Author Topic: DONT Payoff your Mortgage Club  (Read 788925 times)

rmorris50

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Re: DONT Payoff your Mortgage Club
« Reply #3550 on: January 30, 2023, 09:06:50 PM »
Now this is funnyÖ




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talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #3551 on: January 31, 2023, 07:51:06 AM »
Where did you find a photo of us, @rmorris50 ?

midweststache

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Re: DONT Payoff your Mortgage Club
« Reply #3552 on: January 31, 2023, 08:51:11 AM »
Now this is funnyÖ

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You're not wrong. We are at 2.625% and, two years into ownership with a +$100K larger mortgage, we are already paying less in interest than we were on our previous home after four years of ownership.

I've told DH were here for the next 28 years - enough time to get both our kids through the local HS (walking distance to public schools K-8 and a short bus ride/bike ride to the HS is what sold us on this place, in addition to being a SFH [rather than a condo] on a lot and a half across from a giant park and in an excellent school system).

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #3553 on: January 31, 2023, 10:57:28 AM »
I was making the trip to work today and listening to local radio, and they mentioned that we're in another property-revaluation cycle, so taxes are going to go up soon. Good thing I optimized on the principal/interest part of my payment!

rmorris50

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Re: DONT Payoff your Mortgage Club
« Reply #3554 on: January 31, 2023, 11:06:31 AM »
Where did you find a photo of us, @rmorris50 ?
You know, on the internetsÖ


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Radagast

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Re: DONT Payoff your Mortgage Club
« Reply #3555 on: January 31, 2023, 07:53:40 PM »
Now this is funnyÖ




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Oh Snap...*

*I remember this phrase being funny in grad school. Cooler people have informed me it was funny in middle school.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #3556 on: February 01, 2023, 03:16:29 PM »
The meme is particularly appropriate since vampires are immortal, presumably they could leverage all the way to the hilt, perhaps should even consider a negative amortization.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #3557 on: February 01, 2023, 03:58:26 PM »
I think a 90 year old vampire could make a killing* taking out a series of COLA adjusted annuities. Sure, it might not get great returns the first few years, but just wait until the third or forth decade kicks in!

* pun intended

rmorris50

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Re: DONT Payoff your Mortgage Club
« Reply #3558 on: February 01, 2023, 04:28:57 PM »
Gives a whole new meaning to signing your life awayÖ


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talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #3559 on: February 02, 2023, 09:32:04 AM »
I suppose the real question is why a Vampire would ever not be 100% stocks?

YttriumNitrate

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Re: DONT Payoff your Mortgage Club
« Reply #3560 on: February 02, 2023, 09:46:18 AM »
I suppose the real question is why a Vampire would ever not be 100% stocks?
On a long enough time period, black swan events become a serious risk. Since stocks are publicly known there's a much higher chance of them being nationalized relative to a pile of gold hidden in an underground lair protected by an army of the undead.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #3561 on: February 02, 2023, 11:59:01 AM »
I suppose the real question is why a Vampire would ever not be 100% stocks?
On a long enough time period, black swan events become a serious risk. Since stocks are publicly known there's a much higher chance of them being nationalized relative to a pile of gold hidden in an underground lair protected by an army of the undead.

but what is the opportunity cost of forming and maintaining an army of the undead?

Psychstache

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Re: DONT Payoff your Mortgage Club
« Reply #3562 on: February 02, 2023, 12:46:39 PM »
I suppose the real question is why a Vampire would ever not be 100% stocks?
On a long enough time period, black swan events become a serious risk. Since stocks are publicly known there's a much higher chance of them being nationalized relative to a pile of gold hidden in an underground lair protected by an army of the undead.

but what is the opportunity cost of forming and maintaining an army of the undead?

I think it would depend on whether you are employing them or have more of an independent contractor army on 1099s. If you have to provide benefits I don't think it is worthwhile. Zombie health insurance rates are bananas, what with all the surgical reattachment procedures they require.

mtnman125

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Re: DONT Payoff your Mortgage Club
« Reply #3563 on: February 10, 2023, 12:17:21 PM »
I'm on board with DPYMC, but thinking about how the strategy works with early retirements, specifically ACA subsidies.

Right now my mortgage is $2000/mo, 28 years left at 2.5%- so if I kept things as is that's an extra $24k I'd need to withdraw in retirement

An ACA silver plan will be 8.5% of AGI (just for premium), so essentially a penalty of $8.5 per $1000 withdrawn.

Would I be better off paying off in full at time or retirement, or maybe a lump sum payment and recast to lower payment (say $1k/mo)?

Any advice welcome- thanks.

grantmeaname

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Re: DONT Payoff your Mortgage Club
« Reply #3564 on: February 10, 2023, 03:53:02 PM »
Edit: Friday brain.

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #3565 on: February 10, 2023, 05:16:53 PM »
I'm on board with DPYMC, but thinking about how the strategy works with early retirements, specifically ACA subsidies.

Right now my mortgage is $2000/mo, 28 years left at 2.5%- so if I kept things as is that's an extra $24k I'd need to withdraw in retirement

An ACA silver plan will be 8.5% of AGI (just for premium), so essentially a penalty of $8.5 per $1000 withdrawn.

Would I be better off paying off in full at time or retirement, or maybe a lump sum payment and recast to lower payment (say $1k/mo)?

Any advice welcome- thanks.
Depends on the structure of your portfolio to an extent. If all the money can come out of Roth contributions (or qualified after 59.5), that's no ACA subsidy impact I believe. Opposite if traditional. If you're taking money out of a taxable account, then some of it is income and some of it is return of basis.

In any event, looking at it as 8.5% additional marginal rate at withdrawal can help your analysis.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #3566 on: February 10, 2023, 07:42:25 PM »
I'm on board with DPYMC, but thinking about how the strategy works with early retirements, specifically ACA subsidies.

Right now my mortgage is $2000/mo, 28 years left at 2.5%- so if I kept things as is that's an extra $24k I'd need to withdraw in retirement

An ACA silver plan will be 8.5% of AGI (just for premium), so essentially a penalty of $8.5 per $1000 withdrawn.

Would I be better off paying off in full at time or retirement, or maybe a lump sum payment and recast to lower payment (say $1k/mo)?

Any advice welcome- thanks.
It almost always makes sense to stuff everything you can into tax deferred accounts, then Roths (if eligible) then taxable investment accounts, etc. Get as many soldiers working for you as fast as possible. Eventually, you will get to a point where you can easily decide to pay the aging mortgage off, or, more likely, continue to have fun watching your investments earn more than you ever did on your best day working.

rmorris50

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Re: DONT Payoff your Mortgage Club
« Reply #3567 on: February 10, 2023, 08:31:49 PM »
I'm on board with DPYMC, but thinking about how the strategy works with early retirements, specifically ACA subsidies.

Right now my mortgage is $2000/mo, 28 years left at 2.5%- so if I kept things as is that's an extra $24k I'd need to withdraw in retirement

An ACA silver plan will be 8.5% of AGI (just for premium), so essentially a penalty of $8.5 per $1000 withdrawn.

Would I be better off paying off in full at time or retirement, or maybe a lump sum payment and recast to lower payment (say $1k/mo)?

Any advice welcome- thanks.
So the penalty means you need to withdrawal about $26k instead of $24k. What interest rate would your mortgage have to be to require a $26k annual withdrawal? 3%? You prob would still choose to not prepay a 3% mortgage? Thatís how I would think about it.


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TomTX

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Re: DONT Payoff your Mortgage Club
« Reply #3568 on: February 11, 2023, 10:23:30 AM »
No discussion is allowed there, only celebration.

Wasn't aware no discussion was allowed there. Isn't that the entire point of forums? I started that thread and it certainly wasn't my intention for it to be a celebration only thread... however it is a ten year old thread and has probably changed a lot in my absence.
Hmmm... If those thread denizens were made aware how far they strayed from the original intent of the thread with their "celebrations only" demands - that could be pretty funny.

TomTX

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Re: DONT Payoff your Mortgage Club
« Reply #3569 on: February 11, 2023, 10:28:28 AM »
I had temporarily forgotten about Mr Orange.  Man, that got weird.
Hm, never saw that one.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #3570 on: February 11, 2023, 11:55:16 AM »
I had temporarily forgotten about Mr Orange.  Man, that got weird.
Hm, never saw that one.

Ö and youíll never see the weirdest parts as they e been scrubbed. But Mr Orange has the distinction of being the only poster Iím aware of to have entire sections of his journal redacted by the mods. It was Ö bizarre.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #3571 on: February 11, 2023, 12:18:23 PM »
No discussion is allowed there, only celebration.

Wasn't aware no discussion was allowed there. Isn't that the entire point of forums? I started that thread and it certainly wasn't my intention for it to be a celebration only thread... however it is a ten year old thread and has probably changed a lot in my absence.
Hmmm... If those thread denizens were made aware how far they strayed from the original intent of the thread with their "celebrations only" demands - that could be pretty funny.
Not gonna lie, for a moment I was tempted to share that gem with the mods, but some of us were sternly warned to keep out of the "discussion" or risk being banned. Not worth it to me. Let 'em celebrate all they want. However, when people say this forum has changed, I always think it started with those threads.

TomTX

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Re: DONT Payoff your Mortgage Club
« Reply #3572 on: February 11, 2023, 02:18:06 PM »
No discussion is allowed there, only celebration.

Wasn't aware no discussion was allowed there. Isn't that the entire point of forums? I started that thread and it certainly wasn't my intention for it to be a celebration only thread... however it is a ten year old thread and has probably changed a lot in my absence.
Hmmm... If those thread denizens were made aware how far they strayed from the original intent of the thread with their "celebrations only" demands - that could be pretty funny.
Not gonna lie, for a moment I was tempted to share that gem with the mods, but some of us were sternly warned to keep out of the "discussion" or risk being banned. Not worth it to me. Let 'em celebrate all they want. However, when people say this forum has changed, I always think it started with those threads.
Can't disagree with that. Face punches blocked in favor of creating a "safe space" - which apparently wasn't even the intent of the originator of the discussion.

nouseforausername

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Re: DONT Payoff your Mortgage Club
« Reply #3573 on: February 13, 2023, 07:24:27 AM »
I have 111k left on a 15 year mortgage at 2.75% that'll mature in 2031.

Posting here to hold myself accountable not to curtail or payoff the balance -- as sometimes I question a bit my DPYMC faith.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #3574 on: February 13, 2023, 07:52:04 AM »
I have 111k left on a 15 year mortgage at 2.75% that'll mature in 2031.

Posting here to hold myself accountable not to curtail or payoff the balance -- as sometimes I question a bit my DPYMC faith.

Curious, what would tempt you to pay something like that off? Just trying to understand the motivationÖ

sonofsven

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Re: DONT Payoff your Mortgage Club
« Reply #3575 on: February 13, 2023, 08:48:29 AM »
I received an email from Better mortgage brokers, they have a deal going where if you close on a mortgage now they will pay up to $3500 closing costs on a re-fi if rates go down. Needs to be at least six months after close, and be done within three years of close.
Might just be marketing BS, but maybe it's an option for folks who need a mortgage now.

ChpBstrd

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Re: DONT Payoff your Mortgage Club
« Reply #3576 on: February 13, 2023, 11:55:20 AM »
No discussion is allowed there, only celebration.

Wasn't aware no discussion was allowed there. Isn't that the entire point of forums? I started that thread and it certainly wasn't my intention for it to be a celebration only thread... however it is a ten year old thread and has probably changed a lot in my absence.
Hmmm... If those thread denizens were made aware how far they strayed from the original intent of the thread with their "celebrations only" demands - that could be pretty funny.
Not gonna lie, for a moment I was tempted to share that gem with the mods, but some of us were sternly warned to keep out of the "discussion" or risk being banned. Not worth it to me. Let 'em celebrate all they want. However, when people say this forum has changed, I always think it started with those threads.
Can't disagree with that. Face punches blocked in favor of creating a "safe space" - which apparently wasn't even the intent of the originator of the discussion.
How about this:

If you have a 3.5% mortgage, you belong in the DPOYM club.
If you have a 6.5% mortgage, you belong in the POYM club.
If you're in between, there's no clear answer.

In the world of the past, there were only cheap mortgages and anyone with a pulse refinanced every few years. In today's world, there are people with vastly different mortgage realities. It doesn't make sense to tell the 3.5% person to pay off their mortgage, and it also doesn't make sense to tell the 6.5% person NOT to pay off their mortgage if they will still have good liquidity afterward. It's not so much that it's rude or insensitive to give each type of person bad advice, it's just that the advice is often bad if the interest rate is not taken into account.

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #3577 on: February 13, 2023, 12:00:37 PM »
I mean, yeah - starting to get a little high at 6.5%. I might look to do a 2nd mortgage at some point in the next year. Definitely not refinancing from 3.75% to 6.5% on $118K just to get $70K out when I can probably get close to same rate with a 2nd mortgage.

Way upthread you'll see why that's the case for me - tried to refinance one last time in 2021, but didn't have the energy to deal with my unusual situation then having gone from Self Employed for 10 years -> W2 employee for 10 monhths -> back to self employed right when I decided there was enough equity to try (we had refinanced to 80% LTV in October 2019 - crazy run up since then even). Will have that coveted 2 years of tax returns soon.

nouseforausername

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Re: DONT Payoff your Mortgage Club
« Reply #3578 on: February 13, 2023, 12:17:04 PM »
I have 111k left on a 15 year mortgage at 2.75% that'll mature in 2031.

Posting here to hold myself accountable not to curtail or payoff the balance -- as sometimes I question a bit my DPYMC faith.

Curious, what would tempt you to pay something like that off? Just trying to understand the motivationÖ

It would lower my fixed costs by 44%. I'd have to re-model it, but I think it would actually move up a "technically I'm capable to FIRE" tipping point.

Just answering a question here! If this isn't the place to ponder it -- no problem :]

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #3579 on: February 13, 2023, 03:40:03 PM »
How about this:

If you have a 3.5% mortgage, you belong in the DPOYM club.
If you have a 6.5% mortgage, you belong in the POYM club.
If you're in between, there's no clear answer.

In the world of the past, there were only cheap mortgages and anyone with a pulse refinanced every few years. In today's world, there are people with vastly different mortgage realities. It doesn't make sense to tell the 3.5% person to pay off their mortgage, and it also doesn't make sense to tell the 6.5% person NOT to pay off their mortgage if they will still have good liquidity afterward. It's not so much that it's rude or insensitive to give each type of person bad advice, it's just that the advice is often bad if the interest rate is not taken into account.
Uh, you must have a very short view into "the past"...

How about this:

Even at 6.5%, the answer isn't quite so clear. If you're not saving enough to get your employer's full match or saving less pre-tax that what's allowed in your situation, or skipping Roth IRAs (if eligible), then you have no business paying extra on your mortgage. Even if you're doing all these things, there is still the time value of money to consider and the mighty, mighty hedge against inflation a fixed mortgage generously provides.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #3580 on: February 13, 2023, 03:46:06 PM »
I have 111k left on a 15 year mortgage at 2.75% that'll mature in 2031.

Posting here to hold myself accountable not to curtail or payoff the balance -- as sometimes I question a bit my DPYMC faith.

Curious, what would tempt you to pay something like that off? Just trying to understand the motivationÖ

It would lower my fixed costs by 44%. I'd have to re-model it, but I think it would actually move up a "technically I'm capable to FIRE" tipping point.

Just answering a question here! If this isn't the place to ponder it -- no problem :]
This is the place where discussion is encouraged. You are absolutely in the right place!

One of the many reasons not to do it is the money you pull from investments will stop growing. Keeping it means the true cost of your housing goes down with inflation, while your investments continue to grow. There's a whole lot of good sleep to be had knowing you could pay off your mortgage in a heartbeat. However, watching your assets grow is exponentially more reassuring. Over time, the markets always go up, while your fixed rate mortgage doesn't.

nouseforausername

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Re: DONT Payoff your Mortgage Club
« Reply #3581 on: February 14, 2023, 04:47:57 AM »
@Dicey Thanks!

dragoncar

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Re: DONT Payoff your Mortgage Club
« Reply #3582 on: February 17, 2023, 05:47:51 PM »
How about this:

If you have a 3.5% mortgage, you belong in the DPOYM club.
If you have a 6.5% mortgage, you belong in the POYM club.
If you're in between, there's no clear answer.

In the world of the past, there were only cheap mortgages and anyone with a pulse refinanced every few years. In today's world, there are people with vastly different mortgage realities. It doesn't make sense to tell the 3.5% person to pay off their mortgage, and it also doesn't make sense to tell the 6.5% person NOT to pay off their mortgage if they will still have good liquidity afterward. It's not so much that it's rude or insensitive to give each type of person bad advice, it's just that the advice is often bad if the interest rate is not taken into account.
Uh, you must have a very short view into "the past"...

How about this:

Even at 6.5%, the answer isn't quite so clear. If you're not saving enough to get your employer's full match or saving less pre-tax that what's allowed in your situation, or skipping Roth IRAs (if eligible), then you have no business paying extra on your mortgage. Even if you're doing all these things, there is still the time value of money to consider and the mighty, mighty hedge against inflation a fixed mortgage generously provides.

You also don't know what the next few years will hold.  Rates could drop again, and a refinance of original purchase loan is going to get better terms than a cash-out (tax and rate) after you've totally paid off your mortgage

That kind of goes with the theme that keeping your mortgage is just more flexible.  You might end up paying more for that flexibility

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #3583 on: February 18, 2023, 12:21:37 AM »
How about this:

If you have a 3.5% mortgage, you belong in the DPOYM club.
If you have a 6.5% mortgage, you belong in the POYM club.
If you're in between, there's no clear answer.

In the world of the past, there were only cheap mortgages and anyone with a pulse refinanced every few years. In today's world, there are people with vastly different mortgage realities. It doesn't make sense to tell the 3.5% person to pay off their mortgage, and it also doesn't make sense to tell the 6.5% person NOT to pay off their mortgage if they will still have good liquidity afterward. It's not so much that it's rude or insensitive to give each type of person bad advice, it's just that the advice is often bad if the interest rate is not taken into account.
Uh, you must have a very short view into "the past"...

How about this:

Even at 6.5%, the answer isn't quite so clear. If you're not saving enough to get your employer's full match or saving less pre-tax that what's allowed in your situation, or skipping Roth IRAs (if eligible), then you have no business paying extra on your mortgage. Even if you're doing all these things, there is still the time value of money to consider and the mighty, mighty hedge against inflation a fixed mortgage generously provides.

You also don't know what the next few years will hold.  Rates could drop again, and a refinance of original purchase loan is going to get better terms than a cash-out (tax and rate) after you've totally paid off your mortgage

That kind of goes with the theme that keeping your mortgage is just more flexible.  You might end up paying more for that flexibility
Aren't there negative tax consequences associated with pulling cash out of a home you've paid off? Something something $100k limit...?

Tangent: there is some seriously cringe-worthy bombast happening on a certain other thread. I rolled it so hard, my glass eye almost fell out. Not naming or quoting, but Geez, Louise!

grantmeaname

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Re: DONT Payoff your Mortgage Club
« Reply #3584 on: February 18, 2023, 06:10:39 AM »
What tax consequences would those be? Nothing that I'm aware of or that a quick Google search turned up...

TomTX

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Re: DONT Payoff your Mortgage Club
« Reply #3585 on: February 18, 2023, 09:06:28 AM »
Aren't there negative tax consequences associated with pulling cash out of a home you've paid off? Something something $100k limit...?
Taking a loan against an asset like a house is not itself a taxable event. However, you now need more cash flow - if this extra cash flow is income (say, Traditional IRA withdrawal) it may negatively impact your ACA subsidies and other tax incentives.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #3586 on: February 18, 2023, 09:15:45 AM »
Aren't there negative tax consequences associated with pulling cash out of a home you've paid off? Something something $100k limit...?
Taking a loan against an asset like a house is not itself a taxable event. However, you now need more cash flow - if this extra cash flow is income (say, Traditional IRA withdrawal) it may negatively impact your ACA subsidies and other tax incentives.
I'm thinking there is a cap on how much of the interest on the new loan would be tax deductible, though possibly tax code changes implemented by a certain former US president changed that.

TomTX

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Re: DONT Payoff your Mortgage Club
« Reply #3587 on: February 18, 2023, 09:42:02 AM »
Aren't there negative tax consequences associated with pulling cash out of a home you've paid off? Something something $100k limit...?
Taking a loan against an asset like a house is not itself a taxable event. However, you now need more cash flow - if this extra cash flow is income (say, Traditional IRA withdrawal) it may negatively impact your ACA subsidies and other tax incentives.
I'm thinking there is a cap on how much of the interest on the new loan would be tax deductible, though possibly tax code changes implemented by a certain former US president changed that.
You're probably thinking about the $10k SALT cap which the certain former president pushed through. There used to be no cap: https://taxfoundation.org/tax-basics/salt-deduction/

It's irrelevant for me - I use the standard deduction since I come nowhere near enough to make itemizing worth it. The standard deduction for 2023 MFJ is $27,700. For single filers, it's $13,850

LibStache

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Re: DONT Payoff your Mortgage Club
« Reply #3588 on: February 18, 2023, 08:27:01 PM »
Hi folks, Iím new to the idea of NOT paying off your mortgage as a fire strategy. But Iím curious about several things. I am about 6 years from FIRE and I planned to use the last couple of years before retiring to completely pay down the mortgage. Are folks in this camp not planning to pay down the mortgage early at all and just let them ride for the full length of the mortgage (carrying the mortgage payment into retirement), or is it that theyíre planning to do exactly what I said I was planning to do which investing now and then paying down the mortgage just before retirement. I hope this is making sense. Iím just wondering if Iíve been missing something and should reevaluate my need to pay down the mortgage before FIRE.

For what itís worth, we have a $180,000 30-year mortgage (2021), 2.75% interest rate, $1069 payment.  According to my calculations, in order to retire without paying it off would require an extra $300k invested to cover the $1069 monthly payment OR, I could spend a couple extra years just before fire paying down the $150k-ish remaining  principal instead of investing(but also while letting my investments grow) and be done with it.

Am I missing something here?  Iíd love to hear your thoughts.

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Re: DONT Payoff your Mortgage Club
« Reply #3589 on: February 18, 2023, 08:37:21 PM »
Hi folks, Iím new to the idea of NOT paying off your mortgage as a fire strategy. But Iím curious about several things. I am about 6 years from FIRE and I planned to use the last couple of years before retiring to completely pay down the mortgage. Are folks in this camp not planning to pay down the mortgage early at all and just let them ride for the full length of the mortgage (carrying the mortgage payment into retirement), or is it that theyíre planning to do exactly what I said I was planning to do which investing now and then paying down the mortgage just before retirement. I hope this is making sense. Iím just wondering if Iíve been missing something and should reevaluate my need to pay down the mortgage before FIRE.

For what itís worth, we have a $180,000 30-year mortgage (2021), 2.75% interest rate, $1069 payment.  According to my calculations, in order to retire without paying it off would require an extra $300k invested to cover the $1069 monthly payment OR, I could spend a couple extra years just before fire paying down the $150k-ish remaining  principal instead of investing(but also while letting my investments grow) and be done with it.

Am I missing something here?  Iíd love to hear your thoughts.

Personally.  I took out my 30 year 3.875% mortgage in April of 2022.  Iím retiring in July of 2025.  I pay $19.23 extra each month to round up my payment to the nearest $50.  I plan on paying no more than this ever.  Honestly Iím likely to sell before I every reach the end of my Mortgage.  I have enough to pay it off today in my investment account.  Actually I had enough to pay cash for my place 10 months ago and didnít.

LibStache

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Re: DONT Payoff your Mortgage Club
« Reply #3590 on: February 18, 2023, 08:48:31 PM »
Thanks for your reply. I think where Iím confused is that itíll take, at least for me, about the same length of time to pay down the mortgage as it would to have enough extra invested to cover a mortgage payment into retirement. I understand that my invested money would outperform a 2.75% mortgage rate, so I was just wondering if there was more to it, like tax implications, that I might be missing. 

bacchi

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Re: DONT Payoff your Mortgage Club
« Reply #3591 on: February 18, 2023, 09:30:25 PM »
Thanks for your reply. I think where Iím confused is that itíll take, at least for me, about the same length of time to pay down the mortgage as it would to have enough extra invested to cover a mortgage payment into retirement. I understand that my invested money would outperform a 2.75% mortgage rate, so I was just wondering if there was more to it, like tax implications, that I might be missing.

Saving $300k to cover the mortgage payment isn't the correct way to think about it. That's because the mortgage (the PI portion, anyway) goes away at some point. You need to use cfiresim to model what happens if you keep ~$150k (the remaining principal) invested over 28 years. You can add "Spending" at the bottom -- make sure to unclick "Inflation Adjusted," which is where the real magic happens.

You will, of course, need to save 25x to cover insurance and property taxes.

The one thing a mortgage payment (the PI of PITI) does affect for the worse is ACA subsidies. Pulling out extra money for the mortgage may increase your taxes but probably less than you think due to cost basis and Roth conversions, etc.

LibStache

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Re: DONT Payoff your Mortgage Club
« Reply #3592 on: February 18, 2023, 10:04:42 PM »
Wow, thanks for sharing that site. Really cool. I think where Iím still feeling confused is that in order to have enough money to cover monthly expenses that would include the $1069 mortgage payment for the first 22 years of retirement, Iíd still have to have more money saved to do that or Iíd have to increase my withdrawal rate to beyond 5.5%.

LibStache

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Re: DONT Payoff your Mortgage Club
« Reply #3593 on: February 19, 2023, 04:22:53 AM »
Okay! When I woke up this morning it was like a lightbulb went off and what you said clicked.  I only need enough ďextraĒ invested to cover the PI for the remaining time of the loan, which would be about $150k. And really, I wouldnít even need that much since it would continue growing over that period of time anyway.Iíll have to do the math to see exactly how much that would be. Thank you so much for your help!
« Last Edit: February 19, 2023, 04:24:35 AM by LibStache »

Fomerly known as something

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Re: DONT Payoff your Mortgage Club
« Reply #3594 on: February 19, 2023, 10:39:38 AM »
Thanks for your reply. I think where Iím confused is that itíll take, at least for me, about the same length of time to pay down the mortgage as it would to have enough extra invested to cover a mortgage payment into retirement. I understand that my invested money would outperform a 2.75% mortgage rate, so I was just wondering if there was more to it, like tax implications, that I might be missing.

Yes there are major tax implications for me as a single US tax payer.  I itemize and pretty much all of my interest from my mortgage is deductible.

LibStache

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Re: DONT Payoff your Mortgage Club
« Reply #3595 on: February 19, 2023, 05:41:13 PM »
Great point. Thanks for the tip! 

LibStache

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Re: DONT Payoff your Mortgage Club
« Reply #3596 on: February 22, 2023, 01:18:43 PM »
So, Iím really getting into the idea of not paying off the mortgage early but still feel like I need clarity on the process or strategy folks are using to do this. Would anyone be willing to share the process they follow?  Do you have the entire remaining balance of your mortgage invested before FIRE, or do you just have enough invested to pre-pay a certain number of payments?  Also, what types of accounts do you have this money invested in, etc. I assume just a taxable brokerage account unless you happen to already have enough built up in a Roth IRA. Iíd just really appreciate some insight on the process you all are using to make this strategy work, as I rearrange this aspect of my FIRE plan.

For what itís worth, I have $182,000, 2.75%, 28 years of 30 remaining, payment is $1069 including PMI of about $27 that will come off soon.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #3597 on: February 22, 2023, 04:44:25 PM »
So, Iím really getting into the idea of not paying off the mortgage early but still feel like I need clarity on the process or strategy folks are using to do this. Would anyone be willing to share the process they follow?  Do you have the entire remaining balance of your mortgage invested before FIRE, or do you just have enough invested to pre-pay a certain number of payments?  Also, what types of accounts do you have this money invested in, etc. I assume just a taxable brokerage account unless you happen to already have enough built up in a Roth IRA. Iíd just really appreciate some insight on the process you all are using to make this strategy work, as I rearrange this aspect of my FIRE plan.

For what itís worth, I have $182,000, 2.75%, 28 years of 30 remaining, payment is $1069 including PMI of about $27 that will come off soon.
Donít over think it.
The simple premise is this: you will have a lot more money and quite possibly far less risk if you put money towards other investments, particularly if you follow the Investment Order.

I donít segregate my money into ďsinking fundsĒ and the like because money is fungible, but if that helps you mentally thereís no harm or cost in doing so. I already have far more than our mortgage balance in investments and that will continue into retirement. No, I do not plan on paying it off when I retire either, as it would involve transferring wealth from diverse investments into my home.

cFIREsim is very useful for modeling how much additional you might need yo cover the PI for a finite period into retirement.

jsap819

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Re: DONT Payoff your Mortgage Club
« Reply #3598 on: February 23, 2023, 12:05:54 AM »
So, I’m really getting into the idea of not paying off the mortgage early but still feel like I need clarity on the process or strategy folks are using to do this. Would anyone be willing to share the process they follow?  Do you have the entire remaining balance of your mortgage invested before FIRE, or do you just have enough invested to pre-pay a certain number of payments?  Also, what types of accounts do you have this money invested in, etc. I assume just a taxable brokerage account unless you happen to already have enough built up in a Roth IRA. I’d just really appreciate some insight on the process you all are using to make this strategy work, as I rearrange this aspect of my FIRE plan.

For what it’s worth, I have $182,000, 2.75%, 28 years of 30 remaining, payment is $1069 including PMI of about $27 that will come off soon.

I think you're mistaking the forest for the trees. You're looking at your $1069 payment as part of the 4% SWR when in reality, it's inflation protected which means your monthly payment will never go up year after year and eventually the payment will stop once the balance is down to $0.  To make things simple, just add your balance of $182k to your FIRE (expenses without the mortgage payment x25) number and be done with it.

You can choose to pay off your mortgage in one lump sum when you reach that number. Or, you can keep that $182k invested and just take out the monthly mortgage payment from that as long as you can beat your rate of 2.75% every year. With 28 years remaining, you're very likely to beat that with ease and end up with possibly double or triple the amount you started with after you make that last payment.

Hope that clarifies it for you as this is what seems to be holding you up.
« Last Edit: February 23, 2023, 01:08:17 PM by jsap819 »

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #3599 on: February 23, 2023, 07:08:10 AM »
So, Iím really getting into the idea of not paying off the mortgage early but still feel like I need clarity on the process or strategy folks are using to do this. Would anyone be willing to share the process they follow?  Do you have the entire remaining balance of your mortgage invested before FIRE, or do you just have enough invested to pre-pay a certain number of payments?  Also, what types of accounts do you have this money invested in, etc. I assume just a taxable brokerage account unless you happen to already have enough built up in a Roth IRA. Iíd just really appreciate some insight on the process you all are using to make this strategy work, as I rearrange this aspect of my FIRE plan.

For what itís worth, I have $182,000, 2.75%, 28 years of 30 remaining, payment is $1069 including PMI of about $27 that will come off soon.

The mechanics of making the payments is the easy part. Organizing the rest of your life such that you're saving 25% or more of the remaining income takes discipline.

 

Wow, a phone plan for fifteen bucks!