Author Topic: Do you regret paying off your mortgage early?  (Read 98560 times)

dougules

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Re: Do you regret paying off your mortgage early?
« Reply #650 on: December 06, 2017, 04:09:47 PM »
Not. One. Bit.

Best birthday present to my husband ever. 

NoraLenderbee

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Re: Do you regret paying off your mortgage early?
« Reply #651 on: December 06, 2017, 09:47:30 PM »
Number of no-regrets votes: +1
Number of new posts insisting that carrying a mortgage is higher ROI and completely missing the point of the question: +42,000 (in progress)

dragoncar

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Re: Do you regret paying off your mortgage early?
« Reply #652 on: December 07, 2017, 01:34:48 AM »
Not. One. Bit.

Best birthday present to my husband ever.

Hey my bday is coming up.  Just sayin

Zola.

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Re: Do you regret paying off your mortgage early?
« Reply #653 on: December 07, 2017, 02:38:44 AM »
It's worth noting that we're having this discussion amid a very long bull run in the market. In fact, the MMM site and much of the current early-retirement movement developed since 2008.

How would the discussion be different if the timing and conditions were different? What if this were 2009? We're all human (I assume) and the never-pay-off-the-mortgage argument is EXTREMELY easy to make in late 2017, as is the "invest 100% in stocks!" argument.

Tunes will change when the market is down 50 percent. The math won't change, but unless you're Dr. Spock or a droid, feelings about the math will.

And please don't tell me that the depths of a recession or crash would be the perfect time to have a huge mortgage and buy up a bunch of stocks. I know that -- it's been mentioned 4,387 times. The fact is you'll have a sinking feeling in your stomach, and if you haven't been through it yet, you can't be sure what you'll do.

Probably the wisest comment I have read in this thread in a while!  Everything in moderation!

boarder42

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Re: Do you regret paying off your mortgage early?
« Reply #654 on: December 07, 2017, 03:54:56 AM »
It's worth noting that we're having this discussion amid a very long bull run in the market. In fact, the MMM site and much of the current early-retirement movement developed since 2008.

How would the discussion be different if the timing and conditions were different? What if this were 2009? We're all human (I assume) and the never-pay-off-the-mortgage argument is EXTREMELY easy to make in late 2017, as is the "invest 100% in stocks!" argument.

Tunes will change when the market is down 50 percent. The math won't change, but unless you're Dr. Spock or a droid, feelings about the math will.

And please don't tell me that the depths of a recession or crash would be the perfect time to have a huge mortgage and buy up a bunch of stocks. I know that -- it's been mentioned 4,387 times. The fact is you'll have a sinking feeling in your stomach, and if you haven't been through it yet, you can't be sure what you'll do.

Probably the wisest comment I have read in this thread in a while!  Everything in moderation!

This is one reason the forum exists. So in the depths of that market we can all be a support group for each other to help everyone stay strong. 
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farmecologist

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Re: Do you regret paying off your mortgage early?
« Reply #655 on: December 07, 2017, 08:54:12 AM »
It's worth noting that we're having this discussion amid a very long bull run in the market. In fact, the MMM site and much of the current early-retirement movement developed since 2008.

How would the discussion be different if the timing and conditions were different? What if this were 2009? We're all human (I assume) and the never-pay-off-the-mortgage argument is EXTREMELY easy to make in late 2017, as is the "invest 100% in stocks!" argument.

Tunes will change when the market is down 50 percent. The math won't change, but unless you're Dr. Spock or a droid, feelings about the math will.

And please don't tell me that the depths of a recession or crash would be the perfect time to have a huge mortgage and buy up a bunch of stocks. I know that -- it's been mentioned 4,387 times. The fact is you'll have a sinking feeling in your stomach, and if you haven't been through it yet, you can't be sure what you'll do.

Probably the wisest comment I have read in this thread in a while!  Everything in moderation!

Yep, I have made this comment many times in various threads and was surprised at the negative reaction.  As an 'old timer' that has been thru it, I can guarantee that many will change their current sentiment very fast if another 'crash' happens.  I'm a bit afraid that there are many younger folks here who haven't been through a major upheaval in the markets and will be heartbroken when/if it happens.  I have seen very strong people get crushed and pull money out of the markets at exactly the wrong time...ALL due to emotion ( not math ).  The psychology of a market crash is not to be taken lightly...regardless of what people say.


« Last Edit: December 07, 2017, 08:57:43 AM by farmecologist »

nereo

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Re: Do you regret paying off your mortgage early?
« Reply #656 on: December 07, 2017, 09:29:01 AM »

Yep, I have made this comment many times in various threads and was surprised at the negative reaction.  As an 'old timer' that has been thru it, I can guarantee that many will change their current sentiment very fast if another 'crash' happens.  I'm a bit afraid that there are many younger folks here who haven't been through a major upheaval in the markets and will be heartbroken when/if it happens.  I have seen very strong people get crushed and pull money out of the markets at exactly the wrong time...ALL due to emotion ( not math ).  The psychology of a market crash is not to be taken lightly...regardless of what people say.

The fact that this forum hasn't existed long enough to go through a prolonged economic downturn is a common topic around here.  I hope during the next downturn the people here will be a bit better informed and not sell in a panic (though certainly some will).  What I worry and wonder about is whether emphasizing emotions over data is exactly the wrong approach to prevent this sort of panic behavior in the future. This emphasis on how not having a mortgage "just feels great" is tying emotions into financial decisions. Could that not make the next crash worse?  Further, haven't we established that allowing our emotions to guide financial transactions is a really bad idea?  It's the very reason why "panic" selling happens in the first place.  We would be skeptical of someone buying stock because they just "feel like it'll take off soon"- why do mortgages get a pass?

Full disclosure - I'm approaching this topic having gone through the housing crash in a very volatile real-estate sector in California. I saw a lot of people (including friends) who had put an undue emotional emphasis on their homes and mortgages suddenly find themselves without the savings to weather a layoff and plunge in home prices (and demand).  Some continued to deplete their savings to pay off their mortgage until they were left with an asset they couldn't sell and no funds to cover daily expenses.

It's great if you can manage to pay off your mortgage and have substantial savings - better cashflow + big liquid cushion. But there's real danger in prioritizing home payoff at the expense of all other savings, particularly given that a market downturn (be it equities or real-estate) can happen at any time and are largely unpredictable. I'll argue that tying your emotions to your mortgage is a bad idea. I hope people approach their finances and future financial security with a bit more objectivity.
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MrMoneySaver

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Re: Do you regret paying off your mortgage early?
« Reply #657 on: December 07, 2017, 09:47:15 AM »
Quote
The fact that this forum hasn't existed long enough to go through a prolonged economic downturn is a common topic around here.

This forum exists at a particular point in history, in a certain context, and that is not a coincidence. To understand the forum, the opinions expressed within, and the early-retirement movement itself, it's absolutely crucial to consider that.

Quote
haven't we established that allowing our emotions to guide financial transactions is a really bad idea?

No. We want to have a lot of money and retire early because that will make us "happy" (or content, or fulfilled, or less stressed), right? Those are emotions; they are guiding our financial decisions. They are the goal -- and pure maximization of dollars is not, or shouldn't be. If it was, you should just work forever and keep making money.

Quote
there's real danger in prioritizing home payoff at the expense of all other savings

I haven't seen people advocate that.

BFGirl

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Re: Do you regret paying off your mortgage early?
« Reply #658 on: December 07, 2017, 09:53:11 AM »

Yep, I have made this comment many times in various threads and was surprised at the negative reaction.  As an 'old timer' that has been thru it, I can guarantee that many will change their current sentiment very fast if another 'crash' happens.  I'm a bit afraid that there are many younger folks here who haven't been through a major upheaval in the markets and will be heartbroken when/if it happens.  I have seen very strong people get crushed and pull money out of the markets at exactly the wrong time...ALL due to emotion ( not math ).  The psychology of a market crash is not to be taken lightly...regardless of what people say.

The fact that this forum hasn't existed long enough to go through a prolonged economic downturn is a common topic around here.  I hope during the next downturn the people here will be a bit better informed and not sell in a panic (though certainly some will).  What I worry and wonder about is whether emphasizing emotions over data is exactly the wrong approach to prevent this sort of panic behavior in the future. This emphasis on how not having a mortgage "just feels great" is tying emotions into financial decisions. Could that not make the next crash worse?  Further, haven't we established that allowing our emotions to guide financial transactions is a really bad idea?  It's the very reason why "panic" selling happens in the first place.  We would be skeptical of someone buying stock because they just "feel like it'll take off soon"- why do mortgages get a pass?

Full disclosure - I'm approaching this topic having gone through the housing crash in a very volatile real-estate sector in California. I saw a lot of people (including friends) who had put an undue emotional emphasis on their homes and mortgages suddenly find themselves without the savings to weather a layoff and plunge in home prices (and demand).  Some continued to deplete their savings to pay off their mortgage until they were left with an asset they couldn't sell and no funds to cover daily expenses.

It's great if you can manage to pay off your mortgage and have substantial savings - better cashflow + big liquid cushion. But there's real danger in prioritizing home payoff at the expense of all other savings, particularly given that a market downturn (be it equities or real-estate) can happen at any time and are largely unpredictable. I'll argue that tying your emotions to your mortgage is a bad idea. I hope people approach their finances and future financial security with a bit more objectivity.
d

While I disagree with the blanket premise that math should rule and potential optimization should be the only concern,  I do think it is a mistake to pay more towards mortgage payments if there isn't sufficient liquidity to weather a downturn.  I feel it is best to save the funds you'd be paying towards the mortgage in the investment vehicle of your choice and when the total balance of the payoff has been saved, then make a decision whether or not to pay off the mortgage.

I paid for my house with cash and have no regrets.  I also have a fairly conservative allocation because I will have a small pension and am mainly in a preservation mode with my investments (and keeping up with inflation) rather than the accumulation phase.  I plan to retire in 3 years.

nereo

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Re: Do you regret paying off your mortgage early?
« Reply #659 on: December 07, 2017, 11:32:14 AM »
Quote
there's real danger in prioritizing home payoff at the expense of all other savings

I haven't seen people advocate that.
Here's the one of the previous threads https://forum.mrmoneymustache.com/investor-alley/paying-off-mortgage-early-how-bad-is-it-for-your-fi-date/.  It was discussed at length there.  It also came up on another thread here (page 2), here, and here
It was also discussed several times in this thread.  Brooklynguy's post (page 1) is probably the first.  It's been reiterated several times in different 'flavors' throughout these 12+ pages.

Quote
haven't we established that allowing our emotions to guide financial transactions is a really bad idea?

No. We want to have a lot of money and retire early because that will make us "happy" (or content, or fulfilled, or less stressed), right? Those are emotions; they are guiding our financial decisions. They are the goal -- and pure maximization of dollars is not, or shouldn't be. If it was, you should just work forever and keep making money.

There's a big difference between investing to provide future happiness/less stress/more security and using emotions to guide our decisions.  Blocking out that emotional part of our brain that does irrational things which can ultimately harm us (anything from panicking during an economic downturn to stuffing ourselves with junk food) is important for long-term stability and, ultimately, happiness. I'm also not talking about working forever to keep making money; approaching investing with logic gives us the opportunity to work less and avoid potential pitfalls.

(edited to fix links)
« Last Edit: December 07, 2017, 11:37:46 AM by nereo »
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boarder42

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Re: Do you regret paying off your mortgage early?
« Reply #660 on: December 07, 2017, 11:35:51 AM »
Quote
The fact that this forum hasn't existed long enough to go through a prolonged economic downturn is a common topic around here.

This forum exists at a particular point in history, in a certain context, and that is not a coincidence. To understand the forum, the opinions expressed within, and the early-retirement movement itself, it's absolutely crucial to consider that.

Quote
haven't we established that allowing our emotions to guide financial transactions is a really bad idea?

No. We want to have a lot of money and retire early because that will make us "happy" (or content, or fulfilled, or less stressed), right? Those are emotions; they are guiding our financial decisions. They are the goal -- and pure maximization of dollars is not, or shouldn't be. If it was, you should just work forever and keep making money.

Quote
there's real danger in prioritizing home payoff at the expense of all other savings

I haven't seen people advocate that.

So every time someone joins the mortgage payoff thread do you just congratulate them and welcome them and cheer them on or do you help them understand if they should actually be making that decision. I've seen many a poster in there going balls to the wall on mortgage paydown with no regard for any other savings.  I've been banished from posting in there so would be good if those people that run a thread that could be devastingly detrimental to someones financial welfare actually assist in making sure it is the right choice for that person.  And would probably be received better coming from someone in that thread not a Dont pay off your mortgage person. 

also setting an objective of FI for whatever the case may be you can link it to emotions.  And then using math to acheive that objective and putting emotion aside to set your path as optimally as possible makes much more sense.

i stand by what Nereo's take is - the people who are most likely to pull their money out in a down turn are not those that understand and dont pay off their mortgages it is those acting on primarily emotion to paydown their mortgage over investing. 

Just because many havent lived through a downturn doesnt mean we dont understand how to go thru one and when the market is falling i damn sure wont be putting money at my mortgage i'll be buying stocks all the way to the bottom and all the way back to the top b/c thats what you do thats how its worked historically the math simply works - if the math fails as has been stated many times and the future is not like the past then paying or not paying down a mortgage will be of little concern to anyone b/c capitalism will have failed.
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farmecologist

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Re: Do you regret paying off your mortgage early?
« Reply #661 on: December 07, 2017, 11:42:43 AM »
I think some of you completely misread my point.  I'm most certainly not advocating 'using emotions' to guide any financial decision.   However, one ought to acknowledge that in a market 'crash' situation, emotions absolutely do come into play...big time.  Listen...I've seen many people talk big about being 'data driven' and all that and that a downturn will not affect them.  However, when it actually happens all that goes out the window for many and they do make some extremely bad decisions...due to emotions.   You can deny it all you want but it does happen...quite a bit.  I'm not saying it will happen to anyone here though...as most of us are generally much more savvy than the 'average Joe'.

MrMoneySaver

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Re: Do you regret paying off your mortgage early?
« Reply #662 on: December 07, 2017, 11:50:54 AM »
Quote
So every time someone joins the mortgage payoff thread do you just congratulate them and welcome them and cheer them on or do you help them understand if they should actually be making that decision.

Neither. I am not emotionally invested in whether they pay off their mortgages or not, so I've skimmed the thread but never posted. Why should I assume that I know what's best for them, better than they do? They seem like competent adults.

Quote
Just because many havent lived through a downturn doesnt mean we dont understand how to go thru one and when the market is falling i damn sure wont be putting money at my mortgage i'll be buying stocks all the way to the bottom and all the way back to the top b/c thats what you do thats how its worked historically the math simply works

Good for you. Again, very easy to say in December 2017 -- a lot more nerve-wracking to put into action when you're in the middle of it.

farmecologist

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Re: Do you regret paying off your mortgage early?
« Reply #663 on: December 07, 2017, 11:58:32 AM »
Quote
So every time someone joins the mortgage payoff thread do you just congratulate them and welcome them and cheer them on or do you help them understand if they should actually be making that decision.

Neither. I am not emotionally invested in whether they pay off their mortgages or not, so I've skimmed the thread but never posted. Why should I assume that I know what's best for them, better than they do? They seem like competent adults.

Quote
Just because many havent lived through a downturn doesnt mean we dont understand how to go thru one and when the market is falling i damn sure wont be putting money at my mortgage i'll be buying stocks all the way to the bottom and all the way back to the top b/c thats what you do thats how its worked historically the math simply works

Good for you. Again, very easy to say in December 2017 -- a lot more nerve-wracking to put into action when you're in the middle of it.

Another point that has been made many times is the past is the fact that people lose jobs in crash/recession scenarios and simply can't afford to put money into 'buying stocks' much less pay a mortgage payment.  In fact, this is another reason people make for owning your house.   Not saying it is right or wrong...but there are many, many intangibles to think about depending on your personal situation.  Again...this is something I've seen in the past.   People literally walking away from their home/mortgate, etc...is a pretty devastating blow....don't you think?




boarder42

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Re: Do you regret paying off your mortgage early?
« Reply #664 on: December 07, 2017, 12:41:42 PM »
Quote
So every time someone joins the mortgage payoff thread do you just congratulate them and welcome them and cheer them on or do you help them understand if they should actually be making that decision.

Neither. I am not emotionally invested in whether they pay off their mortgages or not, so I've skimmed the thread but never posted. Why should I assume that I know what's best for them, better than they do? They seem like competent adults.

Quote
Just because many havent lived through a downturn doesnt mean we dont understand how to go thru one and when the market is falling i damn sure wont be putting money at my mortgage i'll be buying stocks all the way to the bottom and all the way back to the top b/c thats what you do thats how its worked historically the math simply works

Good for you. Again, very easy to say in December 2017 -- a lot more nerve-wracking to put into action when you're in the middle of it.

Another point that has been made many times is the past is the fact that people lose jobs in crash/recession scenarios and simply can't afford to put money into 'buying stocks' much less pay a mortgage payment.  In fact, this is another reason people make for owning your house.   Not saying it is right or wrong...but there are many, many intangibles to think about depending on your personal situation.  Again...this is something I've seen in the past.   People literally walking away from their home/mortgate, etc...is a pretty devastating blow....don't you think?

this point has been discussed at length in this thread and unless the house i completely paid off the act of paying down a mortgage over time is much more detrimental for the exact situation you're describing b/c the investor will have more money to put into making the payments than someone paying down the mortgage.
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Re: Do you regret paying off your mortgage early?
« Reply #665 on: December 07, 2017, 01:13:21 PM »
Maybe this isn't the place for this post... but my two cents anyway :P.

Disclaimer: Im all for not paying off your mortgage if done correctly.  I understand why people do pay off their mortgage... but it honestly doesnt make a lot of sense to me with todays interest rates. No one should pay off their mortgage when their rocking like a 3% interest rate. I tell this to my brother who is paying off his house, and we go around in circles.

HOWEVER: It's still an awesome thing to have done, and you still have a paid off house. It may not be mathematically ideal, but if it keeps you motivated, if it protects against your own stupidity, hey theres something to that. Also it brings to mind something that happens in sports sometimes...

Convoluted analogy to follow, I apologize :P. It makes pants to me though(by pants i mean sense, if that makes pants).

Tis a bit like when people argue about the best basketball player... sure we can find the best player by a variety of means advanced stats (PER, WAR, game shares etc) , credentials and awards, titles, career achievements (points scored, years, etc), or WHATEVER, but regardless at the end of the day. Michael Jordan is amazing, Lebron James is amazing, Magic Johnson or Kobe Bryant are all amazing. Just celebrate those players and in this analogy pick the one you want to be. If your all about doing the best for yourself possible, follow what the math says and choose Michael Jordan or Bron. If you like the way their game looks, or how fun it was watching them, pick Magic or Kobe :).

Or be a hipster and take Steph curry. Idk what he is in this analogy ;-P.
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Re: Do you regret paying off your mortgage early?
« Reply #666 on: December 07, 2017, 01:23:47 PM »

Canadian_Fire_tobe

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Re: Do you regret paying off your mortgage early?
« Reply #667 on: December 07, 2017, 02:35:39 PM »
DW and I paid off our mortgage fairly recently, the reason for doing so was that our principle amount remaining was in the 5 digit range it just felt good seeing large chunks drop off every payment.

We knew while making the payments it made little financial sense, disclaimer: I got a little caught up expecting the market to crash. I have no regrets though, being Mortgage free was great.

We've since bought a second property, this time we plan on paying down in about 20 years if we can resist the temptation to put extra down. So put me down in the No regrets but will do it differently next time group :)

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Re: Do you regret paying off your mortgage early?
« Reply #668 on: December 07, 2017, 03:26:05 PM »
Before anyone lectures me, I do understand the math behind investing in stocks, versus paying down a low interest mortgage. I didn't pay off the house but I did refinance to a 15 year mortgage in 2011 with a lower interest rate, because yes it emotionally bothers me to have a mortgage. I have personally seen a number of people I know, take out helocs during the run up in 2003, 2004, 2005, and then lose their house or be in financial duress due to owing so much money. I also saw people buying very expensive houses in the run up, because "real estate can't lose!" and then yes not even be able to sell the same property and lose it, because they also lost their livelihood at the same time. People are not robots. I think everyone here is doing a better than average job, if they are directing their hard earned money to either paying off the mortgage, or investments, versus using helocs for living expenses, unnecessary home renovations, or just spending it. Investing in stocks may get you to financial independence mathematically faster. People who pay off the home like the emotional security of not losing their house during a financial downturn or period. Also housing is local. Where I am, real estate is very hot. I would have made MORE money investing in real estate in my area, than in stocks over the past 15 years. But your results may vary. 
« Last Edit: December 07, 2017, 03:28:01 PM by partgypsy »

dougules

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Re: Do you regret paying off your mortgage early?
« Reply #669 on: December 07, 2017, 04:28:40 PM »
Not. One. Bit.

Best birthday present to my husband ever.

Hey my bday is coming up.  Just sayin

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Re: Do you regret paying off your mortgage early?
« Reply #670 on: December 07, 2017, 05:01:38 PM »
You would have to delete all of your posts in the thread (it may still show up if you're quoted, but I'm not sure).

nereo

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Re: Do you regret paying off your mortgage early?
« Reply #671 on: December 07, 2017, 05:19:27 PM »
You would have to delete all of your posts in the thread (it may still show up if you're quoted, but I'm not sure).

This is the only way to have it not show up in your “show new replies to your posts.”
If someone has quoted you that quote will still show up, but you will not be notified of new posts in this thread.
Deleting posts does create “holes” in threads, so in that regard it’s sub-optimal.  Most of these “invest vs. payoff mortgage” threads go dormant after several months of active posting.
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CoffeeR

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Re: Do you regret paying off your mortgage early?
« Reply #672 on: December 09, 2017, 06:58:40 AM »
Just because many havent lived through a downturn doesnt mean we dont understand how to go thru one and when the market is falling i damn sure wont be putting money at my mortgage i'll be buying stocks all the way to the bottom and all the way back to the top b/c thats what you do thats how its worked historically the math simply works - if the math fails as has been stated many times and the future is not like the past then paying or not paying down a mortgage will be of little concern to anyone b/c capitalism will have failed.
So you think capitalism failed in the US between 1966 to 1982? The S&P annual return was 6.8% and inflation was 6.8% with a real return of 0.0%. To me it seems the only kind of downturn most users on these forums consider are the ones where we have a recovery within 2 to 3 years. Will 1966 to 1982 happen again? Nope. Will a Japan like downturn happen here? Nope. It will be different the next time it happens. It always is. Can you go back to US 1970's and Japan and run the numbers so they "work" and convince yourself that the math is still correct? Yup. Except living through these times is a whole of a lot different then analyzing the math in retrospect.

boarder42

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Re: Do you regret paying off your mortgage early?
« Reply #673 on: December 09, 2017, 07:10:08 AM »
Just because many havent lived through a downturn doesnt mean we dont understand how to go thru one and when the market is falling i damn sure wont be putting money at my mortgage i'll be buying stocks all the way to the bottom and all the way back to the top b/c thats what you do thats how its worked historically the math simply works - if the math fails as has been stated many times and the future is not like the past then paying or not paying down a mortgage will be of little concern to anyone b/c capitalism will have failed.
So you think capitalism failed in the US between 1966 to 1982? The S&P annual return was 6.8% and inflation was 6.8% with a real return of 0.0%. To me it seems the only kind of downturn most users on these forums consider are the ones where we have a recovery within 2 to 3 years. Will 1966 to 1982 happen again? Nope. Will a Japan like downturn happen here? Nope. It will be different the next time it happens. It always is. Can you go back to US 1970's and Japan and run the numbers so they "work" and convince yourself that the math is still correct? Yup. Except living through these times is a whole of a lot different then analyzing the math in retrospect.

Thank you for yet again showing another time paying down a mortgage would have been less successful. Bc real return don't matter when youre comparing a non inflation adjusted liability.  If inflation was 50% and market returns were 45% those with mortgages would come out smelling like roses.
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BlueHouse

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Re: Do you regret paying off your mortgage early?
« Reply #674 on: December 09, 2017, 12:01:57 PM »
I have seen very strong people get crushed and pull money out of the markets at exactly the wrong time...ALL due to emotion ( not math ).  The psychology of a market crash is not to be taken lightly...regardless of what people say.

I've lived through it more than once too and when your 401k turns into a 201k overnight, your stomach turns into a knot and you start hoarding money in case you lose your job.  People stop spending, businesses run into trouble, and we start seeing layoffs.  People burn through their emergency funds within 6 months to a year.  After 2008, it took some very highly qualified people years to get another job.  In the meantime, they had bills to pay.  They dipped into their investment accounts and retirement funds.  Of course they knew it wasn't the optimal time to sell!  They didn't have much choice if they wanted to keep feeding their families and either paying their mortgage, or rent if they weren't homeowners. So while I agree emotions do come in to play, it's not ALL emotional.  Sometimes it's just the only practical option.

Just because many havent lived through a downturn doesnt mean we dont understand how to go thru one and when the market is falling i damn sure wont be putting money at my mortgage i'll be buying stocks all the way to the bottom and all the way back to the top b/c thats what you do thats how its worked historically the math simply works - if the math fails as has been stated many times and the future is not like the past then paying or not paying down a mortgage will be of little concern to anyone b/c capitalism will have failed.

Not everyone will have the option to keep buying all the way down. 

If you keep your job during a recession, you have the chance to outpace your peers in investments by far.   Please have the grace to understand that if you weathered the storm and came out ahead, there was some luck involved and some others who were less fortunate didn't necessarily make unwise choices, they just hit bad luck. 


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Re: Do you regret paying off your mortgage early?
« Reply #675 on: December 09, 2017, 03:50:13 PM »
There is nothing more powerful than debt freedom when a recession hits.  We powered through the 2008 recession even though my wife couldn't work at the time.  Still we invested, didn't sell out of the market, we bought all the way down and all the way up to the present day.
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boarder42

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Re: Do you regret paying off your mortgage early?
« Reply #676 on: December 09, 2017, 08:36:13 PM »
There is nothing more powerful than debt freedom when a recession hits.  We powered through the 2008 recession even though my wife couldn't work at the time.  Still we invested, didn't sell out of the market, we bought all the way down and all the way up to the present day.

So let's look at this.

No debt on a 200k house no other savings. Recession hits both jobs lost. Can't pay for anything.

150k debt on a house 150k in savings regardless of the type taxable or retirement accounts. Recession hits both jobs lost.

I think I'd prefer situation 2.

But yeah having that debt paid off and losing your house to property tax non payment seems to be super freedom.
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Re: Do you regret paying off your mortgage early?
« Reply #677 on: December 09, 2017, 08:57:04 PM »
There is nothing more powerful than debt freedom when a recession hits.  We powered through the 2008 recession even though my wife couldn't work at the time.  Still we invested, didn't sell out of the market, we bought all the way down and all the way up to the present day.

So let's look at this.

No debt on a 200k house no other savings. Recession hits both jobs lost. Can't pay for anything.

150k debt on a house 150k in savings regardless of the type taxable or retirement accounts. Recession hits both jobs lost.

I think I'd prefer situation 2.

But yeah having that debt paid off and losing your house to property tax non payment seems to be super freedom.

We've been over this so many times. Nobody is suggesting paying off the house before having saving or maxing out tax advantaged accounts. Situation 1, as you lay out, is not what anyone is doing here or anywhere else on these forums. It's a straw man argument.

To your second point, forfeiture and foreclosure for property tax non-payment stretches out for years. In Michigan property isn't forfeited until the 2nd year of delinquency and foreclosure doesn't happen for another year. The mortgage foreclosure process, on the other hand, starts the first month after a missed payment.

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Re: Do you regret paying off your mortgage early?
« Reply #678 on: December 09, 2017, 09:19:14 PM »
I have seen very strong people get crushed and pull money out of the markets at exactly the wrong time...ALL due to emotion ( not math ).  The psychology of a market crash is not to be taken lightly...regardless of what people say.

I've lived through it more than once too and when your 401k turns into a 201k overnight, your stomach turns into a knot and you start hoarding money in case you lose your job.  People stop spending, businesses run into trouble, and we start seeing layoffs.  People burn through their emergency funds within 6 months to a year.  After 2008, it took some very highly qualified people years to get another job.  In the meantime, they had bills to pay.  They dipped into their investment accounts and retirement funds.  Of course they knew it wasn't the optimal time to sell!  They didn't have much choice if they wanted to keep feeding their families and either paying their mortgage, or rent if they weren't homeowners. So while I agree emotions do come in to play, it's not ALL emotional.  Sometimes it's just the only practical option.

Just because many havent lived through a downturn doesnt mean we dont understand how to go thru one and when the market is falling i damn sure wont be putting money at my mortgage i'll be buying stocks all the way to the bottom and all the way back to the top b/c thats what you do thats how its worked historically the math simply works - if the math fails as has been stated many times and the future is not like the past then paying or not paying down a mortgage will be of little concern to anyone b/c capitalism will have failed.

Not everyone will have the option to keep buying all the way down. 

If you keep your job during a recession, you have the chance to outpace your peers in investments by far.   Please have the grace to understand that if you weathered the storm and came out ahead, there was some luck involved and some others who were less fortunate didn't necessarily make unwise choices, they just hit bad luck.

Very strong comment.

DirtDiva

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Re: Do you regret paying off your mortgage early?
« Reply #679 on: December 10, 2017, 08:49:22 AM »
There is nothing more powerful than debt freedom when a recession hits.  We powered through the 2008 recession even though my wife couldn't work at the time.  Still we invested, didn't sell out of the market, we bought all the way down and all the way up to the present day.

So let's look at this.

No debt on a 200k house no other savings. Recession hits both jobs lost. Can't pay for anything.

150k debt on a house 150k in savings regardless of the type taxable or retirement accounts. Recession hits both jobs lost.

I think I'd prefer situation 2.

But yeah having that debt paid off and losing your house to property tax non payment seems to be super freedom.

boarder42,
You seem to have a hard time understanding (or perhaps believing) that people can have a paid off home AND savings, both tax-advantaged and taxable.  Trust me, it is possible. 

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Re: Do you regret paying off your mortgage early?
« Reply #680 on: December 10, 2017, 09:15:05 AM »
You seem to have a hard time understanding (or perhaps believing) that people can have a paid off home AND savings, both tax-advantaged and taxable.  Trust me, it is possible.

But if you didn't pay off the mortgage, you'd have more savings/investments. This is the comparison to make.
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Re: Do you regret paying off your mortgage early?
« Reply #681 on: December 10, 2017, 09:20:06 AM »
There is nothing more powerful than debt freedom when a recession hits.  We powered through the 2008 recession even though my wife couldn't work at the time.  Still we invested, didn't sell out of the market, we bought all the way down and all the way up to the present day.

So let's look at this.

No debt on a 200k house no other savings. Recession hits both jobs lost. Can't pay for anything.

150k debt on a house 150k in savings regardless of the type taxable or retirement accounts. Recession hits both jobs lost.

I think I'd prefer situation 2.

But yeah having that debt paid off and losing your house to property tax non payment seems to be super freedom.

boarder42,
You seem to have a hard time understanding (or perhaps believing) that people can have a paid off home AND savings, both tax-advantaged and taxable.  Trust me, it is possible.

Boarder42 has argued these various points in many, many other threads.  It's fine to have this counterpoint argument and I respect that.  However, if you think you are going to convince Boarder42 of anything, think again.  It's like driving into a brick wall. ;-)

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Re: Do you regret paying off your mortgage early?
« Reply #682 on: December 10, 2017, 09:23:36 AM »
You seem to have a hard time understanding (or perhaps believing) that people can have a paid off home AND savings, both tax-advantaged and taxable.  Trust me, it is possible.

But if you didn't pay off the mortgage, you'd have more savings/investments. This is the comparison to make.


Of course you would.  However, those same 'investments' would also be the ones that tank.  Note that I'm talking about the large contingent of 100% equity folks around here.

It seems to me that paying off the mortgage is a diversification play for many people.  Simple as that.  You might not agree with it but that's what it really comes down to.


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Re: Do you regret paying off your mortgage early?
« Reply #683 on: December 10, 2017, 10:13:44 AM »
Wow!  After being responsible enough to pay my mortgage off early, I'm to be irresponsible enough to not have a big emergency fund?  Also must lose all forms of income?
Seems extreme.
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boarder42

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Re: Do you regret paying off your mortgage early?
« Reply #684 on: December 10, 2017, 10:28:31 AM »
Wow!  After being responsible enough to pay my mortgage off early, I'm to be irresponsible enough to not have a big emergency fund?  Also must lose all forms of income?
Seems extreme.

You said there is nothing more powerful than being debt free. I showed you a case where that statement was entirely incorrect.

You can't make the math make sense to payoff a mortgage it's plain and simple. You can keep throwing out but "what if" scenarios but these are in the minority historically.

Historically all those not paying down their mortgage will be safer and retire earlier that point is not debatable. If you want to keep plugging one off what if case scenarios where do you stop. What if 1966 inflation happens every year for the next 30 and the stock market just keeps pace with it. Are you planning for that.

My statement is not a straw man arguement. My case is that while those of you here seem to take my statements as a personal attack on your choice they are not. They are made for those viewing this from the outside who may stumble across the pay off your mortgage club and not be maxing tax advantaged accounts or have other saving bc they came from the typical mindset of eliminate all debt bc it's bad. The fact that you all come to defend your case constantly for your personal situation speaks volumes more than I think you know. Who are you trying to convince yourself.  Look at the other poster in this thread who would only Max to company match then start paying down a low fixed rate mortgage. These are the people who should have their eyes opened. I have no issue with those who have looked at everything I just think it does this community a disservice to have constant posts about how good it feels to be debt free or not regretting paying off a mortgage etc. Bc all of these could be taken and run with by someone who will end up in the exact situation you keep talking about preventing. Bc if that mortgage isn't 100% paid off and they have been socking money away. You're they're everyone is in a far worse off position than the investor regardless of the loss that investor may be selling for

Oh and on that loss everyone likes to talk about. We don't often discuss it but you are always negating the gains that investment likely will have made in the years leading up to a crash and could likely would in most cases be worth much more than the loss it takes in the down year.
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Dicey

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Re: Do you regret paying off your mortgage early?
« Reply #685 on: December 10, 2017, 10:36:18 AM »
Wow!  After being responsible enough to pay my mortgage off early, I'm to be irresponsible enough to not have a big emergency fund?  Also must lose all forms of income?
Seems extreme.

Bateaux, you're one of my favorite long-time members, but you're missing the point entirely. This is absolutely not about being responsible. It's about deploying your green soldiers to maximum effect.
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Re: Do you regret paying off your mortgage early?
« Reply #686 on: December 10, 2017, 10:59:24 AM »
There is nothing more powerful than debt freedom when a recession hits.  We powered through the 2008 recession even though my wife couldn't work at the time.  Still we invested, didn't sell out of the market, we bought all the way down and all the way up to the present day.

So let's look at this.

No debt on a 200k house no other savings. Recession hits both jobs lost. Can't pay for anything.

150k debt on a house 150k in savings regardless of the type taxable or retirement accounts. Recession hits both jobs lost.

I think I'd prefer situation 2.

But yeah having that debt paid off and losing your house to property tax non payment seems to be super freedom.

I was going to say that if hard times hit, they could re-leverage. Then, I remembered that no bank loans on someone with zero income.

seattlecyclone

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Re: Do you regret paying off your mortgage early?
« Reply #687 on: December 10, 2017, 11:23:49 AM »
I've seen a number of people bring up the question of what if you had bought your house in 2002 and could have paid off the mortgage just before the stock market crashed. The assumption seems to be that paying off the mortgage would surely have been better in that case.

Is that assumption correct?

I made this spreadsheet to try and explore that question.

We take out a $250k mortgage at a 7% interest rate in January 2002, which seems to be about the typical market rate at the time.

In the first scenario, the mortgage is paid off in August 2008, a few months before the big crash.

In the second scenario, the exact same amount of extra payments from Scenario 1 are instead used to purchase VTI shares through August 2008. After that, shares are sold to pay the required mortgage payments.

Scenario 2 is a little bit ahead until 2008, at which point it falls way behind Scenario 1 for some time. It slowly recovers as the stock market goes up, finally pulling back ahead of Scenario 1 just a few months ago.

Just looking at these two scenarios, paying off the mortgage seems like a fine option. Scenario 2 is never ahead by much, and it could easily fall behind again if the stock market went back down.

However this Scenario 2 assumes that the person is carrying a 7% mortgage in 2017. That's madness! I also plotted a third scenario, where we refinance the remaining balance into a new 30-year loan at 5% in 2009, and again at 4% in 2012. In this scenario, stock investing pulls back ahead of the early mortgage payoff in mid-2013, and is more than $100k ahead today. Even if the stock market fell by 30% tomorrow, Scenario 3 would still be ahead at this moment.

Note that I'm ignoring the effect of the mortgage interest tax deduction and taxes on dividends. These would tend to counteract each other somewhat. Everyone's tax situation is different, but I'd expect the mortgage interest deduction to be worth a bit more than the dividend tax for most people, pushing Scenarios 2 and 3 a bit ahead of what's shown in the spreadsheet.
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Re: Do you regret paying off your mortgage early?
« Reply #688 on: December 10, 2017, 11:44:40 AM »
Wow!  After being responsible enough to pay my mortgage off early, I'm to be irresponsible enough to not have a big emergency fund?  Also must lose all forms of income?
Seems extreme.

Bateaux, you're one of my favorite long-time members, but you're missing the point entirely. This is absolutely not about being responsible. It's about deploying your green soldiers to maximum effect.

Maybe I polluted my mind with too much Dave Ramsey.  I haven't had a mortgage since last century. 
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Re: Do you regret paying off your mortgage early?
« Reply #689 on: December 10, 2017, 12:12:22 PM »
Here is why I am considering paying off the mortgage.

1. Bull run in market is long overdue

2. I am not over the standard deduction with mortgage interest so the interest is not saving me anything on taxes

3. It is a risk free tax free guarantee of 4.375% return

4. If you could invest in a risk free tax free 4.375% guaranteed return would you put money into it? I am guessing most people would!

5. Extra cash flow monthly and less stress in the event of a downturn knowing you need less cashflow to cover expenses

I think you can go back and forth on this and never agree and I think its not one answer fits all, I think there are a lot of factors that should make you decide which direction to go, I think one major factor is figuring out if you are over the standard deduction or not as having this a a tax advantage or not is pushing me towards paying it off due to I am the higher tax bracket and would need to get 6% or higher returns in taxable account to match my mortgage tax free 4.375% return.

MrMoneySaver

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Re: Do you regret paying off your mortgage early?
« Reply #690 on: December 10, 2017, 01:03:15 PM »
The fact that you all come to defend your case constantly for your personal situation speaks volumes more than I think you know. Who are you trying to convince yourself.

If there were one member who appeared in every -- and I do mean every -- single thread on the topic, crusading for a certain point of view, would that not also speak volumes?

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Re: Do you regret paying off your mortgage early?
« Reply #691 on: December 10, 2017, 01:32:36 PM »
You seem to have a hard time understanding (or perhaps believing) that people can have a paid off home AND savings, both tax-advantaged and taxable.  Trust me, it is possible.

But if you didn't pay off the mortgage, you'd have more savings/investments. This is the comparison to make.


Of course you would.  However, those same 'investments' would also be the ones that tank.  Note that I'm talking about the large contingent of 100% equity folks around here.

It seems to me that paying off the mortgage is a diversification play for many people.  Simple as that.  You might not agree with it but that's what it really comes down to.

This.

I have huge exposure in the stock market.  I weathered 1997, the dot.com bust, 2007-9, I even had a few hundred bucks in the market in 1987 (lost $300!).  I kept plowing $$ into stock fund indexes throughout and I never blinked. 

I like diversity.  I understand the concept that you will *probably* make more money in the stock market, especially over decades.  I never tried to pay off my mortgage faster when I was 20,30, or 40.  Now...it seems very attractive to have that obligation off my monthly plate. 

Dicey

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Re: Do you regret paying off your mortgage early?
« Reply #692 on: December 10, 2017, 01:33:35 PM »
The fact that you all come to defend your case constantly for your personal situation speaks volumes more than I think you know. Who are you trying to convince yourself.

If there were one member who appeared in every -- and I do mean every -- single thread on the topic, crusading for a certain point of view, would that not also speak volumes?
My take is that it means he really, really cares. He wants others to understand before they act. It's not like he's getting rich personally or trying to direct traffic to his own blog, for example. 'Tis true that b42 can be terse at times, but his heart is 100% in the right place. I admire his dogged determination.

Had I learned the importance of sequencing early in life, it would literally shaved years off my FIRE date. Perhaps in the future, others will remember boarder42's intelligence, zeal and enthusiasm with gratitude.

Why now is also a great question. I cannot speak for b42, but over time I grew alarmed at the number of folks here who were joining "races" to pay off their mortgages, without fully understanding the cost of the choice they were making. If you want to get to FIRE as fast as possible, and you want to own a home, there's a faster, less expensive way to do it, but it's far less well known. It's so under- and mis-understood that just being willing to share the lesson can lead to heavy criticism.

What I wonder is why anyone pushes back? If you learn sequencing and make your informed decision, hooray, do whatever you want. Make your choice, but don't try to squelch the conversation. There are plenty of others who have no idea what sequencing even refers to.

Watching people mindlessly cheer others on to killing all the debt without seeing the big picture is just not what being mustachian is all about. I applaud B42's vigilence, though not always his syntax, and that of everyone else who chimes in anywhere on this forum because they care enough to learn and to help others by sharing their knowledge.
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DirtDiva

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Re: Do you regret paying off your mortgage early?
« Reply #693 on: December 10, 2017, 01:43:57 PM »
o.

Watching people mindlessly cheer others on to killing all the debt without seeing the big picture is just not what being mustachian is all about. I applaud B42's vigilence, though not always his syntax, and that of everyone else who chimes in anywhere on this forum because they care enough to learn and to help others by sharing their knowledge.
.

I get that, but b42's advice seems to be as whitewashed as the advice to the contrary. I appreciate the presentation of an alternative idea, but investing instead of paying off the mortgage is not the answer to every single situation. 

I love the fact that these conversations are civil, regardless of the passionately held beliefs of the participants.  And the conversations must continue for the edification of everyone.

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Re: Do you regret paying off your mortgage early?
« Reply #694 on: December 10, 2017, 02:01:03 PM »
o.
Watching people mindlessly cheer others on to killing all the debt without seeing the big picture is just not what being mustachian is all about. I applaud B42's vigilence, though not always his syntax, and that of everyone else who chimes in anywhere on this forum because they care enough to learn and to help others by sharing their knowledge.
I get that, but b42's advice seems to be as whitewashed as the advice to the contrary. I appreciate the presentation of an alternative idea, but investing instead of paying off the mortgage is not the answer to every single situation. 
Wait! What? "Kill All The Debt" is whitewashing of the highest order.

Understanding the consequences of "investing instead of paying off the mortgage" is exactly and completely the point.

No one is saying you can't pay off your mortgage. Just be smart and learn all the angles before you do, especially if FIRE is your goal. Why is that so hard? And why would anyone call it whitewashing?
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Re: Do you regret paying off your mortgage early?
« Reply #695 on: December 10, 2017, 02:02:23 PM »

I love the fact that these conversations are civil, regardless of the passionately held beliefs of the participants.  And the conversations must continue for the edification of everyone.

I think a core reason why many of us continue to post in these threads even though essentially every point has been discussed numerous times over the past 6 years is because there are constantly new people filtering in who haven't heard the arguments before. 
Many migrate here from DR or other "debt is evil" perspectives.  Others were still students during the last market crash and even more have never seen a sustained period of >4% inflation.  The concepts of what a market crash, high inflation and very low mortgage rates can mean for your long-term financial health can be mind-blowing, regardless of your conclusions.
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Re: Do you regret paying off your mortgage early?
« Reply #696 on: December 10, 2017, 02:11:16 PM »
I'd argue that 75 percent of the advice in these forums is not mustachian. 

For paying off your mortgage-mathematically it does not make sense.  However the argument that piece of mind can easily be made.  It is just different argument for each person that can't be quantified as easily.

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Re: Do you regret paying off your mortgage early?
« Reply #697 on: December 10, 2017, 03:06:16 PM »
Here is why I am considering paying off the mortgage.

1. Bull run in market is long overdue

2. I am not over the standard deduction with mortgage interest so the interest is not saving me anything on taxes

3. It is a risk free tax free guarantee of 4.375% return

4. If you could invest in a risk free tax free 4.375% guaranteed return would you put money into it? I am guessing most people would!

5. Extra cash flow monthly and less stress in the event of a downturn knowing you need less cashflow to cover expenses

I think you can go back and forth on this and never agree and I think its not one answer fits all, I think there are a lot of factors that should make you decide which direction to go, I think one major factor is figuring out if you are over the standard deduction or not as having this a a tax advantage or not is pushing me towards paying it off due to I am the higher tax bracket and would need to get 6% or higher returns in taxable account to match my mortgage tax free 4.375% return.

You have a lot to learn based on your  statements before you should even consider making  this choice. This is why I wouldn't

1. Is market timing and changing investing strategy based on a market evaluation is a quick way to end up broker.

2. Regardless of standard deduction or not it doesn't really effect this decision with a 4.375% rate.

3. It's not a risk free guaranteed return there is risk in sinking money into a large asset it's been discussed at length.

4. No I wouldn't. Bonds average higher return than this and the beauty of your mortgage is it's fixed for 30 years. And once you dump that dollar in it's not easily rebalanced out like bonds would be. Also the return is not 4.375% it's 4.375% minus inflation. So your return is on average less than 1%

5. This only happens if the house is 100% paid off. Paying down a mortgage over time creates added risk for the exact thing you're trying to mitigate.

We can go back and forth but you should do the math the correct way not try to skew it to help you feel better. The market averages 10-11% you don't deduct inflation from this bc your mortgage doesn't increase with inflation. So you're giving up double your return to increase your risk of what you're trying to prevent in number 5 during the paydown period.   

It's posts like these that make me keep posting. It's a strongly misinformed post and regardless of if you personally do some more research and act differently I don't want someone else coming in here and not seeing the flaws in this line of thinking.
« Last Edit: December 10, 2017, 03:17:27 PM by boarder42 »
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Re: Do you regret paying off your mortgage early?
« Reply #698 on: December 10, 2017, 06:04:40 PM »
I know why I'm so dang irritated!  I paid off my mortage early and that's why I'm not FIRE'd yet.  I'm scheduled to work 84 freakin hours this coming week.  Shouldn't sent that extra money to Countrywide.

B42 you win.
“Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.”
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Class of 2019

boarder42

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Re: Do you regret paying off your mortgage early?
« Reply #699 on: December 10, 2017, 06:24:09 PM »
I know why I'm so dang irritated!  I paid off my mortage early and that's why I'm not FIRE'd yet.  I'm scheduled to work 84 freakin hours this coming week.  Shouldn't sent that extra money to Countrywide.

B42 you win.

So you should help spread the word so others can learn.

Either that or you're trolling me with this post. But with a 2019 FIRE date it's highly probable you're not trolling and would be FIREd now if you hadn't paid it down.
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