Author Topic: Endure Our Mortgage Club  (Read 3316 times)

Le Barbu

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Endure Our Mortgage Club
« on: October 23, 2015, 01:12:20 PM »
I took part in the Mortgage Payoff Club thread for a while but I need a more balanced approach.

First of all, this kind of thread does not facilitate discution or reply. I like being challenged to improve my actions.

Then, I noticed through different comments that having no more debt is a status.

In Canada and USA, mortgages and student loans are virtualy the cheapest money one can borrow. I 100% agree that CC debt and consumer debts should be avoided or repaid in a hurry before even thinking to invest (with few exeption to get generous match from employer or government subsidy).

Not all mortgages are the same and thus, should not all be considered evil. Depends of every individual situation. An eye opener is a CW (35 years old) with a paid-off mortgage. Everyone here consider she's rich because she travel a lot, change car on a regular basis etc. Cashflow is very good. We talked about investing/retirement once, NO INVESTMENT AT ALL!!! No clue about this, doesn't know about the RRSP, RESP and TFSA advantages, dont know the difference between bonds and stock etc. BTW, my parents were exactly the same but with golden pension plan. Our job does not carry any...

I think we should at least run the numbers and decide when killing the mortgage is a priority (or not). For a young couple with 2 kids, average salary, no saving and/or no safety net, a mortgage 4x annual gross income should be taken seriously. On the other end (my own situation) kids are 8-12, mortgage is less than 20% of house market value & 50% of annual income. Savings worth more than 10x our debt and our emergency fund (cash) worth 4 months of expenses. The mortgage will be done in about 44 months (13 years before the 25 years amortization schedual). I see no rush to repay faster!

The "peace of mind" and "sleep better at night" are attractives arguments but can drag the overall return/NW over a lifetime.

What do you think?


matchewed

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Re: Endure Our Mortgage Club
« Reply #1 on: October 23, 2015, 01:19:52 PM »
That it's been a topic discussed to death on these boards. :)

Eric

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Re: Endure Our Mortgage Club
« Reply #2 on: October 23, 2015, 02:16:48 PM »

Le Barbu

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Re: Endure Our Mortgage Club
« Reply #3 on: October 23, 2015, 02:29:32 PM »

brooklynguy

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Re: Endure Our Mortgage Club
« Reply #4 on: October 23, 2015, 02:48:14 PM »
Thank you Eric, I'll read this thread!

Don't do it while operating heavy machinery.  And keep in mind that the discussion is mostly US-centric, with an underlying (and sometimes unspoken) assumption that the mortgage's interest rate will remain fixed for the (30 year) life of the loan.

Le Barbu

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Re: Endure Our Mortgage Club
« Reply #5 on: October 23, 2015, 02:58:14 PM »
Thank you Eric, I'll read this thread!

Don't do it while operating heavy machinery.  And keep in mind that the discussion is mostly US-centric, with an underlying (and sometimes unspoken) assumption that the mortgage's interest rate will remain fixed for the (30 year) life of the loan.

In Canada, the capital gain is not taxed on main residence neither (interest not deductible). In january, I started what is called The Smith Manoeuvre to use my HELOC to invest AND get the interests tax deductible. It's tricky because you got to repay the principal as fast as you can and then use the HELOC for investment purpose (with full proof track record).

Scandium

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Re: Endure Our Mortgage Club
« Reply #6 on: October 26, 2015, 11:31:09 AM »
The "peace of mind" and "sleep better at night" are attractives arguments but can drag the overall return/NW over a lifetime.

What do you think?

Any and every argument is probably addressed in the 436 page thread posted above.

The quoted part is the reason I don't pay off my mortgage early. The lack of liquidity and concentration of assets into one residence (like your CW) is way to unsafe for my taste. I'd rather have my mortgage balance in liquid assets first. In an emergency you can't sell your bathroom to buy food, and a 80% paid off house is no better than a 20%paid off house when it comes to cash flow (at least not without major hassles like refinance).

Le Barbu

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Re: Endure Our Mortgage Club
« Reply #7 on: October 26, 2015, 02:15:31 PM »
The "peace of mind" and "sleep better at night" are attractives arguments but can drag the overall return/NW over a lifetime.

What do you think?

Any and every argument is probably addressed in the 436 page thread posted above.

The quoted part is the reason I don't pay off my mortgage early. The lack of liquidity and concentration of assets into one residence (like your CW) is way to unsafe for my taste. I'd rather have my mortgage balance in liquid assets first. In an emergency you can't sell your bathroom to buy food, and a 80% paid off house is no better than a 20%paid off house when it comes to cash flow (at least not without major hassles like refinance).

I just decided to write a case study (mo own) that you may comment!

http://forum.mrmoneymustache.com/investor-alley/le-barbu-case-study/msg849353/#msg849353