Author Topic: Do you regret paying off your mortgage early?  (Read 98077 times)

EnjoyIt

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Re: Do you regret paying off your mortgage early?
« Reply #400 on: November 30, 2017, 11:39:58 AM »
A few facts I get out of all this:

1)  Historically and mathematically paying down a mortgage early is not ideal.
2)  Those who already paid off their mortgage early almost always believe it is the best decision for them and it is silly to even consider changing their mind.
3)  At some point of the wealth spectrum optimizing financial growth is much less important than being happy or simplifying your life.  With that regard paying down a mortgage may be a very reasonable and appropriate decision.
4) Paying off the mortgage part way provides almost no benefit.  Either pay it off early or don't.  Just dropping a few thousand in provides almost no discernible benefit until you finally get it paid off and able to decrease your expenses.
5) This topic gets rehashed on just about every financial forum on the planet and always gets heated and eventually insults are thrown.

GuitarStv

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Re: Do you regret paying off your mortgage early?
« Reply #401 on: November 30, 2017, 12:53:26 PM »
So . . . because my previous comment was ignored I'll just ask it again, maybe phrasing it a bit differently.

Since many of the people in this thread have already paid off their mortgages, do you believe that remortgaging is a good idea for them?

boarder42

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Re: Do you regret paying off your mortgage early?
« Reply #402 on: November 30, 2017, 12:57:06 PM »
So . . . because my previous comment was ignored I'll just ask it again, maybe phrasing it a bit differently.

Since many of the people in this thread have already paid off their mortgages, do you believe that remortgaging is a good idea for them?

yes
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boarder42

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Re: Do you regret paying off your mortgage early?
« Reply #403 on: November 30, 2017, 01:06:36 PM »
Boarder encourages having a mortgage. Having a mortgage is idiotic because it encourages home ownership. Home ownership is not mathematically ideal and you will have better long term returns by renting and investing the difference/equity. Most people I purchase more house than they need/more than if they were renting. Boarder42 sell your clown house (escalade) and downgrade to an apartment.

the difference in cost between buying and renting is very regional and owning a home can be a much better financial move than renting.  I encourage those who have mortgages at low fixed rates to not pay them down ... you're just brining in a random rent vs buy arguement which is an entirely different story. 

and your opinion on renting vs buying makes sense since you live in a extremely high cost of home ownership area of the PDX in your name is portland.
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slythr

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Re: Do you regret paying off your mortgage early?
« Reply #404 on: November 30, 2017, 01:45:48 PM »
Are you implying that boarder42 is wrong or are you just trying vainly to be funny?

I don't think boarder42 is wrong, nor do I think you or anyone else in the "Don't pay off your mortgage club" is wrong. I think y'all are making the correct decision for you, in your circumstances, with your emotional tolerance. I'm trying to point out to b42 that he's acting foolish if he thinks he'll change anyone's mind by posting the exact same spiel "in any and every thread about a mortgage pay down until this community starts treating it like an Escalade", both in the "mortgage payoff club" and *especially* this particular necro'd thread, and then getting defensive about it when people politely and not-so-politely ask him to knock it off.

Sometimes people do "wrong" things, and then they post about them on the internet. Continuously telling them they're wrong just sucks all the oxygen out of the room. That's not discussion, that's browbeating.

you should go look at some comments in threads where people have changed their minds b/c they had no clue.

its a disservice to this community for such a thread to exist IMO b/c it allows for people who do not truly understand what they are doing to receive support for a decision that is detrimental to many.

Boarder42...

If you are going to esposue understanding then maybe you should do some yourself
I have lurked here for a long time, and I have seen countless threads regarding HOME LOAN payoffs, and the resuting debate between paying and arbitrating, and you always pop in.  With your one sided opinion. And you pick on those who disagree with you and you are positive you are correct in your opinion.

But you aint.  So let me introduce myself.

There are valid reasons for paying a loan off.  And there are equal valid reasons for keeping a loan.  They are both valid options depending on the borrower.


Rule #1.  If you are going to discuss and debate a subject, understand the correct terminology.  As in Mortgage. 

As a borrower...
You don't get a mortgage
You don't have a mortgage
And you don't pay off a mortgage.

The BANK has the mortgage, not the borrower.  The BANK gets the mortgage.  The borrower gets.....a home loan in exchange
The borrower doesn't pay off a mortgage.  They pay off a loan. A mortgage is a lien in exchange for money in the form of a loan described on a note signed on a recorded deed.

You don't go to a restaurant and get money.  You GIVE money and GET food.

Same with mortgages.  You GIVE them.  Banks get them.  I get them.  Because I am the bank.  You aren't.
Learn that first.  Then debate.

#2.

You have been hit over the head with several valid arguments for why anyone would pay off a home loan early, but it goes in one ear and out the other.  There are several reasons.

Here is the primary reason.  Control.

When you agree to a mortgage, that deed of trust I mentioned above has page after page of RESTRICTIONS on what the lender will allow you to do with your home.  I am looking at one now, and there are 11 pages detailing "Uniform Covenants" and they detail items such as maintenance, occupancy, preservation and protection of lenders interest.

So by leveraging or arbitrating your property you give up control of what you can and can't do with or on your property.
Some people are ok with that.  Some are not.  These covenants cover alot of areas and some are very limiting.  Minimum insurance requirements, usage, renting, # of occupants, minimum conditions, etc.

Me...I am not interested in giving up control over anything unless necessary.  Control trumps money in about all situation in my life.  I control my employment.  I control my income.  I control my home and housing too.

For the same reason people prefer to own vs rent.  Control.  Many of those same people prefer to not have a legally vested third party with rights to that property. 

There are other reasons too.  You state in this and other threads that the math works in favor of leverage, but that is not entirely true.  It "Can" work.  It also can't sometimes, like the lost decade from 2000 - 2010.   Historically it may have worked out in certain timeframes due to various simulators, but we don't live in history, and simulators don't pay home loan payments.  And comparing a fixed home loan, which is a bond, with equity markets, skews the risk and is not a viable comparison. You have to account for risk, which you rarely do.  And your reasoning that if you don't trust the 4% SWR we are all screwed, or the argument of how one can you assume a 4% SWR but not apply that in the calculation is an invalid argument. 

Of course there is freedom, and flexibility.  You discount these as reasons, but they still exist

Also..paying off a loan requires less income to maintain a lifestyle.  Less income is generally less taxes paid.  Less income also allows for more tax deductions and more tax credits due to phaseouts.  Less income allows for a higher ACA subsidy. There are 3 more reasons

As well, simply inflating an asset so it can be use to pay off a debt at a later date has it's own inherent risks.  When the market rises, it sounds great as the gains are magnified.  But when the market drops, the losses are magnified as well. You then conflate present market value (which is known and fixed with future market value with an unknown and non-guaranteed return)  You can't do that man.

The proper comparison is bond to bonds.  Home loans to 10yr Treas returns.  You don't compare a home loan to a Vanguard equity index fund without accounting for risk.  For many people, the risk isn't worth it.  For many institutions, the risk isn't worth it.  For most Banks and governments and countries, the risk isn't worth it at all.

See, Mr Keep the Mortgage, the real players play in the Bond market.  That is where banks and governments and state pensions invest. 

Have you ever stopped and asked a simple question?
WHY is the bank loaning you the money in the first place? Why does (or did) this fixed 3.25% $400K home loan even exist.
Why can people borrow up to $424K at under 4% fixed for 30 years for a home today?
Ask it.  I'll wait.

Why are home loan interest rates so low?  Why would most all of these Billion or Trillion dollar banks loan Mr KTM money on a house.  Mr. KTM already laid out his infallible reasoning that the "market" is the better risk over time, and is virtually risk free.  95 or 96% of the time the market wins you say over and over again.  So why are they betting on you as a borrower and all the risk you entail with not making payments on time X millions of home loan borrowers just like you vs just putting that money in a vanguard index fund and then spending the other 29 days of the month at the beach?

HMM????

They have teams...shit they have buildings full of PHD economists, mathematicians and statisticians.  MBA's.  Actuaries.  The smartest mofo's there are.  They have their own trading floors and their own trading desks too.  And I am quite confident they have access to cfire sim and this blog as well.  They could buy index funds all day long...hell...they have their own index funds actually.  Bank of America owns Merril Lynch.  Why didn't your loan officer just take your home loan check and drop it downstairs at their Merril Lynch office and put it in VSTAX.  That would be alot easier.

So WHY, with all this brainpower, all these resources, and all this knowledge do they choose to loan you the $500K instead of index it?  After all, unlike us little people with emotions, these are business whose sole purpose is to profit at maximum efficiency.  Every dollar must be deployed at maximum benefit.  Of all the places to invest that $500K, why did they choose to loan it to you as a home loan? And to all the other Millions of people who get loans each year?

You figure out the answer to that, and you will start to understand why many smart people on this blog already figured it out and paid their loans off early, and why you continuing to insult and beat up on people who do makes you look foolish.

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Re: Do you regret paying off your mortgage early?
« Reply #405 on: November 30, 2017, 01:59:13 PM »
that was the best first post i have ever seen slythr



slythr

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Re: Do you regret paying off your mortgage early?
« Reply #406 on: November 30, 2017, 02:14:12 PM »
Oh, and to answer the OP
Never a regret here paying down or off the home loan or any debt actually

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Re: Do you regret paying off your mortgage early?
« Reply #407 on: November 30, 2017, 02:25:55 PM »

Boarder42...

If you are going to esposue understanding then maybe you should do some yourself
I have lurked here for a long time, and I have seen countless threads regarding HOME LOAN payoffs, and the resuting debate between paying and arbitrating, and you always pop in.  With your one sided opinion. And you pick on those who disagree with you and you are positive you are correct in your opinion.

But you aint.  So let me introduce myself.

There are valid reasons for paying a loan off.  And there are equal valid reasons for keeping a loan.  They are both valid options depending on the borrower.


Rule #1.  If you are going to discuss and debate a subject, understand the correct terminology.  As in Mortgage. 

As a borrower...
You don't get a mortgage
You don't have a mortgage
And you don't pay off a mortgage.

The BANK has the mortgage, not the borrower.  The BANK gets the mortgage.  The borrower gets.....a home loan in exchange
The borrower doesn't pay off a mortgage.  They pay off a loan. A mortgage is a lien in exchange for money in the form of a loan described on a note signed on a recorded deed.

You don't go to a restaurant and get money.  You GIVE money and GET food.

Same with mortgages.  You GIVE them.  Banks get them.  I get them.  Because I am the bank.  You aren't.
Learn that first.  Then debate.

#2.

You have been hit over the head with several valid arguments for why anyone would pay off a home loan early, but it goes in one ear and out the other.  There are several reasons.

Here is the primary reason.  Control.

When you agree to a mortgage, that deed of trust I mentioned above has page after page of RESTRICTIONS on what the lender will allow you to do with your home.  I am looking at one now, and there are 11 pages detailing "Uniform Covenants" and they detail items such as maintenance, occupancy, preservation and protection of lenders interest.

So by leveraging or arbitrating your property you give up control of what you can and can't do with or on your property.
Some people are ok with that.  Some are not.  These covenants cover alot of areas and some are very limiting.  Minimum insurance requirements, usage, renting, # of occupants, minimum conditions, etc.

Me...I am not interested in giving up control over anything unless necessary.  Control trumps money in about all situation in my life.  I control my employment.  I control my income.  I control my home and housing too.

For the same reason people prefer to own vs rent.  Control.  Many of those same people prefer to not have a legally vested third party with rights to that property. 

There are other reasons too.  You state in this and other threads that the math works in favor of leverage, but that is not entirely true.  It "Can" work.  It also can't sometimes, like the lost decade from 2000 - 2010.   Historically it may have worked out in certain timeframes due to various simulators, but we don't live in history, and simulators don't pay home loan payments.  And comparing a fixed home loan, which is a bond, with equity markets, skews the risk and is not a viable comparison. You have to account for risk, which you rarely do.  And your reasoning that if you don't trust the 4% SWR we are all screwed, or the argument of how one can you assume a 4% SWR but not apply that in the calculation is an invalid argument. 

Of course there is freedom, and flexibility.  You discount these as reasons, but they still exist

Also..paying off a loan requires less income to maintain a lifestyle.  Less income is generally less taxes paid.  Less income also allows for more tax deductions and more tax credits due to phaseouts.  Less income allows for a higher ACA subsidy. There are 3 more reasons

As well, simply inflating an asset so it can be use to pay off a debt at a later date has it's own inherent risks.  When the market rises, it sounds great as the gains are magnified.  But when the market drops, the losses are magnified as well. You then conflate present market value (which is known and fixed with future market value with an unknown and non-guaranteed return)  You can't do that man.

The proper comparison is bond to bonds.  Home loans to 10yr Treas returns.  You don't compare a home loan to a Vanguard equity index fund without accounting for risk.  For many people, the risk isn't worth it.  For many institutions, the risk isn't worth it.  For most Banks and governments and countries, the risk isn't worth it at all.

See, Mr Keep the Mortgage, the real players play in the Bond market.  That is where banks and governments and state pensions invest. 

Have you ever stopped and asked a simple question?
WHY is the bank loaning you the money in the first place? Why does (or did) this fixed 3.25% $400K home loan even exist.
Why can people borrow up to $424K at under 4% fixed for 30 years for a home today?
Ask it.  I'll wait.

Why are home loan interest rates so low?  Why would most all of these Billion or Trillion dollar banks loan Mr KTM money on a house.  Mr. KTM already laid out his infallible reasoning that the "market" is the better risk over time, and is virtually risk free.  95 or 96% of the time the market wins you say over and over again.  So why are they betting on you as a borrower and all the risk you entail with not making payments on time X millions of home loan borrowers just like you vs just putting that money in a vanguard index fund and then spending the other 29 days of the month at the beach?

HMM????

They have teams...shit they have buildings full of PHD economists, mathematicians and statisticians.  MBA's.  Actuaries.  The smartest mofo's there are.  They have their own trading floors and their own trading desks too.  And I am quite confident they have access to cfire sim and this blog as well.  They could buy index funds all day long...hell...they have their own index funds actually.  Bank of America owns Merril Lynch.  Why didn't your loan officer just take your home loan check and drop it downstairs at their Merril Lynch office and put it in VSTAX.  That would be alot easier.

So WHY, with all this brainpower, all these resources, and all this knowledge do they choose to loan you the $500K instead of index it?  After all, unlike us little people with emotions, these are business whose sole purpose is to profit at maximum efficiency.  Every dollar must be deployed at maximum benefit.  Of all the places to invest that $500K, why did they choose to loan it to you as a home loan? And to all the other Millions of people who get loans each year?

You figure out the answer to that, and you will start to understand why many smart people on this blog already figured it out and paid their loans off early, and why you continuing to insult and beat up on people who do makes you look foolish.



X2 on best first post, ever.

Seradoc

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Re: Do you regret paying off your mortgage early?
« Reply #408 on: November 30, 2017, 02:38:54 PM »
I paid off my first home in 6 years and got 3 years of mortgage free living.

On my second home, I was not making extra payments due to maths and was going to ride it out 30 years.

Now I am timing the market and selling 4% of my equities to put towards 10% of the mortgage.  If the equity bubble doesn't burst, maybe I'll do it again.



Oh yeah, and no regrets so far.

Yep, that should be adequate to offend all sides of the argument and then some...
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arebelspy

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Re: Do you regret paying off your mortgage early?
« Reply #409 on: November 30, 2017, 02:45:12 PM »
Re: slythr's first post... I found it a bit misguided, on both main points.

1) Re: terminology. No one "gets" a mortgage. You get a loan. The bank gets a promissory note, secured by a deed of trust (a lien on the property). Colloquially the loan you must repay though is called a "mortgage." Everyone refers to paying off a mortgage, including the title of this thread, so to nitpick on one person's use of it, when everyone calls it that, is silly.

2) Re: Why the banks loan it. It's not because they have decided this is the risk-premium and this is a better use of "their" money than investing it in index funds, as you imply that all their eggheads have decided. It's because they can create money out of thin air due to our fractional reserve banking system. When they loan out money, they can do so at a very high ratio. They cannot do this when straight investing it. Therefore they make free money (interest) when creating the loans, so there's no downside to them to do so. The mortgage money you're borrowing isn't money that actually exists somewhere that could be invested at a higher rate somewhere else, it's money where 90%
 of it is created when you take the loan.

Paying off your mortgage, or not, nitpicking on terminology and creating a false reason why mortgages exist isn't what I'd call a stellar post, and I felt the need to correct it since multiple people seemed to think it was.
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slythr

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Re: Do you regret paying off your mortgage early?
« Reply #410 on: November 30, 2017, 03:31:41 PM »
Re: slythr's first post... I found it a bit misguided, on both main points.

1) Re: terminology. No one "gets" a mortgage. You get a loan. The bank gets a promissory note, secured by a deed of trust (a lien on the property). Colloquially the loan you must repay though is called a "mortgage." Everyone refers to paying off a mortgage, including the title of this thread, so to nitpick on one person's use of it, when everyone calls it that, is silly.

2) Re: Why the banks loan it. It's not because they have decided this is the risk-premium and this is a better use of "their" money than investing it in index funds, as you imply that all their eggheads have decided. It's because they can create money out of thin air due to our fractional reserve banking system. When they loan out money, they can do so at a very high ratio. They cannot do this when straight investing it. Therefore they make free money (interest) when creating the loans, so there's no downside to them to do so. The mortgage money you're borrowing isn't money that actually exists somewhere that could be invested at a higher rate somewhere else, it's money where 90%
 of it is created when you take the loan.

Paying off your mortgage, or not, nitpicking on terminology and creating a false reason why mortgages exist isn't what I'd call a stellar post, and I felt the need to correct it since multiple people seemed to think it was.

Hey there Rebel

I am a banker and I understand the terminology quite well.  While the use of a colloquialism may be true and everyone uses it, it is still incorrect. If we are going to debate minuate and fine points, then I think we should get the minuate and fine points straight. 

That is why I didn't call out the OP.  I have no issue with the use of the term Mortgage, but when someone wants to dispute really fine details, then by all means. It may be silly, but only in proportion to the initial reason for the response.

A promissory note "CAN" be secured by a deed of trust when using a trustee as a third party.  When not using a trustee, a note agreed to between a borrower and lender is secured by a mortgage, not a deed of trust. Hence the GIVE a mortgage comment.

But that wasn't the gist of the response.  It was akin to "if you are going to make fun of my name, at least get my name right"

As far as FRB, I have some experience with that as well. Your explanation is not quite accurate.
When making a loan there are 4 entries.  Credit and liability for the bank and credit and liability for the borrower.  Plus the increase in reserve requirement for the bank.  While the bank cannot legally use deposits to invest, they can use their own internal credit and internal assets, which the loan also creates.  This was part of the premise for Glass Stegal in 1933 as what I described in my initial non-stellar post played a large part in the initial stages of the market crash and great depression

We are veering off point though.  The point is, there are several valid financial reasons for early loan payoff and the dismissal of some of them is short sighted.
« Last Edit: November 30, 2017, 03:37:39 PM by slythr »

Cranky

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Re: Do you regret paying off your mortgage early?
« Reply #411 on: November 30, 2017, 03:35:03 PM »
I am very happy to have paid off my mortgage.

Caveat - we are not especially young, and we are not retiring "early", and we've been in this house for 20 years, and it's not an expensive house in the first place.

We bought the house we could afford in the first place, and as we earned more money we paid more on the principal, and then it was paid off.

It's part of our overall strategy. I prefer to cover many bases, financially speaking, and I am very content knowing that whatever happens we have a very inexpensive place to live. No regrets, but my goal isn't a big pile of money, either.

Telecaster

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Re: Do you regret paying off your mortgage early?
« Reply #412 on: November 30, 2017, 03:36:36 PM »
Also worth pointing out that banks really don't make much money by owning mortgages.  So they typically don't.  Your mortgage was probably sold as soon as the ink was dry, probably to an aggregator like Fannie Mae or Freddie Mac, or some Wall Street entity, where it combined into a mortgage-backed security.  There are good reasons why investors want to own MBSs, basically the same reasons people own bonds.  The MBS are then packaged into any number of other types of financial instruments like collateralized debt obligations and asset-backed securities.  Those instruments are then traded, and sometimes leveraged out to oblivion.  That's where the money is made.  If you got a mortgage from Wells Fargo, you might still be writing a check to them every month, but it is unlikely they still own the mortgage.  They just collect the servicing fees. 

So if it isn't worth the bank's time and money to own your mortgage, that's a sign it might be a good deal for you to have one.  I did appreciate your points about the advantages of the need for lowered income by the way. 


slythr

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Re: Do you regret paying off your mortgage early?
« Reply #413 on: November 30, 2017, 03:47:18 PM »
Also worth pointing out that banks really don't make much money by owning mortgages.  So they typically don't.  Your mortgage was probably sold as soon as the ink was dry, probably to an aggregator like Fannie Mae or Freddie Mac, or some Wall Street entity, where it combined into a mortgage-backed security.  There are good reasons why investors want to own MBSs, basically the same reasons people own bonds.  The MBS are then packaged into any number of other types of financial instruments like collateralized debt obligations and asset-backed securities.  Those instruments are then traded, and sometimes leveraged out to oblivion.  That's where the money is made.  If you got a mortgage from Wells Fargo, you might still be writing a check to them every month, but it is unlikely they still own the mortgage.  They just collect the servicing fees. 

So if it isn't worth the bank's time and money to own your mortgage, that's a sign it might be a good deal for you to have one.  I did appreciate your points about the advantages of the need for lowered income by the way.

Really the only reason Banks offer home loans is due to the origination fees collected up front. The majority of income is from the origination and sale to an agency (Fannie/Freddie/HUD).  Then the agency pays the bank a servicing fee to service as well.  But Home Loans are "Very" profitable for banks. You are correct, they are packaged as MBS, which are very similar in structure and duration to 10Y Treas.  Which is why I suggested that home loan leverage and arbitrage be compared to bonds instead of equities, because that is what they are...bonds.

rpr

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Re: Do you regret paying off your mortgage early?
« Reply #414 on: November 30, 2017, 03:50:27 PM »
P2F.

ARS -- Thanks for mentioning fractional reserve banking. I went and saw videos on the Khan Academy on the FRB.

https://www.khanacademy.org/economics-finance-domain/macroeconomics/monetary-system-topic/fractional-reserve-banking-tut/

I highly recommend these if you are interested in learning more about the money system.

ETA: And slythr -- thanks for your first post to which ARS responded and thus stimulated my curiosity about the banking system. I also assume that banks cannot easily deploy their deposits into equity markets due to requirements for collateral. Much easier to originate mortgage loans instead. 
« Last Edit: November 30, 2017, 04:01:00 PM by rpr »

Brother Esau

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Re: Do you regret paying off your mortgage early?
« Reply #415 on: November 30, 2017, 04:26:44 PM »

I will comment on any and every thread about a mortgage pay down until this community starts treating it like an Escalade.

That comparison is ridiculous, insulting, and wrong. The people here who pay off their mortgages are doing so KNOWING that it does not provide the highest ROI in $ terms. They accept the lower ROI because it improves their quality of life, eliminating one debt and giving them peace of mind. MMM isn't about making the most money possible--if it were, we'd all be working three jobs and living in a van with five roommates.  Are you doing that?

Stop acting like an asshole.


+1

Brother Esau

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Re: Do you regret paying off your mortgage early?
« Reply #416 on: November 30, 2017, 04:32:24 PM »
zero mortgage/debt = :-). plenty of green soldiers still working for me in the markets and other places.

BookLoverL

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Re: Do you regret paying off your mortgage early?
« Reply #417 on: November 30, 2017, 04:44:32 PM »
I'm still young (early-mid twenties) and very early in my FIRE journey, with currently low 5 figure savings (UK), and don't have a house yet, but when I'm ready to buy one I'd prefer to buy one outright with cash, rather than ever get a mortgage at all. This is because: a) my burnout rate for office jobs was way shorter than 10 years, and therefore I'm going the self-employment route, which has pretty variable income, and b) I'm shamefully bad at remembering to pay regular payments on specific dates. Each year I end up paying like 50 quid in library fines because the library notifies me that my books will be due in 3 days, doesn't notify me on the actual day, and I forget to renew them. For this reason, I'm not planning to get a credit card, even to game the system, because I know that I'll at some point forget to pay it on time, and if I did get a mortgage, I'm almost certain I would forget to pay it off in time at some point. Any investment where I have to remember to do stuff to it at a specific point is a poor fit for me.

Plus, if I was in debt, it'd hang over me like a storm cloud. I'd rather just know that I own the house, I can do what the hell I like with the decor, what the hell I like with the garden, and if the financial system suddenly collapsed I'd have somewhere to live.
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brooklynguy

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Re: Do you regret paying off your mortgage early?
« Reply #418 on: November 30, 2017, 05:05:04 PM »
I did appreciate your points about the advantages of the need for lowered income by the way.

This point gets brought up periodically (and was actually raised earlier in this thread, several different times), but it's important not to overstate its significance.  Folks commonly fall into the trap of assuming that a leveraged-investing-via-mortgage strategy necessarily translates into additional income in the full amount of the required mortgage payments, but that's not true.  As long as you are investing in investments which generate their returns primarily through capital appreciation (like stocks), then the impact on your income could be minimal (because, as you liquidate those investments to service the mortgage payments, some of the proceeds (and, in the early years, the lion's share of the proceeds) will represent return of basis, not gains, and therefore not income).

jessicat

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Re: Do you regret paying off your mortgage early?
« Reply #419 on: November 30, 2017, 06:00:04 PM »
Another nice thing about having a mortgage paid off is if you have some kind of major natural disaster.  For instance we were one week away from paying off our last house when we got hit by a hail storm.  The hail was 5 1/4 inches.  So softball/gratefruit size.  We had 96k worth of damage in our house.  we lived in a hotel for 4 months while our house was being repaired.  We paid off that mortgage a week after the storm.  It was the best decision especially because of what was going on.  You see we cut the mortgage company out of our claim.  So the insurance agency sent the money to repair it directly to us instead of the mortgage company.  So many of our friends had to fight their mortgage company to get that money to fix their houses.  It was so awful to watch mortgage companies refuse to release the money for a lot of different reasons.  It saved us so much headache to not have a mortgage especially because of everything else we were dealing with.
  Another benefit to us paying off our mortgage early is that we ended up moving and selling the house.  Because it was paid off we bought a much nicer house that we LOVE.  And it has land and is in the country.  We now have a mortgage of 107k.  And yes we plan to pay it off in the next 2-3 years because I HATE having a mortgage.  You can throw all the numbers you want at me.  But I feel free when I don't have a mortgage.  I don't do things always because of numbers.  I am a human and emotion and state of being comes in to play.  I am happier and have less stress when I don't have debt of any kind.  And that kind of peace for me is priceless.  Most of us are here because we want that peace that comes from the kind of lifestyle that is shown here.  Details might be different but I am pretty sure everyone is looking for a peaceful way to live.  Which is why it is stupid to compare what is peaceful to each other and sit around insisting that the other person's position on whether or not to have a mortgage is kind of dumb.  I am happiest living in the country.  Other people are happiest living in the city.  Neither is wrong.  It is a preference.

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Re: Do you regret paying off your mortgage early?
« Reply #420 on: November 30, 2017, 06:57:56 PM »
Boarder encourages having a mortgage. Having a mortgage is idiotic because it encourages home ownership. Home ownership is not mathematically ideal and you will have better long term returns by renting and investing the difference/equity. Most people I purchase more house than they need/more than if they were renting. Boarder42 sell your clown house (escalade) and downgrade to an apartment.

Often this is the case.  I bought a house when it cost me about $800/mo in a market where an equivalent rental would've cost $1100-1300/mo.  It has appreciated approximately 50% in less than five years.

Am I an outlier? Probably.  However, if I were to have invested the difference between my mortgage and what rent would have cost, I'd have had to draw down investments instead of having a savings available to invest.

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Re: Do you regret paying off your mortgage early?
« Reply #421 on: November 30, 2017, 07:14:24 PM »
Another nice thing about having a mortgage paid off is if you have some kind of major natural disaster.  For instance we were one week away from paying off our last house when we got hit by a hail storm.  The hail was 5 1/4 inches.  So softball/gratefruit size.  We had 96k worth of damage in our house.  we lived in a hotel for 4 months while our house was being repaired.  We paid off that mortgage a week after the storm.  It was the best decision especially because of what was going on.  You see we cut the mortgage company out of our claim.  So the insurance agency sent the money to repair it directly to us instead of the mortgage company.  So many of our friends had to fight their mortgage company to get that money to fix their houses.  It was so awful to watch mortgage companies refuse to release the money for a lot of different reasons.  It saved us so much headache to not have a mortgage especially because of everything else we were dealing with.
  Another benefit to us paying off our mortgage early is that we ended up moving and selling the house.  Because it was paid off we bought a much nicer house that we LOVE.  And it has land and is in the country.  We now have a mortgage of 107k.  And yes we plan to pay it off in the next 2-3 years because I HATE having a mortgage.  You can throw all the numbers you want at me.  But I feel free when I don't have a mortgage.  I don't do things always because of numbers.  I am a human and emotion and state of being comes in to play.  I am happier and have less stress when I don't have debt of any kind.  And that kind of peace for me is priceless.  Most of us are here because we want that peace that comes from the kind of lifestyle that is shown here.  Details might be different but I am pretty sure everyone is looking for a peaceful way to live.  Which is why it is stupid to compare what is peaceful to each other and sit around insisting that the other person's position on whether or not to have a mortgage is kind of dumb.  I am happiest living in the country.  Other people are happiest living in the city.  Neither is wrong.  It is a preference.
+1

I feel MMM's blog is a celebration about having control over one' life through financial independence and frugal living. 

Having believed and lived FI and frugal living for 35+ years, I am also pleased to see an educated forum discussing the topic.  My only hope for this thread is that we remain civil, a group, and remember that we are generally nice people who enjoy sharing our ideas.

Anyway, we are debt free and leverage free with no regrets.  The aim for 100% control of my home was a key reason, though with taxes and regulation, we all never fully own a home.  Anyway, to each their own.
« Last Edit: November 30, 2017, 07:22:00 PM by PizzaSteve »
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Re: Do you regret paying off your mortgage early?
« Reply #422 on: November 30, 2017, 08:26:03 PM »
Another nice thing about having a mortgage paid off is if you have some kind of major natural disaster.  For instance we were one week away from paying off our last house when we got hit by a hail storm.  The hail was 5 1/4 inches.  So softball/gratefruit size.  We had 96k worth of damage in our house.  we lived in a hotel for 4 months while our house was being repaired.  We paid off that mortgage a week after the storm.  It was the best decision especially because of what was going on.  You see we cut the mortgage company out of our claim.  So the insurance agency sent the money to repair it directly to us instead of the mortgage company.  So many of our friends had to fight their mortgage company to get that money to fix their houses.  It was so awful to watch mortgage companies refuse to release the money for a lot of different reasons.  It saved us so much headache to not have a mortgage especially because of everything else we were dealing with.
  Another benefit to us paying off our mortgage early is that we ended up moving and selling the house.  Because it was paid off we bought a much nicer house that we LOVE.  And it has land and is in the country.  We now have a mortgage of 107k.  And yes we plan to pay it off in the next 2-3 years because I HATE having a mortgage.  You can throw all the numbers you want at me.  But I feel free when I don't have a mortgage.  I don't do things always because of numbers.  I am a human and emotion and state of being comes in to play.  I am happier and have less stress when I don't have debt of any kind.  And that kind of peace for me is priceless.  Most of us are here because we want that peace that comes from the kind of lifestyle that is shown here.  Details might be different but I am pretty sure everyone is looking for a peaceful way to live.  Which is why it is stupid to compare what is peaceful to each other and sit around insisting that the other person's position on whether or not to have a mortgage is kind of dumb.  I am happiest living in the country.  Other people are happiest living in the city.  Neither is wrong.  It is a preference.
+1

I feel MMM's blog is a celebration about having control over one' life through financial independence and frugal living. 

Having believed and lived FI and frugal living for 35+ years, I am also pleased to see an educated forum discussing the topic.  My only hope for this thread is that we remain civil, a group, and remember that we are generally nice people who enjoy sharing our ideas.

Anyway, we are debt free and leverage free with no regrets.  The aim for 100% control of my home was a key reason, though with taxes and regulation, we all never fully own a home.  Anyway, to each their own.

Amen to that.   Hike your own fu <kin hike.
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keyvaluepair

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Re: Do you regret paying off your mortgage early?
« Reply #423 on: November 30, 2017, 08:50:38 PM »
In defense of boarder42, I'll say that his thesis isn't wrong, but an optimal decision depends on the time at which you make the decision and the amount of mortgage remaining. If the (Markovian) market is yielding poorly (or negatively) then paying off an assured mortgage makes sense if you have ready cash.

On the other hand if the market is going gangbusters at this particular point, where returns are higher than the risk free interest (or mortgage) rate then it makes more sense to do what boarder42 suggests.

Honestly, we don't have to be purists about this, and it doesn't take much to be civil to each other as well. We have enough screaming in our national discourse. Let's not bring that here.

Please.

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Re: Do you regret paying off your mortgage early?
« Reply #424 on: November 30, 2017, 09:05:57 PM »
I, for one, am glad that boarder42 and others continue to comment in these mortgage payoff threads.  While it may get heated at times, I think boarder is coming from a good place in trying to save us all some money.  It is discussions like these that did change my mind and convinced me not to put any extra money towards my mortgage.  It seems like paying off a mortgage is always looked at as a good thing.  I mean, it's easy to see the interest you would save by paying it down.  Yes, this is an exact, guaranteed number.  What you may make (or lose) in the stock market is not.  But over 30 years, you better damn well believe you'll make more than a 4% non-inflation adjusted return in the market.  If not, none of us should FIRE.  When you look at historical data and do all the math, it really makes so much more sense to keep your low rate mortgage.  So I think it's important that these discussions continue to happen, as tiring as they may be.  The fact that we keep having them means at least one person may be willing to change their mind, it which case the discussion is worth having.

I do understand why some people pay off their mortgage.  There may be some circumstances where it makes financial sense, though I think these are fairly rare.  Or it may still not make financial sense but makes people feel better, which does have some value.  I have no problem with it.  The point here is to think about it, look at the historical data, and understand that you'll generally come out ahead by investing instead.  At that point, make whatever decision you want.  But at least be informed.

Dicey

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Re: Do you regret paying off your mortgage early?
« Reply #425 on: November 30, 2017, 10:36:28 PM »
I, for one, am glad that boarder42 and others continue to comment in these mortgage payoff threads.  While it may get heated at times, I think boarder is coming from a good place in trying to save us all some money.  It is discussions like these that did change my mind and convinced me not to put any extra money towards my mortgage.  It seems like paying off a mortgage is always looked at as a good thing.  I mean, it's easy to see the interest you would save by paying it down.  Yes, this is an exact, guaranteed number.  What you may make (or lose) in the stock market is not.  But over 30 years, you better damn well believe you'll make more than a 4% non-inflation adjusted return in the market.  If not, none of us should FIRE.  When you look at historical data and do all the math, it really makes so much more sense to keep your low rate mortgage.  So I think it's important that these discussions continue to happen, as tiring as they may be.  The fact that we keep having them means at least one person may be willing to change their mind, it which case the discussion is worth having.

I do understand why some people pay off their mortgage.  There may be some circumstances where it makes financial sense, though I think these are fairly rare.  Or it may still not make financial sense but makes people feel better, which does have some value.  I have no problem with it.  The point here is to think about it, look at the historical data, and understand that you'll generally come out ahead by investing instead.  At that point, make whatever decision you want.  But at least be informed.
^All of this^. It is crucial to appreciate that the earlier you load up your investment accounts, the faster they begin doing the heavy lifting for you. If you wait until after you pay off your mortgage to start maxing out every retirement vehicle available to you, it's simply going to cost you more money, time and effort. As mustachians, that's a crucial point. We're all about getting there as fast as possible, with as little effort as possible. If people take the time to understand the importance of sequencing and its profound effect on wealth accumulation, they'll be miles ahead than those who just mindlessly Kill. All.The. Debt. Perhaps one day they'll look back in genuine appreciation for boarder42's enthusiasm, despite his bluntness. His passion is commendable. He doesn't have to care. He doesn't have to try to help people. But he does. His zeal will one day be appreciated by everyone who listened to his (and everyone else who shares this lesson's) message.

This does NOT mean that everyone must or should have a mortgage. IMO, obvious exceptions are people, especially relatively "older" people who hold mortgages in LCOLAs that are well under, say $100k, I don't think it'll make a helluva lot of difference for amounts that small. If you're near FIRE and have a huge nest egg accumulated? Pay that motherfucker off if you want to! Just make triple sure you'll have enough to pay the taxes, insurance, utilities and maintenance forever. If you own a house long enough, you will need to fix/repair/upgrade major systems that might not even be in your budget calculations at present.

Thanks to everyone who keeps the discussion going. It is most definitely helping people, one by one. If you've done the research and made your decision, just remember that many more people haven't yet. It's not like anyone's teaching this message in school. This thread (and all related threads) is as good a place as any to share the message. Please forgive us if we continue our ongoing and 100% voluntary efforts to spread the good word.

At five years post-FIRE, I am endlessly grateful to the person who taught me this lesson, even though I thought he was out of his gourd when he first explained it to me. I was most assuredly skeptical and possibly even hostile to his message. But I eventually learned, and I am grateful. That's why I share the lesson. If I'd gotten it through my thick skull sooner, I'd be celebrating an even higher FIREversary next week.

Musings From the Crystal Ball Department: It's going to be damn funny when interest rates rise and people start bemoaning the fact that they didn't ride their cheap-ass mortgages all the way to the end of their thirty year lifespan.


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Bateaux

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Re: Do you regret paying off your mortgage early?
« Reply #426 on: November 30, 2017, 10:59:17 PM »
/\ /\ /\

Shit Dicey is feisty tonight.  It is very good advice that you won't get in school.   I can't imagine sleeping in a house that I would owe 500k, 600k or shit a million on.  I don't live in that world.  But, if you do then hell yes you'd better invest before paying that big son of a bitch off.  With the low ass rates we've seen last decade or so.  Our tiny ass mortgage was at 8.5% in 1992.  Just paid it off in a few years.  Shit was cheap then though.
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SC93

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Re: Do you regret paying off your mortgage early?
« Reply #427 on: November 30, 2017, 11:27:07 PM »
The great thing about it is that if you regret paying off your mortgage you can always go take out another mortgage within hours. Ours was paid in cash so in a sense, we have never paid off a mortgage... we have never had one. But if we wanted one I'm sure we could get one.

^^^^ Someone up there commented about having a maid service. sssshhhhhh QUIET!!! That's how I made all of my money. I owned the company that was cleaning for people that thought they could afford a house cleaner when in fact most couldn't and I was making more than most of my customers. It was GREAT!!! They were all paying house payments all the while their maid service paid cash for theirs in the same part of town. lol ^^^^

JLee

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Re: Do you regret paying off your mortgage early?
« Reply #428 on: November 30, 2017, 11:59:14 PM »
If we define Mustachian as being like MMM then Boarder42 and Dicey are encouraging anti-mustachianism as MMM paid off his mortgage early.

Strategy 4: http://www.mrmoneymustache.com/2012/02/24/pay-down-the-mortgage-or-invest-more-a-winwin-question/

Sure, if you're comfortably retired with $100k+ in passive income, do basically whatever you want!

I guess everybody on here who doesn't earn hundreds of thousands a year in retirement is anti-mustachian.

Exflyboy

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Re: Do you regret paying off your mortgage early?
« Reply #429 on: December 01, 2017, 12:04:50 AM »
Hehe.. well although I paid mine off.. I just advised a lady who is 55 (has a $120k nest egg and plans to retire at 70) to not pay hers off and to max out her 403b instead and put it all into a single stock ETF.

Now of course she doesn't have much time but with a bit of pension and Social Security she could do pretty well and may even be FI.

So yeah I swapped sides I guess...:)

Dicey

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Re: Do you regret paying off your mortgage early?
« Reply #430 on: December 01, 2017, 12:12:28 AM »
If we define Mustachian as being like MMM then Boarder42 and Dicey are encouraging anti-mustachianism as MMM paid off his mortgage early.

Strategy 4: http://www.mrmoneymustache.com/2012/02/24/pay-down-the-mortgage-or-invest-more-a-winwin-question/

Your citation proves not what you think it does, pdxmonkey, but I guess it's fodder for another lesson, sigh...

Here's a story: DH and I paid cash for our current home, AFTER we were FI. And we live in a crazy HCOLA. FWIW, I'm sure our house cost a helluva lot more than Pete's did. Not that we're anywhere close Pete's reported income league. Funny, we had the extra ca$$$h available because we sold two homes that we'd held long-term, fixed rate mortgages on for many years. We actually did something different than Pete, but all of us waited to do so until AFTER we were FI, which is the whole damn point! Save early, invest, get to FI, then you can do whatever the fuck you want with the piles and piles of money you'll have. It's amazing how it grows!*

If you think that's anti-mustachian, then alas, I cannot help you, pdxmonkey, which makes me sad, but perhaps someone else will have a light-bulb moment.

*Another vignette: Recently, one of our rentals developed an elusive and potentially very costly and diffucult to correct water leak. The whole time we were trying to figure out what the hell was wrong and how to fix it, we only cared about how much water was being wasted. We never had to worry about what it was going to cost or how we were going to pay for it! Sweet!

And thanks JLee and EFB, I just saw your posts when I hit Preview.
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Lmoot

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Re: Do you regret paying off your mortgage early?
« Reply #431 on: December 01, 2017, 12:14:39 AM »
For now I am not paying my mortgage early, but eventually I will. Very little has to do with financial reasons. A mortgage is a lien on the property and there are things I plan on doing with the property in the future that would be difficult if not impossible with a mortgage; and I don't feel like pleading my case for what to do with my own house. All I want to focus on is getting it approved by the City. Some bonuses of course would be not having a mortgage anymore, and being able to lower my insurance premiums to whatever I want.

I am not opposed to the pay off naysayers, and agree with most of their points. But I also believe that if the decision (whatever it is), still allows you to meet your financial goals, and let's you sleep at night, then it's not a "wrong" decision, and I feel that boarder et al tend to throw a blanket over everyone without asking fact-finding questions.

Also, honey trumps vinegar.
« Last Edit: December 01, 2017, 12:25:22 AM by Lmoot »

JLee

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Re: Do you regret paying off your mortgage early?
« Reply #432 on: December 01, 2017, 12:48:18 AM »
For now I am not paying my mortgage early, but eventually I will. Very little has to do with financial reasons. A mortgage is a lien on the property and there are things I plan on doing with the property in the future that would be difficult if not impossible with a mortgage; and I don't feel like pleading my case for what to do with my own house. All I want to focus on is getting it approved by the City. Some bonuses of course would be not having a mortgage anymore, and being able to lower my insurance premiums to whatever I want.

I am not opposed to the pay off naysayers, and agree with most of their points. But I also believe that if the decision (whatever it is), still allows you to meet your financial goals, and let's you sleep at night, then it's not a "wrong" decision, and I feel that boarder et al tend to throw a blanket over everyone without asking fact-finding questions.

Also, honey trumps vinegar.

I don't get that impression.  Many people go into "debt is bad, must pay off ASAP" mode without realizing that it's not always the most fiscally responsible avenue.

An informed decision is a better decision than one made out of incorrect assumptions, and the incorrect assumptions are what's getting corrected.  That is my take on it, anyway.

For example, when my car loan gets small enough that I can pay it off with one or two paychecks, I'll probably do it just to make it go away.  With a rate below 2% and a roaring market, I'm much better off carrying it to term...and I realize that, but with a small enough amount I don't really care.

Lmoot

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Re: Do you regret paying off your mortgage early?
« Reply #433 on: December 01, 2017, 01:09:53 AM »
For now I am not paying my mortgage early, but eventually I will. Very little has to do with financial reasons. A mortgage is a lien on the property and there are things I plan on doing with the property in the future that would be difficult if not impossible with a mortgage; and I don't feel like pleading my case for what to do with my own house. All I want to focus on is getting it approved by the City. Some bonuses of course would be not having a mortgage anymore, and being able to lower my insurance premiums to whatever I want.

I am not opposed to the pay off naysayers, and agree with most of their points. But I also believe that if the decision (whatever it is), still allows you to meet your financial goals, and let's you sleep at night, then it's not a "wrong" decision, and I feel that boarder et al tend to throw a blanket over everyone without asking fact-finding questions.

Also, honey trumps vinegar.

I don't get that impression.  Many people go into "debt is bad, must pay off ASAP" mode without realizing that it's not always the most fiscally responsible avenue.

An informed decision is a better decision than one made out of incorrect assumptions, and the incorrect assumptions are what's getting corrected.  That is my take on it, anyway.

For example, when my car loan gets small enough that I can pay it off with one or two paychecks, I'll probably do it just to make it go away.  With a rate below 2% and a roaring market, I'm much better off carrying it to term...and I realize that, but with a small enough amount I don't really care.

Except that even when people outrightly say that they are informed, but still making the decision to pay off their mortgage, the conversation doesn't end there. The goal then switches from informing someone, to trying to convince them why their decision is idiotic.

dragoncar

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Re: Do you regret paying off your mortgage early?
« Reply #434 on: December 01, 2017, 01:19:45 AM »
Hey guys should I pay off my boat loan too?

arebelspy

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Re: Do you regret paying off your mortgage early?
« Reply #435 on: December 01, 2017, 02:34:02 AM »
If we define Mustachian as being like MMM

We don't.

If we define Mustachian as being like MMM then Boarder42 and Dicey are encouraging anti-mustachianism as MMM paid off his mortgage early.

Strategy 4: http://www.mrmoneymustache.com/2012/02/24/pay-down-the-mortgage-or-invest-more-a-winwin-question/

What kind of insane definition for Mustachianism is "copy and do everything exactly like Pete" and if you aren't doing it exactly like him, you're encouraging anti-Mustachianism?

"Pete did it" is a logical fallacy (argument from authority), but I've seen it before.

I have not, however, seen it taken to such an extreme that merely not acting exactly like Pete is "encouraging anti-mustachianism".

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Dicey

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Re: Do you regret paying off your mortgage early?
« Reply #436 on: December 01, 2017, 02:36:32 AM »
Hey guys should I pay off my boat loan too?
Nah, I think you're smarter than the average bear. I completely trust your ability to make a well-informed decision and have all the picnic baskets in Jellystone Park well before dark as well. You're funnier than most, too, which is a nice bonus. Besides, it's a houseboat, thus your interest is deductible, r-i-i-i-i-ght?
« Last Edit: December 01, 2017, 08:47:40 AM by Dicey »
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Re: Do you regret paying off your mortgage early?
« Reply #437 on: December 01, 2017, 03:56:06 AM »
The great thing about it is that if you regret paying off your mortgage you can always go take out another mortgage within hours. Ours was paid in cash so in a sense, we have never paid off a mortgage... we have never had one. But if we wanted one I'm sure we could get one.


This while correct is a bad way to view it. Mortgage rates fluctuate. And are lockable in the USA for 30 years. I happen to have lockrd at the absolute bottom for my area.  But the avg 30 year mortgage rate is between 5-6% not the 4% or in many cases sub 4% mortgages people are paying down. Most things regress to the mean. So your point that you can always go get a mortgage is correct. But you cannot always go get a mortgage at what are still near historical lows that we currently have.

You also cannot easily rebalance a mortgage like you can a bond allocation. Many try to say it's like bonds. It is except the fact that it's not easily rebalanced as an overall part of your asset allocation. Bond returns also avg more than most of these mortgages people are paying down today. So it's extremely short sighted IMO to say it's like a bond and my rate is higher than a bond is right now so it's better to dump it into the mortgage.  While again true in the current state it more than likely will be false in the not too distant future.
« Last Edit: December 01, 2017, 04:08:05 AM by boarder42 »
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boarder42

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Re: Do you regret paying off your mortgage early?
« Reply #438 on: December 01, 2017, 05:44:45 AM »
Many of my posts may come across as blunt and "gruff"  but its due to the same comments that keep coming up - for most people in this forum it is better to keep their mortgage at a low fixed rate than not.  Just like for most people in this forum it is better to not have a lawn mowing service - does that mean that people cannot choose to have a lawn mowing service and that the lawn mowing service could be adding dollars to the bottom line for them by allowing them to spend more time working on a productive task that produces more that 30 dollars an hour no it doesnt.  But we dont have massive threads discussing how awesome it feels to watch joey mow their lawn while they sip a beer on the deck. 

The base information relayed to forum members should be of the highest quality so they can then choose the best decision.  This is a FIRE forum not the general public.  On a FIRE forum discussion around paying down low fixed rate mortgages is more detrimental to the overall society than helpful. 

I've stated many times if the financials work out that paying down a mortgage makes sense then i would instantly switch sides for a given case.  In 10 years its unlikely we are even having these conversations any more because rates will have risen and the decision will be much less black and white. 

I also do not understand these points about control.  I've had no issues doing what i wanted to my property regardless of the bank my mortgage was with - i've had a hail storm and my insurance covered that with no issues with my mortgage company.  I have a 5k deductible on my house b/c 10k doesnt get me much savings.  if i want to build i deck i dont go to the bank and ask i just build a deck.  If i want to paint my house i just paint it.  Where in the world are these mortgage companies that prevent you from doing these tasks or must be consulted?
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Re: Do you regret paying off your mortgage early?
« Reply #439 on: December 01, 2017, 07:11:19 AM »
Although I've been aware of the "pay off, or not to pay off" debate since before I bought my first place (I've generally lived in places where it was cheaper to buy than rent), I still value the ongoing discussion.

As mentioned above, I paid my home loan off and don't regret it, though I know that under the circumstances I paid a fairly hefty financial price for my comfort (my rate was insanely low). I'm satisfied with the price that I paid for my ease in this instance, but I know that if I were to make every decision based on ease, that I'd soon be broke and having to return to work (bleh!). So, I mow my own lawn, clean my own house, do my own repairs, etc.. This discussion reminds me that FIRE-ing with a limited stash is about making deliberate choices about what value things have for me, and consciously considering how I could attain the given benefit (in this case, a reduction to my late-night angst), for a better value.

My little house may be my Escalade (it is only marginally larger), but I know it and am ok with it. boarder42, I do value your input, as it reminds me to be aware of the financial consequences of my decisions, so please keep chiming in!

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Re: Do you regret paying off your mortgage early?
« Reply #440 on: December 01, 2017, 08:14:22 AM »
The great thing about it is that if you regret paying off your mortgage you can always go take out another mortgage within hours. Ours was paid in cash so in a sense, we have never paid off a mortgage... we have never had one. But if we wanted one I'm sure we could get one.


This while correct is a bad way to view it. Mortgage rates fluctuate. And are lockable in the USA for 30 years. I happen to have lockrd at the absolute bottom for my area.  But the avg 30 year mortgage rate is between 5-6% not the 4% or in many cases sub 4% mortgages people are paying down. Most things regress to the mean. So your point that you can always go get a mortgage is correct. But you cannot always go get a mortgage at what are still near historical lows that we currently have.

You also cannot easily rebalance a mortgage like you can a bond allocation. Many try to say it's like bonds. It is except the fact that it's not easily rebalanced as an overall part of your asset allocation. Bond returns also avg more than most of these mortgages people are paying down today. So it's extremely short sighted IMO to say it's like a bond and my rate is higher than a bond is right now so it's better to dump it into the mortgage.  While again true in the current state it more than likely will be false in the not too distant future.
In Canada I could get 5 mortgages on my house, making a mortgage ladder with all the terms being 5 years (so 20% of my house gets a new loan that I can adjust every year). Can't you get multiple mortgages in the states to rebalance the mortgage portfolio? for me to get a second-fifth mortgage was some online paperwork, about 30-45 minutes/year.

I also had the option, which I used, of transferring a large % of the mortgage to a credit line, about $50,000. Then as the rates fluctuated I could pay it down or increase it (borrow from the line). I did that for several years, predominantly paying it down as the rates were at their historical higher levels (5%, no interest deductions in Canada). Do you not have similar HELOC's in the USA? In Canada the mortgages are extremely easy to rebalance, although not commonly done, our only drawback is we don't get 30 year loans.

My point is that it can be extremely easy to rebalance annually the mortgage part of your portfolio, in Canada. I thought the US system would also have similar options. Something like lock in 60% of your mortgage for 30 years, 20% for 10 years and leave 20% in shorter term loans. Although I agree that the long term low rates are amazing, I disagree that you can't rebalance the mortgage in your portfolio.

Maybe Americans can't get multiple loans though, that's the easiest way in Canada to get immediate benefits from paying off a loan, you don't need to pay off 100% of the house, just the 20% that's in each of the 5 loans.

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Re: Do you regret paying off your mortgage early?
« Reply #441 on: December 01, 2017, 08:22:57 AM »
everytime you get a new loan on your house either thru a REFI or getting a Home Equity loan or a HELOC(these are variable)  - you pay origination fees or you sacrafice your rate to cover the costs to do one of these tasks.  So it makes it costly to use a home like a bond, and add to that the fact that the interest rates will change - paying down something thats at all time lows just doesnt add up IMO. b/c whatever you take out later will likely be higher than what its at today, or was 1.5 years ago at the market bottom.
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Re: Do you regret paying off your mortgage early?
« Reply #442 on: December 01, 2017, 09:27:27 AM »
This thread is 2 years old and was revived. I will comment on any and every thread about a mortgage pay down until this community starts treating it like an Escalade.

But it's not an Escalade, which is a sharply-depreciating asset. In most areas, a house is more like a bond or T-bill, or a CD just keeping up with inflation. People paying off their mortgages early are more analogous to someone having a more bond-heavy AA than "normal" for their age.

boarder42

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Re: Do you regret paying off your mortgage early?
« Reply #443 on: December 01, 2017, 09:50:18 AM »
This thread is 2 years old and was revived. I will comment on any and every thread about a mortgage pay down until this community starts treating it like an Escalade.

But it's not an Escalade, which is a sharply-depreciating asset. In most areas, a house is more like a bond or T-bill, or a CD just keeping up with inflation. People paying off their mortgages early are more analogous to someone having a more bond-heavy AA than "normal" for their age.

incorrect as bonds are liquidable and once you drop money into your mortgage it is not easily liquidable
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boarder42

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Re: Do you regret paying off your mortgage early?
« Reply #444 on: December 01, 2017, 10:01:02 AM »
When I paid off in '09, in the depth of a downturn, it wasn't clear at all that there was an upturn ahead and when. So when I paid off the mortgage, it was quantitatively a decent thing to do without knowledge of a future upturn. So I find these binary discussions a little bit off the mark since the decision has to be made at a point in time. Those who paid off their mortgages are not always incapable of doing math, just not of predicting the future.

So no, no regrets at all. As I also said earlier, having the mortgage off my back, allowed me to take risks that have paid off in terms of stash health and my current FIRE.

How do you plan to retire without projecting future typical stock gains and inflation. The entire premise of fire is based upon avg stock returns and inflation.
I think you missed my point. When I was faced with the choice, I had uncertainty in terms of when we were going to pull out of the downturn vs an assured mortgage interest payment. The decision had to be made at the point in time - given that I had no knowledge of the future, I chose the minimax strategy. So while average returns are all very well and that is how we plan for FIRE anyway, remember that the decision problem is always time dependent. Finally, note that stock prices are Markovian, which means that stock price evolution is determined by today's price and the risk free interest rate - you can draw the obvious conclusion at this point.

I might make a different decision today.

so you've played this no knowledge card a few times.  but we do have knowledge we know what our interest rate is on our house and we know what the market had done historically over all previous 30 year periods.  And there has yet to be a 30 year period that beats the current mortgage rates.  could you cherry pick some select start years and put a set paydown over that to come out ahead possibly but we have no idea.  Particularly in your instance it was a larger negative play to choose to pay down a mortgage in an economic down turn, when stocks are on sale may be the worst time to pay off a low fixed mortgage.  When stocks are at all time highs you could try to market time and pay off your mortgage and you may come out ahead but in all likelihood based on history you will not.  You market timed with the exact inverse of the mentality a person should.  Looking at any financial decision as a single point in time decision is a flawed in that an instant snapshot doesnt give someone the true data they need to come out farther ahead and retire earlier. 

We cannot predict the future but we can look to the past and assume similar outcomes - its the basis for how over 90% of this forum plans to fund their FIRE plans with an SWR of 3-4% or higher.
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arebelspy

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Re: Do you regret paying off your mortgage early?
« Reply #445 on: December 01, 2017, 10:31:57 AM »
Paying my mortgage early made the day I can live on 4% of assets dinner by reducing required cash flow. My mortgage payment was in the vicinity of $1000/month requiring 300k of assets in the market to service it safely at 4%. The balance was approx 100k when I started paying early. The 100k would not have grown to 300k for many additional years. The math is that paying my mortgage early allowed significant freedom earlier. It is not optimal from a makes the most money possible in your life standpoint. It is optimal from a fire standpoint. I encourage you to do the math for any interest rate and mortgage term currently obtainable and check the dates of payoff vs the date of being able to service the mortgage on 4% of assets.

Sure, that 100k wouldn't have grown to 300k for years, but you don't need it to. You just keep paying down the mortgage slowly with that bucket of money, and it'll grow faster than the amount you have to pay. In other words, you don't need a 4% WR (25x) for the part that's set aside to pay the mortgage.

In other words, the final (bolded) calculation is irrelevant.
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Re: Do you regret paying off your mortgage early?
« Reply #446 on: December 01, 2017, 10:44:40 AM »
On my phone. Someone else explain it, or you can go find an earlier explanation, pdx.

The short answer is money is fungible, that 100k doesn't have to service it all alone, and while sequence of returns could hit, the vast majority of the time you come out ahead.

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Re: Do you regret paying off your mortgage early?
« Reply #447 on: December 01, 2017, 10:45:24 AM »
We aggressively paid off the mortgage on our first house. We bought it shortly after the housing bubble burst. Needless to say, we would have done better investing in stocks. On our current house we took out the biggest non-jumbo mortgage we could and put the rest of the equity we took out of the old house into Vanguard. We're also just doing the regular required payments on the mortgage.

We'll have to re-examine this strategy once we retire. If something like Obamacare still exists at that point we may find it advantageous to have fewer income-producing assets, as the tax benefits could be more valuable than the expected higher return on investment from carrying mortgage debt.
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Re: Do you regret paying off your mortgage early?
« Reply #448 on: December 01, 2017, 10:53:26 AM »
On my phone. Someone else explain it, or you can go find an earlier explanation, pdx.

The short answer is money is fungible, that 100k doesn't have to service it all alone, and while sequence of returns could hit, the vast majority of the time you come out ahead.

The 100k does have to service it all alone if you FIRE and do not plan to go back to work or produce other income. If we are talking about earliest date to FIRE with 95% probability of success for someone with a plan to not work at all its entirely relevant.
No, because if you save up 25x to do a 4% WR on it, and then it pays off a few years later, you're still left with tons of money. This is money you're drawing down on, instead.
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Re: Do you regret paying off your mortgage early?
« Reply #449 on: December 01, 2017, 11:28:43 AM »
After a short calculation, I'm not.
 The rates in 1995 for a 30 year fixed rate mortgage when I bought my home were 7.2% to 9.15%, I'll say 7.5%.
 The S&P grew at 6.5% including dividends minus inflation. I may have been able to refinance
at lower interest, and additional costs.
I'm comfortable I just paid for it, but I argue to others not to, especially at 3.5% interest.
  With refinancing, it's possible I could have come out slightly ahead, but we made it to FI anyway.