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.