Author Topic: I'm tempted to pay off my house...I know I shouldn't but I'm tempted  (Read 8926 times)

Allen

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We owe $144,000 on our house on a 15 year fixed mortgage at 2.875% interest.  This is a great deal.

My mother recently passed away after a dementia diagnosis, and I will receive a variable annuity as a life insurance benefit of approximately $190k. 

I have already earmarked $10k for cash, $15k for final settlement of her estate, and had planned to invest the rest into a taxable account. 

Alternatively, I'm considering nuking the mortgage.  Math wise, I know that is a bad idea, but the peace of mind from being 100% debt free, and slowly investing the former mortgage payment vs. putting it all in at once seems appealing somehow beyond the math. 

I know the arguments on both side, and math wise keeping the mortgage wins every time.  I also know that they are both good options compared to blowing the money or something.  Not having the money is one sure-fire way to ensure it can't be blown.  Based on our current savings rate, we will be FIRE in at most 10 years (and significantly less if my spouses business performs well).  The mortgage pays off in 14 years.  If we invest it it potentially moves forward our FIRE date, although our fire amount is based on the house being paid off (no mortgage in the expenses).

Not sure why it would matter in my case, but I also will inherit an IRA for around $130k which I'm planning to roll over into a beneficiary IRA which will require me to take my first distribution within 5 years and ongoing as part of a required minimum distribution setup.

Advice?

I'm a red panda

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #1 on: December 11, 2015, 01:59:13 PM »
I'm sorry for your loss.

With a windfall, I'd go ahead and pay it off. Invest the extra then invest the payments. It's nice to be debt free.

meandmyfamily

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #2 on: December 11, 2015, 02:06:57 PM »
Sorry for your loss!  I would pay off the house immediately.

Ftao93

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #3 on: December 11, 2015, 02:21:29 PM »
Sorry to hear that your mother passed, dementia is truly terrible.

I am not anywhere near your situation, but maybe if you think it's a bad idea to pay it all off, split the difference, and pay it much farther down?  maybe shave off that 44k or even plop down the 65k.  That would give you peace of mind AND you'd still have 100k in taxable.

I'd be torn too!

aj_yooper

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #4 on: December 11, 2015, 02:31:34 PM »
Sorry for your loss.  It is never easy.

Either choice you have is good.  We paid ours off and feel great.  The math may not be so much in favor of investing, given current estimates of market and bond returns.  Most importantly, do what you feel is the best use of the money.

justajane

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #5 on: December 11, 2015, 02:39:16 PM »
2.8% is just such an incredible deal. That type of rate is really unprecedented.

If you run 150K into Dave Ramsey's investment calculator and even put it at a very conservative return, see what you will get.

For symmetry's sake, I ran the return at 2.8% for 15 years. That 150K will grow to $226K. Even at the still conservative 4%, it will be 270K in 15 years.

https://www.daveramsey.com/blog/investing-calculator/#/entry_form

What's your monthly payment? How much will you be paying in interest over the next 15 years? I'm guessing it's far, far less than that.

I would keep that money liquid, if I were you.

yyc-phil

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #6 on: December 11, 2015, 02:39:22 PM »
Allen, sorry about the loss of your mom.

With such low interest on your mortgage, I'd recommend to keep keep it as is, and invest the windfall. Easier said than done, I did the total opposite five years ago in my pre-mustachian days when I made a significant profit on a real estate sale, and bought two properties, one cash (our principal residence), the other (a rental) with a very small mortgage. The psychological effect of having no debt are not to be overlooked, and I don't really regret that decision especially since I am way ahead of all my peers, but in hindsight, now that I am close to retirement and trying to sell in a depressed real estate market, I realize I should have invested the cash in liquidable investments rather than illiquid assets.

Langer83

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #7 on: December 11, 2015, 02:41:39 PM »
I'm sorry to hear about your loss.

If I were you, I'd try to time the elimination of your mortgage with your FIRE date. So if you plan to FIRE in 8-10 years, then pay enough extra now, so that it will be paid off in 8-10 years if you continue to pay the regular payment. That way you can benefit from higher investment returns during your accumulation years by putting most of the money into stocks, but benefit from the peace of mind and lower cash flow requirements during your withdrawal years. So some rough math would have you putting $35-$55k into your mortgage and investing the rest.

justajane

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #8 on: December 11, 2015, 02:43:32 PM »
I'm sorry to hear about your loss.

If I were you, I'd try to time the elimination of your mortgage with your FIRE date. So if you plan to FIRE in 8-10 years, then pay enough extra now, so that it will be paid off in 8-10 years if you continue to pay the regular payment. That way you can benefit from higher investment returns during your accumulation years by putting most of the money into stocks, but benefit from the peace of mind and lower cash flow requirements during your withdrawal years. So some rough math would have you putting $35-$55k into your mortgage and investing the rest.

This is an excellent hybrid approach. I like it!

DK

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #9 on: December 11, 2015, 03:00:23 PM »
I'd invest it, let inflation eat away at how 'much' the mtg is over the years. Guessing the 190K should be tax free, so realize if you are trying to make that up with working, you have to earn much more than that, plus it will be spread out over many years. If you invest it today, with a 15 year timeframe you should be pretty much guaranteed to come out ahead.

Dezrah

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #10 on: December 11, 2015, 03:48:30 PM »
If her passing was really recent, I'd suggest doing nothing (don't invest, don't pay off debt, don't splurge) until enough time has passed that the worst of the immediate emotions have passed. I hear a lot of people suggest at least six months. You have the rational arguments down pat and now you just need to see how you feel about it emotionally but it's likely your wires are getting crossed if it's not too raw. Taking six months won't make that much difference financially but making a decision you regret could sour your memories.

TLDR, wait  six months to see how you feel and then be at peace with whatever you decide.

Catbert

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #11 on: December 11, 2015, 04:02:01 PM »
So sorry for your lose.  I agree with Dezrah, don't do anything for 6 months.

Before you do anything make sure that you understand any tax consequences of the annuity and IRA distributions.  I think that the cost basis of annuities are not stepped up upon death.  If I'm right then you'll owe taxes on part of the money you withdraw. Also IIRC on non-spousal inherited IRAs you have to either take a RMD starting the year after the death of the originator OR take all the money out within 5 years.

I may not be right about either of these things.  It may also depend on the type of annuity and whether the decedent was already at RMD age. 

Allen

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #12 on: December 11, 2015, 06:31:42 PM »
Thank you all for your advice.  I have persuasive arguments in every direction and some I didn't consider. 

It seems the only consensus is that blowing the money is stupid, so I won't do that, otherwise I can't make a wrong choice (invest, pay off, hybrid, wait)

Another option that was NOT presented was that in 9-10 years my payoff balance will be $55k on the house.  I could invest it and then use a portion of the money to pay off the remainder when I'm ready to retire.



As to the advice on waiting, it is good advice and I know for example Dave Ramsey recommends this.  I'm in an odd spot as far as grieving in that I actually lost my mom two years ago to the dementia and have had to come to terms with that already.  Her recent death was a blessing for her and her wishes and gave me closure.  There is still grieving of course, but nothing like if she had died suddenly out of the blue.

pbkmaine

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #13 on: December 11, 2015, 08:08:32 PM »
Before you do anything, see if there are any surrender charges on the annuity.


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Fireball

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #14 on: December 11, 2015, 10:23:54 PM »
Hi Allen,

Sorry about the loss of your mother.  If the plan is to stay in your current home when you FIRE, I like Langer's approach.  Seems to solve the problem of paying off the house at a time when you need lower expenses and also puts a large portion into investments sooner rather than later.  I'm firmly in the "don't payoff the mortgage" camp, but that suggestion makes sense to me. Best of luck.

FrugalSaver

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #15 on: December 11, 2015, 11:18:30 PM »
2.8% is just such an incredible deal. That type of rate is really unprecedented.

If you run 150K into Dave Ramsey's investment calculator and even put it at a very conservative return, see what you will get.

For symmetry's sake, I ran the return at 2.8% for 15 years. That 150K will grow to $226K. Even at the still conservative 4%, it will be 270K in 15 years.

https://www.daveramsey.com/blog/investing-calculator/#/entry_form

What's your monthly payment? How much will you be paying in interest over the next 15 years? I'm guessing it's far, far less than that.

I would keep that money liquid, if I were you.

I know 4% seems conservative, but returns the last 15 years have yielded barely more than 4% with dividends included. Been a not so great 15 years. Hopefully the next 15 are better.

jengod

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #16 on: December 11, 2015, 11:38:01 PM »
PAY IT OFF, PAY IT OFF, PAY IT OFF.

If you are just dying to have a 3% house loan again in a year or two (so you can invest it in the stock market), you can always take out another mortgage on your primary residence.

Being debt-free including your house is a special kind of liberation. IF YOU HAVE A CHOICE, DO NOT WAIT UNTIL YOU ARE 65 TO EXPERIENCE THIS.

We did this three years ago. Everyone we asked about it told us we were nuts (including both sets of financially adroit parents). Maybe we did it "wrong" by some external metric, but we have not regretted the choice for one second. It feels SO GOOD.

mancityfan

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #17 on: December 12, 2015, 03:12:35 AM »
We had a very similar scenario a year ago. My wife's mother passed - also dementia -  and left $300k or so. We had around 77k left on the mortgage. The math always comes out indicating you are better to invest with this low loan rate environment. We (my wife mainly) decided to pay off the mortgage and invest the rest. What I can share with you is that my wife used to worry a lot about money, since paying off the mortgage her attitudes have changed, it has contributed to a happier outlook. The feeling of well being is difficult to quantify, it does not fit into the math calculations,  but for us it is there.

Davids

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #18 on: December 12, 2015, 07:40:06 AM »
I am sorry for your loss. While I would say invest it since you have a great mortgage rate I understand if you pay it off instead. For many the peace of mind of being debt free is priceless and there is nothing wrong with that. As long as you do not wastefully spend it then whatever decision you make will be fine. Again so sorry for your loss.

Camarillo Brillo

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #19 on: December 12, 2015, 07:58:35 AM »
We owe $144,000 on our house on a 15 year fixed mortgage at 2.875% interest.  This is a great deal.

My mother recently passed away after a dementia diagnosis, and I will receive a variable annuity as a life insurance benefit of approximately $190k. 

I have already earmarked $10k for cash, $15k for final settlement of her estate, and had planned to invest the rest into a taxable account. 

Alternatively, I'm considering nuking the mortgage.  Math wise, I know that is a bad idea, but the peace of mind from being 100% debt free, and slowly investing the former mortgage payment vs. putting it all in at once seems appealing somehow beyond the math. 

I know the arguments on both side, and math wise keeping the mortgage wins every time.  I also know that they are both good options compared to blowing the money or something.  Not having the money is one sure-fire way to ensure it can't be blown.  Based on our current savings rate, we will be FIRE in at most 10 years (and significantly less if my spouses business performs well).  The mortgage pays off in 14 years.  If we invest it it potentially moves forward our FIRE date, although our fire amount is based on the house being paid off (no mortgage in the expenses).

Not sure why it would matter in my case, but I also will inherit an IRA for around $130k which I'm planning to roll over into a beneficiary IRA which will require me to take my first distribution within 5 years and ongoing as part of a required minimum distribution setup.

Advice?
I do not know much about estate settlement.  How is it that you are personally responsible for her debts (I assume that is what is involved in estate settlement)?


rantk81

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #20 on: December 12, 2015, 08:10:15 AM »
Very sorry for your loss.

My recommendation is to wait for a while before making a decision.  The stress and pain from a recent loss may cause you not to be in the best frame of mind for making a large financial decision.

K-ice

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #21 on: December 12, 2015, 08:49:27 AM »
This is a horrible question but are you married? How's your marriage?

Rules differ from place to place but usually if you put an inheritance into your matromonial home it becomes "ours" and would be split 50:50 in the event of a divirce.

If you save it & invest it & keep it seperate from shared family money it can stay "yours" after a divorce.

Check with a professional, lawyer, account etc if you have any doubt.

Tough question but I thought I would throw it into the mix.

Assuming you have a secure marraige I would top up both yours & your spouse's tax defered investments before the end of the year. Upto a max of about 20k.

Then take a bit of time to think about everything but I would follow a hybrid approach.

Wishing you the best during this difficult time.





SirFrugal

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #22 on: December 12, 2015, 09:31:02 AM »
Its a gamble either way...you could pay the interest and maybe make some gains in the market and come out a few % ahead...or like this year, a lot of people are probably going to end the year a few % down in their investments...so had they paid off mortgages instead of put it in the market they would have come out ahead.

I'd probably pay the debt off, but that's just me.  I'd rather have the peace of mind of a paid off primary residence and lower monthly expenses then gambling on a 7%+ year next year just to come out a little ahead.

elaine amj

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #23 on: December 12, 2015, 09:44:38 AM »
In another thread, someone suggested investing the value of your mortgage into a taxable account. Hold on to it through the life of you mortgage. If anything happens, you have the investments available to pay it off at any time. It made sense.(I don't know how well this translates to the risks of a stock market crash at the same time as a job loss though)

For what it's worth, we decided to pay ours off. About 8 more months to go - it does feel good :)

Dicey

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #24 on: December 12, 2015, 11:11:42 AM »
Hey Allen, I understand the double loss. My MIL lives with us and has Alzheimer's. She also has a large amount of assets, but we're assuming it's going to take all of it to keep her going once she is no longer able to live with us. I hope you have lots of good photos and memories of your mom's good years, when she was still herself.

I have a few thoughts to share, and apologize if this sounds a little disjointed.

You know how people who are wallowing in debt think their life is going to be all unicorns and rainbows when their debt is paid off? Many think paying off the mortgage is going to be the same way. I'm here to tell you that it just ain't so. DH and I sold each of our houses after we were married to buy a single story house that was close to his work and a safe layout for his mom. We did well on both houses and chose to pay cash for our new one. It's been three years now and we both feel like we're missing something.

There is key information missing from your post. Namely your age(s) and how much you have saved for retirement. Also, the interest rate on your mortgage. So, let me pose a different question, assuming that you're relatively young and don't have as much saved as you'd like. Would you rather retire even earlier than you had planned or pay off your house now? Taking the lump sum and paying off the house just means you will have a paid-off house. Investing a lump sum now means that you have more money invested sooner, hence more and faster nest-egg growth.  Solid investments with a long time horizon will earn you more money in the long run than paying off a fixed rate mortgage of relatively short duration. Investing instead of paying off the house (assuming fixed rate) over time allows your money to grow, while your mortgage outlay remains constant. When you hit your FI number, you will always have the option of paying off the house.

I promise you, on a scale of elation, hitting FI and being able to RE beats the pants off not having a mortgage. And yes, it is completely possible to FIRE with a mortgage. Hell, the mighty arebelspy even did it with outstanding student loans!

Hope this helps.

Frugalman19

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #25 on: December 12, 2015, 11:47:29 AM »
I'm so sorry for your loss.

This is a really common question, my view is what ever saves you from yourself.
1. Paying off the mortgage, hopefully you would dollar cost average what you would be saving into some investment. My fear would be that you pay off the mortgage and just increase your lifestyle to match your new take home pay. Which happens a lot.
2. By keeping the mortgage and investing the money you keep your current lifestyle the same, and mathematically you will come ahead in the long run.

I use mint, which shows net worth, and even if you have the mortgage you will see you have the cash to pay it off whenever you want, take comfort in that.

Don't discount the behavioral aspect of having less expenses per month, the tendency is to just start spending more.

My 2 cents.

Telecaster

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #26 on: December 12, 2015, 12:53:48 PM »
Resist the temptation.   If it doesn't make financial sense, it doesn't make sense. 

ETwagon

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #27 on: December 12, 2015, 01:23:42 PM »

I know the arguments on both side, and math wise keeping the mortgage wins every time.

 You just inherited $320K.   Handing over $35,000-ish in interest plus PMI to a bank/mortgage company when you don't have to never wins (in my book anyway). Peace of mind having a paid for home plus that mortgage payment can now be invested every month. 

Just my simple take on it. Good Luck in your decision's.

Frugalman19

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #28 on: December 12, 2015, 01:31:03 PM »

I know the arguments on both side, and math wise keeping the mortgage wins every time.

 You just inherited $320K.   Handing over $35,000-ish in interest plus PMI to a bank/mortgage company when you don't have to never wins (in my book anyway). Peace of mind having a paid for home plus that mortgage payment can now be invested every month. 

Just my simple take on it. Good Luck in your decision's.

The argument is that 320,000, could yield 70,000 ish in capital gains/dividends, so he's handing away $35,000 to double his money. And that's a conservative estimate.


SirFrugal

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #29 on: December 12, 2015, 01:32:11 PM »
Resist the temptation.   If it doesn't make financial sense, it doesn't make sense.

Sure it does.  I paid mine off early this year.  I saved myself 3,000 dollars in interest payments over the course of the year.  Had I put the money in the market...well the market is going to finish down this year so I'd have probably lost some of that money instead, so I'm 3,000 in interest I didn't pay ahead + avoided what probably would have been 2-4% lost on that money in the market this year...

I now have a lower monthly budget, which means I will be FI with a smaller nest egg, and I have extra money every month to buy into a market that is lower then when I paid my mortgage off.

You always win when you pay off debt...its just sometimes you might win a little more in the market.

Telecaster

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #30 on: December 12, 2015, 01:53:11 PM »

Sure it does.  I paid mine off early this year.  I saved myself 3,000 dollars in interest payments over the course of the year.  Had I put the money in the market...well the market is going to finish down this year so I'd have probably lost some of that money instead, so I'm 3,000 in interest I didn't pay ahead + avoided what probably would have been 2-4% lost on that money in the market this year...

I now have a lower monthly budget, which means I will be FI with a smaller nest egg, and I have extra money every month to buy into a market that is lower then when I paid my mortgage off.

You always win when you pay off debt...its just sometimes you might win a little more in the market.

This has been hashed out to death on these boards, so no real reason to jump again.

However, I do think it is important to frame the question properly, otherwise the answers don't make sense.   The OP has 14 years left on the mortgage.  That's the investment horizon we're looking at, not what happened last year.   

Now the question becomes, "is it reasonable to earn greater than 2.875% per year in the market over the next 14 years?"   



Frugalman19

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #31 on: December 12, 2015, 04:49:24 PM »

Sure it does.  I paid mine off early this year.  I saved myself 3,000 dollars in interest payments over the course of the year.  Had I put the money in the market...well the market is going to finish down this year so I'd have probably lost some of that money instead, so I'm 3,000 in interest I didn't pay ahead + avoided what probably would have been 2-4% lost on that money in the market this year...

I now have a lower monthly budget, which means I will be FI with a smaller nest egg, and I have extra money every month to buy into a market that is lower then when I paid my mortgage off.

You always win when you pay off debt...its just sometimes you might win a little more in the market.

This has been hashed out to death on these boards, so no real reason to jump again.

However, I do think it is important to frame the question properly, otherwise the answers don't make sense.   The OP has 14 years left on the mortgage.  That's the investment horizon we're looking at, not what happened last year.   

Now the question becomes, "is it reasonable to earn greater than 2.875% per year in the market over the next 14 years?"

Plus lose the tax writeoff

itamarst

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #32 on: December 12, 2015, 05:53:54 PM »
If you have an asset allocation that calls for bonds, paying off extra principal is the same as buying a Treasury bond with same interest rate. It's as good as a Treasury since the return is guaranteed. So unless you intend to invest 100% in the stock market you can replace bonds with extra mortgage principal and get the same result.

Allen

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #33 on: December 12, 2015, 10:21:40 PM »
All thanks again for all the advice.

I read the statement wrong and it's actually going to be $90k not $190k.

Even if it had been 190, I'm going to invest it. Leaving emotion and following the rational mmm plan has so far brought me amazing prosperity. Why leave the math now to chase the intangible good (great!) feeling of a paid off mortgage?  I really appreciated all the posters and viewpoints and thank you all for the support after losing my mother.

Staying unemotional and going with the math.

BlueHouse

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #34 on: December 13, 2015, 08:39:10 PM »
The part of the equation that I think many people exclude is how comfortable you are putting 100% of the lump sum into an investment on day 1.  For me, I'm a bit nervous with what the markets are doing, so I prefer to dollar-cost-average. 

So if you put 100% of the cash in a money market and DCA over the course of the next year or two, I'd feel better paying down the mortgage and then DCAing the would-be payments into the market instead. 


Villanelle

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #35 on: December 13, 2015, 11:04:51 PM »
Jut make sure you don't tie up all that money in investments before you are sure the entire estate, including taxes (for any year in which they might need to be filed) are taken care of.  Beyond that, I offer my condolences on your loss.

kite

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #36 on: December 14, 2015, 05:48:11 AM »
Hi Allen,

Sorry about the loss of your mother.  If the plan is to stay in your current home when you FIRE, I like Langer's approach.  Seems to solve the problem of paying off the house at a time when you need lower expenses and also puts a large portion into investments sooner rather than later.  I'm firmly in the "don't payoff the mortgage" camp, but that suggestion makes sense to me. Best of luck.

I was reading through the replies hoping someone would zero in on this detail.  How long you plan to live in a house is key.   The other key detail is what do other assets currently looking like. 

coppertop

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #37 on: December 14, 2015, 07:14:50 AM »
Resist the temptation.   If it doesn't make financial sense, it doesn't make sense.

Sure it does.  I paid mine off early this year.  I saved myself 3,000 dollars in interest payments over the course of the year.  Had I put the money in the market...well the market is going to finish down this year so I'd have probably lost some of that money instead, so I'm 3,000 in interest I didn't pay ahead + avoided what probably would have been 2-4% lost on that money in the market this year...

I now have a lower monthly budget, which means I will be FI with a smaller nest egg, and I have extra money every month to buy into a market that is lower then when I paid my mortgage off.

You always win when you pay off debt...its just sometimes you might win a little more in the market.
+

eyePod

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #38 on: December 14, 2015, 08:24:46 AM »
That sucks, but really this isn't the lesser of two evils, it's the lesser of two goods. Neither is a bad decision, sometimes one is better than the other but man I just imagine not having to pay a mortgage payment every month.

Even if you have the cash earmarked, if you're like me, you'll always make excuses about paying it off and just doing the smallest amount.

Think about the freedom you'd have realizing that you'll never have to make that mortgage payment again. Man oh man that's such a nice feeling.

Fishindude

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #39 on: December 14, 2015, 08:34:51 AM »
I think paying off the mortgage is a great idea, regardless of the interest rate.

A mortgage is "real debt" that at some point needs to be paid off for you to really start getting ahead.
Making more than that 2.85% in investments is not guaranteed.   In fact you could lose some of your investments.

I'd go with the sure deal.

Dicey

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #40 on: December 14, 2015, 09:19:02 AM »
I think paying off the mortgage is a great idea, regardless of the interest rate.

A mortgage is "real debt" that at some point needs to be paid off for you to really start getting ahead.
Making more than that 2.85% in investments is not guaranteed.   In fact you could lose some of your investments.

I'd go with the sure deal.

Even if it means you end up with less money at the end or it takes longer to get to a comfortably sustainable level of FIRE? The longer you wait to start saving for retirement, the more actual dollars you will have to save. Don't have enough green soldiers saved because you paid off your house early instead? Pity.

dramaman

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #41 on: December 14, 2015, 09:29:07 AM »
I paid off my mortgage this last year and it IS a tremendously freeing experience.

That being said, my interest rate was around 2 percentage points higher than yours. Considering inflation, your real interest rate is insignificant. If you can stomach investing the entire sum and a potential short term loss, that is probably the smartest way to go over the long haul.

zephyr911

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #42 on: December 14, 2015, 09:29:20 AM »
Math and historical data say invest it all.

If your personal preference makes you feel better about the payoff, then by all means, do it. Word is, it definitely enhances your sense of freedom.

If I had even $10K in unexpected cash I'd just put it down on another rental, but that's me. I'm into that sort of thing. Do what works for you.

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #43 on: December 14, 2015, 09:36:05 AM »



As to the advice on waiting, it is good advice and I know for example Dave Ramsey recommends this.  I'm in an odd spot as far as grieving in that I actually lost my mom two years ago to the dementia and have had to come to terms with that already.  Her recent death was a blessing for her and her wishes and gave me closure.  There is still grieving of course, but nothing like if she had died suddenly out of the blue.

Sorry to hear that. Iím in a similar situation where my mother is heading down that path. Itíll be a while but that path is one way. Sadly she is early enough in the diagnosis that she knows it.

Paying off does make an emotional sense. Or maybe paying off enough that the final payments will tie in with FIRE dates.

How about leveraging that into a rental or two Ė then everytime you collect rent you can treat it as a gift from your mom.
 

sandandsun

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #44 on: December 14, 2015, 09:38:53 AM »
we paid off our mortgage a couple of years ago... mathematically, it made more sense to keep the mortgage and invest, but we really wanted to be debt free and have a paid off house.  It was the right decision for us- and we have religiously saved/invested the money that was previously going to payments, no lifestyle inflation, which I think is key...

Playing with Fire UK

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #45 on: December 15, 2015, 05:13:08 AM »
Just to add some balance here, I paid off my mortgage (in a roundabout way), I thought it would be an amazing feeling to be totally debt free, but it wasn't all that (for me), so I'm applying for a cash out mortgage to invest.

doggyfizzle

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Re: I'm tempted to pay off my house...I know I shouldn't but I'm tempted
« Reply #46 on: December 15, 2015, 12:13:30 PM »
Invest it, and either use your collected dividends (or draw 2-4% if you're a capital gains hunter/indexer) each year to make an extra payment or two.  You end up keeping the principal and knocking a year or two off the mortgage.  Seems to be the best of both worlds...