Author Topic: DONT Payoff your Mortgage Club  (Read 540804 times)

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2700 on: May 28, 2021, 07:57:24 AM »
I was a fan of not-escrowing, as I could make an easy walk in early December to the County assessor's office and write them a fat check in person.

But then they moved the office out of foot (or scooter) distance for me, and my newest mortgage didn't allow it anyway, so I'm sending $00's a month to some bank to do it for me now. Sigh.

Telecaster

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Re: DONT Payoff your Mortgage Club
« Reply #2701 on: May 28, 2021, 08:06:17 PM »
But then they moved the office out of foot (or scooter) distance for me, and my newest mortgage didn't allow it anyway, so I'm sending $00's a month to some bank to do it for me now. Sigh.

Bastards.  Although these days you usually get a slightly lower rate if you escrow. 

dragoncar

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Re: DONT Payoff your Mortgage Club
« Reply #2702 on: May 28, 2021, 08:15:15 PM »
Still hate escrowing.  My processing was transferred to Flagstar and their online capabilities are kinda trash w/ no app.  Now they want me to make an extra escrow payment of like $1k to cover a supposed deficiency, but there is no deficiency they just want to max out their legally allowed buffer/slush fund.  At least they have to pay me 2% interest which ain't to shabby RN.

I'm going to request removal of escrow as soon as my refi hits 365 days.  I don't know if they will allow it but worth a shot.  They might also require 12 months of actual payments (so more like 14 months from closing date) or 12 months from when the loan was transferred (which would be almost another year)

At least in my state they aren't allowed to charge a fee for this (in most other states they charge 0.25% of the principal balance (!!!)

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2703 on: May 28, 2021, 08:30:49 PM »
Still hate escrowing.  My processing was transferred to Flagstar and their online capabilities are kinda trash w/ no app.  Now they want me to make an extra escrow payment of like $1k to cover a supposed deficiency, but there is no deficiency they just want to max out their legally allowed buffer/slush fund.  At least they have to pay me 2% interest which ain't to shabby RN.

I'm going to request removal of escrow as soon as my refi hits 365 days.  I don't know if they will allow it but worth a shot.  They might also require 12 months of actual payments (so more like 14 months from closing date) or 12 months from when the loan was transferred (which would be almost another year)

At least in my state they aren't allowed to charge a fee for this (in most other states they charge 0.25% of the principal balance (!!!)
Crikey!

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2704 on: June 01, 2021, 12:04:01 PM »
2% interest on escrowed funds when your mortgage rate is 2.625% seems...not very strategic.

dragoncar

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Re: DONT Payoff your Mortgage Club
« Reply #2705 on: June 01, 2021, 02:55:00 PM »
2% interest on escrowed funds when your mortgage rate is 2.625% seems...not very strategic.

Nobody is doing it for the 2%, itís basically a consolation prize.  You have to consider that most of it is allocated to biannual payments so most people are already going to build up a property tax buffer in their savings account over 6 mo which will earn less than 2% (sure some people will just sell stocks a few days before they pay their property taxes)

But I saved around $1k in costs by doing escrow so as long as I can get out of it relatively soon I come out way ahead on lost opportunity cost

sonofsven

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Re: DONT Payoff your Mortgage Club
« Reply #2706 on: June 04, 2021, 09:50:18 AM »
Just closed on a re-fi at LenderFi, a small cash out.
Rate of 2.875%, down from the 3% rate I got in August from them.
Loan cost $1600 approx, because of the cash out.
I hemmed and hawed over paying for points (approx $5k to get 2.49%, approx $9k to get 2.25%) but ultimately decided to forego the points.
Breakeven timelines were from just under six years to just over ten years.
I "plan" on staying here forever, but ya know...plans can change, and I'm cheap (ahem, frugal).
From the inquiry email to signing closing docs on my front porch was, amazingly, 15 days.

ohyonghao

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Re: DONT Payoff your Mortgage Club
« Reply #2707 on: June 06, 2021, 06:23:47 AM »
I probably won't be in this thread any time soon, not having a house anymore, but I agree with what ya'll are doing. I am, however, in student loan debt of about $50,000 averaging 3.7% or so with the current rate being 0%. The math has always been simple, using 7% as a conservative number, as long as my loans are below that it doesn't make sense to pay them off any faster than required. I took the maximum I could each year and graduated in 3 years, which unfortunately coincided with the pandemic starting. Thanks to these loans, though, we survived the crash and managed to not sell anything for the past year. In March I was offered employment and am now back in working towards FIRE.

My net worth when starting school was about $200k, it is now $275k including the $50k for student loans (account balances are about $325k). I'm signed up for the graduated repayment over 30 years. Maybe one day I'll decide to pay them off just for fun, but logically there is no need. I'll continue to enjoy my investments growing and being able to stash even more money away each month!

If I ever buy a house again I'll come back here and join everyone, until then enjoy my stamp of approval for being good at numbers, I have a $50k piece of paper which says I am :-P (BS in Math and CS).

P.S.
I'd argue that arithmetic is being good at numbers and mathematics is a much deeper topic to do with abstraction and relationships around objects, some of which just happen to be numbers.

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #2708 on: June 06, 2021, 06:56:43 AM »
Renting is "not paying off the mortgage" in my book @ohyonghao - plus as you've noted the arithmetic works in other areas on low, fixed-rate debt.

MountainLakeMama

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Re: DONT Payoff your Mortgage Club
« Reply #2709 on: June 06, 2021, 08:01:53 AM »
Hi everyone! I'm thinking about joining the club!!! I just refinanced in Nov. 2020 (before I discovered MMM or FI). I'm new to this and I'm a single mom. My mortgage is at $167,000, 20 years at 3.125%. I'm thinking about going back to a 30-year (hopefully better interest rate- I think my credit rating has improved) and putting the lower payment difference into my Roth.

I also have a 403b and will be eligible for a pension in 10 years.

Am I on the right track? Is there a tool somewhere I can use to see if this is the way to go? I have the Case Study Spreadsheet from someone on this forum but it's a little over my head. I also know I have to take fees into account, but I'm not sure exactly how.

mckaylabaloney

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Re: DONT Payoff your Mortgage Club
« Reply #2710 on: June 06, 2021, 09:42:05 AM »
@MountainLakeMama Not sure if you mean a tool to see if you should refinance, or a tool to see if you shouldn't pay off your mortgage early, but:

Here is a straightforward prepaying vs. investing calculator: https://usehhaf.org/loan-information/loan-calculators/mortgage-investment-analysis-calculator/

And here is a refinance calculator that shows you the breakeven point on refinances: https://www.bankrate.com/calculators/mortgages/mortgage-refinance-break-even-calculator.aspx (You will need to check your actual rates to use it effectively, since you need to know whether lenders will be charging you points for various rates.)

You could check your refinance rates first, figure out your ideal refinance situation based on the break even calculator, then plug those potential loan numbers into the payoff vs. investing calculator.

In general, unless you're planning to leave your current home in the next few years, it's very likely you'll be offered a lower rate that makes sense to take. It's also very likely that it makes sense to invest the difference in payments (plus any other extra cash you may have) rather than putting it into your home. That's almost always the correct decision mathematically at current interest rates; reasons to pay off the mortgage early are typically psychological (although even then, investing the money until you have enough to pay off the mortgage in a lump sum is typically much safer and much more profitable).

MountainLakeMama

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Re: DONT Payoff your Mortgage Club
« Reply #2711 on: June 06, 2021, 10:49:32 AM »
@mckaylabaloney Those are both exactly what I needed... tools for figuring out the cost to refinance AND whether or not to payoff mortgage early. Thank you! I'll keep the group posted on my progress!

sonofsven

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Re: DONT Payoff your Mortgage Club
« Reply #2712 on: June 06, 2021, 11:34:01 AM »
Hi everyone! I'm thinking about joining the club!!! I just refinanced in Nov. 2020 (before I discovered MMM or FI). I'm new to this and I'm a single mom. My mortgage is at $167,000, 20 years at 3.125%. I'm thinking about going back to a 30-year (hopefully better interest rate- I think my credit rating has improved) and putting the lower payment difference into my Roth.

I also have a 403b and will be eligible for a pension in 10 years.

Am I on the right track? Is there a tool somewhere I can use to see if this is the way to go? I have the Case Study Spreadsheet from someone on this forum but it's a little over my head. I also know I have to take fees into account, but I'm not sure exactly how.

I like the really simple Bankrate amortization schedule calculator, you can plug in any combination of interest rate, mortgage amount,  and length of term to see your payment amount, and also see what your remaining balance would be in five years, ten years, etc.
If you did a "no cost" at 2.875%  30 year on a loan balance of $167,000 your payment would be $693.
Of course there's more to it.
Some of the costs involved are things you have to pay anyway, but they want them up front (escrow fund for taxes and insurance for one year, typically).
There's a mega refinance thread at the bogleheads forum with a lot of info, too.

Eco_eco

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Re: DONT Payoff your Mortgage Club
« Reply #2713 on: June 06, 2021, 01:26:53 PM »
Hello

We are joining the don't pay off your mortgage club. We are very comfortable with low levels of manageable debt and will simply allow our loans to be paid down over the coming 20 or so years. We hold roughly 18x our annual spending in debt, most of this is held against our rental property investments. Our personal mortgage is small, at about 0.75x our annual spending.

Why?
- I really like the forced savings that come from mortgages (it helps with our cash control, anti splurge discipline)
- The investment return is sooo much higher than the interest cost at the moment
- With debt inflation is a friend, rather than than stealth tax. Inflation decreases the real costs of the loan.
- We are very comfortable with relatively high debt loads having been real estate investors for our whole adult lives and have the cash management strategies which evolved our the challenges which have come along over the years.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2714 on: June 06, 2021, 01:50:08 PM »
Hello

We are joining the don't pay off your mortgage club. We are very comfortable with low levels of manageable debt and will simply allow our loans to be paid down over the coming 20 or so years. We hold roughly 18x our annual spending in debt, most of this is held against our rental property investments. Our personal mortgage is small, at about 0.75x our annual spending.

Why?
- I really like the forced savings that come from mortgages (it helps with our cash control, anti splurge discipline)
- The investment return is sooo much higher than the interest cost at the moment
- With debt inflation is a friend, rather than than stealth tax. Inflation decreases the real costs of the loan.
- We are very comfortable with relatively high debt loads having been real estate investors for our whole adult lives and have the cash management strategies which evolved our the challenges which have come along over the years.
Welcome!

aetheldrea

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Re: DONT Payoff your Mortgage Club
« Reply #2715 on: June 11, 2021, 09:13:36 AM »
I like the really simple Bankrate amortization schedule calculator, you can plug in any combination of interest rate, mortgage amount,  and length of term to see your payment amount, and also see what your remaining balance would be in five years, ten years, etc.
If you did a "no cost" at 2.875%  30 year on a loan balance of $167,000 your payment would be $693.
Iím a big fan of the Payment function in Excel (=PMT I think) for calculating any principal, any rate, any time frame. From there it is super easy to create a simple formula and drag it down to create your own amortization schedule.

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #2716 on: June 14, 2021, 11:30:25 AM »
Just started a re-finance with Lender-Fi. Half a percent lower to 3.25% and unlocking about $18,000 in equity to buy investments with. Closing costs always seem ridiculous to me, but should be a bit under $4K (seriously how are y'all getting these sub-$2,000 cost mortgages? Just the recording fees are over $1,000 and and our loan is small). Less than two years since we corrected our big mistake of having a paid-off house, but rates continued lower and house has increased in value as well, so why not. With the expected return on the newly available $18K, plus saving 0.5% on the outstanding $121K balance, should recoup the closing cost in less than 2 years.

On the one hand our small house is great - relatively easy maintenance, inexpensive, pretty awesome location in many ways. But I'm a little jealous of the lower rates I see in this thread at times. Still, 3.25% is very cheap money.

Anyway, time to upload documents.

dragoncar

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Re: DONT Payoff your Mortgage Club
« Reply #2717 on: June 14, 2021, 12:18:07 PM »
Just started a re-finance with Lender-Fi. Half a percent lower to 3.25% and unlocking about $18,000 in equity to buy investments with. Closing costs always seem ridiculous to me, but should be a bit under $4K (seriously how are y'all getting these sub-$2,000 cost mortgages? Just the recording fees are over $1,000 and and our loan is small). Less than two years since we corrected our big mistake of having a paid-off house, but rates continued lower and house has increased in value as well, so why not. With the expected return on the newly available $18K, plus saving 0.5% on the outstanding $121K balance, should recoup the closing cost in less than 2 years.

On the one hand our small house is great - relatively easy maintenance, inexpensive, pretty awesome location in many ways. But I'm a little jealous of the lower rates I see in this thread at times. Still, 3.25% is very cheap money.

Anyway, time to upload documents.

Try a quote with no cash out, escrow yes, highest FICO, and the lowest points available and let us know the rate

No cost is basically a function of negative points which means a higher rate.  Whether the resulting rate is decent often seems to depend on your region and other specific stuff

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #2718 on: June 14, 2021, 01:10:18 PM »
As I was pulling that quote, the LenderFi rep called me - they can actually loan us more money than I originally thought, at the same rate, without an appraisal, and at a lower closing cost by over $1,000 than I had run the quote for and decided "yep - gonna pull the trigger today on this".

In any event the "zero closing cost" option with highest credit score + escrow + no cash out was 3.625%.

Actual loan is going to be, if it goes through as we've agreed to: $150K @3.25%, no escrow, net closing costs of under $2600 (including the prior-mentioned $1K+ of recording fees). Which should result in about $26,000 to us when the loan is funded, and that will be immediately directed to investments once it arrives.

Not quite as exciting as in 2019 when the place was initially paid off and we corrected that mistake so it was a six-figure credit to our account, but I'm pretty stoked to be doing this again so soon, and at even better terms than I was expecting.

bryan995

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Re: DONT Payoff your Mortgage Club
« Reply #2719 on: June 19, 2021, 06:03:30 AM »
We would like to officially join this incredible club and celebrate the occasion with a cash-out-refi.

Home Value: 1,190,000
Mortgage Balance: 610,000
Monthly payment: 2,950
Terms: 30yr at 2.75 (refi’d a few months ago)

Would like to refi again at <2.75%, 30yr fixed, and pull out 1-300k (depending on appraisal) to then invest in a rental property.  Will start getting quotes this weekend.

We bought the home for 793k  (new construction) only 22 months ago. Prices have been exploding in our neighborhood for sure.

Thoughts? Extract as much from the cash out refi as they will let me?

I very much view this as an inflation hedge using the banks dollars. We’ve talked about moving but I think we would keep this home for the long term.  Or since we are in CA, maybe there is a future prop19/60 play on lower taxes?  Worst worst worst case we end up buying a vacation home elsewhere instead of ‘upgrading’ the current one :).
« Last Edit: June 19, 2021, 08:55:24 PM by bryan995 »

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #2720 on: June 19, 2021, 06:54:53 AM »
Good luck! I would extract as much as they'll give you - mortgages are kind of a hassle, so might as well take the money when they are willing. Then you'll have it for whatever rentals pop up on your radar or just to put in index funds. So long as you're reasonably investing the money and not blowing it on stuff you don't need, it should work out.

StarBright

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Re: DONT Payoff your Mortgage Club
« Reply #2721 on: June 19, 2021, 07:11:04 AM »
This thread has a way of worming itself into your brain.

I am a pay off your mortgage early person, we pay extra every month (refied to a 15 year not that long ago and just kept on paying what we had been paying previously, which is now extra).

But - we have an extra chunk of cash outside of our set budget and it just seems to keep growing lately. DH asked if I wanted to throw it at the mortgage, but I thought about how it doesn't get me that much closer to paying it off.  Into investments it went - it is more flexible there for the long term!

I'm still probably going to pay off early - I have a deep need for security and come from a family of people who have always paid off houses early. It is part of my financial DNA. But I just threw a double digit chunk into investments instead, which is the biggest chunk I've ever done at one time!

Malcat

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Re: DONT Payoff your Mortgage Club
« Reply #2722 on: June 19, 2021, 07:38:25 AM »
This thread has a way of worming itself into your brain.

I am a pay off your mortgage early person, we pay extra every month (refied to a 15 year not that long ago and just kept on paying what we had been paying previously, which is now extra).

But - we have an extra chunk of cash outside of our set budget and it just seems to keep growing lately. DH asked if I wanted to throw it at the mortgage, but I thought about how it doesn't get me that much closer to paying it off.  Into investments it went - it is more flexible there for the long term!

I'm still probably going to pay off early - I have a deep need for security and come from a family of people who have always paid off houses early. It is part of my financial DNA. But I just threw a double digit chunk into investments instead, which is the biggest chunk I've ever done at one time!

I'm big on security too, and it was B42 who showed me how I was much more secure not paying off my mortgage, and how splitting money between extra payments and investments was by far the least secure option.

If I planned to pay off my mortgage, I would definitely only do it in one large lump sum now that I've wrapper my mind around how extra mortgage payments actually maximize your risk.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #2723 on: June 21, 2021, 05:04:40 AM »
This thread has a way of worming itself into your brain.

I am a pay off your mortgage early person, we pay extra every month (refied to a 15 year not that long ago and just kept on paying what we had been paying previously, which is now extra).

But - we have an extra chunk of cash outside of our set budget and it just seems to keep growing lately. DH asked if I wanted to throw it at the mortgage, but I thought about how it doesn't get me that much closer to paying it off.  Into investments it went - it is more flexible there for the long term!

I'm still probably going to pay off early - I have a deep need for security and come from a family of people who have always paid off houses early. It is part of my financial DNA. But I just threw a double digit chunk into investments instead, which is the biggest chunk I've ever done at one time!

I'm big on security too, and it was B42 who showed me how I was much more secure not paying off my mortgage, and how splitting money between extra payments and investments was by far the least secure option.

If I planned to pay off my mortgage, I would definitely only do it in one large lump sum now that I've wrapper my mind around how extra mortgage payments actually maximize your risk.

Iíve got to credit B42 (and a few others) as well for shifting my focus and making me realizes that extra mortgage payments actually maximizes risk during the entire payoff period. For me, security comes from having the most amount of cash (invested according to my AA, of course). Paying down a mortgage is choosing to have less cash in exchange for more equity in your home.

The mortgage crisis (and subsequent Ďgreat recessioní) also made me very wary of having a very high percentage of our NW tied to a home.  They are not Ďsecure investmentsí - no matter what the National Realtors Association says. 

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2724 on: June 21, 2021, 07:58:00 AM »
This thread has a way of worming itself into your brain.

I am a pay off your mortgage early person, we pay extra every month (refied to a 15 year not that long ago and just kept on paying what we had been paying previously, which is now extra).

But - we have an extra chunk of cash outside of our set budget and it just seems to keep growing lately. DH asked if I wanted to throw it at the mortgage, but I thought about how it doesn't get me that much closer to paying it off.  Into investments it went - it is more flexible there for the long term!

I'm still probably going to pay off early - I have a deep need for security and come from a family of people who have always paid off houses early. It is part of my financial DNA. But I just threw a double digit chunk into investments instead, which is the biggest chunk I've ever done at one time!

I'm big on security too, and it was B42 who showed me how I was much more secure not paying off my mortgage, and how splitting money between extra payments and investments was by far the least secure option.

If I planned to pay off my mortgage, I would definitely only do it in one large lump sum now that I've wrapper my mind around how extra mortgage payments actually maximize your risk.

Iíve got to credit B42 (and a few others) as well for shifting my focus and making me realizes that extra mortgage payments actually maximizes risk during the entire payoff period. For me, security comes from having the most amount of cash (invested according to my AA, of course). Paying down a mortgage is choosing to have less cash in exchange for more equity in your home.

The mortgage crisis (and subsequent Ďgreat recessioní) also made me very wary of having a very high percentage of our NW tied to a home.  They are not Ďsecure investmentsí - no matter what the National Realtors Association says.
Some random thoughts:

We own four properties and three mortgages. The unmortgaged property is worth more than the others combined. The threat of inflation* has me seriously considering taking out a mortgage on our primary. However,  DH isn't really on board, because we don't really need the money (MPP for sure).

The other three mortgages are at okay rates, but they are at 50% LTV. We have looked into refinancing, but the fees were so high, we couldn't pull the trigger. Our existing rates are good enough, but the process made us pine for those sweet, rock-bottom re-fis.

One more thought: In retrospect, I wish I'd counted my mortgage as a bond and placed a higher percentage of my investments in equities. By following traditional guidelines, which tend to ignore mortgage(s), my portfolio was actually more conservative than I intended. Live and learn.

*One advantage of our age is that we've lived through multiple inflationary periods and KNOW what that's going to feel like. Hell, we lived through the Seventies, when gas pump meters only went to 99.9 CENTS per gallon. Every single one of them had to be modified when gas prices surged past $1.00. Everyone who has a long, affordable, low interest mortgage is going to be doing the happy dance in the next few years. Double bonus points if you're US based and that mortgage is tax deductible.

FragglesRock666

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Re: DONT Payoff your Mortgage Club
« Reply #2725 on: June 21, 2021, 02:40:27 PM »
Just checking in!  I re-fi'd in October 2020, and in between signing the paperwork and my first "new" mortgage payment, I became part of this club.  So, too late to change from a 20 year mortgage to a 30 year for my re-fi, BUT I haven't made any extra payments on my house at all.

Even though I just got an inheritance check of $5,000 (who knew my grandma had any money left? I sure didn't), that money is NOT going towards my house (though it is killing me a little), but instead it is going into savings for my kiddo's college fund.

I am still building my "one year's expenses" emergency fund, so no investments beyond my 401k at work yet.  I'm the sole breadwinner at the moment, and I have MS, so I want a large, very safe fund in case I can't work for a while. 

I appreciate this thread, it helps me keep on track when I start to consider tossing some extra at the house.  Reminds me to NOT do it. 

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2726 on: June 22, 2021, 07:20:49 AM »
So i was going over the last month's expenses, and I completely forgot to send in my mortgage payment. I was wondering how the checking balance had gotten so high. Do I get extra credit in this club?

Will have to call the lender today and figure out how bad the fees will be to get current again. Sigh.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2727 on: June 22, 2021, 07:29:15 AM »
So i was going over the last month's expenses, and I completely forgot to send in my mortgage payment. I was wondering how the checking balance had gotten so high. Do I get extra credit in this club?

Will have to call the lender today and figure out how bad the fees will be to get current again. Sigh.
Extra credit granted.

Related: our Costco bill is on auto pay. For reasons yet unknown, it was not autopaid last month The bill was $3500, which is more than most mortgage payments, I'd guess.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2728 on: June 25, 2021, 11:50:54 AM »
Happened to see this on the internet today. https://www.financialsamurai.com/never-sell-assets-and-pay-less-in-taxes-like-billionaires/

The content of the post may not contain much new, but in the comments, Sam basically describes maintaining a slug of continuing mortgage debt--which we consider the foundational strategy of this club--as analogous to the tax-sheltering techniques modern billionaires are using.

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #2729 on: June 25, 2021, 12:01:06 PM »
I'll just go ahead and assume whatever analysis was done there is deeply flawed. Although you'd think a guy who believes only 0.5% withdrawal rate or less is safe would be strongly anti-debt.

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #2730 on: June 28, 2021, 12:03:46 PM »
LenderFi sucks. 2 weeks ago said "we'll fund the loan in two weeks". Today "your business has inadequate history". Even though I put the whole deal on the application and explained every time I sent it in "I just started this up - expect $10,000 / month per my contract but first month was May". Aggravating - if I was a regular state employee making 1/3 to 1/2 this much, would be no problem rubber stamping it. But 10 years of self-employed history isn't enough because I did something stupid and took a regular job for 10 months and formed an LLC for this new deal this year.

Whatever, don't need the money, and maybe rates will stay low while the house continues to go up.
« Last Edit: June 28, 2021, 12:05:45 PM by dandarc »

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2731 on: June 29, 2021, 11:28:42 AM »
I'll just go ahead and assume whatever analysis was done there is deeply flawed. Although you'd think a guy who believes only 0.5% withdrawal rate or less is safe would be strongly anti-debt.

Sure, I agree that the 0.5% withdrawal rate article was bad, and the SF numbers seem cartoonish to me (in my humble North Carolina real estate market). The particular article I shared seemed to align with our founding philosophy here in the DNPYM thread, tho.

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Re: DONT Payoff your Mortgage Club
« Reply #2732 on: June 29, 2021, 12:50:44 PM »
LenderFi sucks. 2 weeks ago said "we'll fund the loan in two weeks". Today "your business has inadequate history". Even though I put the whole deal on the application and explained every time I sent it in "I just started this up - expect $10,000 / month per my contract but first month was May". Aggravating - if I was a regular state employee making 1/3 to 1/2 this much, would be no problem rubber stamping it. But 10 years of self-employed history isn't enough because I did something stupid and took a regular job for 10 months and formed an LLC for this new deal this year.

Whatever, don't need the money, and maybe rates will stay low while the house continues to go up.

Yeah, mortgage underwriting and self-employed income does not mix well.

I was very cautious with Lenderfi. They've ordered up appraisals and then backed out, similar to what you experienced. They told us that it was "no problem" qualifying for a re-fi with dividends, withdrawals, and a little SE income. It turns out that it was a problem.

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Re: DONT Payoff your Mortgage Club
« Reply #2733 on: June 29, 2021, 12:54:09 PM »
LenderFi sucks. 2 weeks ago said "we'll fund the loan in two weeks". Today "your business has inadequate history". Even though I put the whole deal on the application and explained every time I sent it in "I just started this up - expect $10,000 / month per my contract but first month was May". Aggravating - if I was a regular state employee making 1/3 to 1/2 this much, would be no problem rubber stamping it. But 10 years of self-employed history isn't enough because I did something stupid and took a regular job for 10 months and formed an LLC for this new deal this year.

Whatever, don't need the money, and maybe rates will stay low while the house continues to go up.

Yeah, mortgage underwriting and self-employed income does not mix well.

I was very cautious with Lenderfi. They've ordered up appraisals and then backed out, similar to what you experienced. They told us that it was "no problem" qualifying for a re-fi with dividends, withdrawals, and a little SE income. It turns out that it was a problem.
On the plus side, with no mortgage application pending, I've opened 5 credit cards to scare up some miles today. Our 10th anniversary is next year - I have something somewhat ridiculous in mind to celebrate, and this will help mitigate the cost big time.

TomTX

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Re: DONT Payoff your Mortgage Club
« Reply #2734 on: June 30, 2021, 01:10:29 PM »
We own four properties and three mortgages. The unmortgaged property is worth more than the others combined. The threat of inflation* has me seriously considering taking out a mortgage on our primary. However,  DH isn't really on board, because we don't really need the money (MPP for sure).

The other three mortgages are at okay rates, but they are at 50% LTV. We have looked into refinancing, but the fees were so high, we couldn't pull the trigger. Our existing rates are good enough, but the process made us pine for those sweet, rock-bottom re-fis.

Take out a low-rate mortgage on the primary, use the proceeds to pay off the other higher rate mortgages.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2735 on: June 30, 2021, 01:12:41 PM »
We own four properties and three mortgages. The unmortgaged property is worth more than the others combined. The threat of inflation* has me seriously considering taking out a mortgage on our primary. However,  DH isn't really on board, because we don't really need the money (MPP for sure).

The other three mortgages are at okay rates, but they are at 50% LTV. We have looked into refinancing, but the fees were so high, we couldn't pull the trigger. Our existing rates are good enough, but the process made us pine for those sweet, rock-bottom re-fis.

Take out a low-rate mortgage on the primary, use the proceeds to pay off the other higher rate mortgages.
You're joking, right?

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Re: DONT Payoff your Mortgage Club
« Reply #2736 on: July 03, 2021, 07:55:35 PM »
The name of this thread amuses me so much. Love it!

I have posted about this before and no one has really given me a good answer, maybe you all can since you guys have spent a lot of time thinking about this.

Are you planning on having your mortgage payment x 25 (4% swr) for retirement so you can keep paying your mortgage? How are you planning on paying your actual mortgage payment in retirement?

For example, if you have 200k balance, refinance today at 4.125% for 30 years is just around a payment of 1,000 per month (for math simplicity). Will you just save the 200k or save for the 12k * 25 = 300k for your retirement in order to keep making those payments? It is easy to have a mortgage while working but what are actual plans for making payments when you are actually retired? I am reading many saying they will have lower balances or have paid off house when they retire, so I am interested in the 30 yr mortgage crowd.

Thanks in advance.

I haven't heard anyone talk about this either. Maybe most don't relate mortgage payments to the safe withdrawal rate, but to me they are very similar and deserve the same considerations.

One difference though is that you don't need mortgage payment x 25. The study that came up with the 4% swr adjusts withdrawals for inflation, but mortgage payments are fixed. Thus you can support a mortgage with a smaller portfolio.

Radagast

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Re: DONT Payoff your Mortgage Club
« Reply #2737 on: July 03, 2021, 10:00:40 PM »
The name of this thread amuses me so much. Love it!

I have posted about this before and no one has really given me a good answer, maybe you all can since you guys have spent a lot of time thinking about this.

Are you planning on having your mortgage payment x 25 (4% swr) for retirement so you can keep paying your mortgage? How are you planning on paying your actual mortgage payment in retirement?

For example, if you have 200k balance, refinance today at 4.125% for 30 years is just around a payment of 1,000 per month (for math simplicity). Will you just save the 200k or save for the 12k * 25 = 300k for your retirement in order to keep making those payments? It is easy to have a mortgage while working but what are actual plans for making payments when you are actually retired? I am reading many saying they will have lower balances or have paid off house when they retire, so I am interested in the 30 yr mortgage crowd.

Thanks in advance.

I haven't heard anyone talk about this either. Maybe most don't relate mortgage payments to the safe withdrawal rate, but to me they are very similar and deserve the same considerations.

One difference though is that you don't need mortgage payment x 25. The study that came up with the 4% swr adjusts withdrawals for inflation, but mortgage payments are fixed. Thus you can support a mortgage with a smaller portfolio.
It been talked about, including in this thread (I am 99% sure, been a while). We are more split on that one. Many say carry the mortgage all the way to the end. Others may pay it off at retirement to protect against sequence of returns risk.

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Re: DONT Payoff your Mortgage Club
« Reply #2738 on: July 04, 2021, 07:30:35 AM »
The name of this thread amuses me so much. Love it!

I have posted about this before and no one has really given me a good answer, maybe you all can since you guys have spent a lot of time thinking about this.

Are you planning on having your mortgage payment x 25 (4% swr) for retirement so you can keep paying your mortgage? How are you planning on paying your actual mortgage payment in retirement?

For example, if you have 200k balance, refinance today at 4.125% for 30 years is just around a payment of 1,000 per month (for math simplicity). Will you just save the 200k or save for the 12k * 25 = 300k for your retirement in order to keep making those payments? It is easy to have a mortgage while working but what are actual plans for making payments when you are actually retired? I am reading many saying they will have lower balances or have paid off house when they retire, so I am interested in the 30 yr mortgage crowd.

Thanks in advance.

I haven't heard anyone talk about this either. Maybe most don't relate mortgage payments to the safe withdrawal rate, but to me they are very similar and deserve the same considerations.

One difference though is that you don't need mortgage payment x 25. The study that came up with the 4% swr adjusts withdrawals for inflation, but mortgage payments are fixed. Thus you can support a mortgage with a smaller portfolio.
It been talked about, including in this thread (I am 99% sure, been a while). We are more split on that one. Many say carry the mortgage all the way to the end. Others may pay it off at retirement to protect against sequence of returns risk.

indeed, it has been discussed extensively. Simply put, itís a far more complex issue than simple ďhave 25x to cover the mortgageĒ (which is incorrect).

First, as others have indicated the classic WR is pegged to inflation, and a fixed mortgage is not, ergo the PI will go down relative to annual withdrawals. Over a ~30 year timeline the effect can be substantial - less than half the initial amount.

Second, while itís easy to talk about our ďretirement numberĒ as if itís a fixed amount (e.g. ďI need $50k/year), in reality itís almost never this static. Almost all posters will receive some form of pension and/or SS/Old-Age benefits; for generally thrifty, partnered mustachians this can be a sizable chunk of their total. Windfalls, kids fleeing the nest and the well-documented trend of lower-spending in retirement are other important factors.  A mortgage ultimately dropping off the ledger (see below) is yet another.  It makes back-of-the-envelope calculations less reliable, but thankfully thereís ample software (example: cFireSim) that will include increased payments (e.g. SS) and dropped expenses (e.g. mortgage, tuition) for each year of your planned retirement.

While most of us will carry a mortgage for many years into retirement, itís unlikely this wonít get paid off at some point.  As we discussed a few pages back, banks frequently reject to refinance once you donít have a reliable income, regardless of assets. This recently happened to my parents.  One of the pieces of advice frequently given in this thread is to refinance a year or two before pulling the plug, to maximize the number of years you can carry the mortgage into ER.

Bottom line though is you donít need an extra $250k in investments to cover $10k in annual mortgage payments. You donít need anywhere close to that amount.

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Re: DONT Payoff your Mortgage Club
« Reply #2739 on: July 04, 2021, 08:01:58 AM »
The name of this thread amuses me so much. Love it!

I have posted about this before and no one has really given me a good answer, maybe you all can since you guys have spent a lot of time thinking about this.

Are you planning on having your mortgage payment x 25 (4% swr) for retirement so you can keep paying your mortgage? How are you planning on paying your actual mortgage payment in retirement?

For example, if you have 200k balance, refinance today at 4.125% for 30 years is just around a payment of 1,000 per month (for math simplicity). Will you just save the 200k or save for the 12k * 25 = 300k for your retirement in order to keep making those payments? It is easy to have a mortgage while working but what are actual plans for making payments when you are actually retired? I am reading many saying they will have lower balances or have paid off house when they retire, so I am interested in the 30 yr mortgage crowd.

Thanks in advance.

I haven't heard anyone talk about this either. Maybe most don't relate mortgage payments to the safe withdrawal rate, but to me they are very similar and deserve the same considerations.

One difference though is that you don't need mortgage payment x 25. The study that came up with the 4% swr adjusts withdrawals for inflation, but mortgage payments are fixed. Thus you can support a mortgage with a smaller portfolio.

But...you have to save more to pay off the mortgage anyway, so either way, yeah, you need to save enough to pay for your expenses, including housing.

The fine details of the math are so fine it basically doesn't matter. If you have enough to retire on, it will make very little difference if you maintain a mortgage or not, unless your house is insanely expensive, this just doesn't matter.

What really matters is what you do in accumulation phase, that's where paying extra on your mortgage really bites you in the ass, both in terms of costing you money AND increasing your risk.

Beyond that, it's kind of silly to overthink it.

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Re: DONT Payoff your Mortgage Club
« Reply #2740 on: July 04, 2021, 08:14:55 AM »
You may not necessarily need 25x your mortgage payment added on top of your portfolio. You may only need 10-15x that amount. However, keeping 25x your non-mortgage spend and 15x your mortgage payment still leaves your first 5-10 years of retirement slightly more vulnerable than 25x across the board (and more convoluted as well).

I think I've noted in here that we plan to pay off our mortgage when we retire. This is based on reduction of SORR and optimizing for ACA subsidies & FAFSA. Using various calculators, risk of failure was lower for us by having $200k less in investments and $18k less in expenses than keeping the mortgage. Additionally, keeping our AGI $18k lower is great for ACA & FAFSA.

However, we aren't paying a penny extra until we retire.

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Re: DONT Payoff your Mortgage Club
« Reply #2741 on: July 04, 2021, 10:18:29 AM »
For most people, the mortgage is the biggest debt they've ever taken on. If they look at the total amount to be paid over the life of the loan, it's staggering. It seems impossible that they could ever be worth enough to surpass that figure, which creates fear. And fear is what sells, hence the power of messengers like Ramsey

If one starts saving and investing early and consistently, there will come a point where investment growth and compound interest will exceed their income, then their mortgage balance, and so on, all the way to FI. Factor in wage growth, inflation and low, fixed mortgage rates, and it happens even faster, as everyone on this thread knows. IMO, it's a lack of education and imagination, but the fear is still real. The power of MMM and the FIRE philosophy in general is that it teaches people, so they can move past their fears. That is far more powerful, but it's a lot more nuanced than "Kill all the debt", so it's always going to be an uphill battle. It doesn't help that saving/investing is mostly voluntary in the US and we do not emphasize financial literacy in school.

My first mortgage was $101k, and I was petrified when I signed the papers. If anyone had told me that by not prepaying my mortgage I'd end up in the "Beyond" section of the "Race from $2-$4M and Beyond" club, having never been a high wage earner or lottery winner, I'd have laughed hysterically and never, ever believed them. I will forever be grateful to Pete and everyone along the way who helped me learn these lessons.


.
« Last Edit: July 04, 2021, 06:58:56 PM by Dicey »

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Re: DONT Payoff your Mortgage Club
« Reply #2742 on: July 04, 2021, 06:43:13 PM »
Seems like no one has said this recently. Congrats to everyone in this thread! Inflation and wages are rising, asset prices are going up, and mortgages are going nowhere!

We have two houses: a rental duplex on a 15/15yr @3.0% (don't bother with a 15/15, they were dubious then and dumb now) and a two unit on 30yr @2.75%. We rent three units which nearly cover the cost of both. The two duplexes knock on wood are filled with good tenants and have never had a vacancy and for that reason I have never raised rent, but at the next vacancy we will raise the rent and break even on the mortgages. After a slow start, we now have people lining up to rent out our casita which looks to have 90+% occupancy on more profitable short term furnished rentals (1-4mo) to fancy professionals.

My wife and I both got mid year bonuses because our employers are concerned rising wages elsewhere will suck us away (and they should be concerned, I have strongly contemplated other jobs which pay a little better). DW got an additional outright random raise for the same reason, and she will get an ordinary COL raise effective this month. I am being told to expect a larger than average annual raise at the end of the year, and am past due for a promotion and raise.

Investments fluctuate, but have been going up on all fronts, even bonds and international stocks and value stocks over the past three years.

Meanwhile, those mortgage payments ain't gone up one dime!!!!!!!!! We are making bank by not paying off our mortgages, and thanks to our rapidly growing assets are safer than ever. We are many streets ahead of where we would be if we were paying off the mortgages. Another five years of this and those mortgages will seem very inconsequential. Theory, meet Reality.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2743 on: July 04, 2021, 06:56:26 PM »
[Snip]
Meanwhile, those mortgage payments ain't gone up one dime!!!!!!!!! We are making bank by not paying off our mortgages, and thanks to our rapidly growing assets are safer than ever. We are many streets ahead of where we would be if we were paying off the mortgages. Another five years of this and those mortgages will seem very inconsequential. Theory, meet Reality.
Ain't it grand? Congratulations!!!

Radagast

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Re: DONT Payoff your Mortgage Club
« Reply #2744 on: July 04, 2021, 07:32:04 PM »
[Snip]
Meanwhile, those mortgage payments ain't gone up one dime!!!!!!!!! We are making bank by not paying off our mortgages, and thanks to our rapidly growing assets are safer than ever. We are many streets ahead of where we would be if we were paying off the mortgages. Another five years of this and those mortgages will seem very inconsequential. Theory, meet Reality.
Ain't it grand? Congratulations!!!
I overheard a couple of my mindlessly partisan coworkers complaining about government debt and the devaluation of the dollar the other day. IMO devaluation is beneficial to the economy and has been overly slow. Either way, if you can't beat em join em!

Malcat

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Re: DONT Payoff your Mortgage Club
« Reply #2745 on: July 04, 2021, 08:05:38 PM »
[Snip]
Meanwhile, those mortgage payments ain't gone up one dime!!!!!!!!! We are making bank by not paying off our mortgages, and thanks to our rapidly growing assets are safer than ever. We are many streets ahead of where we would be if we were paying off the mortgages. Another five years of this and those mortgages will seem very inconsequential. Theory, meet Reality.
Ain't it grand? Congratulations!!!

I do chuckle at how laughably small my already modest mortgage payment will be in 20 year's time. It will be couch-cushion change by the time we near the end of our 25 year amortization period.

Paying it off would take away the fun of watching inflation make our payments laughably small.

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Re: DONT Payoff your Mortgage Club
« Reply #2746 on: July 05, 2021, 12:58:21 AM »

We are many streets ahead of where we would be if we were paying off the mortgages.

Paying off your mortgage is streets behind

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Re: DONT Payoff your Mortgage Club
« Reply #2747 on: July 05, 2021, 07:31:09 PM »
August 1 will be my last mortgage payment.  Because Iím selling and renting.  I donít think the mortgage people would congratulate me.  Iím moving out by Dicey.  Iím not real thrilled with the options in my price range that would tie up so much equity and still have a big mortgage so Iíll rent, then I can spend the dividends from my old house equity on fun stuff (or not and grow it).

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Re: DONT Payoff your Mortgage Club
« Reply #2748 on: July 06, 2021, 05:04:55 AM »
August 1 will be my last mortgage payment.  Because Iím selling and renting.  I donít think the mortgage people would congratulate me.  Iím moving out by Dicey.  Iím not real thrilled with the options in my price range that would tie up so much equity and still have a big mortgage so Iíll rent, then I can spend the dividends from my old house equity on fun stuff (or not and grow it).

Recently got into the same boat as you, formerly-something. Iím a bit bitter at not being able to find a sane place for us to buy and hold these ridiculously, stupid-low fixed mortgages through term.  But thatís FWP I suppose. 

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2749 on: July 06, 2021, 06:24:38 AM »
I imagine you have family or other motivations for moving where you are?