Author Topic: DONT Payoff your Mortgage Club  (Read 70468 times)

Rufus.T.Firefly

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Re: DONT Payoff your Mortgage Club
« Reply #600 on: May 17, 2018, 08:52:58 AM »
Pseudo, you're a man of contradictions. You want a low-risk, guarantee on your mortgage. But you're already planning to work extra years so you can buy a Ferrari? How will owning a car that's worth the same amount as your house make your retirement less risky?

B42 already explained the math pretty well.

But here's a missing part of your thought process: you're only considering the first 10 years of the math. Have you consider how the numbers fair 30 or 40 years from now? I think you came here in earnest, so I'll take the time to post this using your figures considering a 30 year time-frame.

Scenario 1: Pay Off Mortgage Early (367K, 3.5% interest, 30 year term)
Additional monthly payment: $1,629

*runs mortgage payoff calculator* (see bankrate.com)
*result: mortgage will be paid off in 11 years, 4 months*

So at the end of 11 years, 4 months, you will have:
Mortgage loan: $0
Additional Investments: $0

Now, presumably you will invest the additional monthly payment + your normal payment in the stock market:
Additional Investment: $3,277/month

*runs investment return calculator* (see bankrate.com)

After the remaining 19 years, you'll have $1,525,048

End result after 30 years:
Mortgage Loan: $0
Additional Investments: $1,525,048

Scenario #2: Pay off Mortgage slowly
Additional Investment: 1,629/month

*runs investment calculator*

After 30 years, you'll have $1,915,810

End result after 30 years:
Mortgage Loan: $0
Additional Investments: $1,915,810

Difference between two scenarios: $390,762

***Note this is with conservative, 7% investment rate of return. If you use 10% return rate instead of 7%, the difference is $1,268,003***


"I have worked my way up from nothing to a state of extreme poverty"

~ Groucho Marx

tomsang

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Re: DONT Payoff your Mortgage Club
« Reply #601 on: May 17, 2018, 09:35:51 AM »
Hello - Can someone help me understand my numbers (see attached pic) ....  Granted I'm a bit more conservative on the Projected Investment Yield front than most of you at 7%.

My goal is to FIRE in 10-11 years, which is how/why I've calculated my extra monthly payment to be $1629.

Maybe I'm misreading the spreadsheet, but it seems to indicate that after 10-ish years, my "benefit" will only be about $35K-$40K.

I understand that $35K is still better than $0 and could be more if we get better than 7% returns - but it could also be less.

Given my inputs, and FIRE timeline, what would be an optimal strategy?

Should I just stick to my plan of paying extra or is it really worth it to extend this out as long as possible? - which means after 10 years, I'd be paying out of investments rather than earned income.

Yes, you are misreading the spreadsheet.  If you plan on dying in 10 years, then the $35k would be accurate.  If you plan on living longer, then it shows after 30 years that you will be $168k better off.  If you project it out farther that number will continue to grow. 

Goldielocks

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Re: DONT Payoff your Mortgage Club
« Reply #602 on: May 17, 2018, 05:10:08 PM »
I am starting to get torn about not paying off more of my mortgage.

The interest rate has been creeping up on it.
The mortgage needs to be renewed in 12 months.

  It was still a very good mortgage decision when we got it, but the cashflow to service it now that I am FIRED is quite high out of our monthly income.   And it will only get to be more $$'s as the rates go up.   It was a great mortgage decision when we got it 4 years ago, but now?  hmmm.  Maybe out situation has changed.

Meanwhile, the BOND funds I have money in have lost about 4% of their value.   
AND we have less income and may not re-qualify for the full mortgage amount next year (we can't shop the mortgage this large to other lenders).

Shouldn't I be thinking about moving money from my BOND asset allocation, to get a guaranteed payoff against the mortgage?


Recap --
Have a large variable mortgage renews in 2019.  Currently at 2.85% now.  Has increased from 2.1% in the past 16 months and likely to go to at least 3% this year.

20 year amortization remaining.

5 year variable rates are 2.5% (today, likely to increase)
5 year fixed rates are 3.15% (today, likely to increase, especially if we can't shop it around)

I am currently cashflow negative (drawing from savings), and it will get to be moreso as my mortgage rate increase.

No tax benefits for holding a mortgage - both because of country differences, and also because my income is so low that the Marginal Tax Rate is also quite low.  So don't need to adjust for taxes in the calcs.

Bond fund in my (tax free) investments have dropped (negative returns) over the past 18 months.  Return average over 5 years would at best be, what, 1% more than a mortgage rate?


-- Should I put a large lump sum ($100k to $200k) onto my mortgage, drawing down my fixed income portfolio?--


Le Barbu

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Re: DONT Payoff your Mortgage Club
« Reply #603 on: May 17, 2018, 08:31:27 PM »
I am starting to get torn about not paying off more of my mortgage.

The interest rate has been creeping up on it.
The mortgage needs to be renewed in 12 months.

  It was still a very good mortgage decision when we got it, but the cashflow to service it now that I am FIRED is quite high out of our monthly income.   And it will only get to be more $$'s as the rates go up.   It was a great mortgage decision when we got it 4 years ago, but now?  hmmm.  Maybe out situation has changed.

Meanwhile, the BOND funds I have money in have lost about 4% of their value.   
AND we have less income and may not re-qualify for the full mortgage amount next year (we can't shop the mortgage this large to other lenders).

Shouldn't I be thinking about moving money from my BOND asset allocation, to get a guaranteed payoff against the mortgage?


Recap --
Have a large variable mortgage renews in 2019.  Currently at 2.85% now.  Has increased from 2.1% in the past 16 months and likely to go to at least 3% this year.

20 year amortization remaining.

5 year variable rates are 2.5% (today, likely to increase)
5 year fixed rates are 3.15% (today, likely to increase, especially if we can't shop it around)

I am currently cashflow negative (drawing from savings), and it will get to be moreso as my mortgage rate increase.

No tax benefits for holding a mortgage - both because of country differences, and also because my income is so low that the Marginal Tax Rate is also quite low.  So don't need to adjust for taxes in the calcs.

Bond fund in my (tax free) investments have dropped (negative returns) over the past 18 months.  Return average over 5 years would at best be, what, 1% more than a mortgage rate?


-- Should I put a large lump sum ($100k to $200k) onto my mortgage, drawing down my fixed income portfolio?--

I am not a fan of holding debt and bonds at the same Time. For me, it’s a continuum. First, you have debt and 100% stocks, then deleverage  but still 100% stocks, finaly introduce short term bonds. YMMV, let see what others think!
"The real reason this blog exists, is simply to save the entire human race from destroying itself through overconsumption of its own habitat"

-MMM

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #604 on: May 17, 2018, 10:59:41 PM »
I am starting to get torn about not paying off more of my mortgage.

The interest rate has been creeping up on it.
The mortgage needs to be renewed in 12 months.

  It was still a very good mortgage decision when we got it, but the cashflow to service it now that I am FIRED is quite high out of our monthly income.   And it will only get to be more $$'s as the rates go up.   It was a great mortgage decision when we got it 4 years ago, but now?  hmmm.  Maybe out situation has changed.

Meanwhile, the BOND funds I have money in have lost about 4% of their value.   
AND we have less income and may not re-qualify for the full mortgage amount next year (we can't shop the mortgage this large to other lenders).

Shouldn't I be thinking about moving money from my BOND asset allocation, to get a guaranteed payoff against the mortgage?


Recap --
Have a large variable mortgage renews in 2019.  Currently at 2.85% now.  Has increased from 2.1% in the past 16 months and likely to go to at least 3% this year.

20 year amortization remaining.

5 year variable rates are 2.5% (today, likely to increase)
5 year fixed rates are 3.15% (today, likely to increase, especially if we can't shop it around)

I am currently cashflow negative (drawing from savings), and it will get to be moreso as my mortgage rate increase.

No tax benefits for holding a mortgage - both because of country differences, and also because my income is so low that the Marginal Tax Rate is also quite low.  So don't need to adjust for taxes in the calcs.

Bond fund in my (tax free) investments have dropped (negative returns) over the past 18 months.  Return average over 5 years would at best be, what, 1% more than a mortgage rate?


-- Should I put a large lump sum ($100k to $200k) onto my mortgage, drawing down my fixed income portfolio?--

I am not a fan of holding debt and bonds at the same Time. For me, it’s a continuum. First, you have debt and 100% stocks, then deleverage  but still 100% stocks, finaly introduce short term bonds. YMMV, let see what others think!
@Le Barbu, funny, I said something very similar on another thread this week. Wish I'd worked that out in my head when I was much younger. I think I was unnecessarily conservative way back then because I failed to realize this. It simply wasn't taught that way then, which, once again, underscores the value of resources like this forum.

@Goldielocks - It would freak me the fuck out to have a mortgage system that's not fixed for a very long period of time and is not tax deductible. My "don't prepay the mortgage" stance assumes both. In your shoes, I'd probably wondering the same things. However, I can't hope to provide an answer your last question without a lot more information. My gut response is "Cash is king, no matter where you live". Good luck, whatever you decide!
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Goldielocks

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Re: DONT Payoff your Mortgage Club
« Reply #605 on: May 18, 2018, 12:44:18 AM »
Hmm,  Thanks to you both.  Good thoughts.   DH thinks of it as a cash continuum, too.   I also hold out that bonds, pensions and mortgage are all in the same field as "fixed investments" in the  asset allocation game.

Dicey -- what sorts of additional information would be important to you to consider in this scenario?

In the past, I have been basically looking at rates of return, net of taxes for mtg versus investments.





Le Barbu

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Re: DONT Payoff your Mortgage Club
« Reply #606 on: May 18, 2018, 04:31:52 AM »
I am starting to get torn about not paying off more of my mortgage.

The interest rate has been creeping up on it.
The mortgage needs to be renewed in 12 months.

  It was still a very good mortgage decision when we got it, but the cashflow to service it now that I am FIRED is quite high out of our monthly income.   And it will only get to be more $$'s as the rates go up.   It was a great mortgage decision when we got it 4 years ago, but now?  hmmm.  Maybe out situation has changed.

Meanwhile, the BOND funds I have money in have lost about 4% of their value.   
AND we have less income and may not re-qualify for the full mortgage amount next year (we can't shop the mortgage this large to other lenders).

Shouldn't I be thinking about moving money from my BOND asset allocation, to get a guaranteed payoff against the mortgage?


Recap --
Have a large variable mortgage renews in 2019.  Currently at 2.85% now.  Has increased from 2.1% in the past 16 months and likely to go to at least 3% this year.

20 year amortization remaining.

5 year variable rates are 2.5% (today, likely to increase)
5 year fixed rates are 3.15% (today, likely to increase, especially if we can't shop it around)

I am currently cashflow negative (drawing from savings), and it will get to be moreso as my mortgage rate increase.

No tax benefits for holding a mortgage - both because of country differences, and also because my income is so low that the Marginal Tax Rate is also quite low.  So don't need to adjust for taxes in the calcs.

Bond fund in my (tax free) investments have dropped (negative returns) over the past 18 months.  Return average over 5 years would at best be, what, 1% more than a mortgage rate?


-- Should I put a large lump sum ($100k to $200k) onto my mortgage, drawing down my fixed income portfolio?--

I am not a fan of holding debt and bonds at the same Time. For me, it’s a continuum. First, you have debt and 100% stocks, then deleverage  but still 100% stocks, finaly introduce short term bonds. YMMV, let see what others think!
@Le Barbu, funny, I said something very similar on another thread this week. Wish I'd worked that out in my head when I was much younger. I think I was unnecessarily conservative way back then because I failed to realize this. It simply wasn't taught that way then, which, once again, underscores the value of resources like this forum.

@Goldielocks - It would freak me the fuck out to have a mortgage system that's not fixed for a very long period of time and is not tax deductible. My "don't prepay the mortgage" stance assumes both. In your shoes, I'd probably wondering the same things. However, I can't hope to provide an answer your last question without a lot more information. My gut response is "Cash is king, no matter where you live". Good luck, whatever you decide!

Bolded part of your post is exactly what happened to me!
« Last Edit: May 18, 2018, 05:05:36 AM by Le Barbu »
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boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #607 on: May 18, 2018, 08:00:19 AM »
Hi All,

We paid off our mortgage a few months early last Tuesday. We did that as my wife has 'pre-tired' and her income has halved so it is a debit we didn't need coming out of our account on the 1st of each month. Also, although the interest is very low, the mortgage protection is a lot higher and we are saving that. It was, in fairness, a small enough amount left to pay. Just wanted to tell someone. It's a bit anticlimactic and, this week, our beloved cat died, the fridge freezer packed in same day  and a rad in the rental house has been leaking(unknown to us) for 2 months and those are all extra expenses this week! I miss the cat. All else is just stuff! IT

wrong thread if you're looking for congrats, if you're looking to remortgage and take advantage of these still low rates then you've come to the correct place.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #608 on: May 18, 2018, 08:46:39 AM »
I am starting to get torn about not paying off more of my mortgage.

The interest rate has been creeping up on it.
The mortgage needs to be renewed in 12 months.

  It was still a very good mortgage decision when we got it, but the cashflow to service it now that I am FIRED is quite high out of our monthly income.   And it will only get to be more $$'s as the rates go up.   It was a great mortgage decision when we got it 4 years ago, but now?  hmmm.  Maybe out situation has changed.

Meanwhile, the BOND funds I have money in have lost about 4% of their value.   
AND we have less income and may not re-qualify for the full mortgage amount next year (we can't shop the mortgage this large to other lenders).

Shouldn't I be thinking about moving money from my BOND asset allocation, to get a guaranteed payoff against the mortgage?


Recap --
Have a large variable mortgage renews in 2019.  Currently at 2.85% now.  Has increased from 2.1% in the past 16 months and likely to go to at least 3% this year.

20 year amortization remaining.

5 year variable rates are 2.5% (today, likely to increase)
5 year fixed rates are 3.15% (today, likely to increase, especially if we can't shop it around)

I am currently cashflow negative (drawing from savings), and it will get to be moreso as my mortgage rate increase.

No tax benefits for holding a mortgage - both because of country differences, and also because my income is so low that the Marginal Tax Rate is also quite low.  So don't need to adjust for taxes in the calcs.

Bond fund in my (tax free) investments have dropped (negative returns) over the past 18 months.  Return average over 5 years would at best be, what, 1% more than a mortgage rate?


-- Should I put a large lump sum ($100k to $200k) onto my mortgage, drawing down my fixed income portfolio?--

Goldielocks: are you currently retired? What percentage of your expenses would go to the mortgage payments under different scenarios?

boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #609 on: May 18, 2018, 09:01:22 AM »
snip

I am not a fan of holding debt and bonds at the same Time. For me, it’s a continuum. First, you have debt and 100% stocks, then deleverage  but still 100% stocks, finaly introduce short term bonds. YMMV, let see what others think!
@Le Barbu, funny, I said something very similar on another thread this week. Wish I'd worked that out in my head when I was much younger. I think I was unnecessarily conservative way back then because I failed to realize this. It simply wasn't taught that way then, which, once again, underscores the value of resources like this forum.

@Goldielocks - It would freak me the fuck out to have a mortgage system that's not fixed for a very long period of time and is not tax deductible. My "don't prepay the mortgage" stance assumes both. In your shoes, I'd probably wondering the same things. However, I can't hope to provide an answer your last question without a lot more information. My gut response is "Cash is king, no matter where you live". Good luck, whatever you decide!

Bolded part of your post is exactly what happened to me!

I'm thankful every day i found this site. it has taught me many things and lead to research on many other new learnings

1. I dont need 5MM to retire - i only need 2MM
2. Understanding indexing and why its better
3. Understanding the large amount of money left on the table paying down these crazy low mortgages.  Honestly i doubt we ever see the 3.25%/30year notes i have on my house again. banks are going to look back at this time and think WTF were we thinking.  (My mortgage holder calls me monthly to talk about refinancing)
4. Understanding different withdrawal strategies to protect assets
5. Understanding how safe the 4% number truly is - i'm a risk taker it didnt take much convincing
6. Travel hacking
7. Selling Tradelines
8. Taxes man thats huge- particularly tax strategy
9. Trad over Roth

PseudoStache

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Re: DONT Payoff your Mortgage Club
« Reply #610 on: May 18, 2018, 09:39:15 AM »
So you're planning to market time and bet against history. Best of luck then. But when you don't care about money who gives a fuck.
Why the hostility

You sound like a pretty angry person and are probably an asshole in real life.. best of luck to ya!

Have a blessed day!
MOD EDIT: Forum rule #1.
@PseudoStache, there is a thread that celebrates mortgage payoff, in which apparently no discussion of other/better options is allowed. Then there is this thread, where discussion and learning is encouraged and paying off cheap, affordable, fixed rate, primarily US-based mortgages is not. This is obvious, based on the all-cap "DONT" in the thread title. You have quite possibly just stumbled into the wrong thread. Or you could be a troll. For sure you do not understand B42's direct style. Someone who cares enough to tirelessly teach the same lesson over and over to people who are often hostile, skeptical, and unwilling to listen to reason is clearly NOT what you impolitely suggest he is. As the mods have pointed out, you do not get to do that here or anywhere else on this forum.

One more caution: This forum is populated by a significant number of people who range from casually agnostic to full-on atheist. You're welcome to stay and learn, but please refrain from flamethrowing blessings. As written, your final words are as deserving of redlining as the ones that were.

So Boarder's "Direct Style" of being a Jerk doesn't conflict with your rules?  Tell me how in my previous post that I in any way attacked him?  While he goes on to tell me I'm one of the selfish people that he DOESN'T know? 

Look I'm all about learning and facepunches - but you don't have to be rude or mean about it.




PseudoStache

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Re: DONT Payoff your Mortgage Club
« Reply #611 on: May 18, 2018, 09:44:57 AM »
Pseudo, you're a man of contradictions. You want a low-risk, guarantee on your mortgage. But you're already planning to work extra years so you can buy a Ferrari? How will owning a car that's worth the same amount as your house make your retirement less risky?

B42 already explained the math pretty well.

But here's a missing part of your thought process: you're only considering the first 10 years of the math. Have you consider how the numbers fair 30 or 40 years from now? I think you came here in earnest, so I'll take the time to post this using your figures considering a 30 year time-frame.

Scenario 1: Pay Off Mortgage Early (367K, 3.5% interest, 30 year term)
Additional monthly payment: $1,629

*runs mortgage payoff calculator* (see bankrate.com)
*result: mortgage will be paid off in 11 years, 4 months*

So at the end of 11 years, 4 months, you will have:
Mortgage loan: $0
Additional Investments: $0

Now, presumably you will invest the additional monthly payment + your normal payment in the stock market:
Additional Investment: $3,277/month

*runs investment return calculator* (see bankrate.com)

After the remaining 19 years, you'll have $1,525,048

End result after 30 years:
Mortgage Loan: $0
Additional Investments: $1,525,048

Scenario #2: Pay off Mortgage slowly
Additional Investment: 1,629/month

*runs investment calculator*

After 30 years, you'll have $1,915,810

End result after 30 years:
Mortgage Loan: $0
Additional Investments: $1,915,810

Difference between two scenarios: $390,762

***Note this is with conservative, 7% investment rate of return. If you use 10% return rate instead of 7%, the difference is $1,268,003***


Honest question:

If I'm retiring in 10 years, where is this "extra investment" coming from?

I'm not going to be earning any more money to invest.

PseudoStache

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Re: DONT Payoff your Mortgage Club
« Reply #612 on: May 18, 2018, 10:08:14 AM »
Hello - Can someone help me understand my numbers (see attached pic) ....  Granted I'm a bit more conservative on the Projected Investment Yield front than most of you at 7%.

My goal is to FIRE in 10-11 years, which is how/why I've calculated my extra monthly payment to be $1629.

Maybe I'm misreading the spreadsheet, but it seems to indicate that after 10-ish years, my "benefit" will only be about $35K-$40K.

I understand that $35K is still better than $0 and could be more if we get better than 7% returns - but it could also be less.

Given my inputs, and FIRE timeline, what would be an optimal strategy?

Should I just stick to my plan of paying extra or is it really worth it to extend this out as long as possible? - which means after 10 years, I'd be paying out of investments rather than earned income.

Yes, you are misreading the spreadsheet.  If you plan on dying in 10 years, then the $35k would be accurate.  If you plan on living longer, then it shows after 30 years that you will be $168k better off.  If you project it out farther that number will continue to grow.

But isn't this spreadsheet counting on the fact that I would be continuing to invest the $1629?  As I mentioned just a minute ago, if I'm retired, where would that investment be coming from?

And folks, believe it or not - In principle I AM in this camp - at least partially - I'm just not convinced to go all in (with keeping my mortgage as long as possible). 








boarder42

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Re: DONT Payoff your Mortgage Club
« Reply #613 on: May 18, 2018, 01:13:41 PM »
if you are 40k ahead after 10 years put 40k into this caluclator with 0 extra invested at 7% over the next 20 years.   -- its worth 154k at the end of that.  time value of money and compounding

http://www.moneychimp.com/calculator/compound_interest_calculator.htm


PseudoStache

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Re: DONT Payoff your Mortgage Club
« Reply #614 on: May 18, 2018, 03:02:39 PM »
if you are 40k ahead after 10 years put 40k into this caluclator with 0 extra invested at 7% over the next 20 years.   -- its worth 154k at the end of that.  time value of money and compounding

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Yup - I've done the math and get compounding... I didn't get to $1.75MM invested by mistake :)

Despite what appears to be cluelessness, I've been on here since 2013 and have learned a lot.

This is a purely psychological battle that I'm fighting within.... as I've mentioned, the math is the math.

But I am taking baby steps!  I just opened up a separate Vanguard account for the sole purpose of modulating "extra payments" into.

If I can't make myself go all in, I'll take it month by month :)





tyort1

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Re: DONT Payoff your Mortgage Club
« Reply #615 on: May 18, 2018, 04:51:15 PM »
if you are 40k ahead after 10 years put 40k into this caluclator with 0 extra invested at 7% over the next 20 years.   -- its worth 154k at the end of that.  time value of money and compounding

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Yup - I've done the math and get compounding... I didn't get to $1.75MM invested by mistake :)

Despite what appears to be cluelessness, I've been on here since 2013 and have learned a lot.

This is a purely psychological battle that I'm fighting within.... as I've mentioned, the math is the math.

But I am taking baby steps!  I just opened up a separate Vanguard account for the sole purpose of modulating "extra payments" into.

If I can't make myself go all in, I'll take it month by month :)

How about:
1. Dump all extra funds into investments
2. Save up enough to FIRE in the shortest time possible
3. Save up any additional amount needed to pay off your morgage
4. Pay off the mortgage

This allows you to front load your investments (where it matters the most) without having to carry the mental burden of thinking you'll have to pay a mortgage for 20 more years. 

That's what I'm doing.  My FIRE number is 1.5m plus $320k.  The 1.5 mil gets my expenses taken care of, the $320k abolishes my mortgage.  Just something to think about.
Frugalite in training.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #616 on: May 18, 2018, 08:24:46 PM »
Hmm,  Thanks to you both.  Good thoughts.   DH thinks of it as a cash continuum, too.   I also hold out that bonds, pensions and mortgage are all in the same field as "fixed investments" in the  asset allocation game.

Dicey -- what sorts of additional information would be important to you to consider in this scenario?

In the past, I have been basically looking at rates of return, net of taxes for mtg versus investments.
@Goldielocks, my chief resistance to people paying off the mortgage early is when they are missing out on other opportunities just for the sake of ferociously killing.all.the.debt. Are they getting their full employer match? Maxing their 401k? Roth-ing, if eligible? Backdoor? Mega-Backdoor? Decent EF? Taxable account? Blah x3. I differ with B42 a bit in that I'm okay with people paying off their mortgages eventually, provided they've taken all these other steps first. It's missing out on the tsunami-like power of compound interest that I don't want to see happen to people. If they learn the math and value of sequencing, then they really can make decisions that will accelerate their path to FIRE, as counterintuitive as that seems. What no one can ever do is regain those lost years of compounding. Once they're gone, they're gone forever.

In your case, I strongly suspect you are not leaving money on the table, as some others seem to be elsewhere. This is the kind of information I'm wondering about. You don't have to answer my questions directly (really, don't). I've tried to word this response in a way that will give you a little more to help you figure it out.

One more general thought, not specific to Goldilocks: getting the sequence wrong isn't the end of the freaking world. It just means you'll have to work longer and earn/save/invest more actual dollars to achieve FIRE. If you're looking to retire at a traditional age, that's no big deal. But aren't we all here to learn how to achieve FIRE faster and more efficiently? To that end, B42 and I are at your service. Slightly different message, same good wishes for all.

And while I'm in here fixing typos, thanks for your cross post, @sherr. It took me a while to get used to B42's direct style and phrasing, but I wouldn't change it for the world. And he surely wasn't the one breaking the forum rules, as you aptly noted.
« Last Edit: May 18, 2018, 09:20:48 PM by Dicey »
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sherr

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Re: DONT Payoff your Mortgage Club
« Reply #617 on: May 18, 2018, 08:52:20 PM »
You sound like a pretty angry person and are probably an asshole in real life.. best of luck to ya!
MOD EDIT: Forum rule #1.
...

So Boarder's "Direct Style" of being a Jerk doesn't conflict with your rules?  Tell me how in my previous post that I in any way attacked him?  While he goes on to tell me I'm one of the selfish people that he DOESN'T know? 

Look I'm all about learning and facepunches - but you don't have to be rude or mean about it.

Seriously? Because, "you sound like an angry person and are probably an asshole in real life" is a direct attack on a person, not an opinion or argument or position. Boarder can be... "relentless" in attacking positions he disagrees with, and I've had a run-in or two with him about that in the past. But you attacked him as a person, directly. Are you seriously incapable of distinguishing between the two? How can you even ask a question like "Tell me how in my previous post that I in any way attacked him"?

PseudoStache

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Re: DONT Payoff your Mortgage Club
« Reply #618 on: May 19, 2018, 10:03:29 AM »
You sound like a pretty angry person and are probably an asshole in real life.. best of luck to ya!
MOD EDIT: Forum rule #1.
...

So Boarder's "Direct Style" of being a Jerk doesn't conflict with your rules?  Tell me how in my previous post that I in any way attacked him?  While he goes on to tell me I'm one of the selfish people that he DOESN'T know? 

Look I'm all about learning and facepunches - but you don't have to be rude or mean about it.

Seriously? Because, "you sound like an angry person and are probably an asshole in real life" is a direct attack on a person, not an opinion or argument or position. Boarder can be... "relentless" in attacking positions he disagrees with, and I've had a run-in or two with him about that in the past. But you attacked him as a person, directly. Are you seriously incapable of distinguishing between the two? How can you even ask a question like "Tell me how in my previous post that I in any way attacked him"?

Umm I was obviously referring to my posts before my last Mod deleted remark.

He said: "Those who say who cares i could die with an extra million are some of the more selfish people alive."

While he may not have said directly: "PSEUDOSTACHE is one the more selfish people alive"

I would hope that you would also be able to comprehend that this an indictment on my character.

Then goes on to say "So you're planning to market time and bet against history. Best of luck then. But when you don't care about money who gives a fuck."

Yeah, don't you just love it when strangers talk to you like that?

Would you be OK if I said something like, "People who act like Boarder on forums are jerks"  Hey, I'm not directly attacking him, just the thought of people like him.

Are we good now - or do we need to keep this going?

MOD EDIT: No. You don't need to keep going. Take it to PMs.
« Last Edit: May 21, 2018, 09:47:24 AM by arebelspy »

PseudoStache

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Re: DONT Payoff your Mortgage Club
« Reply #619 on: May 19, 2018, 10:45:09 AM »
if you are 40k ahead after 10 years put 40k into this caluclator with 0 extra invested at 7% over the next 20 years.   -- its worth 154k at the end of that.  time value of money and compounding

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Yup - I've done the math and get compounding... I didn't get to $1.75MM invested by mistake :)

Despite what appears to be cluelessness, I've been on here since 2013 and have learned a lot.

This is a purely psychological battle that I'm fighting within.... as I've mentioned, the math is the math.

But I am taking baby steps!  I just opened up a separate Vanguard account for the sole purpose of modulating "extra payments" into.

If I can't make myself go all in, I'll take it month by month :)

How about:
1. Dump all extra funds into investments
2. Save up enough to FIRE in the shortest time possible
3. Save up any additional amount needed to pay off your morgage
4. Pay off the mortgage

This allows you to front load your investments (where it matters the most) without having to carry the mental burden of thinking you'll have to pay a mortgage for 20 more years. 

That's what I'm doing.  My FIRE number is 1.5m plus $320k.  The 1.5 mil gets my expenses taken care of, the $320k abolishes my mortgage.  Just something to think about.

That is sort of what I'm doing right now - but stretching it out to 10 years since I am a work from home SWAMI.  If my job circumstances change before then, then so will my mindset, likely.

We are already saving/investing about $5K per month and figured that the additional $1629 applied to the mortgage would be a good use of funds.

I'm not really worried about portfolio failure at this point.... so I think that in my case, I'm probably good either way.

I was simply just looking for an objective analysis/understanding of my spreadsheet results to figure out the best way to optimize these next ten to eleven years.

It seems like the spreadsheet is NOT accounting for FIRE (with no additional investment).





sherr

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Re: DONT Payoff your Mortgage Club
« Reply #620 on: May 19, 2018, 10:47:27 AM »
Are we good now - or do we need to keep this going?

Well obviously there would be no point in that, but Mods disagree with you, and I do too.

PseudoStache

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Re: DONT Payoff your Mortgage Club
« Reply #621 on: May 19, 2018, 11:13:25 AM »
Are we good now - or do we need to keep this going?

Well obviously there would be no point in that, but Mods disagree with you, and I do too.

"Direct Style" and "Relentlessness" do not break the Number 1 Forum rule of not being a jerk nor rule 4 of being respectful to other members - Noted.

sherr

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Re: DONT Payoff your Mortgage Club
« Reply #622 on: May 19, 2018, 02:23:48 PM »
Are we good now - or do we need to keep this going?

Well obviously there would be no point in that, but Mods disagree with you, and I do too.

"Direct Style" and "Relentlessness" do not break the Number 1 Forum rule of not being a jerk nor rule 4 of being respectful to other members - Noted.

Border regularly toes the line. You decided to escalate and stepped right over it, while simultaneously riding on a high horse of moral superiority. Not to mention that you are contentious enough in your own right.

Have a blessed day!

tyort1

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Re: DONT Payoff your Mortgage Club
« Reply #623 on: May 19, 2018, 04:26:36 PM »
if you are 40k ahead after 10 years put 40k into this caluclator with 0 extra invested at 7% over the next 20 years.   -- its worth 154k at the end of that.  time value of money and compounding

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Yup - I've done the math and get compounding... I didn't get to $1.75MM invested by mistake :)

Despite what appears to be cluelessness, I've been on here since 2013 and have learned a lot.

This is a purely psychological battle that I'm fighting within.... as I've mentioned, the math is the math.

But I am taking baby steps!  I just opened up a separate Vanguard account for the sole purpose of modulating "extra payments" into.

If I can't make myself go all in, I'll take it month by month :)

How about:
1. Dump all extra funds into investments
2. Save up enough to FIRE in the shortest time possible
3. Save up any additional amount needed to pay off your morgage
4. Pay off the mortgage

This allows you to front load your investments (where it matters the most) without having to carry the mental burden of thinking you'll have to pay a mortgage for 20 more years. 

That's what I'm doing.  My FIRE number is 1.5m plus $320k.  The 1.5 mil gets my expenses taken care of, the $320k abolishes my mortgage.  Just something to think about.

That is sort of what I'm doing right now - but stretching it out to 10 years since I am a work from home SWAMI.  If my job circumstances change before then, then so will my mindset, likely.

We are already saving/investing about $5K per month and figured that the additional $1629 applied to the mortgage would be a good use of funds.

I'm not really worried about portfolio failure at this point.... so I think that in my case, I'm probably good either way.

I was simply just looking for an objective analysis/understanding of my spreadsheet results to figure out the best way to optimize these next ten to eleven years.

It seems like the spreadsheet is NOT accounting for FIRE (with no additional investment).

The way I look at is this - if I have money extra money, investing gets me 10%.  Paying of the mortgage gets me a savings of 4%.  So investing gets me a 6% better return than paying down the mortgage. 

Using this math, I can see that on a 30 year time horizon, every month I use that $1625 to pay extra towards the mortgage, I am leaving about $10k on the table.  Every month!  $10k!

On the other hand, I really hate debt.  Hence my plan to get to FIRE asap using high return investments (VTSAX) front-loaded, and then once I have FI, I'll re-evaluate. 

I'll say this - once you get to 1.5 to 2 million, the compounding becomes just crazy.  For example, if you get 10% returns on 1.5 mil, that's $150,000 returns per year.  Once I hit 1.5 million, the investment gains ALONE will pay off the balance of my mortgage in about 2 years.  Crazy. 
« Last Edit: May 19, 2018, 04:29:09 PM by tyort1 »
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Re: DONT Payoff your Mortgage Club
« Reply #624 on: May 19, 2018, 05:27:34 PM »
I'm about to buy a 250k home with 20 percent down.  Even with over 2 million in current net worth that debt scares the hell out of me.
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Re: DONT Payoff your Mortgage Club
« Reply #625 on: May 19, 2018, 07:50:53 PM »
I'm about to buy a 250k home with 20 percent down.  Even with over 2 million in current net worth that debt scares the hell out of me.

I feel your pain.

I owe $162k with 13 years and 2 months to go out of the original 15.  Fixed rate at 2.75%.

Just sold my old house and it looks like we'll sell our flip house early.   I want to just pay off the darn mortgage.  Intellectually I know it's foolish and, unless we'll save a bunch on ACA subsidies by avoiding the subsidy cliff, I think we'll hold off on paying it off early.

But it still bugs me.

Goldielocks

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Re: DONT Payoff your Mortgage Club
« Reply #626 on: May 20, 2018, 12:12:49 AM »
I am starting to get torn about not paying off more of my mortgage.

The interest rate has been creeping up on it.
The mortgage needs to be renewed in 12 months.
Goldielocks: are you currently retired? What percentage of your expenses would go to the mortgage payments under different scenarios?

Well, I am retired, and only working a part time adjunct professor role.  DH is working but at half the pay he used to get, but likes the job better and it is 40hr/wk max and 6 miles away from us.

What percentage of my expenses to to the mortgage payments?

Currently, the mortgage is 40% of what we WANT to spend for total expenses, and 50% of what we SHOULD spend (a lower amount ) of our total expenses.

We have around 67% equity currently.  If we pay it off, (the max I am willing to pay off) we will still have a mortgage for 17% of the home value.

Our property taxes, insurance, water / sewer / garbage bill is another 8% of our total (desired) expense budget.
Then, of course, we have general maintenance, gardening supplies ( i need to buy a new hose,  seeds), heating, etc.

If we pay down half of our mortgage, it would fall to around 20% to 25% of our expenses.

Goldielocks

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Re: DONT Payoff your Mortgage Club
« Reply #627 on: May 20, 2018, 12:23:08 AM »
Hi Dicey, thanks for explaining.

Yeah,  I do have a pension with my tiny part time job, that I definitely max out at $2k/yr contributions.  RRSP's (kinda like IRAs) have the same (or less) tax credit going in as coming out, so minimal net benefit on those now.
 
DH essentially has no employer benefits, working for a small manufacturing company in their R&D department.

We do max out the kids RESP, (for the free money), and our TFSA's, and yeah, I am thinking of pulling money from the TFSA's (sort of like a Roth) and non-registered to put on the mortgage. If I do, I would readjust our asset allocations and treat the mortgage pre=payment like the bond percentage we keep.

So, the only better places to put the money is non-registered funds, and keep the $$ in our TFSAs. (tax free growth).

The decision is to keep the fixed income part of our portfolio, or pay off the mortgage (partially) now.?

Le Barbu

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Re: DONT Payoff your Mortgage Club
« Reply #628 on: May 20, 2018, 05:43:51 AM »
Hi Dicey, thanks for explaining.

Yeah,  I do have a pension with my tiny part time job, that I definitely max out at $2k/yr contributions.  RRSP's (kinda like IRAs) have the same (or less) tax credit going in as coming out, so minimal net benefit on those now.
 
DH essentially has no employer benefits, working for a small manufacturing company in their R&D department.

We do max out the kids RESP, (for the free money), and our TFSA's, and yeah, I am thinking of pulling money from the TFSA's (sort of like a Roth) and non-registered to put on the mortgage. If I do, I would readjust our asset allocations and treat the mortgage pre=payment like the bond percentage we keep.

So, the only better places to put the money is non-registered funds, and keep the $$ in our TFSAs. (tax free growth).

The decision is to keep the fixed income part of our portfolio, or pay off the mortgage (partially) now.?

It’s not a big deal to put the fixed income from non-registered to pay down the mortgage. If all of your tax-advantaged accounts are maxed out and your AA is at least 80-90% stocks or stocks-alike, you’ll be fine. Maybe, you just have to much of a house or live in a HCOL, wich is not always an advatage for retirement.
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Goldielocks

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Re: DONT Payoff your Mortgage Club
« Reply #629 on: May 20, 2018, 11:32:40 AM »
Definite HCOL.   (1)  The cheapest house for sale out of a region of 2.5 million people starts at $650k.

I came to terms with the idea of having an eternal mortgage when we moved here.  As long as I can sell and buy a nice townhouse or condo outright, I am ok with it.

The challenge now is wondering if the risk  / dislike of changing (increasing) rates and reduced monthly cash flow is worth the slight advantage of having Fixed income -- assuming the fixed income returns positive over the long term.

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Re: DONT Payoff your Mortgage Club
« Reply #630 on: May 20, 2018, 01:14:27 PM »
Did you think of downsizing or even rent? Even in my not HCOL town (350k$ for a datached cottage) I plan to move when kids will be gone. Not only for the financial reasons but to get closer to downtown happening and services and get rid of at least 1 car. My neigbourhood is perfect for young families but not for older us.
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Re: DONT Payoff your Mortgage Club
« Reply #631 on: May 21, 2018, 12:52:04 AM »
Relocating is the backup plan to the backup plan (the first level is that I go earn a bit of money, at least until my kids are out of high school.).  DH loves his workshop here, so is not ready to downsize.

I can make it work, it is just that I am closer to the hurdle point of paying off half the mortgage -- or now.  Trying to figure it out.

Le Barbu

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Re: DONT Payoff your Mortgage Club
« Reply #632 on: May 21, 2018, 05:17:03 AM »
My kids are 11 and 14 so, I fully understand you dont move now!

If I may ask, how much is your mortgage balance and taxable account(s) value? If you sell your investments now, what would be your capital gain?

Did you know you can make your mortgage interest deductibles in Canada? It’s called the Smith Manoeuvre.

There is a version of SM, the Singleton Shuffle, you can use when you already have taxable investments.

« Last Edit: May 21, 2018, 05:41:45 AM by Le Barbu »
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Goldielocks

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Re: DONT Payoff your Mortgage Club
« Reply #633 on: May 21, 2018, 10:19:50 AM »
I am not going to share the numbers but the mortgage is around half the value of my investments.   Taxes on the non-reg portion is fairly minor (I reset them a year ago, and minimal cap gains since then, some tax losses), and depending on what we pull, only a portion would come from non-reg.

As I stated upthread, my income is low, so the tax deduction on a Smith Maneouvre is not really relevant and the spread between mortgage rate and HELOC rate is just over 1%... or about 0.8% with tax deduction taken into account.

Instead, it would be to my advantage to bring the mortgage into our RRSP, but then I would want to do that with the whole damn thing (instead of creating two mortgages), and having 50% of our investments as equivalent to fixed income is too much for me, I don't want to exceed 75%, (I like the total $'s I have in equities) and the RRSP mortgage adds at least 0.5% cost to self-fund / register your mortgage each year, compared to the typical mortgage route at a big bank.    This tactic also encourages you to put more $'s into the tax free  RRSP account, (by creating a higher mortgage rate) but the issue is cash flow for me, not the size of the RRSP at this point.   (RRSP mortgage is a good strategy to over fund the RRSP if anyone is looking for that).

I think we will sit on it for 6 months, then talk to our bank about early renewals.  If I don't like the answers (they won't match the best available rate, or insist that my new low income is not enough to carry the mortgage), then I will evaluate paying down the mortgage.