Author Topic: Should I pay off my mortgage?  (Read 5277 times)

polo18

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Should I pay off my mortgage?
« on: June 14, 2014, 09:22:55 PM »
Here are my stats:
43yoF - working full time making $140K

$900K in stocks, mutual funds, IRAs - on average earn about 10% return per year

No debt other than mortgage- owe $180K on house worth $600K
Mortgage rate is 2% (it is a 30 yr 5:1 arm in year 10)- has been low for years

My goal is to stop working a corporate bullish*t job (although I work from home barely 20 hrs a week and get paid for full time with excellent benefits) and find something to do that I love.

What would you do?

Thanks in advance


fxsts12

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Re: Should I pay off my mortgage?
« Reply #1 on: June 14, 2014, 09:39:21 PM »
Not as long as your rate stays low.  Don't even consider it.  You can never borrow money that cheap. Any additional payments should be made in other areas as investments. Keep it simple and look at purchasing your retirement house and lease it out until you move in while you depreciate it. If your on a five or six your plan you will recover 1/5 of the value of the property.

Frankies Girl

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Re: Should I pay off my mortgage?
« Reply #2 on: June 14, 2014, 10:07:23 PM »
Tons of previous discussions on this subject.

Basically comes down to your personal comfort level. At a 2% rate, logically it makes sense to invest instead, but if you don't ~need~ the money in investments, then the piece of mind in knowing that the house is done (other than property tax and insurance) can be worth more psychologically than the investment returns...

http://forum.mrmoneymustache.com/ask-a-mustachian/trying-to-calculate-the-benefit-of-paying-off-the-mortgage
http://forum.mrmoneymustache.com/ask-a-mustachian/pay-off-mortgage-or-invest-7871/
http://forum.mrmoneymustache.com/investor-alley/paying-off-mortgage-early-how-bad-is-it-for-your-fi-date/

Me personally, I still waffle back and forth, but then my house is only assessed at about 100K (3.75% rate) and the payoff is around 40K and that is a small percentage of my overall portfolio, so I'm not going to be tying up a large amount of money in a non-liquid asset, so I'm leaning more towards taking it out over the next two years to just be done with it, although logically I know it would be better to just invest and keep paying the regular mortgage.



AlexK

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Re: Should I pay off my mortgage?
« Reply #3 on: June 14, 2014, 10:22:24 PM »
I have the same issue except it's a rental property and my mortgage rate is 5.9% (I could refinance for slightly better rate but the quotes I've had aren't much lower and $4k closing costs). Payoff amount is $128k and I have more than enough in taxable stock account to pay it off. I'm probably going to do it one of these days.

Joel

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Re: Should I pay off my mortgage?
« Reply #4 on: June 14, 2014, 10:52:08 PM »
Not as long as your rate stays low.  Don't even consider it.  You can never borrow money that cheap. Any additional payments should be made in other areas as investments. Keep it simple and look at purchasing your retirement house and lease it out until you move in while you depreciate it. If your on a five or six your plan you will recover 1/5 of the value of the property.

Could always have the cash ready if your interest rate goes up significantly. Of course that cash could be in the stock market likely getting much more than a 2% return until then!

chasesfish

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Re: Should I pay off my mortgage?
« Reply #5 on: June 15, 2014, 06:42:33 AM »
I would keep the cash handy in some blue chip, dividend paying stocks.  You can get a 3%+ dividend then only pay two of it out in the interest component of your mortgage


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Exflyboy

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Re: Should I pay off my mortgage?
« Reply #6 on: June 15, 2014, 07:07:48 AM »
I paid mine off but that was for three reasons

1) The employment situation at the time was looking distinctly unstable.. If I owned the roof over my head I always had somewhere to live.
2) The interest rate was about 5.5% or so.. So 5.5% guaranteed return looked pretty good compared to say 8 to 10% at risk.
3) I had very little in savings at the time.

You appear to be not in the above categories (in fact if I could make 140k by working 20 hours a week and enjoyed the job I wouldn't stop till I hit $2M). Thus no reason at all to pay it off.. you have a fairly big boatload of stocks you could sell to pay it off tomorrow if you wanted.

Why $2M?... Lets say the we had a 2008 all over again .. we all temporarilly lost 50% of the market.. well then your $2M would become $1M.. Which is still enough to get get by on unless you have an outrageously expensive lifestyle.

Frank

Catbert

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Re: Should I pay off my mortgage?
« Reply #7 on: June 15, 2014, 02:53:00 PM »
Another vote for not paying it off at 2% interest.  You probably have a cap so the loan interest can't rise more than 1 or 2% a year  uu"ll have notice when rates rise and hyou can reconcider paying it off then.

I recently paid off my mortgage, but I was different in 2 respects:

*Interest rate was 4.75% with 5 years or so to go on a 15 year fixed.

*My balance was only 50K and I had bonds maturing to cover much of it.

CarDude

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Re: Should I pay off my mortgage?
« Reply #8 on: June 15, 2014, 03:35:37 PM »
Fiscally, it makes sense to invest the difference. Personally, I'd pay it off early and be done with it.

rmendpara

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Re: Should I pay off my mortgage?
« Reply #9 on: June 15, 2014, 03:57:24 PM »
Here are my stats:
43yoF - working full time making $140K

$900K in stocks, mutual funds, IRAs - on average earn about 10% return per year

No debt other than mortgage- owe $180K on house worth $600K
Mortgage rate is 2% (it is a 30 yr 5:1 arm in year 10)- has been low for years

My goal is to stop working a corporate bullish*t job (although I work from home barely 20 hrs a week and get paid for full time with excellent benefits) and find something to do that I love.

What would you do?

Thanks in advance

The math suggests you keep paying the minimum until the rate gets a big higher, but given you are considering going into a lower paying job that you love, it may be easier to just pay it off and cut your living expenses way down.

The situation I'm thinking is you find a new job that you enjoy that pays you $55k, and you can no longer stay cash flow positive each month between living expenses and the housing payment (even though the rate is tiny). In this case, you basically have to sell off some investments each month to fund the mortgage... not a good trade off.

If, however, you can stay cash flow positive with a lower paycheck, then as long as the rate doesn't start creeping up too high (maybe 4.5%?), it may be worthwhile to keep paying the minimum.

polo18

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Re: Should I pay off my mortgage?
« Reply #10 on: June 15, 2014, 04:16:16 PM »
Thanks for all your comments.  I think I will keep the mortgage for now, leave all of my other money invested and enjoy everything I have (except my job)!  I'm very frugal with most things, but will splurge on trips (using frequent flyer miles of course and hotel points!) and on keeping my house up.  I do remember living paycheck to paycheck 20 yrs ago and money can't buy happiness but it certainly makes things easier when you aren't worrying.


Exflyboy

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Re: Should I pay off my mortgage?
« Reply #11 on: June 15, 2014, 07:28:05 PM »
Thanks for all your comments.  I think I will keep the mortgage for now, leave all of my other money invested and enjoy everything I have (except my job)!  I'm very frugal with most things, but will splurge on trips (using frequent flyer miles of course and hotel points!) and on keeping my house up.  I do remember living paycheck to paycheck 20 yrs ago and money can't buy happiness but it certainly makes things easier when you aren't worrying.

Money can't buy happiness.. But if you have it at least you have the CHOICE to be miserable...:)

Frank