Author Topic: Why Do you do ....... AND pay off your mortgage early?  (Read 84393 times)

BlueHouse

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #100 on: March 29, 2017, 02:25:28 PM »
Boarder42 I really can't understand why you are so passionate about this issue... I've seen you post so many times about this in all kinda of threads and I think you just need to chill out on this argument it's been beaten to death. Almost everyone out there including you makes decisions that don't fall into the realm of "perfectly efficient" and "mustacian" because that is what is important to them.

just for the record I AGREE... I do not pay off my mortgage and send everything to 100% equities but what is with the witch hunt man... let the mortgage payoffers be who they be
Ha ha...so true.  Boarder42, why don't you sell your boat and put the proceeds into equities? 
I'm just glad he's not spouting off about religion because you can see how worked up he gets about his beliefs!

rantk81

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #101 on: March 29, 2017, 02:26:32 PM »
just for the record I AGREE... I do not pay off my mortgage and send everything to 100% equities but what is with the witch hunt man... let the mortgage payoffers be who they be

Some people just are incapable of taking a rest, as long as there is still at least one more person on the internet who is "wrong" ;)

« Last Edit: March 29, 2017, 02:29:49 PM by rantk81 »

shawndoggy

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #102 on: March 29, 2017, 02:29:38 PM »
Ha ha...so true.  Boarder42, why don't you sell your boat and put the proceeds into equities? 
I'm just glad he's not spouting off about religion because you can see how worked up he gets about his beliefs!

Boarder!?  Do.Not.Tell.Me. that you own your vlx outright?  A boat that's at the bottom of its depreciation curve?  Go refi dat stat!

BFGirl

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #103 on: March 29, 2017, 02:38:42 PM »
Whether to pay down your mortgage or not depends upon more than a mathematical hypothetical.  Although the trend has been for the stock market to go up over the long term, that doesn't mean that it always will and that doesn't mean that there won't be down periods on the march upwards.  There is risk in investing in anything, whether it be your house, stocks, bonds, etc. 

What if I become mentally disabled?  What if a caregiver is able to exploit me and gain access to my accounts and drain them? It is very hard to recover those assets unless you can somehow pin it on the financial institution as negligence.   Although it can be done, it is a lot harder for them to successfully get my house.  Even if they make me sign a deed, it can be invalidated if I didn't have the capacity to know what I was signing.  Then at least one of my assets would be available for my future needs. 

If someone's goal is to accumulate the most wealth possible in the shortest time possible and they are willing to take any steps to do that, then perhaps a facepunch for being unwilling to consider investing instead of paying down a mortgage is warranted.  However, for most people, there are other considerations and values than just the accumulation of wealth quickly.

OP, I don't disagree with the theoretical logic of your argument.  However, for people who are out of debt, saving and investing, I hardly think that because they choose to diversify their assets differently from you that they should be "facepunched."

The whole path to FI involves investing in the stock market.  If you're not going to accept that the stock market is an optimal investment over a term of 30 years, then I don't know what to say.

I'm sure you can set up a legal document to dictate how your assets should be handled if you lose the cognitive ability to manage them yourself.  You would likely have a spouse who can handle those decisions for you.

The goal is not to accumulate the most wealth as quickly as possible.  The goal is to accumulate the most wealth very slowly over the course of a lifetime.  Accumulating that wealth to achieve FI is the whole reason we're here.

No one is saying that paying off the mortgage early as a form of diversification is inherently wrong.  People are saying that too often other people justify the aggressive paying off of a mortgage for reasons that are factually incorrect.

I never said that you shouldn't invest in the market.  I have 4 times in investments than in the value of my home.  I just don't think that you have to maximize your investment in the market using your house as leverage.  I think there needs to be a balance between your market investments and your home equity.  I don't think you should have zero equity in your home and 100% of everything else in the stock market.  It just doesn't seem rational to me.  I am not being obtuse and I do understand the math, however, for me and others like me, I feel the risk is too great to have all my eggs in a single basket.  Likewise, I think it is foolish to pay off your house and have nothing invested.  But I disagree that I am making a poor decision to have a paid for house and not have the equity invested in the market.  And I am willing to get to FI a little bit slower and not take that risk.

You can set up legal documents to give authority to other people to manage your affairs.  That doesn't mean that my scenario above can't and doesn't happen.  I have a secure job mostly because there are people who exploit those who are unable to make their own decisions.  I have seen situations where a caregiver, friend or someone with a power of attorney steals from the incapacitated person.  The house may be the only asset left with any value by the time the exploitation is discovered.

Again, I don't disagree with the theory, just it's application in a vacuum that doesn't take into account varying situations and reasoning.

JLee

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #104 on: March 29, 2017, 02:41:04 PM »
Boarder42 I really can't understand why you are so passionate about this issue... I've seen you post so many times about this in all kinda of threads and I think you just need to chill out on this argument it's been beaten to death. Almost everyone out there including you makes decisions that don't fall into the realm of "perfectly efficient" and "mustacian" because that is what is important to them.

just for the record I AGREE... I do not pay off my mortgage and send everything to 100% equities but what is with the witch hunt man... let the mortgage payoffers be who they be

Of course we do. That's why there are so many facepunches on this board.

It is ironic, though, how paying for convenience/time is generally frowned upon (lawn service, house cleaning, etc) but paying a mortgage off to feel good is congratulated.

Hotstreak

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #105 on: March 29, 2017, 04:03:58 PM »
Whether to pay down your mortgage or not depends upon more than a mathematical hypothetical.  Although the trend has been for the stock market to go up over the long term, that doesn't mean that it always will and that doesn't mean that there won't be down periods on the march upwards.  There is risk in investing in anything, whether it be your house, stocks, bonds, etc. 

What if I become mentally disabled?  What if a caregiver is able to exploit me and gain access to my accounts and drain them? It is very hard to recover those assets unless you can somehow pin it on the financial institution as negligence.   Although it can be done, it is a lot harder for them to successfully get my house.  Even if they make me sign a deed, it can be invalidated if I didn't have the capacity to know what I was signing.  Then at least one of my assets would be available for my future needs. 

If someone's goal is to accumulate the most wealth possible in the shortest time possible and they are willing to take any steps to do that, then perhaps a facepunch for being unwilling to consider investing instead of paying down a mortgage is warranted.  However, for most people, there are other considerations and values than just the accumulation of wealth quickly.

OP, I don't disagree with the theoretical logic of your argument.  However, for people who are out of debt, saving and investing, I hardly think that because they choose to diversify their assets differently from you that they should be "facepunched."

The whole path to FI involves investing in the stock market.  If you're not going to accept that the stock market is an optimal investment over a term of 30 years, then I don't know what to say.

I'm sure you can set up a legal document to dictate how your assets should be handled if you lose the cognitive ability to manage them yourself.  You would likely have a spouse who can handle those decisions for you.

The goal is not to accumulate the most wealth as quickly as possible.  The goal is to accumulate the most wealth very slowly over the course of a lifetime.  Accumulating that wealth to achieve FI is the whole reason we're here.

No one is saying that paying off the mortgage early as a form of diversification is inherently wrong.  People are saying that too often other people justify the aggressive paying off of a mortgage for reasons that are factually incorrect.

I never said that you shouldn't invest in the market.  I have 4 times in investments than in the value of my home.  I just don't think that you have to maximize your investment in the market using your house as leverage.  I think there needs to be a balance between your market investments and your home equity.  I don't think you should have zero equity in your home and 100% of everything else in the stock market.  It just doesn't seem rational to me.  I am not being obtuse and I do understand the math, however, for me and others like me, I feel the risk is too great to have all my eggs in a single basket.  Likewise, I think it is foolish to pay off your house and have nothing invested.  But I disagree that I am making a poor decision to have a paid for house and not have the equity invested in the market.  And I am willing to get to FI a little bit slower and not take that risk.

You can set up legal documents to give authority to other people to manage your affairs.  That doesn't mean that my scenario above can't and doesn't happen.  I have a secure job mostly because there are people who exploit those who are unable to make their own decisions.  I have seen situations where a caregiver, friend or someone with a power of attorney steals from the incapacitated person.  The house may be the only asset left with any value by the time the exploitation is discovered.

Again, I don't disagree with the theory, just it's application in a vacuum that doesn't take into account varying situations and reasoning.

It's a ridiculous example.  Just because it can happen does not mean that it's likely to happen to you.  You are suggesting every person should pay off their mortgages ASAP because of this miniscule chance that they will become mentally defective, and then after their brain turns to mush they happen to work with one of the small portion of caregivers who are crooks and will steal their money, then that nobody else will notice the thievery until most or all assets are taken away.  Maybe you are too close to this because you work in the industry, I can't see how else you would come to the belief that what you're proposing is rational.

Clean Shaven

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #106 on: March 29, 2017, 04:08:43 PM »
For reference, the following Boglehead post is what I would consider an example of an investor that maximizes expected return without regard to risk.

https://www.bogleheads.org/forum/viewtopic.php?t=5934 

Thanks for the link.  The "mortgage your retirement" theory referenced in that bogleheads thread links to this article:
http://www.whynot.net/main/mortgage_retirement.pdf

... which ends in two sentences that sound very boarder42-like, advocating leveraging oneself in order to invest more: 

"The big missed opportunity is to do a better job diversifying over time, getting an early (and leveraged) start in stocks. We do this with houses, so why not stocks?"

You can see from that bogleheads thread how that theory worked out for the guy who decided to apply it in real life.


Bee21

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #107 on: March 29, 2017, 04:51:10 PM »
Has anybody run the numbers on the total costs? Like how much will you have paid by the end of your 30 year term? Is it more or less than your house will be worth at that point?

BFGirl

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #108 on: March 29, 2017, 04:54:30 PM »
Whether to pay down your mortgage or not depends upon more than a mathematical hypothetical.  Although the trend has been for the stock market to go up over the long term, that doesn't mean that it always will and that doesn't mean that there won't be down periods on the march upwards.  There is risk in investing in anything, whether it be your house, stocks, bonds, etc. 

What if I become mentally disabled?  What if a caregiver is able to exploit me and gain access to my accounts and drain them? It is very hard to recover those assets unless you can somehow pin it on the financial institution as negligence.   Although it can be done, it is a lot harder for them to successfully get my house.  Even if they make me sign a deed, it can be invalidated if I didn't have the capacity to know what I was signing.  Then at least one of my assets would be available for my future needs. 

If someone's goal is to accumulate the most wealth possible in the shortest time possible and they are willing to take any steps to do that, then perhaps a facepunch for being unwilling to consider investing instead of paying down a mortgage is warranted.  However, for most people, there are other considerations and values than just the accumulation of wealth quickly.

OP, I don't disagree with the theoretical logic of your argument.  However, for people who are out of debt, saving and investing, I hardly think that because they choose to diversify their assets differently from you that they should be "facepunched."

The whole path to FI involves investing in the stock market.  If you're not going to accept that the stock market is an optimal investment over a term of 30 years, then I don't know what to say.

I'm sure you can set up a legal document to dictate how your assets should be handled if you lose the cognitive ability to manage them yourself.  You would likely have a spouse who can handle those decisions for you.

The goal is not to accumulate the most wealth as quickly as possible.  The goal is to accumulate the most wealth very slowly over the course of a lifetime.  Accumulating that wealth to achieve FI is the whole reason we're here.

No one is saying that paying off the mortgage early as a form of diversification is inherently wrong.  People are saying that too often other people justify the aggressive paying off of a mortgage for reasons that are factually incorrect.

I never said that you shouldn't invest in the market.  I have 4 times in investments than in the value of my home.  I just don't think that you have to maximize your investment in the market using your house as leverage.  I think there needs to be a balance between your market investments and your home equity.  I don't think you should have zero equity in your home and 100% of everything else in the stock market.  It just doesn't seem rational to me.  I am not being obtuse and I do understand the math, however, for me and others like me, I feel the risk is too great to have all my eggs in a single basket.  Likewise, I think it is foolish to pay off your house and have nothing invested.  But I disagree that I am making a poor decision to have a paid for house and not have the equity invested in the market.  And I am willing to get to FI a little bit slower and not take that risk.

You can set up legal documents to give authority to other people to manage your affairs.  That doesn't mean that my scenario above can't and doesn't happen.  I have a secure job mostly because there are people who exploit those who are unable to make their own decisions.  I have seen situations where a caregiver, friend or someone with a power of attorney steals from the incapacitated person.  The house may be the only asset left with any value by the time the exploitation is discovered.

Again, I don't disagree with the theory, just it's application in a vacuum that doesn't take into account varying situations and reasoning.

It's a ridiculous example.  Just because it can happen does not mean that it's likely to happen to you.  You are suggesting every person should pay off their mortgages ASAP because of this miniscule chance that they will become mentally defective, and then after their brain turns to mush they happen to work with one of the small portion of caregivers who are crooks and will steal their money, then that nobody else will notice the thievery until most or all assets are taken away.  Maybe you are too close to this because you work in the industry, I can't see how else you would come to the belief that what you're proposing is rational.

No where in any of my posts did I advocate for someone to pay off their house ASAP because they might encounter exploitation in the future, nor have I used it in my posts explaining why my house is paid for.  I used it as a possible example of times where diversification protected some assets.  I only explained it further because the previous person responding to my post seemed to discount that such at thing can happen.  Please don't presume that I am too close to this to be rational because you disagree with my opinion.

I really don't care whether people pay off their houses or use that money to invest.  I just think that people are narrow minded when they think that their way is the only "right" way.

Hotstreak

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #109 on: March 29, 2017, 05:35:17 PM »
Whether to pay down your mortgage or not depends upon more than a mathematical hypothetical.  Although the trend has been for the stock market to go up over the long term, that doesn't mean that it always will and that doesn't mean that there won't be down periods on the march upwards.  There is risk in investing in anything, whether it be your house, stocks, bonds, etc. 

What if I become mentally disabled?  What if a caregiver is able to exploit me and gain access to my accounts and drain them? It is very hard to recover those assets unless you can somehow pin it on the financial institution as negligence.   Although it can be done, it is a lot harder for them to successfully get my house.  Even if they make me sign a deed, it can be invalidated if I didn't have the capacity to know what I was signing.  Then at least one of my assets would be available for my future needs. 

If someone's goal is to accumulate the most wealth possible in the shortest time possible and they are willing to take any steps to do that, then perhaps a facepunch for being unwilling to consider investing instead of paying down a mortgage is warranted.  However, for most people, there are other considerations and values than just the accumulation of wealth quickly.

OP, I don't disagree with the theoretical logic of your argument.  However, for people who are out of debt, saving and investing, I hardly think that because they choose to diversify their assets differently from you that they should be "facepunched."

The whole path to FI involves investing in the stock market.  If you're not going to accept that the stock market is an optimal investment over a term of 30 years, then I don't know what to say.

I'm sure you can set up a legal document to dictate how your assets should be handled if you lose the cognitive ability to manage them yourself.  You would likely have a spouse who can handle those decisions for you.

The goal is not to accumulate the most wealth as quickly as possible.  The goal is to accumulate the most wealth very slowly over the course of a lifetime.  Accumulating that wealth to achieve FI is the whole reason we're here.

No one is saying that paying off the mortgage early as a form of diversification is inherently wrong.  People are saying that too often other people justify the aggressive paying off of a mortgage for reasons that are factually incorrect.

I never said that you shouldn't invest in the market.  I have 4 times in investments than in the value of my home.  I just don't think that you have to maximize your investment in the market using your house as leverage.  I think there needs to be a balance between your market investments and your home equity.  I don't think you should have zero equity in your home and 100% of everything else in the stock market.  It just doesn't seem rational to me.  I am not being obtuse and I do understand the math, however, for me and others like me, I feel the risk is too great to have all my eggs in a single basket.  Likewise, I think it is foolish to pay off your house and have nothing invested.  But I disagree that I am making a poor decision to have a paid for house and not have the equity invested in the market.  And I am willing to get to FI a little bit slower and not take that risk.

You can set up legal documents to give authority to other people to manage your affairs.  That doesn't mean that my scenario above can't and doesn't happen.  I have a secure job mostly because there are people who exploit those who are unable to make their own decisions.  I have seen situations where a caregiver, friend or someone with a power of attorney steals from the incapacitated person.  The house may be the only asset left with any value by the time the exploitation is discovered.

Again, I don't disagree with the theory, just it's application in a vacuum that doesn't take into account varying situations and reasoning.

It's a ridiculous example.  Just because it can happen does not mean that it's likely to happen to you.  You are suggesting every person should pay off their mortgages ASAP because of this miniscule chance that they will become mentally defective, and then after their brain turns to mush they happen to work with one of the small portion of caregivers who are crooks and will steal their money, then that nobody else will notice the thievery until most or all assets are taken away.  Maybe you are too close to this because you work in the industry, I can't see how else you would come to the belief that what you're proposing is rational.

No where in any of my posts did I advocate for someone to pay off their house ASAP because they might encounter exploitation in the future, nor have I used it in my posts explaining why my house is paid for.  I used it as a possible example of times where diversification protected some assets.  I only explained it further because the previous person responding to my post seemed to discount that such at thing can happen.  Please don't presume that I am too close to this to be rational because you disagree with my opinion.

I really don't care whether people pay off their houses or use that money to invest.  I just think that people are narrow minded when they think that their way is the only "right" way.

Just because it CAN happen doesn't mean that paying off a mortgage early instead of investing the difference is a remotely good idea.  A black swan event like a thief caretaker is extremely unlikely.  Just because having a paid off house can provide some protection in the event it occurs, does not mean it is a financially sound situation, because there is little to no way to predict it would ever occur and little reason to expect it would happen to you.  You're citing this example which if widely implemented might save on average a few hundred or a few thousand dollars per person, while costing them all hundreds of thousands of dollars in lost investment growth.  That's poor risk management.  Not to mention that a crook could simply convince the elderly to take out a home mortgage, then steal that money from them.

If you're not advocating paying off the mortgage ASAP I'm not sure what you're ultimately talking about, since this thread is about people paying off mortgages quickly versus making the minimum payments and investing the difference.

Last thing and this is getting off topic, but I didn't presume you are too close to it because I disagree (as you can see I don't disagree that this could happen, I just think it is irrational to plan for something so unlikely, especially when there are better alternatives).  I said maybe you are too close to it because you work in the industry.., meaning you see it all the time and therefore it has more resonance with you beyond it's actual significance. 

BFGirl

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #110 on: March 29, 2017, 05:55:53 PM »
Hotstreak,

I'm not sure why you are focusing on this.  No where have I stated that you should pay off your mortgage to avoid exploitation.  I mainly used it as a possible example of how the diversification of having a paid off house has been advantageous in hindsight on some cases I've dealt with.

I could explain a lot more of the law on the exploitation issue to counter some of your statements, but that would be taking this thread too far off track.

I'm not sure why so many of those in the "don't pay off the mortgage" camp are so determined they have to convince those of us who have made a different decision.

In my posts on this issue, I've tried to explain my PERSONAL reasons for having a paid for house and am not advocating one way or the other. 


Lmoot

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #111 on: March 29, 2017, 06:17:14 PM »
I am paying my mortgage off early (before I turn 35), because I want to invest in rental property and want my primary residence to be protected in the event of litigation or foreclosure; I would rather foreclose on a rental than my primary. I don't anticipate foreclosure, and will take steps to prevent one, including imagining a scenario in which it could happen. I am paying it down to lower my DTI after a recast so I can qualify easier for a mortgage on the next property.

Hotstreak

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #112 on: March 29, 2017, 06:22:40 PM »
Hotstreak,

I'm not sure why you are focusing on this.  No where have I stated that you should pay off your mortgage to avoid exploitation.  I mainly used it as a possible example of how the diversification of having a paid off house has been advantageous in hindsight on some cases I've dealt with.

What stands out to me here is that it's based on hindsight.  It's not rational a mortgage and then assume you will have a debilitating mental condition in 30 years, and that you will deal with crooked help, and plan based on that, when the certain cost of doing so is incredibly high as a dollar amount.


Quote
I'm not sure why so many of those in the "don't pay off the mortgage" camp are so determined they have to convince those of us who have made a different decision.

In my posts on this issue, I've tried to explain my PERSONAL reasons for having a paid for house and am not advocating one way or the other.

I re-read your original post in which you state there are "other considerations and values than just the accumulation of wealth quickly", and the only example you cite is that if you become mentally disabled and a caregiver is able to exploit you that your home may be a protected asset.  So please forgive me if this is bothersome but I think it's absolutely ridiculous that any person would base such a large part of their savings and retirement strategy on a black swan like this.  And on a forum where we shine a light on poor financial decisions I don't think that dissecting your post is out of line.

FIT_Goat

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #113 on: March 29, 2017, 06:29:56 PM »
I have been throwing extra money $700/mo towards my mortgage, because it's a brand new FHA loan with MI for the life of the loan.  I was hoping to get more than 20% equity, so I could refinance.

I think you've convinced me that the math just doesn't make sense. So, you win.  I'm strongly considering moving that money to monthly investments.  This month's payment went out this morning.  So, I have time to change it up.

My mortgage is for 30 years at 3.25% with a 0.85% annual MI premium.  Basically, I have a 4.1% APR on my mortgage.  It's going to be pretty hard to refinance at a rate that's enough below that to make up for the refinance costs.  Right now, the rates are hovering at 4% anyway.  By the time I have 20% equity, there's little chance that the rates will be better than they are now.  If they do drop to super-low levels, I would be able to cash out the investments and bring the needed money to closing (hopefully).

I don't get any tax advantage from my mortgage interest, and I will be investing post-tax so there will be some costs there.  But, I think the math works out when looking at the 20-30 year time-frame.

boarder42

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #114 on: March 29, 2017, 06:53:25 PM »
No disagreement from me owning a boat is for the wall of shame and comedy. Just as paying down your low fixed rate mortgage should be. 
« Last Edit: March 29, 2017, 07:00:41 PM by boarder42 »

JG in Hangzhou

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #115 on: March 29, 2017, 06:59:13 PM »
But you know what? It is *HARD* to get a loan nowadays if you don't have active job income. You'd be surprised at how many banks don't want to talk to me despite me showing them statements proving my stash, despite them seeing my super credit score. The bank I got my mortgage from doesn't even do construction loans. And it was so hard to get my mortgage through as it was. They've added so many hurdles since the 2008 crash for a mortgage because they don't trust Joe Q.

I resemble this remark! 
Seriously, I can't seem to re-fi my rental house that is the adjustable phase of an ARM to lock in low rates. 
Also worried about the future move back to the US as that will require either 'renting for the future' or buying a new home. 
How to get a mortgage with no documented income and no job?
Do I need to interview and get a job just to get a mortgage?  Then tell the boss, "sorry, now that I have my mortgage, I have no use for this company..."

If you can share some strategies you used with the bank to convince them, short of a co-signer, I would be happy to hear them. 
The new banking laws seem like another layer of "keep the working class working" as well as the middle, the upper middle and anyone not interested in buying for cash.

brian313313

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #116 on: March 29, 2017, 07:01:03 PM »
Here are my numbers: I bought a 130k condo fixer-upper. I paid cash. (I had to when I bought but I could have been financed in three months after January taxes were filed for my company. An oddity with the new FNMA guidelines for going to work for someone else for about a year.) If I financed 80%, that would have been a 104k mortgage. Add ~2% of the mortgage amount to the purchase price for closing costs that I did not have for paying cash -> 132k total. The mortgage amount is too low so you pay about an extra 1/2% on the interest rate. Looking at Bankrate.com today, it says about 4.4%. Interest and property tax are too low to make a difference when itemizing deductions so standard deduction. This means that I pay this interest with after-tax dollars.

Suppose I invest the 102k (minus the closing costs that are above cash sale closing costs) and earn 8%. My marginal tax rate is about 40%. If I can keep it invested and not pay taxes until later, this has a difference because I can compound before paying the interest. I have a problem getting dividends when I don't want them. Let's just suppose I liquidate in a year. (I know this assumption has big changes to the numbers, but the assumption that you won't sell or have dividends in the other calculations are the opposite extreme.)

Mortgage Interest: 4.4% x 104k = 4576.
Investment Estimated Payout: 8% * 102k * 60% = 4896.
Profit = $320

For me and my numbers this savings is not enough to make a difference. My savings rate is about 5k/month so this isn't going to add up that quick. I don't plan RE, but I could in about 4.5 years following normal statistical charts for the stock market. If I do retire, then stock market volatility comes into play. There is a real cost to taking the money out of investments on low years and high years to pay a fixed investment. They do not even out. The higher the volatility the higher the real cost.

If you spend more on a home than I did, that is a probably a luxury. (I know this is COL dependent but I'm not in a cheap area. The average condo price in my area is about 400k. Homes are about 800k. I just have one that looks like an apartment and nobody wants them in the luxury area. Also, my final cost was 170k after renovations.) My savings by buying a cheaper condo will by far outweigh anyone who spends enough to benefit from itemized deductions.

To be clear, I'm not arguing that keeping a mortgage is better financially. Even in my situation with a low home value & high marginal tax rate on investments I come out ahead. A lot of the theoretical formulas break down in the real world though. Just some additional things I can think of...
- If I have a late payment, an additional fee.
- I need to keep more money in my non-interest bearing checking account to cover higher monthly expenses.

Another thing, this comparison is the difference between paying cash or financing. 2% of the mortgage amount has already been paid if you have a mortgage already. I see no reason to pay it off early.

To each their own, but I'm happy with my decision. Some additional factors for me are that most of that money was made flipping homes. Additionally, I've never lived anywhere longer than 3 years so closing costs add up.

brian313313

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #117 on: March 29, 2017, 07:11:38 PM »
Do I need to interview and get a job just to get a mortgage?  Then tell the boss, "sorry, now that I have my mortgage, I have no use for this company..."

Most likely, yes. I was surprised when I couldn't get a mortgage. I have been self-employed as a consultant since 1997 with pretty steady growth. I took a permanent position with a consulting company for about a year. Then I went back to my own company. So I could only use self-employment income because I no longer had income from someone else. My previous year was only 20k so no loan, "you don't make enough". I was able to open 30k in credit cards to pay for renovations though. No secured loan but fine for unsecured loan. It's the hardening of FNMA guidelines.

If you have enough rental income I think that you can count a percentage of that but I'm not into landlording. You'd really need to talk to a mortgage person though. You could have differences in your situation.

Scortius

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #118 on: March 29, 2017, 07:45:31 PM »
I am paying my mortgage off early (before I turn 35), because I want to invest in rental property and want my primary residence to be protected in the event of litigation or foreclosure; I would rather foreclose on a rental than my primary. I don't anticipate foreclosure, and will take steps to prevent one, including imagining a scenario in which it could happen. I am paying it down to lower my DTI after a recast so I can qualify easier for a mortgage on the next property.

If you're investing in real estate and are worried about liability, you should instead be forming a unique LLC for each property and transferring the ownership of the property to the LLC.

Bee21

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #119 on: March 29, 2017, 07:58:00 PM »
Wait...boarder has a boat???

You just made my day people.

Ps we have a boat AND paid off the mortgage early, bring it on 😀

BFGirl

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #120 on: March 29, 2017, 08:47:19 PM »
Hotstreak,

I'm not sure why you are focusing on this.  No where have I stated that you should pay off your mortgage to avoid exploitation.  I mainly used it as a possible example of how the diversification of having a paid off house has been advantageous in hindsight on some cases I've dealt with.

What stands out to me here is that it's based on hindsight.  It's not rational a mortgage and then assume you will have a debilitating mental condition in 30 years, and that you will deal with crooked help, and plan based on that, when the certain cost of doing so is incredibly high as a dollar amount.


Quote
I'm not sure why so many of those in the "don't pay off the mortgage" camp are so determined they have to convince those of us who have made a different decision.

In my posts on this issue, I've tried to explain my PERSONAL reasons for having a paid for house and am not advocating one way or the other.

I re-read your original post in which you state there are "other considerations and values than just the accumulation of wealth quickly", and the only example you cite is that if you become mentally disabled and a caregiver is able to exploit you that your home may be a protected asset.  So please forgive me if this is bothersome but I think it's absolutely ridiculous that any person would base such a large part of their savings and retirement strategy on a black swan like this.  And on a forum where we shine a light on poor financial decisions I don't think that dissecting your post is out of line.

I'm not sure you have read all of my posts in this topic, but whatever.  If you are determined to be morally outraged because of a real world example I gave, then feel free. 

Simpli-Fi

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #121 on: March 29, 2017, 08:56:37 PM »
How does it feel paying $600k for a $350k asset?

BFGirl

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #122 on: March 29, 2017, 08:57:29 PM »
Hotstreak,

I'm not sure why you are focusing on this.  No where have I stated that you should pay off your mortgage to avoid exploitation.  I mainly used it as a possible example of how the diversification of having a paid off house has been advantageous in hindsight on some cases I've dealt with.

I could explain a lot more of the law on the exploitation issue to counter some of your statements, but that would be taking this thread too far off track.

I'm not sure why so many of those in the "don't pay off the mortgage" camp are so determined they have to convince those of us who have made a different decision.

In my posts on this issue, I've tried to explain my PERSONAL reasons for having a paid for house and am not advocating one way or the other.

Thanks for bringing up this point. I have read many generic threads that cover this topic, however, this is the first time someone has made the point that real-estate could have less risk of theft or fraud than liquid assets. Although I could not find specific crime numbers (I did not spend a very long time looking) fraud is clearly very prevalent among older individuals. 2/3's of the time it is committed against the elderly by someone they know.

If financial assets are stolen through fraud and any chance of recovering the funds requires the criminal caught, convicted, and to still be in possession of the money. It is unlikely the victim will get their money back. However, if fraud occurs around real-estate the title can be transferred back to the victim or a mortgage drawn fraudulently can be eliminated.

https://www.caring.com/articles/caregiver-theft

https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-report-finds-hundreds-counties-nationwide-fighting-elder-financial-abuse-community-efforts/

Thank you.  You stated this very well.

Hotstreak

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #123 on: March 29, 2017, 09:08:23 PM »

I'm not sure you have read all of my posts in this topic, but whatever.  If you are determined to be morally outraged because of a real world example I gave, then feel free.


I am not morally outraged, I'm not sure where you get that idea.  This is the second time in this thread you have responded directly to me by creating a strawman.  Maybe you could formulate a clear defensible argument for your position that doesn't rely on these sort of tactics?

BFGirl

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #124 on: March 29, 2017, 09:32:52 PM »
Hotstreak:  Did you even read my earlier post on this?

Yet another thread about how foolish it is to pay off your mortgage early.  It really is okay to consider other things than math in making decisions that affect your life. 

1.  I have lots of other investments, so I consider my paid off house as part of my diversification.
2.  My house is protected from being seized if I am sued.
3.  It was a tactical advantage in a divorce for me to pay for my house in cash.  Now that I don't have that consideration, the potential gains that I could make by leveraging the equity in my house is not enough to tempt me to endure the hassle and take the risk.  A bird in the hand is worth 2 in the bush.
4.  I hadn't even considered that not having a mortgage can keep me from taking more out of tax advantaged accounts in the future which may help me get ACA subsidies.
5.  It gives me peace of mind.  It really is okay for this to be a reason.

I don't believe that I ever indicated that I had based a financial plan on the possibility of exploitation when I am elderly.  I did use this as an example of how having a paid off house has been financially advantageous for those who have been victims of financial exploitation. I'm not sure which argument you think is a strawman, and don't particularly care to debate it with you.   I don't really care whether you think my financial decisions are poor or not.

I agree with the OP in theory as I have stated before.  However, as restated above,  I made my decision after considering many possible alternatives and taking into account my personal situation and goals.  I don't believe mathematics alone is the only valid consideration.

Lmoot

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #125 on: March 30, 2017, 02:16:54 AM »
I am paying my mortgage off early (before I turn 35), because I want to invest in rental property and want my primary residence to be protected in the event of litigation or foreclosure; I would rather foreclose on a rental than my primary. I don't anticipate foreclosure, and will take steps to prevent one, including imagining a scenario in which it could happen. I am paying it down to lower my DTI after a recast so I can qualify easier for a mortgage on the next property.

If you're investing in real estate and are worried about liability, you should instead be forming a unique LLC for each property and transferring the ownership of the property to the LLC.

 LLCs are something that I am considering, but my understanding is it only protects personal liability when it comes to business related debts/claims.  But personal liability in regards to owner negligence or error (ex, the owner is being sued, not the business), can still leave  personal assets vulnerable.




boarder42

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #126 on: March 30, 2017, 04:44:14 AM »
Wait...boarder has a boat???

You just made my day people.

Ps we have a boat AND paid off the mortgage early, bring it on 😀

How do 2 black eyes feel? 

As stated above I've not really got an issue with paying your mortgage down. If it's an emotional decision like owning a boat or having someone mow your lawn or using your clothes dryer.  But to call it pretty much equivalent to everything else and deem it non face punch worthy when it's a much larger cost to fire than anything listed here is destructive to teaching newcomers. It would be like having a 25 page thread titled show me your budget boat pics in the share your badassity vs antimustachian wall of shame and comedy.

Lots of people come here from Dave Ramsey in full pay off debt mode with shitty investing advice. I'd wager many in the pay off your mortgage thread aren't even maxing all tax advantaged accounts first.  Those that are vocal about it in these threads typically do have those maxed and then some.

I just feel it's quite the disservice to have so many people thinking this one large detriment to fire is an ok emotional decision but your gym membership deserves a face punch.

Some situations are unique. But many are of the 90%+ who will be using some form of stocks and the 4% rule

To the guy making the comment about paying 600k over the life of a loan for a 350k house you are quite clearly not understanding the math and really should look into it. This statement is a pretty awful one.   

Maenad

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #127 on: March 30, 2017, 06:41:17 AM »
Is holding bonds in your portfolio facepunch-worthy? I can show mathematically that over any given 30-year period, equities are likely to generate a far better return.
I think this comment needs to be reiterated, and I know I'd like a response.

boarder42, your logic is sound, absolutely, and if you wander over to the Wall of Shame and Comedy you'll see many many people who want to scream "What's wrong with you?! Can't you see how much money you're wasting?!" at friends, family, and co-workers, just like you're saying here.

However, this thread is also a prime example of why you shouldn't do that in real life, or online. No one wants to be told they're an idiot, and whether that's your intention or not, that's how you come across. And you can see how defensive everyone gets.

Absolutely, keep advocating holding a mortgage when the rate is low. Keep encouraging people to think about it rather than just default to "pay it down quickly". Thinking about our choices is good. Challenging our choices is good. But cut the attitude, if you actually want to convince anyone. If you just want to feel superior to others, by all means, keep on as you are.

runewell

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #128 on: March 30, 2017, 06:52:10 AM »
My marginal tax rate is about 40%.

If you can hold your investments for a year, the long-term capital gains tax is no more than 15%.  Factor in state taxes on that money as well and you should be able to stay in the 20%-25% range if you're careful.  That's a lot different than 40%.

runewell

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #129 on: March 30, 2017, 06:55:00 AM »

To the guy making the comment about paying 600k over the life of a loan for a 350k house you are quite clearly not understanding the math and really should look into it. This statement is a pretty awful one.

Agreed.  Anyone that makes a statement like this is likely ignorant of the math involved in the big picture.  It's not about how much interest you pay, it's about how much wealth you gain.  People here are interested in net worth.

Bruizer

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #130 on: March 30, 2017, 06:57:26 AM »
Is holding bonds in your portfolio facepunch-worthy? I can show mathematically that over any given 30-year period, equities are likely to generate a far better return.
I think this comment needs to be reiterated, and I know I'd like a response.

boarder42, your logic is sound, absolutely, and if you wander over to the Wall of Shame and Comedy you'll see many many people who want to scream "What's wrong with you?! Can't you see how much money you're wasting?!" at friends, family, and co-workers, just like you're saying here.

However, this thread is also a prime example of why you shouldn't do that in real life, or online. No one wants to be told they're an idiot, and whether that's your intention or not, that's how you come across. And you can see how defensive everyone gets.

Absolutely, keep advocating holding a mortgage when the rate is low. Keep encouraging people to think about it rather than just default to "pay it down quickly". Thinking about our choices is good. Challenging our choices is good. But cut the attitude, if you actually want to convince anyone. If you just want to feel superior to others, by all means, keep on as you are.

Thank you.  I agree with the principles of not paying off your mortgage early, but the attitude behind the message is unbecoming for a mustachian.  We need to support and educate each other, not put people down.

Lmoot

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #131 on: March 30, 2017, 07:09:20 AM »
Another tangible benefit of paying off the mortgage is you can make decisions about the real estate that a lender may have a problem with. Add-ons, insurance deductibles and coverage, land-use…etc.

 A reason to pay in cash is ic you want to build a nontraditional structure that perhaps the lender will not view as salable. This might apply to me one day.

runewell

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #132 on: March 30, 2017, 07:24:00 AM »
I and at least two others in this thread have posited that home equity, depending on where you live, may also be off limits to your creditors.  Home equity can be a liability hedge in a way that an after-tax brokerage account will never be.  (just because I'm paranoid doesn't mean someone isn't out to get me).

Are the creditors knocking on your door because you put all your money into your house and now you can't afford anything else?

Further, if the government does take your home through the power of eminent domain, you will be paid the fair market value of said home.  So you might lose the intangible unique quality of that particular home, but you won't lose the market value of the asset.

Don't see what this has to do with anything.  It will happen regardless of whether you have paid your house off or not.

Both these comments seem far-fetched.  The fact that know of three people who agree with your statements (including yourself) only proves this.

Simpli-Fi

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #133 on: March 30, 2017, 07:29:00 AM »

To the guy making the comment about paying 600k over the life of a loan for a 350k house you are quite clearly not understanding the math and really should look into it. This statement is a pretty awful one.

Agreed.  Anyone that makes a statement like this is likely ignorant of the math involved in the big picture.  It's not about how much interest you pay, it's about how much wealth you gain.  People here are interested in net worth.

Simple math and simple question.  But I agree with the crowd that says some people just aren't happy unless they are arguing that they are superior in their ways.  BTW I have 4% mortgage I've never made an additional payment on and a paid off house.  But obviously I'm ignorant of the big picture of how to build net worth in MY situation.

boarder42

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #134 on: March 30, 2017, 07:37:54 AM »
Is holding bonds in your portfolio facepunch-worthy? I can show mathematically that over any given 30-year period, equities are likely to generate a far better return.
I think this comment needs to be reiterated, and I know I'd like a response.

boarder42, your logic is sound, absolutely, and if you wander over to the Wall of Shame and Comedy you'll see many many people who want to scream "What's wrong with you?! Can't you see how much money you're wasting?!" at friends, family, and co-workers, just like you're saying here.

However, this thread is also a prime example of why you shouldn't do that in real life, or online. No one wants to be told they're an idiot, and whether that's your intention or not, that's how you come across. And you can see how defensive everyone gets.

Absolutely, keep advocating holding a mortgage when the rate is low. Keep encouraging people to think about it rather than just default to "pay it down quickly". Thinking about our choices is good. Challenging our choices is good. But cut the attitude, if you actually want to convince anyone. If you just want to feel superior to others, by all means, keep on as you are.

holding bonds in a portfolio is a liquid diversification much different than pumping money into a mortgage.  How exactly do you rebalance your home equity easily back into a low fixed rate since those rates are ever changing.(a HELOC isnt a solution here as its callable)  bonds in a portfolio are easily liquidated and moved to cash if needed or rebalanced to equities.  For the record during wealth accumulation i support 0 bonds.  why not get there as efficiently as possible is their some down side risk yes, but as has been pointed out the markets are at all time highs more often than not so if you're holding bonds in accumulation you're really betting on the smaller probability.  Playing with cFIREsim personally i wont have a bond balance higher than 10% once i FIRE.  I think past 10% the protection needed for the first 5-10 years is greatly diminished and would rather look longer term once i've got the 10% bonds.  or less it could be 0 we'll see in 5 years. 

shawndoggy

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #135 on: March 30, 2017, 07:48:43 AM »

As stated above I've not really got an issue with paying your mortgage down. If it's an emotional decision like owning a boat or having someone mow your lawn or using your clothes dryer.  But to call it pretty much equivalent to everything else and deem it non face punch worthy when it's a much larger cost to fire than anything listed here is destructive to teaching newcomers. It would be like having a 25 page thread titled show me your budget boat pics in the share your badassity vs antimustachian wall of shame and comedy.

If we were all purely math based automatons trying to maximize our wealth based on the performance of the human economy over the past 100-150 cycles of this planet around the sun (the tiniest of drops in the bucket of human existence), then yes, none of us should have boats, we should all drive beater priuses, we should live in small houses on the wrong side of the tracks, and we should buy all of our clothing at thrift stores.  And we should plow every excess cent into the stock market.

Haha I remember reading a comment on the MMM blog where a guy was bragging about only having two outfits, which he showered in so he could get himself and his clothes clean at the same time.  (come to think of it I hope that was satire).

However, being human, other calculations come into the mix.  Has having a boat delayed my retirement date?  UNDOUBTEDLY.  Like abso-friggin-lutely.   But was it a "mistake"?  The priceless memories made with my kids before they left the nest and all of their friends are something I'll cherish forever.

Same goes for getting the house paid off.  "Bad" decision from a pure wealth maximization perspective?  Maybe.  But it has been a great decision personally.  Makes cash flow a snap in a job with huge swings in income and reduces stress about personal liability.

Same really goes for my retirement stash number too.  I'm willing to work a little longer so I can do whatever the F I want in retirement and not live on a super thin budget.  Am I "doing it wrong"?

What about all that money we saved for the kids' college when I could've kept for FIRE and they could've stayed at home and worked their way through at local U.  A "waste" or one of my greatest achievements in life?

shawndoggy

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #136 on: March 30, 2017, 07:57:05 AM »
I and at least two others in this thread have posited that home equity, depending on where you live, may also be off limits to your creditors.  Home equity can be a liability hedge in a way that an after-tax brokerage account will never be.  (just because I'm paranoid doesn't mean someone isn't out to get me).

Are the creditors knocking on your door because you put all your money into your house and now you can't afford anything else?

Further, if the government does take your home through the power of eminent domain, you will be paid the fair market value of said home.  So you might lose the intangible unique quality of that particular home, but you won't lose the market value of the asset.

Don't see what this has to do with anything.  It will happen regardless of whether you have paid your house off or not.

Both these comments seem far-fetched.  The fact that know of three people who agree with your statements (including yourself) only proves this.

LOL, I didn't bring up the silly eminent domain argument in the first place, I was responding to the ridiculous assertion that you could "lose" your house through eminent domain and therefore it was a bad place to store value.

Who said I put everything in my house and I had creditors?  Good grief man.  First things first -- maximize deferred comp.  Have done that since I've had a "real" job.  Then maximize IRAs before incomes got too high.  Then backdoor Roth once I learned about it.  I'm talking about where to save the "extra" money after maximizing all pretax options, and how to minimize the bullseye for potential judgment creditors.  Is this liability hedge not important to you (or more likely available to you because of where you live)?  Cool!  Nobody is making you do it!

boarder42

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #137 on: March 30, 2017, 08:03:33 AM »

As stated above I've not really got an issue with paying your mortgage down. If it's an emotional decision like owning a boat or having someone mow your lawn or using your clothes dryer.  But to call it pretty much equivalent to everything else and deem it non face punch worthy when it's a much larger cost to fire than anything listed here is destructive to teaching newcomers. It would be like having a 25 page thread titled show me your budget boat pics in the share your badassity vs antimustachian wall of shame and comedy.

If we were all purely math based automatons trying to maximize our wealth based on the performance of the human economy over the past 100-150 cycles of this planet around the sun (the tiniest of drops in the bucket of human existence), then yes, none of us should have boats, we should all drive beater priuses, we should live in small houses on the wrong side of the tracks, and we should buy all of our clothing at thrift stores.  And we should plow every excess cent into the stock market.

Haha I remember reading a comment on the MMM blog where a guy was bragging about only having two outfits, which he showered in so he could get himself and his clothes clean at the same time.  (come to think of it I hope that was satire).

However, being human, other calculations come into the mix.  Has having a boat delayed my retirement date?  UNDOUBTEDLY.  Like abso-friggin-lutely.   But was it a "mistake"?  The priceless memories made with my kids before they left the nest and all of their friends are something I'll cherish forever.

Same goes for getting the house paid off.  "Bad" decision from a pure wealth maximization perspective?  Maybe.  But it has been a great decision personally.  Makes cash flow a snap in a job with huge swings in income and reduces stress about personal liability.

Same really goes for my retirement stash number too.  I'm willing to work a little longer so I can do whatever the F I want in retirement and not live on a super thin budget.  Am I "doing it wrong"?

What about all that money we saved for the kids' college when I could've kept for FIRE and they could've stayed at home and worked their way through at local U.  A "waste" or one of my greatest achievements in life?

not sure how this combats what my statement was.  you're now lumping a boat in with paying down your mortgage.  so i think we 100% agree.  That was the premise of this entire thread.  Paying down a mortgage is synonymous and actually worse on the scale of many of the things other people are face punched for.

you can have your house and optimize your investing this isnt an either or scenario like paying for kids college or a boat ... or mowing your lawn or not... so it just baffles me that something that isnt an either or scenario gets so much emotional love.  you have your house you live whether you're leveraging a low interest loan or otherwsie.  boat / college / kids those are absolutes either or ...

the mortgage is the one place you can have your cake and eat it to its simply the lowest hanging fruit and many run by it to hang dry clothes. etc.
« Last Edit: March 30, 2017, 08:08:06 AM by boarder42 »

shawndoggy

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #138 on: March 30, 2017, 08:24:58 AM »
very well said neo. 

JLee

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #139 on: March 30, 2017, 08:25:08 AM »
boarder42

As you know, I agree with the decision not to pay down your mortgage, and to help educate people that don't realize it's better. However, ultimately, it's a personal decision. And the point of all of this, this site, this forum, how we want to encourage people to live their lives - is to align your lifestyle, spending and planning with your personal values. If you have a deep-seated personal value that you should contribute 10% to a tithe, or prioritize debt payoff of any kind, it's your choice to do that, and the consequences of those choices are yours as well.

I think the reason people argue against you so vehemently is because you are arguing math in a way that is almost religious. "This is the right way to do things!" Well, you're right (mathematically) and wrong (philosophically) because for some people, their personal values don't align with yours, and their financial strategy has to vary because of this.

Yes - there are plenty of times when people simple say "You can't compare the way it feels", and they might not realize that such a statement can be a slippery slope for doing things that aren't good for your finances. But there are plenty that have carefully weighed this decision, and ultimately, it's up to them.

So if your goal is for more people to open their eyes through education, please continue education, but also take a look at your methods, how you educate, and how you can most effectively reach the most people with useful, digestible and actionable information, rather than just incite resistance against what can often feel like proselytizing.

- neo

I agree entirely.

That said, I hope the irony of how facepunches are accepted (and encouraged) for basically every other poor financial decision is quite evident.

Cwadda

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #140 on: March 30, 2017, 08:26:05 AM »
neo hit the nail on the head here.

In other news, I will be starting a mortgage this June and will be paying the minimum on it :)

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #141 on: March 30, 2017, 08:39:21 AM »
Another tangible benefit of paying off the mortgage is you can make decisions about the real estate that a lender may have a problem with. Add-ons, insurance deductibles and coverage, land-use…etc.

A reason to pay in cash is ic you want to build a nontraditional structure that perhaps the lender will not view as salable. This might apply to me one day.

We did exactly this.  We built half a house and moved in.  No lender would have given us a certificate of occupancy.  In fact, we were only able to find one insurance company to insure it.  It gave us the ability to finish the work at our own pace (and to do it ourselves.)

caracarn

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #142 on: March 30, 2017, 08:41:19 AM »
Our plan is to continue to pay the minimum on our 3.875% mortgage and to invest the extra $360/month we would have used to pay it down faster.  However, when we are ready to retire, we will pay off the remaining balance to me be mortgage free and eliminate our largest expense.  That is a comfort issue for us as we can to know that if we need to cut back our SWR that we do not have a huge mortgage payment looking at us. 

boarder42

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #143 on: March 30, 2017, 08:59:03 AM »
boarder42

As you know, I agree with the decision not to pay down your mortgage, and to help educate people that don't realize it's better. However, ultimately, it's a personal decision. And the point of all of this, this site, this forum, how we want to encourage people to live their lives - is to align your lifestyle, spending and planning with your personal values. If you have a deep-seated personal value that you should contribute 10% to a tithe, or prioritize debt payoff of any kind, it's your choice to do that, and the consequences of those choices are yours as well.

I think the reason people argue against you so vehemently is because you are arguing math in a way that is almost religious. "This is the right way to do things!" Well, you're right (mathematically) and wrong (philosophically) because for some people, their personal values don't align with yours, and their financial strategy has to vary because of this.

Yes - there are plenty of times when people simple say "You can't compare the way it feels", and they might not realize that such a statement can be a slippery slope for doing things that aren't good for your finances. But there are plenty that have carefully weighed this decision, and ultimately, it's up to them.

So if your goal is for more people to open their eyes through education, please continue education, but also take a look at your methods, how you educate, and how you can most effectively reach the most people with useful, digestible and actionable information, rather than just incite resistance against what can often feel like proselytizing.

- neo

I agree entirely.

That said, I hope the irony of how facepunches are accepted (and encouraged) for basically every other poor financial decision is quite evident.

i agree i come off quite abrasive.  Its both online and in my normal life and i could/should work on that. 

And yes the point of this thread was to show just that ... the irony.  and people come out of the woodwork to say this is different. 

Brother Esau

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #144 on: March 30, 2017, 09:13:19 AM »
Our plan is to continue to pay the minimum on our 3.875% mortgage and to invest the extra $360/month we would have used to pay it down faster.  However, when we are ready to retire, we will pay off the remaining balance to me be mortgage free and eliminate our largest expense.  That is a comfort issue for us as we can to know that if we need to cut back our SWR that we do not have a huge mortgage payment looking at us.

Did & doing the same thing. Started making extra payments to the mortgage recently since we can clearly see the light at the end of the FIRE tunnel.

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #145 on: March 30, 2017, 09:17:14 AM »
boarder42

As you know, I agree with the decision not to pay down your mortgage, and to help educate people that don't realize it's better. However, ultimately, it's a personal decision. And the point of all of this, this site, this forum, how we want to encourage people to live their lives - is to align your lifestyle, spending and planning with your personal values. If you have a deep-seated personal value that you should contribute 10% to a tithe, or prioritize debt payoff of any kind, it's your choice to do that, and the consequences of those choices are yours as well.

I think the reason people argue against you so vehemently is because you are arguing math in a way that is almost religious. "This is the right way to do things!" Well, you're right (mathematically) and wrong (philosophically) because for some people, their personal values don't align with yours, and their financial strategy has to vary because of this.

Yes - there are plenty of times when people simple say "You can't compare the way it feels", and they might not realize that such a statement can be a slippery slope for doing things that aren't good for your finances. But there are plenty that have carefully weighed this decision, and ultimately, it's up to them.

So if your goal is for more people to open their eyes through education, please continue education, but also take a look at your methods, how you educate, and how you can most effectively reach the most people with useful, digestible and actionable information, rather than just incite resistance against what can often feel like proselytizing.

- neo

I agree entirely.

That said, I hope the irony of how facepunches are accepted (and encouraged) for basically every other poor financial decision is quite evident.

i agree i come off quite abrasive.  Its both online and in my normal life and i could/should work on that. 

And yes the point of this thread was to show just that ... the irony.  and people come out of the woodwork to say this is different.

Boarder, I still have a real concern about the behavioral ability of most people to stay fully invested in the market when it turns downward, and we'll see how that goes.  But seriously--although I think you're right that the tone could be a little softer--I appreciate your pushing so hard on this point.  On this forum, it's appropriate.  People should understand the math and understand the choice they're making, especially in conjunction with the concept of relying on the 4% rule, which is all about relying on the market.

So thank you for the thread. 

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #146 on: March 30, 2017, 09:23:09 AM »
Interesting thread. 

I believe OP was simply trying to suggest that the MMM community should consider "investing rather than early mortgage payoff" to be the default position.  Many people in the thread brought up narrow and/or unlikely situations that may be exceptions to this rule, which somewhat derailed the thread into arguments whether such exceptions were actually exceptions.  But I saw the OP's point as merely being that the standard rule should be "investing rather than early mortgage payoff," not that exceptions never arise.

Suppose a case study poster asks for general advice for increasing wealth and owns a large SUV.  The "correct" initial response from the MMM community is to sell the SUV and get a hatchback that has better MPG.  However, if the case study poster lives in an area that receives heavy snow and has a large family, it may make sense for the poster to keep the SUV, an exception to the automobile "rules" of MMM. 

This exception to the rule doesn't change the advice the MMM community would give to the next case study poster that owns a gas guzzling SUV.  The "correct" initial advice is still to sell it.  Furthermore, the MMM community would punch back rather forcefully if the subsequent case study poster's justification for keeping the SUV was an emotional one.  (Think of The Beatles' case study and how their emotional based arguments for not taking the MMM community's advice was met.)

I suspect the OP is primarily arguing that when the inevitable "should I invest or pay down mortgage" thread arises, which seems weekly at this point, that the consensus response should be "invest," unless the poster of the thread has a unique situation that they include in their post.  Right now, a large number of responses we see from the MMM community is a wishy-washy "do whatever feels right" type of response that the MMM community would never tolerate when applying to any other face-punch worthy behavior. 

If the goal of the forum is to help others increase their wealth, then the community is providing a disservice when it does not suggest "invest and keep the mortgage," unless there are special circumstances that need to be evaluated.  And this advice should be given with the same unwavering face-punchy gusto that the MMM community gives to any poster seeking advice about their SUVs or any other face-punch worthy behavior.


Lmoot

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #147 on: March 30, 2017, 09:23:25 AM »
boarder42

As you know, I agree with the decision not to pay down your mortgage, and to help educate people that don't realize it's better. However, ultimately, it's a personal decision. And the point of all of this, this site, this forum, how we want to encourage people to live their lives - is to align your lifestyle, spending and planning with your personal values. If you have a deep-seated personal value that you should contribute 10% to a tithe, or prioritize debt payoff of any kind, it's your choice to do that, and the consequences of those choices are yours as well.

I think the reason people argue against you so vehemently is because you are arguing math in a way that is almost religious. "This is the right way to do things!" Well, you're right (mathematically) and wrong (philosophically) because for some people, their personal values don't align with yours, and their financial strategy has to vary because of this.

Yes - there are plenty of times when people simple say "You can't compare the way it feels", and they might not realize that such a statement can be a slippery slope for doing things that aren't good for your finances. But there are plenty that have carefully weighed this decision, and ultimately, it's up to them.

So if your goal is for more people to open their eyes through education, please continue education, but also take a look at your methods, how you educate, and how you can most effectively reach the most people with useful, digestible and actionable information, rather than just incite resistance against what can often feel like proselytizing.

- neo

I agree entirely.

That said, I hope the irony of how facepunches are accepted (and encouraged) for basically every other poor financial decision is quite evident.

i agree i come off quite abrasive.  Its both online and in my normal life and i could/should work on that. 

And yes the point of this thread was to show just that ... the irony.  and people come out of the woodwork to say this is different.

 For what it's worth, I don't think it comes from a bad place. And I agree that what you say makes sense. The only thing I don't agree with is that you always present it as an always, risk-free, across the board best option. I also don't agree with the idea that not pursuing the best option  equals a mistake. For me personally if something doesn't impact your life in a negative way, drastically or otherwise, can it really be considered a mistake?  What if paying off your house doesn't change the timeline of when you want to retire. Notice I said want, and not can. Not everybody here wants to retire when they can.

 Also, you always present this argument, every time you do, in a way as if eberyone paying off their mortgage are constantly miserable and whining about wanting to escape their current existence. Most of the payer offers I witness here are very grounded and otherwise satisfied with their lives and their timeline for retirement. But I guess that's the same reason why I don't refer to my savings as an FU you fund. I actually enjoy both of my jobs, and I enjoy being a landlord. There's nothing I need to run away from, nothing I find the need to conquer, punish, or make my bitch. I'm simply planning for a day when I want to change things up, and to give me more options.

boarder42

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #148 on: March 30, 2017, 09:28:51 AM »
Interesting thread. 

I believe OP was simply trying to suggest that the MMM community should consider "investing rather than early mortgage payoff" to be the default position.  Many people in the thread brought up narrow and/or unlikely situations that may be exceptions to this rule, which somewhat derailed the thread into arguments whether such exceptions were actually exceptions.  But I saw the OP's point as merely being that the standard rule should be "investing rather than early mortgage payoff," not that exceptions never arise.

Suppose a case study poster asks for general advice for increasing wealth and owns a large SUV.  The "correct" initial response from the MMM community is to sell the SUV and get a hatchback that has better MPG.  However, if the case study poster lives in an area that receives heavy snow and has a large family, it may make sense for the poster to keep the SUV, an exception to the automobile "rules" of MMM. 

This exception to the rule doesn't change the advice the MMM community would give to the next case study poster that owns a gas guzzling SUV.  The "correct" initial advice is still to sell it.  Furthermore, the MMM community would punch back rather forcefully if the subsequent case study poster's justification for keeping the SUV was an emotional one.  (Think of The Beatles' case study and how their emotional based arguments for not taking the MMM community's advice was met.)

I suspect the OP is primarily arguing that when the inevitable "should I invest or pay down mortgage" thread arises, which seems weekly at this point, that the consensus response should be "invest," unless the poster of the thread has a unique situation that they include in their post.  Right now, a large number of responses we see from the MMM community is a wishy-washy "do whatever feels right" type of response that the MMM community would never tolerate when applying to any other face-punch worthy behavior. 

If the goal of the forum is to help others increase their wealth, then the community is providing a disservice when it does not suggest "invest and keep the mortgage," unless there are special circumstances that need to be evaluated.  And this advice should be given with the same unwavering face-punchy gusto that the MMM community gives to any poster seeking advice about their SUVs or any other face-punch worthy behavior.

Thats a pretty good summary of my opinions and the point of this thread in general is to drive the thought that way.  It should be the first response for all long term low fxed rate mortgages.  We shouldnt have 50% of people saying in essense keep the SUV you'll love the way it makes you feel.

Well thought out and well written thanks!

boarder42

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Re: Why Do you do ....... AND pay off your mortgage early?
« Reply #149 on: March 30, 2017, 09:36:32 AM »
From my point of view, the assumption that 'invest' is always the right answer is incomplete.

Invest has higher risk, higher reward.

Reduce debt is lower risk, slower FIRE with the caveat that this assumes historic market gains (which is not a given...though it is tge lijely outcome)

Fair enough?

higher risk volatility higher reward.  the Risk isnt there.  If a poster plans to follow the 4% SWR rule in FIRE they have accepted they market is volatile and not risky.  If that point is accepted holding the mortgage actually decreases risk.

 

Wow, a phone plan for fifteen bucks!