because much of the investment-liquidation done to service the mortgage payments will represent return of investment principal, not capital gains/income).  So retaining your mortgage does not necessarily have a major (or even a material) impact on your income (or, in turn, on your tax liability, ACA subsidy eligibility, etc.).

Mmm_Donuts

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Re: Do you regret paying off your mortgage early?
« Reply #155 on: January 03, 2016, 08:30:10 AM »
Brooklyn and Telecaster -- interesting points, food for thought.  Appreciate it.

+1

We paid off our mortgage early because of the 2008 recession. Both of our jobs became unstable, and we had a massive mortgage hanging over our heads (over 400k left to pay).

We didn't do it at the expense of our retirement accounts, which continued to be maxed out. But as it turned out, mathematically we would have been better off investing the mortgage prepayments, as the timespan turned out to be a long run of high market growth. We didn't know that at the time, of course.

Emotionally, however, and I don't discount this, we have no regrets in paying the mortgage off. Peace of mind and emotions aren't valueless. Our jobs did end up having some stumbles, and our incomes have both dropped since. I'm basically semi retired. If we still had 3k mortgage payments every month, I would not be in this situation.

The downside of course is that our house is now the bulk of our net worth. Part of that is due to the crazy increase in house values in our city. But I would like to get our financial assets quite a bit higher before we completely retire.

Bertram

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Re: Do you regret paying off your mortgage early?
« Reply #156 on: January 03, 2016, 10:55:52 AM »
Mustachian coworkers and I are discussing paying off our mortgages early.  One question is - "Have you ever met someone who regretted paying off their mortgage early?"

So how about it do you regret paying off your mortgage and not making use of "cheap money"?

I am reminded of the poem "The Road Not Taken" by Frost. I think in general the difference between paying off the mortgage or not is a few percent p.a. over a fixed amount of time and a fixed amount of money. So in the end either way it will not be a huge life-impacting decision. But it's one of those things people will assign a lot more meaning to in hindsight, then is actually warranted. What's important in the end, is that people kept saving.

Daisy

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Re: Do you regret paying off your mortgage early?
« Reply #157 on: January 03, 2016, 11:23:52 AM »
Possibly, but don't fall into the trap of thinking that your investment horizon ends on your planned retirement date.  The money the early retiree invests during the accumulation phase will be slowly drawn down over the entirety of her retirement, so the time horizon for the aspiring-early-retiree-investor is the multi-decade period constituting the remainder of her expected lifespan, not the few short remaining years until her target retirement date.

Sure but if she's planning on using the four percent rule to retire and suddenly she has only 12.5 times her expenses after ten years rather than the planned 25x (as would have been the case in the 2008 recession), the numbers say she's gotta keep working. 
Of course with a paid off house her income needs may be halved so she may still be on track. And with a paid off house, even if it's value decline by half like mine did during the Great Recession, and historically that is a rare thing, it's still a usable asset (i.e. a free/low cost place to live) unlike money assets that may also be halved in a downturn.  I rode out the 2008 downturn as a recent FIREee and was the only person in my 'hood (as well as the only person I know) who didn't lose their house as well as most of their investments and job. Able to ride it out easily (due to not needing much money because of paid off house) and now prices have rebounded to almost prior levels. Had my house value been in money investments that tanked instead of a useable house investment, and I lost that same equivalent amount as I did of house value, I would not have gotten that back as I did when my house value started to increase again unless I earned more money to invest.  So while in good times having a paid off house might not always be the best financial choice over money investments, it can be very valuable during economic downturns - especially for ERers. In addition you can live on less income, pay less in income taxes, and get more in ACA subsidies.

Interesting perspective. Makes me think of another benefit of paying off the mortgage. In the case of a job loss and temporary stock market crash as in 2008, you'd have to sell off distressed investments in order to pay the mortgage payments. If you can't come up with the cash for the mortgage, you could get foreclosed on and lose your house AND have taken money out of the stock market at a low. This is especially more of a concern for single people as they can't rely on a spouse's income to tide them over until they find a new job. Although this person may have been better off renting...but that's a different topic.

Daisy

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Re: Do you regret paying off your mortgage early?
« Reply #158 on: January 03, 2016, 11:26:15 AM »
Another thing to consider (on the side of not prepaying your mortgage) is that if you are in the last 5-10 years of your mortgage, due to amortization calculations you are hardly paying any interest at the end of your mortgage loan. In that case, it may not make sense to pay off a mortgage as you are really not saving much.

This doesn't make sense. If you want to keep debt outstanding because its cheap, the less mandatory prepayments of principal there are, the better (meaning that the principal-heavy amortization near the end of a mortgage's life is worse from the perspective of someone who wants to retain the mortgage).  People always get tripped up by the ratcheting mandatory prepayment schedule of a mortgage loan, but the interest you pay never changes -- you're always paying the same rate of interest, calculated on the total outstanding principal balance; it's just that the total outstanding principal balance keeps getting lower as you get closer to maturity because of those forced principal prepayments (which, again, you'd rather not be making, if you want to keep the debt outstanding).

What does happen as you get closer to final maturity, though, is your time horizon shrinks (the weighted average remaining life to maturity of your mortgage loan gets shorter and shorter), which weighs in favor of the other direction -- as your time horizon gets shorter, paying off the loan starts to become a better idea (assuming then-prevailing interest rates are no longer favorable -- if they are, you can refinance into a new loan with an extended maturity).

I hadn't thought of it that way, but it makes sense the way you describe it. It took me a few times reading it to understand though.

Mmm_Donuts

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Re: Do you regret paying off your mortgage early?
« Reply #159 on: January 03, 2016, 11:30:56 AM »
Mustachian coworkers and I are discussing paying off our mortgages early.  One question is - "Have you ever met someone who regretted paying off their mortgage early?"

So how about it do you regret paying off your mortgage and not making use of "cheap money"?

I am reminded of the poem "The Road Not Taken" by Frost. I think in general the difference between paying off the mortgage or not is a few percent p.a. over a fixed amount of time and a fixed amount of money. So in the end either way it will not be a huge life-impacting decision. But it's one of those things people will assign a lot more meaning to in hindsight, then is actually warranted. What's important in the end, is that people kept saving.

This is an excellent point. It's quite useless to place regrets, years later, on choices we have already made. In our case I can calculate that our choice to pay off the mortgage early cost us roughly $300k. And yet I can't really muster up any regret. Why? Because we saw the fork in the road and consciously chose a path. We made a choice, and met our goal, and that's what matters.

Looking back and feeling regret is pretty pointless. We didn't know what the markets would be like in the years following 2008, and without that certainty, I still feel that we made the right decision with the information we had at the time. I'm sure if we were less debt averse, and if 2008 hadn't scared our pants off, and we had gone the other route, we would feel equally free of regret having made the choice to invest the prepayments instead. But we weren't, and it didn't, so here we are.

tlsv

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Re: Do you regret paying off your mortgage early?
« Reply #160 on: January 03, 2016, 11:38:01 AM »
We bought out current house in Nov. 2004 and made our final mortgage payment in Jan 2012.
We have not for one minute regretted paying it off early, and I work at a bank so qualify for preferred lending rates.
Both my husband and I are debt adverse and love the freedom of knowing we own our houses, cars, etc and not the bank.
My husband is a consultant and I get substantial performance bonuses so our income is never guaranteed.
It is nice to know if we have a bad income year we will just save less, rather than stress about how to make high debt payments.

train_writer

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Re: Do you regret paying off your mortgage early?
« Reply #161 on: January 03, 2016, 12:35:11 PM »
I haven't done this yet, but I know one other person has on the forum - I'm doing a recast next year to lower our payment.  A recast is where you put down a large chunk on the principal and then the bank re-amortizes the loan based on the new principal balance.
(...)
Anyways, just throwing it out there.  I think it's a decent compromise.  I get the added security of lower payments, we also are paying the mortgage down but it's possible we'll stop at some point when the monthly payment is low enough.

^^Exactly this! I am paying extra towards the principal every other month, and the minimum payment is -in my case automatically, I live in the Netherlands- recasted. In this way, I can take an incremental route to see at what monthly 'payment' we are comfortable not paying off that aggressively.*

*but then our interest rate was locked above the 4% and we have taxation on stash, which makes it all the more profitable to pay off a bit aggresively.

Debts_of_Despair

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Re: Do you regret paying off your mortgage early?
« Reply #162 on: January 03, 2016, 01:04:02 PM »


This is a community about retiring early right? Volatility is a big deal. A theoretical person who planned on a ten year working career staring in 1999 who leveraged all of their assets into the market would have their early retirement plans busted up pretty quickly.

EXCELLENT point!  I've been in the market for the past 14 years with regular contributions throughout and my average annual return is barely over 4%.  It will most likely be years before I see that magical 7 or 8% I am supposed to be able to count on.  I feel like there is too much exuberance on these forums based on market returns in 2009-2014.  It is shortsighted.
« Last Edit: January 03, 2016, 01:07:33 PM by Debts_of_Despair »

Telecaster

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Re: Do you regret paying off your mortgage early?
« Reply #163 on: January 03, 2016, 01:42:37 PM »
Interesting perspective. Makes me think of another benefit of paying off the mortgage. In the case of a job loss and temporary stock market crash as in 2008, you'd have to sell off distressed investments in order to pay the mortgage payments. If you can't come up with the cash for the mortgage, you could get foreclosed on and lose your house AND have taken money out of the stock market at a low. This is especially more of a concern for single people as they can't rely on a spouse's income to tide them over until they find a new job. Although this person may have been better off renting...but that's a different topic.

Careful, because that same scenario can work against you too.   Paying off the mortgage only becomes safe after the bank receives the final payment. 

Let's say there was a 2008 scenario, job loss, market crash, etc. and you were paying down the mortgage but hadn't yet paid it off.   Now you are at risk of losing your house, along with quite a bit of that principle you've been pre-paying.  Plus you don't have liquid assetts, your money is in your house.*  So where does money for non-home living expenses come from?  Good luck being able to re-fiance with no job.   In the event of some crisis,  I would much, much rather have money in the market and be able to access it, even if I had to accept some market losses.   


*One thing people usually say at this point is that you should have a suitably large emergency fund before putting money in your house.   That's fine.  But if we're assuming a suitably large emergency fund in either scenario, then there is no advantage in safety either way. 






Daisy

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Re: Do you regret paying off your mortgage early?
« Reply #164 on: January 03, 2016, 02:37:02 PM »
Interesting perspective. Makes me think of another benefit of paying off the mortgage. In the case of a job loss and temporary stock market crash as in 2008, you'd have to sell off distressed investments in order to pay the mortgage payments. If you can't come up with the cash for the mortgage, you could get foreclosed on and lose your house AND have taken money out of the stock market at a low. This is especially more of a concern for single people as they can't rely on a spouse's income to tide them over until they find a new job. Although this person may have been better off renting...but that's a different topic.

Careful, because that same scenario can work against you too.   Paying off the mortgage only becomes safe after the bank receives the final payment. 

Let's say there was a 2008 scenario, job loss, market crash, etc. and you were paying down the mortgage but hadn't yet paid it off.   Now you are at risk of losing your house, along with quite a bit of that principle you've been pre-paying.  Plus you don't have liquid assetts, your money is in your house.*  So where does money for non-home living expenses come from?  Good luck being able to re-fiance with no job.   In the event of some crisis,  I would much, much rather have money in the market and be able to access it, even if I had to accept some market losses.   


*One thing people usually say at this point is that you should have a suitably large emergency fund before putting money in your house.   That's fine.  But if we're assuming a suitably large emergency fund in either scenario, then there is no advantage in safety either way.

Agree. I've said before I wouldn't prepay the mortgage incrementally. It's better to pay the regular payments and then build up and invest the other amounts then pay off the mortgage in one big payment.  It gives you more flexibility.  But of course don't  pay off the mortgage if it leaves the rest of your stash at 0. That would be extremely risky.

TheNick

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Re: Do you regret paying off your mortgage early?
« Reply #165 on: January 03, 2016, 03:36:09 PM »
Interesting perspective. Makes me think of another benefit of paying off the mortgage. In the case of a job loss and temporary stock market crash as in 2008, you'd have to sell off distressed investments in order to pay the mortgage payments. If you can't come up with the cash for the mortgage, you could get foreclosed on and lose your house AND have taken money out of the stock market at a low. This is especially more of a concern for single people as they can't rely on a spouse's income to tide them over until they find a new job. Although this person may have been better off renting...but that's a different topic.

This is exactly how I looked at it...if I had to sell in a downturn at a loss, I'd lose money there, plus I'd have lost money paying interest on the loan.  Why did I want to risk losing that hard when I could just pay the mortgage off and I'm guaranteed to win by not having to pay interest.  Its easy to look back at the last 6-7 years and say oh yeah...being leveraged won...but go back a few years earlier and it was the leveraged people who got creamed the worst.

Maybe the leveraged folk will come out ahead this time, maybe they won't, but at least by paying off your debts you know exactly where you stand and minimize the risk of having to make a bad move in a downturn.

Chavak

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Re: Do you regret paying off your mortgage early?
« Reply #166 on: January 03, 2016, 10:40:55 PM »
I have never met anyone who regretted paying it off. We paid ours off about 10 years ago when we had extra money and needed somewhere to put it.
I am very glad we did because it has allowed me to retire a few years early than I would have been able to if I still had that kind of debt.

Playing with Fire UK

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Re: Do you regret paying off your mortgage early?
« Reply #167 on: January 04, 2016, 02:02:10 AM »
I regret paying my mortgage off.

I ended up with waaaaaaaaay too much of my NW in one undiversified house and it is a nightmare trying to get a mortgage again when the banks can see that you don't need it. I did it so that I could move house more quickly, and then the house move got caught up in stupid delays so probably didn't save any time anyway.

Debts_of_Despair

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Re: Do you regret paying off your mortgage early?
« Reply #168 on: January 04, 2016, 08:07:13 AM »
I regret paying my mortgage off.

I ended up with waaaaaaaaay too much of my NW in one undiversified house and it is a nightmare trying to get a mortgage again when the banks can see that you don't need it. I did it so that I could move house more quickly, and then the house move got caught up in stupid delays so probably didn't save any time anyway.

I have never heard of need (or lack of) being a qualification for loan approval. There might however be an issue with lack of payment history if you haven't made any in awhile.

Playing with Fire UK

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Re: Do you regret paying off your mortgage early?
« Reply #169 on: January 04, 2016, 09:13:25 AM »
@Debts of Despair - plenty of payment history - this is a result of new legislation (in the UK) following the mortgage meltdown, it's based on the idea of responsible lending assessments.

dragoncar

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Re: Do you regret paying off your mortgage early?
« Reply #170 on: January 04, 2016, 12:19:31 PM »
I regret paying my mortgage off.

I ended up with waaaaaaaaay too much of my NW in one undiversified house and it is a nightmare trying to get a mortgage again when the banks can see that you don't need it. I did it so that I could move house more quickly, and then the house move got caught up in stupid delays so probably didn't save any time anyway.

I have never heard of need (or lack of) being a qualification for loan approval. There might however be an issue with lack of payment history if you haven't made any in awhile.

Quite the opposite really in the us:

http://www.bloomberg.com/news/articles/2012-07-16/zuckerberg-s-loan-gives-new-meaning-to-the-1-mortgages

PhrugalPhan

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Re: Do you regret paying off your mortgage early?
« Reply #171 on: January 04, 2016, 01:27:48 PM »
Bought my house in 1998, generally split my extra funds between prepaying house and investing.  Watched my investments tank in 2001 & 08-09.  Watched my extra payments to principal *NOT* tank in those years.  Finished house payoff in 2011.  Used extra funds to accelerate investments since then.  I most certainly do not regret paying off the mortgage early (but that was my situation).

Mathematically did I come out ahead or behind with this strategy?  Hard to say but I suspect it was a wash, though the peace of mind was (and is) great.  Those that say holding a mortgage is great certainly have a point in many situations, but the numbers don't always work they way they say.  For the next few years I would prepay a mortgage and then cut back and start putting all extra funds in the market (maybe 2018?).

partgypsy

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Re: Do you regret paying off your mortgage early?
« Reply #172 on: January 04, 2016, 01:48:40 PM »
Interesting perspective. Makes me think of another benefit of paying off the mortgage. In the case of a job loss and temporary stock market crash as in 2008, you'd have to sell off distressed investments in order to pay the mortgage payments. If you can't come up with the cash for the mortgage, you could get foreclosed on and lose your house AND have taken money out of the stock market at a low. This is especially more of a concern for single people as they can't rely on a spouse's income to tide them over until they find a new job. Although this person may have been better off renting...but that's a different topic.

Careful, because that same scenario can work against you too.   Paying off the mortgage only becomes safe after the bank receives the final payment. 

Let's say there was a 2008 scenario, job loss, market crash, etc. and you were paying down the mortgage but hadn't yet paid it off.   Now you are at risk of losing your house, along with quite a bit of that principle you've been pre-paying.  Plus you don't have liquid assetts, your money is in your house.*  So where does money for non-home living expenses come from?  Good luck being able to re-fiance with no job.   In the event of some crisis,  I would much, much rather have money in the market and be able to access it, even if I had to accept some market losses.   


*One thing people usually say at this point is that you should have a suitably large emergency fund before putting money in your house.   That's fine.  But if we're assuming a suitably large emergency fund in either scenario, then there is no advantage in safety either way.
We have very little in the way of an emergency fund, and our house will not be paid off for 10 years (refinanced to a 15 year loan 5 years ago) so we are in this position. While we intend to add to the emergency fund each year, we don't ever anticipate having a large emergency fund while working. What we did was take out a heloc which does cost us $70 a year (plus 5% interest for any money borrowed). Our thinking is that the heloc could be used in case of an emergency. Hopefully we will not have to test this.   
« Last Edit: January 04, 2016, 01:51:00 PM by partgypsy »

Neustache

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Re: Do you regret paying off your mortgage early?
« Reply #173 on: January 04, 2016, 02:01:49 PM »
Interesting perspective. Makes me think of another benefit of paying off the mortgage. In the case of a job loss and temporary stock market crash as in 2008, you'd have to sell off distressed investments in order to pay the mortgage payments. If you can't come up with the cash for the mortgage, you could get foreclosed on and lose your house AND have taken money out of the stock market at a low. This is especially more of a concern for single people as they can't rely on a spouse's income to tide them over until they find a new job. Although this person may have been better off renting...but that's a different topic.

Careful, because that same scenario can work against you too.   Paying off the mortgage only becomes safe after the bank receives the final payment. 

Let's say there was a 2008 scenario, job loss, market crash, etc. and you were paying down the mortgage but hadn't yet paid it off.   Now you are at risk of losing your house, along with quite a bit of that principle you've been pre-paying.  Plus you don't have liquid assetts, your money is in your house.*  So where does money for non-home living expenses come from?  Good luck being able to re-fiance with no job.   In the event of some crisis,  I would much, much rather have money in the market and be able to access it, even if I had to accept some market losses.   


*One thing people usually say at this point is that you should have a suitably large emergency fund before putting money in your house.   That's fine.  But if we're assuming a suitably large emergency fund in either scenario, then there is no advantage in safety either way.
We have very little in the way of an emergency fund, and our house will not be paid off for 10 years (refinanced to a 15 year loan 5 years ago) so we are in this position. While we intend to add to the emergency fund each year, we don't ever anticipate having a large emergency fund while working. What we did was take out a heloc which does cost us $70 a year (plus 5% interest for any money borrowed). Our thinking is that the heloc could be used in case of an emergency. Hopefully we will not have to test this.


And I'm just going to repeat it (because there may be a downside to it, and I don't know about it) but everyone who pays down their mortgage aggressively should check with their bank to see what the conditions are for a mortgage recast. 

Because we plan on recasting our mortgage, our payment will drop, so we WILL see the benefit of paying it down should we lose a job because our payment will be much lower. 


Giro

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Re: Do you regret paying off your mortgage early?
« Reply #174 on: January 04, 2016, 02:28:50 PM »
We bought a short sale a few years ago during the really bad time in the housing market.  We put in the offer and it was well over a year before we heard back.  Apparently, three offers ahead of us fell through because of financing.  Our realtor called us and said if we paid cash, he was sure the bank would take our offer over the others because they had just days before it was going to bankruptcy.

We paid pennies for this house and it was only a 3 year old house.  It appraised at 2.5 times what we paid before we moved in.  I HATED writing that check and I contemplate borrowing equity out of it all the time to invest. 

So, yes I'm glad I paid cash and got a crazy good deal.  But also no, I wish I had a mortgage and the money back to invest. 


Debts_of_Despair

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Re: Do you regret paying off your mortgage early?
« Reply #175 on: January 04, 2016, 04:40:15 PM »
33 for "no"
6 for "yes"

indentured4now

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Re: Do you regret paying off your mortgage early?
« Reply #176 on: January 04, 2016, 06:47:57 PM »
Make it 34 for No, don't regret it a bit.   After paying a mortgage off and being totally debt free briefly in 2010, I  thought "why not do it again since it worked so well to build wealth".   We inflated lifestyle and took on debt with intent of paying it off again, but it was a bigger nut to crack this time and painful.   Took me 5 loooong years to get almost back to where we were in 2010.   True it was an enforced savings plan of sorts, but after a recent recast of our only mortgage, I now save $300 more in equity monthly than before with half the interest expense plus another $300 in my pocket every month as well.   Reduced stress level with more free cash flow is a nice way to live.

So true, in 8 or 9 years out of 10 it's not the most effective use of capital for those with a long way to FI who can ride the mortgage train for awhile as they 'stache and build other liquid investments up...  But Wall Street confiscates "at risk" wealth very quickly from the system on a regular basis as my grandparents taught me the easy way, and I had to learn the hard way in 1987, 2000 and 2009...    And it is a confidence cushion for the rest of my investing and the financial benefit is in not doing emotional things with my other growth oriented long term investments with the house nearly paid for... especially approaching FIRE in the next 5 or so years.   

ender

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Re: Do you regret paying off your mortgage early?
« Reply #177 on: January 04, 2016, 07:00:55 PM »
Make it 34 for No, don't regret it a bit.   After paying a mortgage off and being totally debt free briefly in 2010, I  thought "why not do it again since it worked so well to build wealth".   We inflated lifestyle and took on debt with intent of paying it off again, but it was a bigger nut to crack this time and painful.   Took me 5 loooong years to get almost back to where we were in 2010.   True it was an enforced savings plan of sorts, but after a recent recast of our only mortgage, I now save $300 more in equity monthly than before with half the interest expense plus another $300 in my pocket every month as well.   Reduced stress level with more free cash flow is a nice way to live.

One thing I wonder about in this question is whether I would be more motivated to save/put extra money against a mortgage payment or investments.

Out of principle they are no different (not spending) but it seems plausible I'd find it easier to sacrifice for a more clear goal (no mortgage) than a nebulous "have a pile of money to RE on!" goal.

gman

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Re: Do you regret paying off your mortgage early?
« Reply #178 on: January 04, 2016, 08:52:00 PM »
Nope don't regret it either. Purchased our home in 1994 with a 30 year mortgage. In 2000-2001 we got scared with the downturn in the market and thought the money invested outside our work retirement accounts would work better for us if we paid down our 5% mortgage.  So we pulled the money out of some Fidelity mutual funds and applied it to the mortgage.  This lump sum payment and a couple of refinances allowed us to pay off the mortgage by 2005.  The feeling that we got when we paid off the mortgage and became completely debt free at age 45 was fantastic. Right now we are FI and retired with our house about 12% of our NW. The rest being in mutual funds and cash.  So basically we choose to pay off the mortgage and continue to max out our work related tax sheltered accounts. Having lower expenses in retirement by not having a mortgage along with pensions that cover these low expenses along  with a 4 year EF allows us to not to have to touch the money in the stock market. We can weather any downturn without stressing out.  Who knows how the math would have turned out if we had let the money back in 2000-2001 stay in the market. We still feel good about the decision.

MrsWhipple

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Re: Do you regret paying off your mortgage early?
« Reply #179 on: January 04, 2016, 09:52:26 PM »
Haven't read most of the thread, but is there anyone here with a paid off home who is borrowing against the equity of their home to buy stocks?
Yes, I suppose you could say we did that. We paid cash and then immediately got a no-cost mortgage at 4% for the max value we could get (75% of purchase price). Then put the mortgage check into our investments, which right now is 80/20 stock/bonds because we're in our early thirties. The financial math I worked out behind it:
- no-cost mortgages abound, making transaction costs a non-issue in this lending environment
- I expect a return of around twice as much as the 4% I'd be getting from the bank in my investments
- we already itemize our expenses, so a mortgage interest deduction takes the 4% interest rate down by nearly a third, making it more of a no-brainer
- (this one is the big one that not everyone will have): maxing out our solo 401ks is a big tax deduction, so we're saving at least $20k right off the bat just by being able to do that with the extra funds; if we didn't have the mortgage check we wouldn't be able to max those out this year. If you're not maxing out your tax-advantaged space because you're prepaying a mortgage, I think you're making a pretty big mistake.

We're keeping enough cash on hand so that we have 3 years of mortgage payments in a savings account - that isn't earning nearly as much money as it would by investing (around 1% in an online savings acct), but it also gives us great peace of mind and the option to max out tax-advantaged accounts if/when we need to and don't have the extra cash laying around.  Having a fixed mortgage payment over the course of 30 years lets me use the liquidity in other ways that I think are more useful than simply paying off low-interest debt. Plus, a mortgage is a leveraged hedge against inflation, so I don't need to have TIPS in my portfolio bringing down my return average.

My last mortgage was paid down rapidly and I regretted it, which is why for this one I took out the largest, longest mortgage I could. Like it or not, the US government subsidizes home ownership through mortgages, and I'm gonna suck out all the good I can get from it! Anyway, that was my reasoning for taking out a mortgage even though we didn't need to. Hope this helps anyone who's thinking about either prepaying their mortgage down or going the reverse route.

Playing with Fire UK

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Re: Do you regret paying off your mortgage early?
« Reply #180 on: January 05, 2016, 07:50:11 AM »
I'm not surprised that there are more people here who don't regret paying off a mortgage; but what I'm taking from this is that there are more than zero people who do regret it or choose not to pay off a mortgage that they could.

If someone has a strong feeling that they want to pay the mortgage off they should probably do it; but not because 'everyone' should do it or 'no-one' regrets it.

HAPPYINAZ

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Re: Do you regret paying off your mortgage early?
« Reply #181 on: January 05, 2016, 10:41:46 AM »
Love having ours paid off and we did it early by doing double payments for awhile and then one lump sum toward the end.  Great peace of mind that I think was worth it!

Wilson Hall

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Re: Do you regret paying off your mortgage early?
« Reply #182 on: January 05, 2016, 11:22:57 AM »


This is a community about retiring early right? Volatility is a big deal. A theoretical person who planned on a ten year working career staring in 1999 who leveraged all of their assets into the market would have their early retirement plans busted up pretty quickly.

EXCELLENT point!  I've been in the market for the past 14 years with regular contributions throughout and my average annual return is barely over 4%.  It will most likely be years before I see that magical 7 or 8% I am supposed to be able to count on.  I feel like there is too much exuberance on these forums based on market returns in 2009-2014.  It is shortsighted.

Totally agree. When I calculate my 403b's long-term value, I consider 4% returns standard. If they go up to 6-7%, I'll be ecstatic.

Having the mortgage paid is a real blessing. If one of us loses a job, we can tap the home equity line if necessary. And, because our extended family lives in a lower COLA than we do, if we eventually move we can probably make a small profit when we sell the house.

Jack

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Re: Do you regret paying off your mortgage early?
« Reply #183 on: January 05, 2016, 11:34:29 AM »
I'm not surprised that there are more people here who don't regret paying off a mortgage; but what I'm taking from this is that there are more than zero people who do regret it or choose not to pay off a mortgage that they could.

If someone has a strong feeling that they want to pay the mortgage off they should probably do it; but not because 'everyone' should do it or 'no-one' regrets it.

Good point: the phrasing of the question skews the answers because the (possibly many) people who chose not to pay down their mortgage can't answer.

Don Jean

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Re: Do you regret paying off your mortgage early?
« Reply #184 on: January 05, 2016, 11:41:51 AM »
I believe that this thread is suffering from either Survivorship Bias or Self-Selection Bias based on the overwhelming number of response phrased:

A) Paid Off
B) Do Not Regret

FIPurpose

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Re: Do you regret paying off your mortgage early?
« Reply #185 on: January 05, 2016, 10:23:27 PM »
Even though it was a small part of this thread, this thread made me recalculate the return on paying down until my pmi is removed. When I first moved in my place I looked into the return on paying to pmi, but it was only about a 4% return. Now that I am about 13k away it is actually closer to a 8% return so I will be paying down to pmi removal. Thanks for the reminder that paying off pmi is  good investment!
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Playing with Fire UK

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Re: Do you regret paying off your mortgage early?
« Reply #186 on: January 06, 2016, 12:30:38 AM »
I'm not surprised that there are more people here who don't regret paying off a mortgage; but what I'm taking from this is that there are more than zero people who do regret it or choose not to pay off a mortgage that they could.

If someone has a strong feeling that they want to pay the mortgage off they should probably do it; but not because 'everyone' should do it or 'no-one' regrets it.

Good point: the phrasing of the question skews the answers because the (possibly many) people who chose not to pay down their mortgage can't answer.

Yep, the OP had a particular question, which has been answered. People have posted to say 'paid off, don't regret' and 'paid off, do regret' but the phrasing doesn't open itself to 'not paid off, don't regret' or 'not paid off, do regret'.

cerat0n1a

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Re: Do you regret paying off your mortgage early?
« Reply #187 on: January 06, 2016, 01:04:26 AM »
"Peace of mind" is probably the only legitimate answer to why someone would do this. Everyone else is doing mental gymnastics to explain their decision.

You're assuming that your own situation applies to all readers.

In my case, the arithmetic was simple. The (variable) mortgage rate in the UK at the time was 6% and I was paying 40% marginal income tax. Therefore I would need a 10% return on investment to do better than paying off the mortgage. It was a no-brainer to do so. If I'd put that money into a FTSE-100 tracker, I'd have lost out big-time, because the index in the UK is still lower than it was 16 years ago, during the dotcom boom. So, no regrets at all.

Of course, with the benefit of hindsight, the better option would have been to mortgage up to the hilt and buy a bunch of properties to take advantage of the housing price bubble in the UK, but investment is easy in the rear view mirror.

Northwestie

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Re: Do you regret paying off your mortgage early?
« Reply #188 on: January 06, 2016, 02:51:14 PM »
Paid off the 15 yr note with 3 years to go, which was a slam dunk decision.  At the end of the loan run so was not making the threshold for interest payments for itemizing income tax and had no desire to refinance - yea, lower rate but all the other refinancing costs made no sense.  And right now there is no where to make a solid 4.2% (was our rate) in a guaranteed investment.  We've maxed out our 401ks for decades and had a lot of cash - so done with that and very happy!!   Did I mention we are very happy!!

JLee

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Re: Do you regret paying off your mortgage early?
« Reply #189 on: January 08, 2016, 10:54:02 AM »
I don't believe in house payments any more than I believe in car payments. I paid cash for a (very) modest house in a good location, and make sure that whatever would have gone to a mortgage payment goes into my Vanguard index funds. I like to own myself and my house. I don't like the feeling that the bank owns me and my house.

If someone were willing to lend at a low interest rate for a car old enough to have already finished most of its depreciation, then I'd totally love to have a car loan.

My $6000 2006 Mazda is financed for 3 years at 1.99%.

2buttons

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Re: Do you regret paying off your mortgage early?
« Reply #190 on: January 08, 2016, 11:37:04 AM »
I wonder why you wouldn't just do both? Invest extra and pay extra. Both ways you are reducing risk exposure. Our plan is to pay off house as early as possible, but I split my cash between extra principal payments and cash into a taxable investment account, after maxing non-tax retirement accounts of course.

I suspect its not as black and white as the question was framed for 99% people on here.   

GuitarStv

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Re: Do you regret paying off your mortgage early?
« Reply #191 on: January 08, 2016, 01:03:21 PM »
Our mortgage will be paid off this year . . . I kinda regret it.  In retrospect, the money probably would have been better off spent pumping into investments.  The idea of not paying the money off handn't really sunk in until we had already plowed a huge amount of cash into the house.  We have been investing as we paid off the house of course, but not as much as we could have.

That said, it's going to be really sweet to have that 400k out of the way and not to see monthly mortgage payments.

Evgenia

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Re: Do you regret paying off your mortgage early?
« Reply #192 on: January 08, 2016, 01:10:55 PM »
In response to the OP: Nope. No, no and no. We've not regretted it, not for a single second, in the almost past full year of having had the house paid off. It's so much money saved over the entire rest of our lives (Sweet Huz and I were 38 and 37 when we paid ours off). We did months of calculations to figure out if any investing could give us returns comparable to interest saved and decided no, especially for the effort. Our home insurance costs dropped, too.

The security of having our own paid-off roof over our heads cannot be overestimated, for us at least.
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brooklynguy

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Re: Do you regret paying off your mortgage early?
« Reply #193 on: January 08, 2016, 01:25:26 PM »
I wonder why you wouldn't just do both? Invest extra and pay extra. Both ways you are reducing risk exposure. Our plan is to pay off house as early as possible, but I split my cash between extra principal payments and cash into a taxable investment account, after maxing non-tax retirement accounts of course.

You can't do both with the same penny, and you need to make the capital allocation decision (deploy towards mortgage paydown?  or investments?  or something else?) for each and every penny.  By doing both (using some of your dollars for mortgage paydown, and some for investments), you are hedging your bets as far as which of these two uses will turn out to be the better use, but the underlying question still applies -- is it better to deploy (or, in this particular thread, "do you regret" deploying) any of your dollars to mortgage prepayment instead of investing them in the market?

lavagirl

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Re: Do you regret paying off your mortgage early?
« Reply #194 on: January 08, 2016, 01:56:25 PM »
Question- would paying off a mortgage make any sense for high earners?

Clean Shaven

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Re: Do you regret paying off your mortgage early?
« Reply #195 on: January 08, 2016, 02:04:39 PM »
As of today, I can post in this thread.

And my answer is "no regrets."  Instead, much happiness!

steveo

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Re: Do you regret paying off your mortgage early?
« Reply #196 on: January 08, 2016, 02:40:23 PM »
As of today, I can post in this thread.

And my answer is "no regrets."  Instead, much happiness!

I just paid my mortgage off and I feel exactly the same way.

dandarc

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Re: Do you regret paying off your mortgage early?
« Reply #197 on: January 08, 2016, 02:41:32 PM »
Question- would paying off a mortgage make any sense for high earners?
It depends.

dragoncar

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Re: Do you regret paying off your mortgage early?
« Reply #198 on: January 08, 2016, 02:47:14 PM »
Question- would paying off a mortgage make any sense for high earners?
It depends.

Only emotionally

skunkfunk

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Re: Do you regret paying off your mortgage early?
« Reply #199 on: January 08, 2016, 03:02:10 PM »
Question- would paying off a mortgage make any sense for high earners?

You could think of it as diversifying into real estate. I guess?