Author Topic: Is taking the penalty to pay house off with our 401k worth it for us?  (Read 4164 times)

bacchi

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Re: Is taking the penalty to pay house off with our 401k worth it for us?
« Reply #50 on: December 28, 2018, 01:18:55 PM »
I rarely see those who proclaim the financial benefits of paying it slowly later remortgage to max borrowing for investing.

*raises hand*

We aggressively paid off the mortgage on our first house. After getting into the forum and running some numbers, we discovered that we would have come out ahead by over $100k if we had invested in VTSAX instead of extra mortgage payments. When we upgraded to a bigger house to raise our family, we took half the equity from our old house and put it into the market, using the rest as a down payment for a pretty sizable mortgage at 4.25%. No regrets so far. We're getting to the point where zero-risk savings bonds are earning an appreciable percentage of our mortgage rate, and interest rates are still rising. The stock market hit a brief bump in the road but I don't expect it to flatline forever.

I've also done it. Twice. Best big-money decisions I've made.


TexasRunner

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Re: Is taking the penalty to pay house off with our 401k worth it for us?
« Reply #51 on: December 28, 2018, 01:35:55 PM »
I rarely see those who proclaim the financial benefits of paying it slowly later remortgage to max borrowing for investing.
...
I've also done it. Twice. Best big-money decisions I've made.

Care to share the juicy details on the rates you got and margins you made?  If it was in the most recent run-up, then it was likely well over 12% on margin.

TomTX

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Re: Is taking the penalty to pay house off with our 401k worth it for us?
« Reply #52 on: December 28, 2018, 02:25:39 PM »
Why are people still repeating the $18k per year 401k limit? It was wrong for 2018 and is more wrong for 2019.

If you can somehow change your contribution for 2018, the limit is $18,500

For 2019, the 401k contribution limit will be $19,000

bacchi

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Re: Is taking the penalty to pay house off with our 401k worth it for us?
« Reply #53 on: December 28, 2018, 02:27:42 PM »
Care to share the juicy details on the rates you got and margins you made?  If it was in the most recent run-up, then it was likely well over 12% on margin.

My last refi was in May of 2015 when I cashed out $60k at 4%. The S&P has had an annualized return of 5% (in nominal dollars) since then, including dividends.

I also pulled out $45k in July? of 2011 at 4.5%. The S&P has had an annualized return of 10.1% (in nominal dollars) since then, including dividends. That difference is enough for a new, not-quite-mustachian, car or a handful of mustachian, used, cars.

Meanwhile, inflation goes up by 2.2% and my mortgage payment stays the same (cue Matthew McConaughey in Dazed and Confused).

TexasRunner

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Re: Is taking the penalty to pay house off with our 401k worth it for us?
« Reply #54 on: December 28, 2018, 02:54:12 PM »
Why are people still repeating the $18k per year 401k limit? It was wrong for 2018 and is more wrong for 2019.

If you can somehow change your contribution for 2018, the limit is $18,500

For 2019, the 401k contribution limit will be $19,000

Thanks, I knew it had changed but without looking at it I didn't know what it was.