Author Topic: DONT Payoff your Mortgage Club  (Read 394023 times)

Tyson

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Re: DONT Payoff your Mortgage Club
« Reply #1900 on: November 18, 2019, 11:56:44 AM »
So, while looking at some long term college planning for the kid, I found a time when it makes sense to pay off the mortgage.

Once I approach FI, taking a lump sum out of investments and paying the mortgage off in one fell swoop reduces my investment gains, but it reduces my annual expenses so much that it would actually push me into financial independence about 15 months earlier.

On top of that, reducing my expenses by paying off the mortgage while being retired reduces the EFC on the FAFSA calculation. That falls under the unethical ways to save money category, but it's something to keep in mind.

That said, during accumulation years, it still makes sense to pay off the mortgage as slowly as possible, and the calculation I made would still reduce long-term portfolio value, but it should get me to FI faster.

It also makes sense to look at your income level post retirement and keep it as low as possible for things like health insurance subsidies.  For example, my mortgage payment is $2200 per month.  That's $26,400 per year.  If I need an additional $40k per year to cover all expenses, that means I have to take out $66,400 per year to cover all costs.  However, if I pay off my mortgage when I retire, then I only have to take out $40k per year to cover all expenses.  I'm not sure what the cutoffs will be when I retire, but it seems likely that $40k is more likely to qualify for a subsidy than $66k. 

That said, I agree with you - it makes zero sense to pay off the mortgage during accumulation phase.
« Last Edit: November 18, 2019, 12:00:46 PM by Tyson »

Kierun

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Re: DONT Payoff your Mortgage Club
« Reply #1901 on: November 18, 2019, 12:34:32 PM »
So, while looking at some long term college planning for the kid, I found a time when it makes sense to pay off the mortgage.

Once I approach FI, taking a lump sum out of investments and paying the mortgage off in one fell swoop reduces my investment gains, but it reduces my annual expenses so much that it would actually push me into financial independence about 15 months earlier.

On top of that, reducing my expenses by paying off the mortgage while being retired reduces the EFC on the FAFSA calculation. That falls under the unethical ways to save money category, but it's something to keep in mind.

That said, during accumulation years, it still makes sense to pay off the mortgage as slowly as possible, and the calculation I made would still reduce long-term portfolio value, but it should get me to FI faster.

It also makes sense to look at your income level post retirement and keep it as low as possible for things like health insurance subsidies.  For example, my mortgage payment is $2200 per month.  That's $26,400 per year.  If I need an additional $40k per year to cover all expenses, that means I have to take out $66,400 per year to cover all costs.  However, if I pay off my mortgage when I retire, then I only have to take out $40k per year to cover all expenses.  I'm not sure what the cutoffs will be when I retire, but it seems likely that $40k is more likely to qualify for a subsidy than $66k. 

That said, I agree with you - it makes zero sense to pay off the mortgage during accumulation phase.
I'm thinking along the same train of thought as my PI is >$2500/mo so knocking off $30k/yr would go a long way for required income post FI.

DadJokes

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Re: DONT Payoff your Mortgage Club
« Reply #1902 on: November 18, 2019, 12:35:35 PM »
So, while looking at some long term college planning for the kid, I found a time when it makes sense to pay off the mortgage.

Once I approach FI, taking a lump sum out of investments and paying the mortgage off in one fell swoop reduces my investment gains, but it reduces my annual expenses so much that it would actually push me into financial independence about 15 months earlier.

On top of that, reducing my expenses by paying off the mortgage while being retired reduces the EFC on the FAFSA calculation. That falls under the unethical ways to save money category, but it's something to keep in mind.

That said, during accumulation years, it still makes sense to pay off the mortgage as slowly as possible, and the calculation I made would still reduce long-term portfolio value, but it should get me to FI faster.

I plugged and played with a handful of different dates to payoff the mortgage.

My "expected" date of FI is currently July 2034. By toying with when I payoff the mortgage, I was able to get it to as early as June 2033 (my original calculation of 15 months had wrong payoff amount). I could pay it off as early as July 2032 to get that result (or later) to get the same result.

How I would access those funds without huge taxes is a different story.

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Re: DONT Payoff your Mortgage Club
« Reply #1903 on: November 18, 2019, 02:36:08 PM »
So, while looking at some long term college planning for the kid, I found a time when it makes sense to pay off the mortgage.

Once I approach FI, taking a lump sum out of investments and paying the mortgage off in one fell swoop reduces my investment gains, but it reduces my annual expenses so much that it would actually push me into financial independence about 15 months earlier.

On top of that, reducing my expenses by paying off the mortgage while being retired reduces the EFC on the FAFSA calculation. That falls under the unethical ways to save money category, but it's something to keep in mind.

That said, during accumulation years, it still makes sense to pay off the mortgage as slowly as possible, and the calculation I made would still reduce long-term portfolio value, but it should get me to FI faster.

Do assets owned not count as part of the FAFSA? I feel like I've just recently heard about some schools looking at your assets as part of that shindig but don't know enough about it. Something to keep in mind if your kid wants to go somewhere that looks at your total assets.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #1904 on: November 18, 2019, 02:47:48 PM »
So, while looking at some long term college planning for the kid, I found a time when it makes sense to pay off the mortgage.

Once I approach FI, taking a lump sum out of investments and paying the mortgage off in one fell swoop reduces my investment gains, but it reduces my annual expenses so much that it would actually push me into financial independence about 15 months earlier.

On top of that, reducing my expenses by paying off the mortgage while being retired reduces the EFC on the FAFSA calculation. That falls under the unethical ways to save money category, but it's something to keep in mind.

That said, during accumulation years, it still makes sense to pay off the mortgage as slowly as possible, and the calculation I made would still reduce long-term portfolio value, but it should get me to FI faster.

Do assets owned not count as part of the FAFSA? I feel like I've just recently heard about some schools looking at your assets as part of that shindig but don't know enough about it. Something to keep in mind if your kid wants to go somewhere that looks at your total assets.

The equity of your primary home is excluded from FAFSA calculations.  Should you own a secondary home - that is not.

DadJokes

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Re: DONT Payoff your Mortgage Club
« Reply #1905 on: November 18, 2019, 02:55:46 PM »
So, while looking at some long term college planning for the kid, I found a time when it makes sense to pay off the mortgage.

Once I approach FI, taking a lump sum out of investments and paying the mortgage off in one fell swoop reduces my investment gains, but it reduces my annual expenses so much that it would actually push me into financial independence about 15 months earlier.

On top of that, reducing my expenses by paying off the mortgage while being retired reduces the EFC on the FAFSA calculation. That falls under the unethical ways to save money category, but it's something to keep in mind.

That said, during accumulation years, it still makes sense to pay off the mortgage as slowly as possible, and the calculation I made would still reduce long-term portfolio value, but it should get me to FI faster.

Do assets owned not count as part of the FAFSA? I feel like I've just recently heard about some schools looking at your assets as part of that shindig but don't know enough about it. Something to keep in mind if your kid wants to go somewhere that looks at your total assets.

From the FAFSA website:

Quote
Investments do not include the home in which the studentís parents live, the value of life insurance, ABLE accounts, retirement plans (401[k] plans, pension funds, annuities, non-education IRAs, Keogh plans, etc.) or cash, savings, and checking accounts already reported in question 88.

Some schools may use calculations other than FAFSA that do a better job of determining a family's ability to pay. If that ends up being the case (we're talking 18+ years from now), we'll be fine. We'll probably provide some aid, depending on the cost of attendance, but I had planned on him being able to pay his own way through school as his parents did.

couponvan

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Re: DONT Payoff your Mortgage Club
« Reply #1906 on: November 19, 2019, 08:12:51 AM »
So, while looking at some long term college planning for the kid, I found a time when it makes sense to pay off the mortgage.

Once I approach FI, taking a lump sum out of investments and paying the mortgage off in one fell swoop reduces my investment gains, but it reduces my annual expenses so much that it would actually push me into financial independence about 15 months earlier.

On top of that, reducing my expenses by paying off the mortgage while being retired reduces the EFC on the FAFSA calculation. That falls under the unethical ways to save money category, but it's something to keep in mind.

That said, during accumulation years, it still makes sense to pay off the mortgage as slowly as possible, and the calculation I made would still reduce long-term portfolio value, but it should get me to FI faster.

Do assets owned not count as part of the FAFSA? I feel like I've just recently heard about some schools looking at your assets as part of that shindig but don't know enough about it. Something to keep in mind if your kid wants to go somewhere that looks at your total assets.

From the FAFSA website:

Quote
Investments do not include the home in which the studentís parents live, the value of life insurance, ABLE accounts, retirement plans (401[k] plans, pension funds, annuities, non-education IRAs, Keogh plans, etc.) or cash, savings, and checking accounts already reported in question 88.

Some schools may use calculations other than FAFSA that do a better job of determining a family's ability to pay. If that ends up being the case (we're talking 18+ years from now), we'll be fine. We'll probably provide some aid, depending on the cost of attendance, but I had planned on him being able to pay his own way through school as his parents did.

This is off topic, but don't forget about the value of an HSA if you are looking to do the college and early retirement FAFSA gaming....it's double blind for FAFSA for now.  You can put in $7K/year for a couple, then save up the receipts and not actually take the money out until Jr. is in college....the FAFSA doesn't count that reimbursement of your expenses as income, and you can still have some extra spending $ during the college years.  I think this method works best with only children.

DadJokes

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Re: DONT Payoff your Mortgage Club
« Reply #1907 on: November 19, 2019, 08:16:02 AM »
So, while looking at some long term college planning for the kid, I found a time when it makes sense to pay off the mortgage.

Once I approach FI, taking a lump sum out of investments and paying the mortgage off in one fell swoop reduces my investment gains, but it reduces my annual expenses so much that it would actually push me into financial independence about 15 months earlier.

On top of that, reducing my expenses by paying off the mortgage while being retired reduces the EFC on the FAFSA calculation. That falls under the unethical ways to save money category, but it's something to keep in mind.

That said, during accumulation years, it still makes sense to pay off the mortgage as slowly as possible, and the calculation I made would still reduce long-term portfolio value, but it should get me to FI faster.

Do assets owned not count as part of the FAFSA? I feel like I've just recently heard about some schools looking at your assets as part of that shindig but don't know enough about it. Something to keep in mind if your kid wants to go somewhere that looks at your total assets.

From the FAFSA website:

Quote
Investments do not include the home in which the studentís parents live, the value of life insurance, ABLE accounts, retirement plans (401[k] plans, pension funds, annuities, non-education IRAs, Keogh plans, etc.) or cash, savings, and checking accounts already reported in question 88.

Some schools may use calculations other than FAFSA that do a better job of determining a family's ability to pay. If that ends up being the case (we're talking 18+ years from now), we'll be fine. We'll probably provide some aid, depending on the cost of attendance, but I had planned on him being able to pay his own way through school as his parents did.

This is off topic, but don't forget about the value of an HSA if you are looking to do the college and early retirement FAFSA gaming....it's double blind for FAFSA for now.  You can put in $7K/year for a couple, then save up the receipts and not actually take the money out until Jr. is in college....the FAFSA doesn't count that reimbursement of your expenses as income, and you can still have some extra spending $ during the college years.  I think this method works best with only children.

Yeah, I was reading that too. Up to this point, we've paid medical bills out of the HSA since we're not yet maxing out all of our retirement accounts, but we will have to re-evaluate with that.

Kierun

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bacchi

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Re: DONT Payoff your Mortgage Club
« Reply #1909 on: November 19, 2019, 12:01:29 PM »
Looks like we're in the wrong club!  https://www.forbes.com/sites/kotlikoff/2019/11/18/prepaying-your-mortgage-is-a-huge-financial-winner/#5adb26005bf3

Quote from: forbes
I then entered an alternative profile in which the couple follows Uncle Jimís advice and a) borrows $360,000 for 30 years on their house at the then-prevailing 4.15 percent mortgage rate and b) invest the proceeds in 30-year Treasuries yielding the then prevailing 30-year bond rate of 2.45 percent.

Shocker! Borrowing at 4.15% to invest at 2.45% is not a good idea!

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #1910 on: November 19, 2019, 12:05:50 PM »
Looks like we're in the wrong club!  https://www.forbes.com/sites/kotlikoff/2019/11/18/prepaying-your-mortgage-is-a-huge-financial-winner/#5adb26005bf3

One of the worst pseudo-financal articles I've read in a while.  Good lord...  The government paying you 2.3% for treasury bonds is not the same thing as a bank giving you money to buy a house at 3.7%.  Does this author not understand risk, debt, or even the concept of leverage??

What idiot leverages their home at 3.7% only to take out treasury bonds paying 2.3%??  And for that matter how paranoid does one have to be to put their entire savings in long term bonds?  A 0/100 allocation?  Good lord...

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #1911 on: November 19, 2019, 03:07:45 PM »
There was another one along these lines today as well. No one seems to understand the time value of money, i.e. compound interest. Then there is inflation. Buy it now, pay it back later with inflated dollars that literally cost you less, plus your payment stays the same while your income typically goes up over time. Then there's leverage. Put a small amount down and get a much larger number working for you.

Much as we welcome everyone, it seems not everyone can earn a place in the DPOYM Club. My congratulations to everyone who has found their way here.

robartsd

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Re: DONT Payoff your Mortgage Club
« Reply #1912 on: November 19, 2019, 04:07:23 PM »
Then there is inflation. Buy it now, pay it back later with inflated dollars that literally cost you less.
Very few loans have interest rates below inflation (and all of them that I've seen were attached to the purchase of overpriced consumer goods). Doesn't take away from the other parts of your arguments.

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #1913 on: November 19, 2019, 04:46:51 PM »
Then there is inflation. Buy it now, pay it back later with inflated dollars that literally cost you less.
Very few loans have interest rates below inflation (and all of them that I've seen were attached to the purchase of overpriced consumer goods). Doesn't take away from the other parts of your arguments.
I'm about to make the first P&I payment on my brand new mortgage. That will cost me $579 2019 dollars. Fast forward 30 years when I make my last payment. It will cost me $579 2049 dollars. 2049 dollars, barring an economic calamity in the interim, will be worth less than 2019 dollars.  I can come up with that without too much trouble working for minimum wage today - should be even easier in 2049.

That is what Dicey's point is. Sure, the interest is likely to be more than the inflation, but I also have $121,000 2019 dollars I can invest right now - I'm not trying to beat inflation with the loan interest, I'm trying to beat the loan interest with investment returns.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #1914 on: November 19, 2019, 06:34:32 PM »
Then there is inflation. Buy it now, pay it back later with inflated dollars that literally cost you less.
Very few loans have interest rates below inflation (and all of them that I've seen were attached to the purchase of overpriced consumer goods). Doesn't take away from the other parts of your arguments.
I'm about to make the first P&I payment on my brand new mortgage. That will cost me $579 2019 dollars. Fast forward 30 years when I make my last payment. It will cost me $579 2049 dollars. 2049 dollars, barring an economic calamity in the interim, will be worth less than 2019 dollars.  I can come up with that without too much trouble working for minimum wage today - should be even easier in 2049.

That is what Dicey's point is. Sure, the interest is likely to be more than the inflation, but I also have $121,000 2019 dollars I can invest right now - I'm not trying to beat inflation with the loan interest, I'm trying to beat the loan interest with investment returns.
DingDingDing! We have a winner. That is exactly what i meant. Thanks for elaborating, @dandarc.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #1915 on: November 20, 2019, 07:03:14 AM »
I've mentioned this before, but thought I'd repeat...
My retired parents like to joke that they are 41 years into a 30 year mortgage, and only have about ten years left before it's paid off.  Currently the taxes on their home are about 2x the Principle + Interest portion of their payments... because: inflation and appreciation.

They did two big cash ReFis along the way, both of which lowered their rate and boosted their savings while keeping their payment basically the same (only the term was extended).  In 1978 when they took out the mortgage it was roughly 1/3 of my father's salary. His income steadily increased over the next 3 decades (both as COLA raises and through promotions) while the payment stayed locked. 

...I wonder if they will have a 'mortgage payoff celebration' and burn their mortgage when it's finally eliminated - 15+ years after they retired.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #1916 on: November 20, 2019, 07:15:48 AM »
I've mentioned this before, but thought I'd repeat...
My retired parents like to joke that they are 41 years into a 30 year mortgage, and only have about ten years left before it's paid off.  Currently the taxes on their home are about 2x the Principle + Interest portion of their payments... because: inflation and appreciation.

They did two big cash ReFis along the way, both of which lowered their rate and boosted their savings while keeping their payment basically the same (only the term was extended).  In 1978 when they took out the mortgage it was roughly 1/3 of my father's salary. His income steadily increased over the next 3 decades (both as COLA raises and through promotions) while the payment stayed locked. 

...I wonder if they will have a 'mortgage payoff celebration' and burn their mortgage when it's finally eliminated - 15+ years after they retired.
Apple, meet tree. Smart strategies certainly do bear repeating. Thanks for sharing.

YttriumNitrate

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Re: DONT Payoff your Mortgage Club
« Reply #1917 on: November 20, 2019, 10:11:00 AM »
Then there is inflation. Buy it now, pay it back later with inflated dollars that literally cost you less.
Very few loans have interest rates below inflation (and all of them that I've seen were attached to the purchase of overpriced consumer goods). Doesn't take away from the other parts of your arguments.
I would change that to "very few loans right now have interest rates below inflation." It wouldn't take much of a bump in inflation to cause a huge number of people to have mortgage rates less than inflation. Will it happen in the next 30 years? We'll see.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #1918 on: November 20, 2019, 12:03:08 PM »
Then there is inflation. Buy it now, pay it back later with inflated dollars that literally cost you less.
Very few loans have interest rates below inflation (and all of them that I've seen were attached to the purchase of overpriced consumer goods). Doesn't take away from the other parts of your arguments.
I would change that to "very few loans right now have interest rates below inflation." It wouldn't take much of a bump in inflation to cause a huge number of people to have mortgage rates less than inflation. Will it happen in the next 30 years? We'll see.

I will be very surprised if we don't see inflation tick above 3% for at least several quarters (if not consecutive years) over the next three decades. 
We've had ultra-low inflation for so long that there's an entire generation of adults who have never really experienced it. Memories are short.

DadJokes

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Re: DONT Payoff your Mortgage Club
« Reply #1919 on: November 20, 2019, 12:09:18 PM »
Then there is inflation. Buy it now, pay it back later with inflated dollars that literally cost you less.
Very few loans have interest rates below inflation (and all of them that I've seen were attached to the purchase of overpriced consumer goods). Doesn't take away from the other parts of your arguments.
I would change that to "very few loans right now have interest rates below inflation." It wouldn't take much of a bump in inflation to cause a huge number of people to have mortgage rates less than inflation. Will it happen in the next 30 years? We'll see.

I will be very surprised if we don't see inflation tick above 3% for at least several quarters (if not consecutive years) over the next three decades. 
We've had ultra-low inflation for so long that there's an entire generation of adults who have never really experienced it. Memories are short.

You're right. It's very difficult for me to comprehend a world where inflation is higher than 2%. I just kind of feel like the Fed can manipulate rates to keep it low indefinitely at this point, but I'm probably wrong there.

Edit: we're only ~11 posts from catching the Mortgage Payoff Club thread.
« Last Edit: November 20, 2019, 12:10:58 PM by DadJokes »

robartsd

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Re: DONT Payoff your Mortgage Club
« Reply #1920 on: November 20, 2019, 12:26:28 PM »
Then there is inflation. Buy it now, pay it back later with inflated dollars that literally cost you less.
Very few loans have interest rates below inflation (and all of them that I've seen were attached to the purchase of overpriced consumer goods). Doesn't take away from the other parts of your arguments.
I would change that to "very few loans right now have interest rates below inflation." It wouldn't take much of a bump in inflation to cause a huge number of people to have mortgage rates less than inflation. Will it happen in the next 30 years? We'll see.

I will be very surprised if we don't see inflation tick above 3% for at least several quarters (if not consecutive years) over the next three decades. 
We've had ultra-low inflation for so long that there's an entire generation of adults who have never really experienced it. Memories are short.

You're right. It's very difficult for me to comprehend a world where inflation is higher than 2%. I just kind of feel like the Fed can manipulate rates to keep it low indefinitely at this point, but I'm probably wrong there.

Edit: we're only ~11 posts from catching the Mortgage Payoff Club thread.
The Federal Reserve targets an average of 2%/year. Long term, I wouldn't expect much variance from that. 2009-2016 averaged quite a bit less, so I'm sure they'd be fine with 2.5% or more for a while to make up for low inflation in those years; and of course there is the possibility that the Federal Reserve is unable to maintain inflation targets and accomplish other monetary policy goals.

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Re: DONT Payoff your Mortgage Club
« Reply #1921 on: November 20, 2019, 01:45:24 PM »
Edit: we're only ~11 posts from catching the Mortgage Payoff Club thread.

Only 9 posts away, you say?

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #1922 on: November 20, 2019, 01:54:05 PM »
Edit: we're only ~11 posts from catching the Mortgage Payoff Club thread.

Only 9 posts away, you say?
I think it's only eight now.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #1923 on: November 20, 2019, 02:03:10 PM »
Edit: we're only ~11 posts from catching the Mortgage Payoff Club thread.

Only 9 posts away, you say?
I think it's only eight now.
I studiously avoid that thread, but I just looked it up. They have almost a four year head start on us. Very impressive!

Seven.

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Re: DONT Payoff your Mortgage Club
« Reply #1924 on: November 20, 2019, 02:42:37 PM »
Edit: we're only ~11 posts from catching the Mortgage Payoff Club thread.

Only 9 posts away, you say?
I think it's only eight now.
I studiously avoid that thread, but I just looked it up. They have almost a four year head start on us. Very impressive!

Seven.

To be fair, it's a lot harder to pay off a mortgage than it is to say "don't pay off your mortgage quickly"...

YttriumNitrate

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Re: DONT Payoff your Mortgage Club
« Reply #1925 on: November 20, 2019, 02:59:49 PM »
To be fair, it's a lot harder to pay off a mortgage than it is to say "don't pay off your mortgage quickly"...

While I agree with this statement if you don't have enough saved up to pay off your mortgage in one shot, once you do then the two options are quite comparable in difficulty.


SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #1926 on: November 20, 2019, 03:05:18 PM »
To be fair, it's a lot harder to pay off a mortgage than it is to say "don't pay off your mortgage quickly"...

While I agree with this statement if you don't have enough saved up to pay off your mortgage in one shot, once you do then the two options are quite comparable in difficulty.

Doesn't require a penny of savings to write this in a forum thread entry, "Don't pay off your mortgage early." 

But it takes a lot of money to actually pay off a mortgage, early or not.

TomTX

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Re: DONT Payoff your Mortgage Club
« Reply #1927 on: November 20, 2019, 04:22:31 PM »
Scheduled for closing Saturday on our 30-year cashout refi, with $32 in costs. Yay credit union!

It's only going to be ~50% LTV to avoid closing costs.

TomTX

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Re: DONT Payoff your Mortgage Club
« Reply #1928 on: November 20, 2019, 04:23:24 PM »
Oh, and we're only 2 posts behind at this point ;)

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #1929 on: November 20, 2019, 04:38:05 PM »
To be fair, it's a lot harder to pay off a mortgage than it is to say "don't pay off your mortgage quickly"...

While I agree with this statement if you don't have enough saved up to pay off your mortgage in one shot, once you do then the two options are quite comparable in difficulty.

Doesn't require a penny of savings to write this in a forum thread entry, "Don't pay off your mortgage early." 

But it takes a lot of money to actually pay off a mortgage, early or not.
Not sure what the relevance of this undisputed truth is. No one's verifying anything that's being reported on either thread.

Frankly, my goal is only for people to make the most informed decision possible. It's damn hard to find information on this topic, and a lot of what's out there is just plain wrong.

For example, there is nothing inherently wrong with keeping a mortgage in retirement. As mustachians, by the time we get to FIRE, we typically have enough to smite the mortgage many times over. So much of the standard advice is biased toward the people who can't find a way to save anything. Obviously not the case in our this minority (but mighty) crowd.

Brother Esau

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Re: DONT Payoff your Mortgage Club
« Reply #1930 on: November 20, 2019, 05:29:46 PM »
To be fair, it's a lot harder to pay off a mortgage than it is to say "don't pay off your mortgage quickly"...

While I agree with this statement if you don't have enough saved up to pay off your mortgage in one shot, once you do then the two options are quite comparable in difficulty.

Doesn't require a penny of savings to write this in a forum thread entry, "Don't pay off your mortgage early." 

But it takes a lot of money to actually pay off a mortgage, early or not.
Not sure what the relevance of this undisputed truth is. No one's verifying anything that's being reported on either thread.

Frankly, my goal is only for people to make the most informed decision possible. It's damn hard to find information on this topic, and a lot of what's out there is just plain wrong.

For example, there is nothing inherently wrong with keeping a mortgage in retirement. As mustachians, by the time we get to FIRE, we typically have enough to smite the mortgage many times over. So much of the standard advice is biased toward the people who can't find a way to save anything. Obviously not the case in our this minority (but mighty) crowd.

word!

Mako52

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Re: DONT Payoff your Mortgage Club
« Reply #1931 on: November 21, 2019, 10:35:04 AM »
Since we refinanced 6 months ago to a 10-year $450k ARM at 3.375%, I thought I'd pose the question here. 

We plan to be out of this house (and HCOL area) in 2028. 

If closing costs are going to be around $1,000, should we switch to a 20-year fixed at 3.25%?  Main advantage is the security of knowing we're locked in 2029 and beyond if we stay here. 

RWD

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Re: DONT Payoff your Mortgage Club
« Reply #1932 on: November 21, 2019, 10:55:06 AM »
Since we refinanced 6 months ago to a 10-year $450k ARM at 3.375%, I thought I'd pose the question here. 

We plan to be out of this house (and HCOL area) in 2028. 

If closing costs are going to be around $1,000, should we switch to a 20-year fixed at 3.25%?  Main advantage is the security of knowing we're locked in 2029 and beyond if we stay here.

Would that increase or decrease your monthly payment amount? On the interest front it would save you a bit for your expected timeline in addition to locking in the rate for more years but I'm worried it would come with a higher opportunity cost (higher payments).

Boofinator

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Re: DONT Payoff your Mortgage Club
« Reply #1933 on: November 21, 2019, 02:00:41 PM »
Since we refinanced 6 months ago to a 10-year $450k ARM at 3.375%, I thought I'd pose the question here. 

We plan to be out of this house (and HCOL area) in 2028. 

If closing costs are going to be around $1,000, should we switch to a 20-year fixed at 3.25%?  Main advantage is the security of knowing we're locked in 2029 and beyond if we stay here.

Sorry for posting twice: Who's offering closing costs of $1k on a loan that size?

DeniseNJ

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Re: DONT Payoff your Mortgage Club
« Reply #1934 on: November 21, 2019, 03:28:59 PM »
I just refied.  So happy.  3.375% on a 30 yr fixed out of an ARM and HELOC.  I used to want to pay it off, but reading here, not so much.  The only benefit to paying it off is saving the interest.  But the interest isn't that much so what's the point.  The interest isn't tax deductible anymore now that my income and property tax are 2 or 3 times the allowable tax deductable limit of 10K.  The house will go up in value or it won't regardless whether I pay the mortgage or not.  The equity is mine when I sell.  When interest rates were way higher like twice as high and it was tax deductible then it made more sense but not now, not at all.

robartsd

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Re: DONT Payoff your Mortgage Club
« Reply #1935 on: November 21, 2019, 04:22:59 PM »
The interest isn't tax deductible anymore now that my income and property tax are 2 or 3 times the allowable tax deductable limit of 10K.
Do you mean that your total deductibles are less than the standard deduction now that SALT deduction is capped at 10k? Mortgage interest is not subject to that cap (there is a limit on how much mortgage principle qualifies for tax deductible interest).

401Killer

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Re: DONT Payoff your Mortgage Club
« Reply #1936 on: November 22, 2019, 08:06:00 AM »
Well, I'm happy to report that I have now basically removed all of my extra payments on the house and have made the min initial $3k investment into VBTLX to up my bond %. I'm now up to about a 46% savings rate!!! I was adding about $1067 extra a month on my mortgage and now it's all going to be dumped into VG.

RWD

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Re: DONT Payoff your Mortgage Club
« Reply #1937 on: November 22, 2019, 08:15:50 AM »
Congrats!

Brother Esau

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Re: DONT Payoff your Mortgage Club
« Reply #1938 on: November 22, 2019, 01:32:16 PM »
Well, I'm happy to report that I have now basically removed all of my extra payments on the house and have made the min initial $3k investment into VBTLX to up my bond %. I'm now up to about a 46% savings rate!!! I was adding about $1067 extra a month on my mortgage and now it's all going to be dumped into VG.

sweet!

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #1939 on: November 25, 2019, 09:42:00 AM »
My new mortgage got sold to a buyer.

First payment is due this Sunday, so I sent some check into the void. Hopefully it gets to the right place, and everything gets recorded properly. I'd forgotten how nerve-wracking those early days of a mortgage can be.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #1940 on: November 25, 2019, 09:57:41 AM »
My new mortgage got sold to a buyer.

My new mortgage was sold THREE TIMES before I made the FIRST PAYMENT!!

TomTX

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Re: DONT Payoff your Mortgage Club
« Reply #1941 on: November 25, 2019, 09:58:14 AM »
Brand new 30 year mortgage signed, funds should hit the account by Friday. Credit union is keeping it inhouse. :D

First payment is January.

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #1942 on: November 25, 2019, 10:03:26 AM »
Loan hasn't been sold yet, but the lender wants me to sign "amended closing documents" at a higher rate than they sent me 3 days before closing and I signed at closing. Granted, the rate they sent me 4 days before closing is this higher rate, but I figured "must have ticked down".

Whole thing has me thinking hard about changing banks. Been working with this bank for over 10 years, and our prior 2 mortgages were very easy, but since this bank was acquired by a larger regional bank a couple of years ago, things have gone to shit.

Deal changed on this mortgage I don't know how many times between the first inquiry (mostly the timing of when they could do an owner-occupied loan - wound up closing over 2 months later than when I was originally told we could), and now they want to change the interest rate a month after closing on the loan.

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #1943 on: November 25, 2019, 10:03:43 AM »
Brand new 30 year mortgage signed, funds should hit the account by Friday. Credit union is keeping it inhouse. :D

First payment is January.
Congratulations!

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #1944 on: November 25, 2019, 10:10:00 AM »
Loan hasn't been sold yet, but the lender wants me to sign "amended closing documents" at a higher rate than they sent me 3 days before closing and I signed at closing. Granted, the rate they sent me 4 days before closing is this higher rate, but I figured "must have ticked down".

Whole thing has me thinking hard about changing banks. Been working with this bank for over 10 years, and our prior 2 mortgages were very easy, but since this bank was acquired by a larger regional bank a couple of years ago, things have gone to shit.

Deal changed on this mortgage I don't know how many times between the first inquiry (mostly the timing of when they could do an owner-occupied loan - wound up closing over 2 months later than when I was originally told we could), and now they want to change the interest rate a month after closing on the loan.
I saw this on another thread. No way would I agree to this. Don't sign anything. Find the contact info for the top execs, threaten to use it and/or actually do so. Someone's trying to pull a fast one. Who knows how many others they've done this to? You have the strength and resources to make that shit stop.

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #1945 on: November 25, 2019, 10:43:02 AM »
My wife pointed out that it could be a simple typo. 3.875% vs. 3.75%. Still, what is the point of all of the stupid waiting periods around closing if you can just change the interest rate on the loan after the fact.

SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #1946 on: November 25, 2019, 12:11:49 PM »
My wife pointed out that it could be a simple typo. 3.875% vs. 3.75%. Still, what is the point of all of the stupid waiting periods around closing if you can just change the interest rate on the loan after the fact.

If you've got docs that say they promised 3.75%, you're golden.   If the docs you have from them say 3.875%, you probably owe that.   I'll wager that you signed an agreement that you would cooperate in fixing mistakes because that's part of the standard boilerplate mortgage agreements I've seen.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #1947 on: November 26, 2019, 08:14:34 AM »
On my mortgage, the difference between 3.75 and 3.875 would be about $75/month.

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #1948 on: November 26, 2019, 09:29:18 AM »
You must have a nicer house than we do - $9-10 / month in our case. Will be interesting to see if they drop it or not - a friend who is a real estate lawyer told me "in my professional opinion, you should tell them to fuck off", which was my initial reaction as well.

robartsd

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Re: DONT Payoff your Mortgage Club
« Reply #1949 on: November 26, 2019, 10:13:34 AM »
You must have a nicer house than we do
Or he lives in an area where houses are much more expensive. Plenty of places where a modest single family home might have a ~700k mortgage.