Mortgage Payoff Club!!

[SwordGuy]

In other words, does the interest I gain from the bank account cancel out the extra interest I will have paid on the mortgage due to not paying down the balance faster? 

Anyone know of an easy way to figure this?

You need to compare interest rates.  If your bank pays 1.5% and you are paying 3% to the mortgage holder, you should pay extra towards the principal balance on your mortgage instead of putting it in a savings account.

Here's an example:

If your mortgage is $100k and you got a 15 year mortgage at 2.5% interest:

Paying nothing extra, your mortgage costs you $20k in interest over 15 years
Paying an extra $100 a month, your mortgage costs you $16.8k in interest over 12 years and 8 months (savings of $3.2k)
Paying an extra $200 a month, your mortgage costs you $14.5k in interest over 11 years and 0 months (savings of $5.5k)
Paying an extra $300 a month, your mortgage costs you $12.7k in interest over 9 years and 8 months (savings of $7.3k)

If you put those extra amounts into a savings account paying you 1.5% interest and wait until you have enough to pay off the remaining balance:
$100 a month: your mortgage costs you $17.8k in interest over 12 years and 10 months (savings of $2.2k)
$200 a month: your mortgage costs you $16.0k in interest over 11 years and 2 months (savings of $4.0k)
$300 a month: your mortgage costs you $14.4k in interest over 9 years and 11 months (savings of $5.6k)

Thanks for simplifying it for me.  Seems obvious how you did the math now that I see it, but it was escaping me before.  We would most definitely come out ahead paying down the mortgage as opposed to saving it and making one lump payment at the end.  We already have sizeable emergency funds in place so I think actively paying down the mortgage is the way to go.

You are welcome!  You are right - by putting your monthly amounts directly at the principal instead of waiting to pay it off in one lump sum, you will not only save extra money, you will pay off your mortgage a few months earlier in each of the three scenarios I calculated out with Excel.

We are going to focus on our mortgage (2.5%) once we finish paying student loans (6.8%).

That, of course, assumes two things:

1) You invest your money in a savings account that pays less interest than your mortgage (instead of bonds or stocks, for example), and

2) You don't have a long bout of unemployment due to market forces or illness/injury so you don't lose your house.

[Eilonwy]

After reading the piece mentioned above, I got curious and checked out my bond investment. The earnings have been considerably less than my mortgage interest rate. :-(

[Blindsquirrel]

   Welp, you live and learn! When I came across the post I had a grand chunk of cash sitting in a checking account earning 0.01% interest.

[Money Badger]

After reading the piece mentioned above, I got curious and checked out my bond investment. The earnings have been considerably less than my mortgage interest rate. :-(

And here's an even better idea (if you're a banker)... lock mortgage holders into a premium over government bond rates that already demand a premium over the rate of inflation (ie, 10 year Treasuries).    And oh yeah, also allow bond holders to lose principal on said bonds each time interest rates go up in a steady pace the next 2 years or so until they reach "normal" market level.   Oh yeah, and remember the stock market has been juiced up to all time highs by low or negative bond interest rates the past 8+ years, so it will likely have a "below historical" return in the same interval or longer.    Google search "Jack Bogle Aspen Institute from 2015" for an eye-opening explanation from an investing sage.   

[Neustache]

We owe 10,258 on the mortgage and I have 13K in checking and savings!  Waiting for my mortgage company to pay the year end property taxes out of escrow then I'm paying it off!  Just seems easier for them to send in the check for the real estate taxes.  After that, I guess I need to save about 3500 a year myself for taxes and insurance.  At least I'll make a tiny bit of interest on it!

So...not officially paid off yet, but close!!

[talltexan]

Congrats on being so close Neustache!

[Money Badger]

Way to go Neustache!  Maybe call and ask them to pay the taxes now, then pay it off this month to avoid the Dec interest payment?   Probably just $30 bucks, but it's something.   Either way, you've killed it... Awesome!!

[never give up]

Wow what a great thread. I only signed up to the site a few weeks back. I paid off my mortgage earlier this year but would have enjoyed the encouragement on here over the years while I was overpaying. Wish I'd found it earlier.

I am extremely risk averse and overpaying the mortgage just felt right to me and I couldn't have found any better way of using my money than the goal of being completely debt free. It is a great feeling to be mortgage/debt free and I would just like to extend my encouragement to everyone in here. It doesn't matter what anyone else says or what the maths looks like, if paying your mortgage off early makes you feel warm and fuzzy inside then go for it.

[never give up]

allsummerlong - as I mentioned I am extremely risk averse but since being mortgage free I feel much more confident about piling into index funds so I’m sure your DH will see this too.

[SwordGuy]

Just put the check in the mail tonight to pay off the HELOC on our old house.   We had originally planned to pay it off by 09/01/2018, but we did better than that. :)   $55K in 2 years and 2 months.

Now we just have the mortgage on our new house to pay off, though at 2.75% I'm tempted to invest instead of hurry to pay it off.  We'll make our choice on that in a year or two, when we sell the house we're flipping.

[Zola.]

June 2015 - £131,000
November 2017 - £120,000

We have just started over paying in October, plan to overpay by £1000 every few months. Hoping to shave the time down considerably.

We are 2.5 years into a 25 year mortgage. I want it paid off in as few years as possible.

[talltexan]

Just put the check in the mail tonight to pay off the HELOC on our old house.   We had originally planned to pay it off by 09/01/2018, but we did better than that. :)   $55K in 2 years and 2 months.

Now we just have the mortgage on our new house to pay off, though at 2.75% I'm tempted to invest instead of hurry to pay it off.  We'll make our choice on that in a year or two, when we sell the house we're flipping.

Heresy! You need to be banished to join the heathens in the Do NOT Pay off your mortgage club... (disclosure: I am also on that thread)

Seriously, Congrats for making such good progress on the HELOC. I wish you continued momentum in achieving your financial goals! (whatever you may choose)

[TheWifeHalf]

Oh how things change!
We bought our house in 1980 when interest rates were 12% and were still going up. We came across a house that was perfect for us and paid 20% down (to not have mortgage ins)
TheHusbandHalf lost his job in 1990 or so but 6 mos later got a better one, that he has now. Interest rates were still 10-11, he got a severance pay from the old, so we just paid off the mortgage.  I'll be honest and say that doing so was the most satisfying, liberating thing we have done. We have not borrowed money since except for a couple of vehicles when we took advantage of the 0% interest rate on car loans.

I suppose I keep that feeling in mind when my oldest son talks about the double payments he makes on his house. We've explained, ONCE, why that might not be the best financially smart thing to do, but he of course is free to do as he pleases. He has his Dd's diy interest and abilities, but also his sticking to his ideas no matter what I say!
His payments are half of what ours were, he makes 4 times what we made then, so I can see him doing this.

[talltexan]

Is he doubling the total payment amount or just doubling the principal?

[BBub]

Currently around $83k.  Paying $1,750/mo, which will eliminate it in about 4yrs.  Will probably freak out at some point between now & then, and just demolish it.

Ok I had my freakout as predicted.  The mortgage is gone.  We are now 100% debt free.  Woot.

Since the beginning of the year, I had paid it down from $83 to $68.  I've also amassed about $40k cash since then, and I had $25k in CD's at low rates as a sort of emergency buffer.  So I cashed those in earlier this week, added a little extra, requested the payoff quote & wired the funds this morning.

100% debt free at 32 & 30 for DW.  Pretty nice.

And to all the haters, I'm not worried about the compound value over 30 years. Just not.  I paid it off in 4 years and also managed to amass $500k liquid on top of the mortgage payoff, using many of the principles and techniques learned on this site.  I just don't think that $100k +/- in debt payoff vs. opportunity cost of investing is going to move the needle for me in a meaningful way over the lifetime.  It's just not a significant enough chunk of cash relative to my earning/savings rate.  The house is now appraised around $250k because we bought it low and made some improvements.  So we've gone from pretty close to $0NW to $750k debt free in about 4-5 years.  Give it another 5 & we should have a solid 7 figure net worth with no debt in our mid 30's.  I'll take that deal every time. 

On the other hand, maybe I'll turn 62 & regret the payoff at 32.  Look back over those last 30 years with a few hundred grand extra & think 'those 30 years of pesky mortgage payments would have been totally worth it.  I wish I wouldn't have had a serene, debt-free existence in my 30's, 40's and 50's raising kids, enjoying vacations and not constantly calculating amortization in my head.'  Doubtful.  The good news is that they're still selling mortgages, so I can always walk down to the bank & get another one if I change my mind!

Anyway, not to make this a negative rant.  It's exciting.  I just wanted to throw up two preemptive middle fingers & offer perspective to the demagogues who advocate against paying off mortgages in all circumstances.  Yes, the spreadsheet may show a larger number in row 30 by carrying the debt, but there's value in living those 30 years without debt too.  And if the debt is small enough relative to the overall financial profile, then the opportunity cost of payoff can actually be worth it.  Kind of like paying for a vacation or experience.  It's not the most optimal allocation of financial resources from an IRR perspective, but it is by no means a foolish thing to do if a person has done the math and decided the opportunity cost is worth the benefit.

[never give up]

Congrats that's great news. I did a similar freak out myself even though my mortgage was less than 2% at the time. All I could think was just get rid of it and move on with my life! You've plenty of time now to invest with the knowledge during any downturns that you own the roof over your head.

[Dicey]

Dear BBub,
Congratulations on your succes!

However, your use of the word "haters" is most troubling...

Would you believe there are people who focus on "killing" the mortgage at the expense of retirement saving? Some don't even save enough to get their employer's full match! The years they choose not to fund every retirement option available to them can never be regained. Some people don't realize the magic of compound interest, understand the power of inflation or the concept of using leverage to create wealth.

At the very heart of Mustachianism is the concept of deploying every green soldier optimally. The earlier one stocks up the investment accounts, the fewer actual dollars it will take to FIRE. The later one starts, the more soldiers are required. Prioritizing repaying a low-interest, fixed rate mortgage before other savings/investments is sub optimal.

People who endeavor to teach this message are LOVERS, not haters. They want to see all of their fellow mustachians reach their dreams as efficiently as possible. They seek for all to understand that sequencing has a huge impact on FIRE dates, and help them make optimal choices. For some, their COLA-to-income-ratio is low enough that the impact of sub-optimal prioritization is less significant. For others, the effect is far more pronounced. We would consider our work a complete success if people just understood the tradeoffs.

Most people will not really feel the impact of their choices until many years hence. How sad to be old, trapped in a paid-off house, yet live in fear of taxes, utilities and the need for a new roof. Better to assure there is enough to provide well for one's future self now, while the ability to earn, learn and invest is comparatively effortless.

BBub, it looks like you are one of the smart and lucky ones who was able to do both, and for that, you are to be heartily and sincerely congratulated. To the people who think the elation of paying off a mortgage lasts forever, I propose that there is an even better, more lasting love out there. Just wait until you experience the thrill of your investments earning more than you ever did in your career! Imagine getting a paycheck with no effort! That's the everlasting miracle of compound interest.

It can happen for everyone who saves a relatively small amount of money, the earlier the better, investing it well and watching it compound astronomically with time. That, my friends, is the opposite of hate. It is called spreading the Love. We will keep doggedly sharing the message until its benefits are common knowledge to all. ♡♡♡♡♡

Kudos to you, BBub, and everyone else who is willing to learn how to make the best choices on the path to FIRE.
Kindest regards,
Dicey

[BBub]

Thanks Dicey, i am feeling the love in your post. 

I guess my main point is there is an entirely different perspective that challenges the Dogma of: buy house, get 30yr mortgage, invest the difference.  The "30yr leverage" logic can be applied to buying cars or anything else on long term fixed debt, and I think it enables many people to justify facepunch worthy housing consumption by looking at the future value of their mortgage balance then feeling really smart.

I'd suggest to those with a high COL to Income ratio that they focus on changing that ratio, rather than leveraging up on an expensive house for 30 years then feeling brilliant because of compound interest.   Of course one should not foolishly forego free match money or the many benefits of maxing out qualified accounts.

[BBub]

Congrats that's great news. I did a similar freak out myself even though my mortgage was less than 2% at the time. All I could think was just get rid of it and move on with my life! You've plenty of time now to invest with the knowledge during any downturns that you own the roof over your head.

Thanks never give up!  Good for you - I can relate to being ready to move on.  I am looking forward to the additional cash flow going forward to take advantage of any small dips or large canyons that may appear in the markets!

[farmecologist]

Thanks Dicey, i am feeling the love in your post. 

I guess my main point is there is an entirely different perspective that challenges the Dogma of: buy house, get 30yr mortgage, invest the difference.  The "30yr leverage" logic can be applied to buying cars or anything else on long term fixed debt, and I think it enables many people to justify facepunch worthy housing consumption by looking at the future value of their mortgage balance then feeling really smart.

I'd suggest to those with a high COL to Income ratio that they focus on changing that ratio, rather than leveraging up on an expensive house for 30 years then feeling brilliant because of compound interest.   Of course one should not foolishly forego free match money or the many benefits of maxing out qualified accounts.

Congrats Bbub!  Your views certainly mirror my own ( as we have discussed in this thread may times in the past ).  That is, there is no 'one size fits all' when it comes to the world of finances.  Some abide by 'the math' and some by 'the gut' but I'm happy that we all have the same ultimate goal...to eventually FIRE.

 

[talltexan]

Thanks Dicey, i am feeling the love in your post. 

I guess my main point is there is an entirely different perspective that challenges the Dogma of: buy house, get 30yr mortgage, invest the difference.  The "30yr leverage" logic can be applied to buying cars or anything else on long term fixed debt, and I think it enables many people to justify facepunch worthy housing consumption by looking at the future value of their mortgage balance then feeling really smart.

I'd suggest to those with a high COL to Income ratio that they focus on changing that ratio, rather than leveraging up on an expensive house for 30 years then feeling brilliant because of compound interest.   Of course one should not foolishly forego free match money or the many benefits of maxing out qualified accounts.

I've appreciated you guys engaging in this debate...I've begun to appreciate that there are two kinds of financial decision-makers:

1. Monthly payment people, and
2. Lump Sum people.

I suspect that most spendy-pants people are monthly-payment people. (disclosure: I probably am, as well)

I think that monthly payment people can be more easily seduced by the "leverage the house for long-term investing" plan, because I think they are more willing to take on debt, in general. But I totally accept the argument of the lump sum people out there that...when you try to perceive a deal in lump sum terms, you will spend less.

I have actively worked on myself by trying to train myself to think of every transaction in lump sum terms. While this didn't stop me from financing a vehicle, it has kept me from committing to some other extravagances that are frequently sold to us as being "not that much when you make payments".

[protostache]

is anyone on this thread taking the approach of stuffing all the money he/she can into an SP500 fund, and then--when the balance is equal to the mortgage--selling to pay off the mortgage?

I'd like to revisit this because it doesn't seem to be talked about much (I haven't read the entire thread, though). We're finally going to be at a point early next year where we can take some action on the mortgage and we're weighing our options.

Our plan has been to save up half of the principal and do a recast, but it turns out our mortgage company doesn't allow recasts. It still seems less risky (where "risk" = "risk of ruin", not "volatility") to me to save up the cash and do one big lump at the end, rather than pay extra principal every month.

The only problem is that we probably are not going to want to invest this money. It's going to be building up for about four years while we amass enough to do one lump and I guess I'm conflicted about building up that much cash in a money market account earning a max of 1.5%.

What about brokered CDs? Building up a set of CDs that all mature right before we're projecting mortgage payoff is somewhat attractive and the average interest rate will probably end up being higher than a money market account.

[BBub]

Protostache - this is basically what I did.  Paying the mortgage off this year wasn't really premeditated, but I ended up with adequate cash then just paid it off.  Having the full amount saved/invested is definitely the lowest risk approach.  If you just pay down a large portion but leave a remaining balance, you are still on the hook for the full payment amount if you fall on lean times.

Here's how our payoff worked out:

Mortgage payoff balance was ($68k).

I bought $25k in CD's a few years ago as an emergency buffer.  5yr ladder of $5k each.  The rates were abysmal (weighted average around 1.4% I think).  At the time, I just wanted a little safe money in the portfolio since the overall allocation was very heavily weighted to equities.  My logic was that even if all hell broke loose and we lost jobs & income, we could manage for quite some time on $25k plus oddjob income.  That was just a comfortable number for me.

After maxing retirement accts this year, I started accumulating cash for a promising real estate deal.  The deal didn't pan out, but I had amassed about $40k.

Before then, the finances had just been on autopilot with any surplus taxable money going straight into the equity portfolio established several years back.  It was a great disciplined approach, but i broke the momentum when the real estate thing came up then fell through.  So I was just kind of staring at the cash & waiting around for who knows what.. when I just decided now was the time for the mortgage payoff.  I already had an accelerated payment schedule to pay off the mortgage in 3.5 more years.  So I figured what the hell, bird in hand, let's kill the thing & be done with it.  I requested a payoff quote last Wednesday, cashed in the CD's, combined all the cash & wired it over to the mortgage company on Friday.

As mentioned, we still have just over $500k liquid & a solid savings rate.  Our FI goal is $1.25M plus a paid off house.  At this point, I can just have a single minded focus on increasing the liquid stache.  It will also feel pretty good to know, if we go into a market downturn or my income decreases, that I paid everything off when times were fat.  I can envision my future self being happy with the decision in lean times, but I can't see a future where I am pissed about the missed spread.  The potential sigh of relief outweighs the little bit of extra greed for me.  Don't get me wrong, I can be a greedy bastard too, this payoff just felt like the right thing to do at the right time.

So, that's pretty much it. Starting next month I'll start investing the surplus straight into equity portfolio again.  Hoping the path to FI is straight, short & simple from here on out!  I'm sure we'll still hit a few bumps or curves along the way, but we'll deal with those as they come.

[birdman2003]

It will also feel pretty good to know, if we go into a market downturn or my income decreases, that I paid everything off when times were fat.  I can envision my future self being happy with the decision in lean times, but I can't see a future where I am pissed about the missed spread.  The potential sigh of relief outweighs the little bit of extra greed for me.  Don't get me wrong, I can be a greedy bastard too, this payoff just felt like the right thing to do at the right time.

This is my line of thinking too.

[Neustache]

I'm here!!

Starting Mortgage:  123K
Current Balance: 122K

Mortgage is at 4.25% with PMI, so while I may switch up strategies at some point, right now the goal is to get the PMI off as quickly as possible, hopefully by August 2015 (we only had 5% down).  If we don't switch strategies, goal is to pay this off in the next 3 or 4 years. 


PMI is on my mind as well - pay off all other debt first and then get rid of that pointless $118 fee that goes to waste every month.  I plan to get rid of it by December 2015.  Good luck to you :)

I love seeing everyone else's progress on this thread.

[/quote]


Current principle:  $103,457.43 - PMI is OFF

Now I switch gears to max out IRAs for 2015, then in 2016 we will have to payoff our foundation repairs (currently at 0%), max out IRA's and pay for school for me...so not a lot of progress will happen on the mortgage front.  I'll see you all again sometime in 2017.  I'll still watch and read others make progress towards their goals.  Good luck, everyone!!
[/quote]


It's paid off!  I started this journey in June 2014 and three and a half years later we are done.  We took a selfie and I told my parents and one close friend who is on a similar journey and we are honest about this stuff.  Selling the rental helped us achieve this goal this year, otherwise we would still be a year or two away from it.  Feels good but also kind of anti-climatic.  Next goal is 500K saved in the next 5 years.  We are 37 and 36 now. 

[Prairie Gal]

It's paid off!  I started this journey in June 2014 and three and a half years later we are done.  We took a selfie and I told my parents and one close friend who is on a similar journey and we are honest about this stuff.  Selling the rental helped us achieve this goal this year, otherwise we would still be a year or two away from it.  Feels good but also kind of anti-climatic.  Next goal is 500K saved in the next 5 years.  We are 37 and 36 now. 

Congratulations! It's a great feeling, isn't it?

[iluvzbeach]

Congrats, Neustache! Welcome to the club.

[farmecologist]

It's paid off!  I started this journey in June 2014 and three and a half years later we are done.  We took a selfie and I told my parents and one close friend who is on a similar journey and we are honest about this stuff.  Selling the rental helped us achieve this goal this year, otherwise we would still be a year or two away from it.  Feels good but also kind of anti-climatic.  Next goal is 500K saved in the next 5 years. We are 37 and 36 now.

I'm sure you will see your savings accelerate tremendously now.  Just remember to invest all of the money you were using to  pay off the mortgage!

[Apple_Tango]

On the other hand, maybe I'll turn 62 & regret the payoff at 32.  Look back over those last 30 years with a few hundred grand extra & think 'those 30 years of pesky mortgage payments would have been totally worth it.  I wish I wouldn't have had a serene, debt-free existence in my 30's, 40's and 50's raising kids, enjoying vacations and not constantly calculating amortization in my head.'  Doubtful.  The good news is that they're still selling mortgages, so I can always walk down to the bank & get another one if I change my mind!

The good news is that if you HATE being debt free and want to pull out equity to play the market(as the DO NOT PAY camp recommends), you can do that. You can always go back into debt if you hate how debt free feels....

[boarder42]

On the other hand, maybe I'll turn 62 & regret the payoff at 32.  Look back over those last 30 years with a few hundred grand extra & think 'those 30 years of pesky mortgage payments would have been totally worth it.  I wish I wouldn't have had a serene, debt-free existence in my 30's, 40's and 50's raising kids, enjoying vacations and not constantly calculating amortization in my head.'  Doubtful.  The good news is that they're still selling mortgages, so I can always walk down to the bank & get another one if I change my mind!

The good news is that if you HATE being debt free and want to pull out equity to play the market(as the DO NOT PAY camp recommends), you can do that. You can always go back into debt if you hate how debt free feels....

This is wildly incorrect. Mortgage rates fluctuate there is a chance you'll never see the rate you have at the start again. So paying down a 4% or less mortgage now may mean if you find the light and the greatness of the low fixed rate mortgages of our current climate but it's 5 years from now and rates are back around the avg 5-7% it no longer may make sense to leverage a mortgage. We are at a very interesting time in mortgage rate history that we may not see again.

[Apple_Tango]

You can certainly take on debt regardless of the interest rate. If you hate having a paid off house, get another mortgage on it. It really is that simple. I get your point that you think a sub 4% interest rate is the bees knees...but to me it just sounds crazy. I don't want to pay it! I would be as likely to acquire debt by taking out a second mortgage at 4% as I am at 15%...which is to say not likely at all. But if you love to be in debt, then go right ahead.

[boarder42]

You can certainly take on debt regardless of the interest rate. If you hate having a paid off house, get another mortgage on it. It really is that simple. I get your point that you think a sub 4% interest rate is the bees knees...but to me it just sounds crazy. I don't want to pay it! I would be as likely to acquire debt by taking out a second mortgage at 4% as I am at 15%...which is to say not likely at all. But if you love to be in debt, then go right ahead.

Not one of the people in the don't pay off your mortgage thread is there because they love debt. It's a math equation. You need to learn alot because you have posted incorrectly in both of those threads and show a clear lack of open mindedness to learn anything against what you Believe or feel. Not a single one of us would advocate for a mortgage at 10% let alone 15. And it's likely closer to 7-8% or less depending on some factors.

[protostache]

You can certainly take on debt regardless of the interest rate. If you hate having a paid off house, get another mortgage on it. It really is that simple. I get your point that you think a sub 4% interest rate is the bees knees...but to me it just sounds crazy. I don't want to pay it! I would be as likely to acquire debt by taking out a second mortgage at 4% as I am at 15%...which is to say not likely at all. But if you love to be in debt, then go right ahead.

Not one of the people in the don't pay off your mortgage thread is there because they love debt. It's a math equation. You need to learn alot because you have posted incorrectly in both of those threads and show a clear lack of open mindedness to learn anything against what you Believe or feel. Not a single one of us would advocate for a mortgage at 10% let alone 15. And it's likely closer to 7-8% or less depending on some factors.

You’ve made your point in this thread over and over and still, people are paying off their mortgages! What’s wrong with them?! Could it be that they fully understand the math and just don’t care? That they weigh their peace of mind more heavily than an interest arbitrage play?

No, they must not have heard your preaching. That must be it.

[Money Badger]

@Neustache,   Congratulations on paying it off and winning your freedom!

[Neustache]

@Neustache,   Congratulations on paying it off and winning your freedom!

Thank you everyone!  I already feel the freedom.  Daughter is sick, normally I'd fret about calling in tomorrow.  Nope!  Did find a sub, though, so I feel good about not being there.  :D

[Dicey]

There is not now, nor will there ever be, freedom from property taxes, maintenance, or utilities. If you pay off your mortgage, the bank can't foreclose on your house, 'tis true. If you fail to pay your taxes, your county tax assessor can auction it right out from under you. Can't pay your utilities? Good luck with that. The utility companies reserve the right to shut off your water, gas, and power. What? You say your roof is caving in, your heater went out, the plumbing leaks and you don't have the money for repairs? So sad...

If you save/invest your money first, THEN pay off your mortgage, the odds are much more in your favor. If you don't understand why,  pleeeeease don't prepay another penny on your mortgage until you do.

Personally, people like b42 and I (and more every day) are grateful someone taught us this math and we were open minded enough to embrace it. We want to help others as we have been helped. If you understand this concept and are stuffing your investment accounts full to bursting first, then hooray for you! If you're just doing it without a clear understanding of the math, then  just know that it's gonna cost you more and take you longer to reach FIRE. That's fine for a lot of people, but we're not spending time on this forum seeking the longer path to FIRE, are we?

BTW, to those who say you can remortgage later, there are catches to that strategy.

1. The best rates and terms are typically for original acquisition loans. i.e. when you first buy the house.
2. It's easier to qualify for a mortgage when you're still drawing a steady paycheck.
3. I'm not a CPA, but I am aware that there limits to the deductibility of money borrowed on a home beyond original home acquisition cost. I believe it's generally $100k if  married or $50k if single. Should you decide to pull say, $250k out of your house for living expenses at a later date, it's going to cost you more because only part of it will be deductible. Consult a tax professional for further detalis.
4. These historically low mortgage rates will not last forever.
5. In the years to come, when rates normalize, people who still have cheap-ass mortgage loans are going to be laughing all the way to the bank. Try to be one of them.

[Askel]

Sure, I did have some well thought out reasons for paying off my mortgage early.

But now I think I'm going to pay off my mortgage just because it makes the DO NOT PAY club so comically angry. 

I'm looking forward to another 6 posts detailing how dumb I am. 

FWIW: I'm in the final count down. 12 months to go and I'm free. 

[boarder42]

You can certainly take on debt regardless of the interest rate. If you hate having a paid off house, get another mortgage on it. It really is that simple. I get your point that you think a sub 4% interest rate is the bees knees...but to me it just sounds crazy. I don't want to pay it! I would be as likely to acquire debt by taking out a second mortgage at 4% as I am at 15%...which is to say not likely at all. But if you love to be in debt, then go right ahead.

Not one of the people in the don't pay off your mortgage thread is there because they love debt. It's a math equation. You need to learn alot because you have posted incorrectly in both of those threads and show a clear lack of open mindedness to learn anything against what you Believe or feel. Not a single one of us would advocate for a mortgage at 10% let alone 15. And it's likely closer to 7-8% or less depending on some factors.

You’ve made your point in this thread over and over and still, people are paying off their mortgages! What’s wrong with them?! Could it be that they fully understand the math and just don’t care? That they weigh their peace of mind more heavily than an interest arbitrage play?

No, they must not have heard your preaching. That must be it.

there is a new poster in this thread who is trying to determine what is best for them.  Its quite easy to get locked into a group think mentality and join other "like minded" people with out truly weighing or understanding all the real options and how they impact you.  Which can be seen from the multiple posts made by this poster in both threads.   sure there are many here who thought this thru.  But you all should be telling people to understand it all before you just include them in the group b/c they must have thought it thru.  I'd be the first to question someone with a 7% mortgage in the dont pay off your mortgage club as to what their mentality was behind it.  But this thread is doing a disservice to the community at large if they react in the way you did to my comments above which did not indicate you shouldnt pay down your mortage it in fact gave a scenario in which i would pay down my mortgage. 

[protostache]

You can certainly take on debt regardless of the interest rate. If you hate having a paid off house, get another mortgage on it. It really is that simple. I get your point that you think a sub 4% interest rate is the bees knees...but to me it just sounds crazy. I don't want to pay it! I would be as likely to acquire debt by taking out a second mortgage at 4% as I am at 15%...which is to say not likely at all. But if you love to be in debt, then go right ahead.

Not one of the people in the don't pay off your mortgage thread is there because they love debt. It's a math equation. You need to learn alot because you have posted incorrectly in both of those threads and show a clear lack of open mindedness to learn anything against what you Believe or feel. Not a single one of us would advocate for a mortgage at 10% let alone 15. And it's likely closer to 7-8% or less depending on some factors.

You’ve made your point in this thread over and over and still, people are paying off their mortgages! What’s wrong with them?! Could it be that they fully understand the math and just don’t care? That they weigh their peace of mind more heavily than an interest arbitrage play?

No, they must not have heard your preaching. That must be it.

there is a new poster in this thread who is trying to determine what is best for them.  Its quite easy to get locked into a group think mentality and join other "like minded" people with out truly weighing or understanding all the real options and how they impact you.  Which can be seen from the multiple posts made by this poster in both threads.   sure there are many here who thought this thru.  But you all should be telling people to understand it all before you just include them in the group b/c they must have thought it thru.  I'd be the first to question someone with a 7% mortgage in the dont pay off your mortgage club as to what their mentality was behind it.  But this thread is doing a disservice to the community at large if they react in the way you did to my comments above which did not indicate you shouldnt pay down your mortage it in fact gave a scenario in which i would pay down my mortgage.

I 100% agree with you that people should think it through entirely before making a decision. I'm suggesting, perhaps more causticly than necessary since I just read every post in the thread including your basic message half a dozen times, that a 29 page thread full of people tracking their progress toward and eventually celebrating their accomplishment of one branch of that decision tree isn't the place to be mounting a campaign for the other branch.

I think the most appropriate course of action would be a sticky thread that links to this thread, the various "starting balance" payoff threads, as well as the "don't pay off your mortgage" club and all of the other super long, incredibly detailed "should I or shouldn't I, how bad is it?" conversations that have happened in the past. That way we could have one place to point people when they ask "should I or shouldn't I" instead of posting the same things repeatedly and having conversations that span multiple concurrent threads. If, after reading all of the material linked from that sticky, people still have questions, they can make a case study.

[boarder42]

You can certainly take on debt regardless of the interest rate. If you hate having a paid off house, get another mortgage on it. It really is that simple. I get your point that you think a sub 4% interest rate is the bees knees...but to me it just sounds crazy. I don't want to pay it! I would be as likely to acquire debt by taking out a second mortgage at 4% as I am at 15%...which is to say not likely at all. But if you love to be in debt, then go right ahead.

Not one of the people in the don't pay off your mortgage thread is there because they love debt. It's a math equation. You need to learn alot because you have posted incorrectly in both of those threads and show a clear lack of open mindedness to learn anything against what you Believe or feel. Not a single one of us would advocate for a mortgage at 10% let alone 15. And it's likely closer to 7-8% or less depending on some factors.

You’ve made your point in this thread over and over and still, people are paying off their mortgages! What’s wrong with them?! Could it be that they fully understand the math and just don’t care? That they weigh their peace of mind more heavily than an interest arbitrage play?

No, they must not have heard your preaching. That must be it.

there is a new poster in this thread who is trying to determine what is best for them.  Its quite easy to get locked into a group think mentality and join other "like minded" people with out truly weighing or understanding all the real options and how they impact you.  Which can be seen from the multiple posts made by this poster in both threads.   sure there are many here who thought this thru.  But you all should be telling people to understand it all before you just include them in the group b/c they must have thought it thru.  I'd be the first to question someone with a 7% mortgage in the dont pay off your mortgage club as to what their mentality was behind it.  But this thread is doing a disservice to the community at large if they react in the way you did to my comments above which did not indicate you shouldnt pay down your mortage it in fact gave a scenario in which i would pay down my mortgage.

I 100% agree with you that people should think it through entirely before making a decision. I'm suggesting, perhaps more causticly than necessary since I just read every post in the thread including your basic message half a dozen times, that a 29 page thread full of people tracking their progress toward and eventually celebrating their accomplishment of one branch of that decision tree isn't the place to be mounting a campaign for the other branch.

I think the most appropriate course of action would be a sticky thread that links to this thread, the various "starting balance" payoff threads, as well as the "don't pay off your mortgage" club and all of the other super long, incredibly detailed "should I or shouldn't I, how bad is it?" conversations that have happened in the past. That way we could have one place to point people when they ask "should I or shouldn't I" instead of posting the same things repeatedly and having conversations that span multiple concurrent threads. If, after reading all of the material linked from that sticky, people still have questions, they can make a case study.

this is what i've recommended to that poster - b/c i'm sure you can see just from the post made here there is a lack of understanding.  Then go check out their post in the Dont pay off your mortgage thread and you will see an even greater distance from understanding even some of the most basic FIRE principals not even regarding carrying a mortgage or otherwise. 

that being said i bit my tongue on bbubs original post about being able to get a mortgage whenever - but could not when a new person bit on that like it was a reality.  The reality in all likelihood is we will not see these rates again in 30 years time and that this is a bottom.  But if it isnt a bottom those with or without mortgage could dip back in and get the rates again.  IF it is and you've paid off your low fixed debt then you've cut off a possible insane deal and that statement should not be proliferated as the truth.  b/c no one knows what rates will do but in paying down a mortgage you have cut off your flexiblity should they rise.

[farmecologist]

Frankly, the intent of this thread is a support group for those that have already made the decision to pay off their mortgage...regardless of the reasoning.  I think we have went over this before...many times.  The arguments for or against just don't seem to belong here.

Perhaps we need a thread for those that are thinking about paying it off....but have not made a decision yet??

[protostache]

Frankly, the intent of this thread is a support group for those that have already made the decision to pay off their mortgage...regardless of the reasoning.  I think we have went over this before...many times.  The arguments for or against just don't seem to belong here.

Perhaps we need a thread for those that are thinking about paying it off....but have not made a decision yet??

Yes, this is my suggestion also. This is a common enough topic that a sticky thread is warranted, even if it just links out to the various on-going threads.

[couponvan]

I feel like I've commented before, but my 2 cents is that once mortgage is below $50K, the mental peace of mind and ability to change the property insurance deductible to a higher minimum makes it financially worth it to prepay. (i.e. a $10K deductible on a $500K house costs approximately $750 less per year than a $1K deductible in my area.) Also, for US FAFSA college financial aid purposes, assets are assessed at a 5-7% rate for college, whereas the equity in your home is not included as an asset available for college funding. So if you have excess after-tax assets (not in a 401(k)/403(b) etc.), and you might qualify for financial aid otherwise, it can make sense to move that $ into your home equity. During the college years, our plan is to only contribute to the 401(k) up to the match and any extra after tuition costs will go into prepaying the mortgage. We're at $219K. We're also holding payoffs until we see how much college will be costing and are sitting on $70K in liquid assets which could be used for mortgage payoffs.

[Money Badger]

Sure, I did have some well thought out reasons for paying off my mortgage early.

But now I think I'm going to pay off my mortgage just because it makes the DO NOT PAY club so comically angry. 

I'm looking forward to another 6 posts detailing how dumb I am. 

FWIW: I'm in the final count down. 12 months to go and I'm free.

Or maybe a re-make of the Miller Lite ads of old... Instead of "Tastes Great!  Less Filling!"    It'll be...  "DUMB!   FREE!   DUMB!!  FREE!!   DUMB!!!   FREEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE!"

[Askel]

It's a floor wax, AND a dessert topping! 

https://www.youtube.com/watch?v=wPO8PqHGWFU

[theadvicist]

I too am so sick of the endless, “do the math!” posts. Why do you need to come and ruins people’s fun? We are not stupid little people who need you to come and educate us, thank you. We have made our decisions and do not need rescuing from them.

For me, the main issue is that in many countries (mine included) it does make financial sense to pay off your mortgage. Did you know that? Shall I wade into the “don’t pay off your mortgage thread” and educate people?

There is not now, nor will there ever be, freedom from property taxes, maintenance, or utilities. If you pay off your mortgage, the bank can't foreclose on your house, 'tis true. If you fail to pay your taxes, your county tax assessor can auction it right out from under you. Can't pay your utilities? Good luck with that. The utility companies reserve the right to shut off your water, gas, and power. What? You say your roof is caving in, your heater went out, the plumbing leaks and you don't have the money for repairs? So sad...

Not true in the UK. Once the bank has no claim on your home, no one does. Technically you could go to prison for non payment of a small tax called Council Tax (£118 a month for us), but only if you refuse to pay it. If you can’t pay it through financial difficulty you are exempted. The test is based on income, so if times really were that lean, you would qualify for the exemption. If times were so bad you couldn’t afford utilities, you certainly won’t be able to pay rent, so that’s kind of moot. And again, in the UK, you would qualify for help if things were that bad.

The rest of my responses are in bold below.

BTW, to those who say you can remortgage later, there are catches to that strategy.

1. The best rates and terms are typically for original acquisition loans. i.e. when you first buy the house. again, not true in the UK. The best rates are for those with a small loan to value ratio. By paying my mortgage down to 50% of the appraised value my rate went from 5.49% to 1.99%

2. It's easier to qualify for a mortgage when you're still drawing a steady paycheck. this i agree with

3. I'm not a CPA, but I am aware that there limits to the deductibility of money borrowed on a home beyond original home acquisition cost. I believe it's generally $100k if  married or $50k if single. Should you decide to pull say, $250k out of your house for living expenses at a later date, it's going to cost you more because only part of it will be deductible. Consult a tax professional for further detalis. tax relief on mortgage interest was abolished here about 30 years ago

4. These historically low mortgage rates will not last forever. very true. And here in the UK you don’t fix for 30 years - your rate goes up and down with prevailing interest rates. In the early 90s my parents were paying 17% interest. Can you imagine spending 17% of your home’s loan value A YEAR just to the bank? That’s no principal payment at all. You are able to fix for a shorter duration, usually between 3 - 5 years. Interest rates here have only one way to go, and the Bank of England’s has been warning that they will start to rise. I intend to only borrow money at the current low rates, which means I need to have a strategy for paying it off once rates start to rise. At that point, I need to be a lender, not a borrower

5. In the years to come, when rates normalize, people who still have cheap-ass mortgage loans are going to be laughing all the way to the bank. Try to be one of them.rates will normalise. And my friends with £300k houses on 95% loans who are already stretched to the max and living paycheck to paycheck will not be laughing at all. The banks will increase rates, and then what will they do? I’ve asked a few, none seem to have a plan. I want to be one of the ones who is never in peril of losing my home because interest rates have done the only predictable thing.

ETA: missing word.

[talltexan]

I feel like I've commented before, but my 2 cents is that once mortgage is below $50K, the mental peace of mind and ability to change the property insurance deductible to a higher minimum makes it financially worth it to prepay. (i.e. a $10K deductible on a $500K house costs approximately $750 less per year than a $1K deductible in my area.) Also, for US FAFSA college financial aid purposes, assets are assessed at a 5-7% rate for college, whereas the equity in your home is not included as an asset available for college funding. So if you have excess after-tax assets (not in a 401(k)/403(b) etc.), and you might qualify for financial aid otherwise, it can make sense to move that $ into your home equity. During the college years, our plan is to only contribute to the 401(k) up to the match and any extra after tuition costs will go into prepaying the mortgage. We're at $219K. We're also holding payoffs until we see how much college will be costing and are sitting on $70K in liquid assets which could be used for mortgage payoffs.

The tax reform bills that are floating in Congress right now will also be quite a bit less favorable to the mortgage interest deduction, although it's subtle in that it comes from raising the standard deduction so much.

The House version of the bill also cuts the upper limit of mortgage balance the interest on which is deductible from $1,000,000 to $500,000.

[Dicey]

I too am so sick of the endless, “do the math!” posts. Why do you need to come and ruins people’s fun? We are not stupid little people who need you to come and educate us, thank you. We have made our decisions and do not need rescuing from them.

For me, the main issue is that in many countries (mine included) it does make financial sense to pay off your mortgage. Did you know that? Shall I wade into the “don’t pay off your mortgage thread” and educate people?

There is not now, nor will there ever be, freedom from property taxes, maintenance, or utilities. If you pay off your mortgage, the bank can't foreclose on your house, 'tis true. If you fail to pay your taxes, your county tax assessor can auction it right out from under you. Can't pay your utilities? Good luck with that. The utility companies reserve the right to shut off your water, gas, and power. What? You say your roof is caving in, your heater went out, the plumbing leaks and you don't have the money for repairs? So sad...

Not true in the UK. Once the bank has no claim on your home, no one does. Technically you could go to prison for non payment of a small tax called Council Tax (£118 a month for us), but only if you refuse to pay it. If you can’t pay it through financial difficulty you are exempted. The test is based on income, so if times really were that lean, you would qualify for the exemption. If times were so bad you couldn’t afford utilities, you certainly won’t be able to pay rent, so that’s kind of moot. And again, in the UK, you would qualify for help if things were that bad.

The rest of my responses are in bold below.

BTW, to those who say you can remortgage later, there are catches to that strategy.

1. The best rates and terms are typically for original acquisition loans. i.e. when you first buy the house. again, not true in the UK. The best rates are for those with a small loan to value ratio. By paying my mortgage down to 50% of the appraised value my rate went from 5.49% to 1.99%

2. It's easier to qualify for a mortgage when you're still drawing a steady paycheck. this i agree with

3. I'm not a CPA, but I am aware that there limits to the deductibility of money borrowed on a home beyond original home acquisition cost. I believe it's generally $100k if  married or $50k if single. Should you decide to pull say, $250k out of your house for living expenses at a later date, it's going to cost you more because only part of it will be deductible. Consult a tax professional for further detalis. tax relief on mortgage interest was abolished here about 30 years ago

4. These historically low mortgage rates will not last forever. very true. And here in the UK you don’t fix for 30 years - your rate goes up and down with prevailing interest rates. In the early 90s my parents were paying 17% interest. Can you imagine spending 17% of your home’s value A YEAR just to the bank? That’s no principal payment at all. You are able to fix for a shorter duration, usually between 3 - 5 years. Interest rates here have only one way to go, and the Bank of England’s has been warning that they will start to rise. I intend to only borrow money at the current low rates, which means I need to have a strategy for paying it off once rates start to rise. At that point, I need to be a lender, not a borrower

5. In the years to come, when rates normalize, people who still have cheap-ass mortgage loans are going to be laughing all the way to the bank. Try to be one of them.rates will normalise. And my friends with £300k houses on 95% loans who are already stretched to the max and living paycheck to paycheck will not be laughing at all. The banks will increase rates, and then what will they do? I’ve asked a few, none seem to have a plan. I want to be one of the ones who is never in peril of losing my home because interest rates have done the only predictable thing.

1. The point is that people make decisions without understanding the math.

2. We are always, always talking about fixed rate, low interest mortgages, which are commonly available throughout the US. Adjustable rate mortgages are a crapshoot.  Point #1 includes anyone who cannot clearly explain why.

3. This blog and forum originate in the Untied States. I live in the United States. All of my many real estate transactions have occurred and will continue to occur in the Untied States. Therefore, my points are anything but "moot", they are perfectly applicable to all who own real estate in the United States. When I read a recipe from anywhere that uses the Metric System, I do not expect it to be translated for me. I do it myself without complaint, because I can math.

4. Here in the United States, those of us who understand the math generally feel quite sorry for those who cannot get fixed rate mortgages and/or deduct mortgage interest on their taxes. (The consolation is possibly that your healthcare systems are much less fucked up more humane than ours.)

5. Mortgage interest deductibility does not negate the math. Leverage, inflation and the time value of money invested are the biggest needle movers.

6. The concepts mentioned in #5 probably apply globally, and are well worth researching and understanding in any country. They are part of the math we should all be striving to understand before making mortgage prepayment decisions.

7. We are not shouting, we are sharing, in hopes of teaching. Sorry if that ruins your "fun".

8. Bonus Point: Forums exist for discussion. To say that only one side can be espoused on any thread herein is stupid ridiculous silly unclear on the concept.

[theadvicist]

2. We are always, always talking about fixed rate, low interest mortgages

See, this is my point. No we are not. This forum is open to anyone who registers and when I say “I have paid x off my mortgage!” I do not mean a fixed rate, low interest mortgage. I just mean my mortgage.

You do not have the right to define what the words “we” use mean. Especially when they are being used perfectly accurately.

[BlueHouse]

Dicey and Boarder42:

I appreciate that you want to be helpful, but as others have mentioned, this is a celebratory and inspirational thread.  Boarder42's counter-thread is a perfect place to suggest to newbies to get a counter-view for decision making.  But since you've both already stated your reasons for not paying off the mortgage so, so, so many times, in the future when you see a newbie and fear they may make "the wrong decision", why don't you just PM them to let them know about your other thread? 

You guys are like the preacher dudes at the baseball games.  Dude, if I want to be preached at, I'll go to church.  But right now, I'm at baseball and I want to hear about baseball, so F Off. 

Edited (to strike the "F Off")
And to add:

My sincerest apologies....I didn't mean to direct that at any forum members.  I was (in my mind) speaking to the preacher dude at the baseball game.