Author Topic: Mortgage Payoff Club!!  (Read 1002541 times)

Money Badger

  • Pencil Stache
  • ****
  • Posts: 509
Re: Mortgage Payoff Club!!
« Reply #2300 on: May 08, 2022, 08:50:02 PM »
Gotcha.   Totally agree on killing the credit card debt first (as does the Dave Ramsey "debt snowball" approach to meaningful wealth creation through removal of consumer and most single family homeowner's homeplace mortgage debt).  Map out a 12 month "burndown" chart and hang it the home office as we did and just go at those cards till they're zero!  With short term rates going up, there's too high a risk of those 0% rates being pulled and ratcheting up such that suddenly that card rate effectively becomes 8 or 10%.   Happened to me on cards in the early 2000s... They just "cancelled" the low % rate and high reward cards and said "tough, here's your new 7% interest card "product" or you can go elsewhere!"  History doesn't repeat, but I certainly hear a lot of rhyming with rates and banks and stag-flation talk lately...   

monarda

  • Handlebar Stache
  • *****
  • Posts: 1395
  • Age: 62
Re: Mortgage Payoff Club!!
« Reply #2301 on: May 09, 2022, 08:19:32 AM »
There's also the HELOC option. Those have 1% or 2% promo rates for the first year, then they go to whatever the going variable rates are. I thought I could engage that option if what you are suggesting with the CCs actually happens.

I probably don't need more than an extra year. We'll see where things stand in the fall, when one of the 0% cards' promo period ends. Another card gets paid off this month.

Money Badger

  • Pencil Stache
  • ****
  • Posts: 509
Re: Mortgage Payoff Club!!
« Reply #2302 on: May 09, 2022, 08:21:06 PM »
Awesome on paying off the card(s) one at a time.    Been the HELOC route too... Absolute minefield of "start up fees", "minimum HELOC balance requirements" and then high monthly payback amounts of 1% of the balance or more, plus a nice ding on credit ratings to drive up any future financing terms on other real estate purchases or refinances.   And heaven forbid you forget to pay 1 month so they hit you with late fees anywhere from $50 to $100 for ONE month's late payment.    F the usurious banks that will screw you when it suits them to pay their dividends to shareholders.   Kill the debt.   Then become your own bank so "they" pay you instead.   

Sorry, the road to eliminate debt was a hard time.   And yes, it left a mark.

AnxietyFly

  • 5 O'Clock Shadow
  • *
  • Posts: 72
Re: Mortgage Payoff Club!!
« Reply #2303 on: May 30, 2022, 10:52:22 AM »
Hey guys! It's been a couple years now since I paid the house off. The sense of accomplishment still resonates in my daily thoughts. The amount of money I was paying towards my house is now being invested towards my retirement.   

LeftA

  • Stubble
  • **
  • Posts: 131
Re: Mortgage Payoff Club!!
« Reply #2304 on: June 01, 2022, 08:18:13 AM »
@AnxietyFly , thanks for dropping by and that feedback!

I canít wait until Iím in the same situation. It will be in 2023!

swaneesr

  • 5 O'Clock Shadow
  • *
  • Posts: 60
Re: Mortgage Payoff Club!!
« Reply #2305 on: June 13, 2022, 12:04:47 AM »
It has been 16 months since we paid off the mortgage.

With the cost of everything going up, everything is much easier without that big payment.

Less stress. Less worry. Itís not just the money math thing.


Sent from my iPad using Tapatalk

Money Badger

  • Pencil Stache
  • ****
  • Posts: 509
Re: Mortgage Payoff Club!!
« Reply #2306 on: June 16, 2022, 08:47:43 PM »
It has been 16 months since we paid off the mortgage.

With the cost of everything going up, everything is much easier without that big payment.

Less stress. Less worry. Itís not just the money math thing.


Sent from my iPad using Tapatalk
This plus a gajillion!   It turns the game around to be without payments... Worry about whether home values are up or down evaporates... interest rate worries evaporate.   Just save more with the free cash flow, earn more dollar averaged investment returns, live and give!

ATtiny85

  • Pencil Stache
  • ****
  • Posts: 521
  • Location: Midwest
Re: Mortgage Payoff Club!!
« Reply #2307 on: June 17, 2022, 09:40:19 AM »
It has been 16 months since we paid off the mortgage.

With the cost of everything going up, everything is much easier without that big payment.

Less stress. Less worry. Itís not just the money math thing.


Sent from my iPad using Tapatalk

Iíve had mortgages and Iíve had paid off houses. Depending on how you do it, Iíll take the paid off house most of the time. We rolled equity forward into larger down payments (corporate relos every few years).

talltexan

  • Walrus Stache
  • *******
  • Posts: 5321
Re: Mortgage Payoff Club!!
« Reply #2308 on: June 17, 2022, 11:07:05 AM »
All of the refinance activity has dropped off (why wouldn't it?). My wife and I both received % pay raises larger than our nominal mortgage rate this year.

FLBiker

  • Handlebar Stache
  • *****
  • Posts: 1681
  • Age: 46
  • Location: Canada
    • Chop Wood Carry FIRE
Re: Mortgage Payoff Club!!
« Reply #2309 on: June 20, 2022, 12:46:11 PM »
After many years in the "don't pay off your mortgage club" I think we're turning in our membership.  I'm hoping to RE in a couple of years, and I like the idea of paying off our house at around the same time.  We moved to Canada and bought a house up here in July 2020.  Mortgages are very different up here -- they're typically amortized for 25 years, but you only lock in the terms for 5, 7 or 10 years at a time (most typically 5 or 7).  We got a 5 year fixed 2.44% mortgage.  If we pay it off early, we actually have to pay a penalty, but we can pay it off when it comes to term (in July of 2025).  So that's my goal. 

We should have a balance of $171,775.34 CAD at that time (or approximately $132315 in USD, as of today).  We've got ~$40,000 USD in I-bonds that I'm planning to put towards it, plus $23,000 USD in "high" interest savings accounts.  I don't have a ton of tax advantaged space available to me here in Canada, but I'm trying to max it out.  The rest we'll likely keep in cash with an eye towards paying off the mortgage.  I'm thinking we should accumulate around another $50K by then, but that's a really rough estimate (I'm still getting my head around our taxes and expenses up here as we have yet to have a truly "normal" year).  And we have a decent-sized taxable account (~$200K USD) that we could take whatever else we need from.  Instead of doing that, though, I might just pay down the mortgage with whatever we have between the I-bonds and the cash, and carry a small 5 year mortgage forward.  It depends on 1) how terrible the rates are in 3 years and 2) how successful I am at resisting putting our available cash into the market over the next 3 years.

iluvzbeach

  • Handlebar Stache
  • *****
  • Posts: 1259
Re: Mortgage Payoff Club!!
« Reply #2310 on: June 20, 2022, 05:03:00 PM »
Iím pretty sure I posted here 5 years ago this month when we paid off our house. Despite the market gains in that time, we have never regretted for one minute our decision to payoff the place. The sense of freedom it has provided is priceless, and our monthly expenses are so low it is incredible. We were long term savers anyway, but weíve ratcheted the savings way up since the payoff. Itís like a firehose of cash going into savings each month & year. So glad we paid off the mortgage when we did.

talltexan

  • Walrus Stache
  • *******
  • Posts: 5321
Re: Mortgage Payoff Club!!
« Reply #2311 on: June 22, 2022, 07:42:03 AM »
Market down like it is, this is a good time to celebrate the lower stresses of mortgage-free life.

Askel

  • Pencil Stache
  • ****
  • Posts: 644
Re: Mortgage Payoff Club!!
« Reply #2312 on: June 22, 2022, 04:37:01 PM »
Yes, but for those of us who aspire to the mortgage free life, a down market is the cause for much soul searching.   

With I bonds at 9.whatever% and the potential for massive discounts in the stock market, letting that 3.5% mortgage ride looks a lot more enticing.   

I'm still happy to split the difference at a 15 year mortgage and enough investments to pay it off if things get weird. If those investments drop to anywhere near the mortgage balance though, I'll be getting a nice nervous sweat going. 

talltexan

  • Walrus Stache
  • *******
  • Posts: 5321
Re: Mortgage Payoff Club!!
« Reply #2313 on: June 23, 2022, 07:46:04 AM »
I think the purpose of this discussion thread is to celebrate the paydown of debt, there are other places where using discretionary money to add risk rather than reduce debt is better explored.

wkumtrider

  • Stubble
  • **
  • Posts: 109
Re: Mortgage Payoff Club!!
« Reply #2314 on: June 23, 2022, 01:06:41 PM »
My house will be paid off in October - just a little over 14 yrs.  Can't wait!

alcon835

  • Pencil Stache
  • ****
  • Posts: 671
Re: Mortgage Payoff Club!!
« Reply #2315 on: June 23, 2022, 06:16:08 PM »
My house will be paid off in October - just a little over 14 yrs.  Can't wait!

Oh wow!!! Keep us updated on the countdown!!

BlueHouse

  • Magnum Stache
  • ******
  • Posts: 3956
  • Location: WDC
Re: Mortgage Payoff Club!!
« Reply #2316 on: June 23, 2022, 08:53:49 PM »
Yes, but for those of us who aspire to the mortgage free life, a down market is the cause for much soul searching.   

With I bonds at 9.whatever% and the potential for massive discounts in the stock market, letting that 3.5% mortgage ride looks a lot more enticing.   

I'm still happy to split the difference at a 15 year mortgage and enough investments to pay it off if things get weird. If those investments drop to anywhere near the mortgage balance though, I'll be getting a nice nervous sweat going.

Yes, I've been doing the soul -searching myself.  I've paid down my mortgage, and will pay off early and have the cash now to pay it all off, but there's too much uncertainty right now for me to do that.  I cannot wait to have this off my mind, but right now isn't the right time for me.

Money Badger

  • Pencil Stache
  • ****
  • Posts: 509
Re: Mortgage Payoff Club!!
« Reply #2317 on: July 04, 2022, 04:42:06 AM »
We should have a balance of $171,775.34 CAD at that time (or approximately $132315 in USD, as of today).  We've got ~$40,000 USD in I-bonds that I'm planning to put towards it, plus $23,000 USD in "high" interest savings accounts.  I don't have a ton of tax advantaged space available to me here in Canada, but I'm trying to max it out.  The rest we'll likely keep in cash with an eye towards paying off the mortgage.  I'm thinking we should accumulate around another $50K by then, but that's a really rough estimate (I'm still getting my head around our taxes and expenses up here as we have yet to have a truly "normal" year).  And we have a decent-sized taxable account (~$200K USD) that we could take whatever else we need from.  Instead of doing that, though, I might just pay down the mortgage with whatever we have between the I-bonds and the cash, and carry a small 5 year mortgage forward.  It depends on 1) how terrible the rates are in 3 years and 2) how successful I am at resisting putting our available cash into the market over the next 3 years.

Here's the Badger-ian way to think about it...   More coming in than going out wins.   Between the taxable account and that high interest account, you can kill that mortgage tomorrow.  Remove the stress, and change your mindset to 100% "I am the F-ing bank, hear me roar!" mode so you grow that roughly $700/month you free up plus the cash flow you were planning to throw at it dollar cost averaged into the market or other favorable investments to build up far more than your current loan balance w/in 5 years.  It will be FAR more under your control, and not the whims of the Fed or a mortgage company or other financial parasites.   The change in one's mindset and investing behavior when there's no debt hanging overhead and having a very clear goal is simply amazing.   Best of luck on the journey to freedom!

talltexan

  • Walrus Stache
  • *******
  • Posts: 5321
Re: Mortgage Payoff Club!!
« Reply #2318 on: July 18, 2022, 01:19:46 PM »
@FLBiker , it sounds like you have a major debt in one currency, and a lot of assets in a different currency. Do your long-term plans include moving back to US? That may affect the desirability of keeping those asset balances higher.

If you don't expect to be returning to the US within a few years, the US dollar is particularly strong lately because of our FRB's aggressiveness in raising rates.

Kiwistash

  • 5 O'Clock Shadow
  • *
  • Posts: 6
Re: Mortgage Payoff Club!!
« Reply #2319 on: July 21, 2022, 09:45:55 PM »
Hello there fellow mortgage pay off club members, Iím coming to join you!
We live in New Zealand where house prices are reeeeeediculously high but we are on a mission to pay off our home. Itís great to be able to discuss and share on here with all you excited like minded people so thanks everyone.

We currently owe $356,912.44.
The interest rate is 2.49% on a fixed term. That expires on August 1st 2023. I reckon one more year after that and we will have, as they say in NZ ďknocked the bugger off.Ē
So, all things going to plan, on the first of August this year, the 2 year countdown will begin to pay this thing off.

Info:
- as itís a fixed term we canít make additional payments without incurring fees, so we save an extra $5500 a month and donít touch it, ready to dump it on the principal when the term expires. The fixed term saved us from rapidly increasing interest rates that would kick on a floating rate.
- we pay over what the bank requires in our monthly payment.
- interest rates here are going up and up, so the sooner we get rid of this thing the better, in our humble opinion.

So itís great to be here and thanks again!

BlueHouse

  • Magnum Stache
  • ******
  • Posts: 3956
  • Location: WDC
Re: Mortgage Payoff Club!!
« Reply #2320 on: July 22, 2022, 02:33:04 PM »
Hello there fellow mortgage pay off club members, Iím coming to join you!
We live in New Zealand where house prices are reeeeeediculously high but we are on a mission to pay off our home. Itís great to be able to discuss and share on here with all you excited like minded people so thanks everyone.

We currently owe $356,912.44.
The interest rate is 2.49% on a fixed term. That expires on August 1st 2023. I reckon one more year after that and we will have, as they say in NZ ďknocked the bugger off.Ē
So, all things going to plan, on the first of August this year, the 2 year countdown will begin to pay this thing off.

Info:
- as itís a fixed term we canít make additional payments without incurring fees, so we save an extra $5500 a month and donít touch it, ready to dump it on the principal when the term expires. The fixed term saved us from rapidly increasing interest rates that would kick on a floating rate.
- we pay over what the bank requires in our monthly payment.
- interest rates here are going up and up, so the sooner we get rid of this thing the better, in our humble opinion.

So itís great to be here and thanks again!

That's such great news Kiwistash!  Tell me, do many Kiwis pay off their mortgages early?  Stay in there houses long or move around a lot?  Is it just an american thing to think of homes as "starter" and "moving up" homes?  I feel as if this is one of the things that really screws with our minds;

Kiwistash

  • 5 O'Clock Shadow
  • *
  • Posts: 6
Re: Mortgage Payoff Club!!
« Reply #2321 on: July 23, 2022, 05:59:17 AM »
Hello there fellow mortgage pay off club members, Iím coming to join you!
We live in New Zealand where house prices are reeeeeediculously high but we are on a mission to pay off our home. Itís great to be able to discuss and share on here with all you excited like minded people so thanks everyone.

We currently owe $356,912.44.
The interest rate is 2.49% on a fixed term. That expires on August 1st 2023. I reckon one more year after that and we will have, as they say in NZ ďknocked the bugger off.Ē
So, all things going to plan, on the first of August this year, the 2 year countdown will begin to pay this thing off.

Info:
- as itís a fixed term we canít make additional payments without incurring fees, so we save an extra $5500 a month and donít touch it, ready to dump it on the principal when the term expires. The fixed term saved us from rapidly increasing interest rates that would kick on a floating rate.
- we pay over what the bank requires in our monthly payment.
- interest rates here are going up and up, so the sooner we get rid of this thing the better, in our humble opinion.

So itís great to be here and thanks again!

That's such great news Kiwistash!  Tell me, do many Kiwis pay off their mortgages early?  Stay in there houses long or move around a lot?  Is it just an american thing to think of homes as "starter" and "moving up" homes?  I feel as if this is one of the things that really screws with our minds;

Thanks Blue House!
Iíd say paying your mortgage off early is about as uncommon in NZ as it is in America. The difference I think is in the general perception of home ownership. Unless people have to move they generally wonít.  If they outgrow the house as the family grows or if they have to move for work then yes, people will move, but thereís much more a sense of settling down to your long term home. People move houses, sure, but many people buy with the intention of being there a good long while, putting roots down. That said, property is a popular way to invest here (being made progressively more difficult with the recent introduction of capital gains tax- by another name) and these houses do sell more but thatís a profit thing.

Money Badger

  • Pencil Stache
  • ****
  • Posts: 509
Re: Mortgage Payoff Club!!
« Reply #2322 on: July 23, 2022, 08:26:12 PM »
@Kiwistash,  Welcome to the ďRace to $356,912 thread but donít prepay my mortgage, instead to kill it in 2023 threadĒ!   Set quarterly goals amd expect setbacksÖ But full
focus on that mortgage wins!  As in EVERYTHING else.  Seriously.

Kiwistash

  • 5 O'Clock Shadow
  • *
  • Posts: 6
Re: Mortgage Payoff Club!!
« Reply #2323 on: July 24, 2022, 04:37:05 AM »
@Kiwistash,  Welcome to the ďRace to $356,912 thread but donít prepay my mortgage, instead to kill it in 2023 threadĒ!   Set quarterly goals amd expect setbacksÖ But full
focus on that mortgage wins!  As in EVERYTHING else.  Seriously.

Thanks for the vote of support Money Badger! I can assure you, I could not be more focused if I tried! Watch out mortgage, weíre cominí to get ya!

Trifele

  • CM*MW 2023 Attendees
  • Walrus Stache
  • *
  • Posts: 5094
  • Age: 56
  • Location: Outside, NC, US
    • In The Garden
Re: Mortgage Payoff Club!!
« Reply #2324 on: July 24, 2022, 06:50:09 AM »

That's fantastic @Kiwistash -- congrats and another welcome to the thread!  So interesting to hear the details about NZ mortgages. 

Kiwistash

  • 5 O'Clock Shadow
  • *
  • Posts: 6
Re: Mortgage Payoff Club!!
« Reply #2325 on: July 25, 2022, 12:52:09 AM »

That's fantastic @Kiwistash -- congrats and another welcome to the thread!  So interesting to hear the details about NZ mortgages.

Hi Trifele, thanks so much. Itís great to be on board with all of you cool cats!

FLBiker

  • Handlebar Stache
  • *****
  • Posts: 1681
  • Age: 46
  • Location: Canada
    • Chop Wood Carry FIRE
Re: Mortgage Payoff Club!!
« Reply #2326 on: July 26, 2022, 09:34:02 AM »
@FLBiker , it sounds like you have a major debt in one currency, and a lot of assets in a different currency. Do your long-term plans include moving back to US? That may affect the desirability of keeping those asset balances higher.

If you don't expect to be returning to the US within a few years, the US dollar is particularly strong lately because of our FRB's aggressiveness in raising rates.

Yep, that's true.  I don't *think* our long term plans are to move back to the US, but who knows.  I've thought about trying to convert more of our investments to CAD, but it's complicated (and I don't want to derail this thread).  It's true that paying off the mortgage is one way to do this, but (like Kiwistash) Canadian mortgages are structured to penalize you if you pay them off early, so I'm waiting until it matures in 3 years (at which point there would still be 20 years left of amortization, but the interest rate would be reset).

Nick_Miller

  • Handlebar Stache
  • *****
  • Posts: 1646
  • Location: A sprawling estate with one of those cool circular driveways in the front!
Re: Mortgage Payoff Club!!
« Reply #2327 on: August 29, 2022, 01:16:18 PM »
What method do people prefer to pay down the mortgage?

1) Do you automatically pay extra each month?
2) Or do you fund an investment account hoping to earn gains and then pay off your mortgage when the balance gets high enough?

I can see pros and cons to each; I didn't know if there was a consensus.

alcon835

  • Pencil Stache
  • ****
  • Posts: 671
Re: Mortgage Payoff Club!!
« Reply #2328 on: August 29, 2022, 02:45:23 PM »
What method do people prefer to pay down the mortgage?

1) Do you automatically pay extra each month?
2) Or do you fund an investment account hoping to earn gains and then pay off your mortgage when the balance gets high enough?

I can see pros and cons to each; I didn't know if there was a consensus.

I had to slow down paying down my mortgage when DW and I decided we want to move, but before then I was paying a set amount each month extra towards my bill. For me it was 2,000 drawn monthly when I only owe 1,200 monthly. Then, near year end, I would make a one-time extra payment with any extra money we had saved up.

I also have a taxable investment account that I've been building up. My original goal for that fund was to use it to pay off the house once it has more money in it than I owe on my house. I am actually pretty close, but again we switched to paying the minimum once we decided we wanted to move.

So...both? The benefits of paying extra every month is it really does take a HUGE bite out of compounding interest. The advantage of putting money into the market is that I can make the decision 'on the day' when the funds are high enough to pay off the mortgage - does it make more sense to pay it all off in one swoop or to keep that cash in the market?


Vashy

  • Bristles
  • ***
  • Posts: 416
Re: Mortgage Payoff Club!!
« Reply #2329 on: August 29, 2022, 05:19:12 PM »
What method do people prefer to pay down the mortgage?

1) Do you automatically pay extra each month?
2) Or do you fund an investment account hoping to earn gains and then pay off your mortgage when the balance gets high enough?

I can see pros and cons to each; I didn't know if there was a consensus.

I overpay and used to overpay aggressively - roughly 2x-3x of what the usual payment would be like. I'll see if I can maintain that while my finance re-adjust to more lumpy and unpredictable pure freelancer income.

hdatontodo

  • Bristles
  • ***
  • Posts: 375
  • Location: Balto Co, MD
Re: Mortgage Payoff Club!!
« Reply #2330 on: August 30, 2022, 05:36:29 AM »
What method do people prefer to pay down the mortgage?

1) Do you automatically pay extra each month?
2) Or do you fund an investment account hoping to earn gains and then pay off your mortgage when the balance gets high enough?

I can see pros and cons to each; I didn't know if there was a consensus.
I had read that a young couple that invested money growing 7% a year for 30 years would come out $1M ahead of another couple who put the money toward extra principal payments on a 3% mortgage.

Sent from my SM-G991U1 using Tapatalk


Askel

  • Pencil Stache
  • ****
  • Posts: 644
Re: Mortgage Payoff Club!!
« Reply #2331 on: August 30, 2022, 05:38:36 AM »
What method do people prefer to pay down the mortgage?

1) Do you automatically pay extra each month?
2) Or do you fund an investment account hoping to earn gains and then pay off your mortgage when the balance gets high enough?

I can see pros and cons to each; I didn't know if there was a consensus.

A little of both. I tend to let some cash pile up some safe. low return liquid investments and then withdraw a chunk every couple of months to toss at the mortgage. 

It's nice to be able to hit a nice round number on the mortgage balance to feel like you're making progress. I usually aim for $5k intervals.   

Nick_Miller

  • Handlebar Stache
  • *****
  • Posts: 1646
  • Location: A sprawling estate with one of those cool circular driveways in the front!
Re: Mortgage Payoff Club!!
« Reply #2332 on: August 30, 2022, 07:12:39 AM »
Thanks for sharing your approaches, everyone!

We still have 12.5 years left our on mortgage but I really don't want to be...60ish?...before it's paid off. And my wife and I can't really downshift until the mortgage goes away.


Vashy

  • Bristles
  • ***
  • Posts: 416
Re: Mortgage Payoff Club!!
« Reply #2333 on: August 30, 2022, 11:18:02 AM »
Thanks for sharing your approaches, everyone!

We still have 12.5 years left our on mortgage but I really don't want to be...60ish?...before it's paid off. And my wife and I can't really downshift until the mortgage goes away.

We felt the same - we pushed down the mortgage from £150k to now <£40k over the past 7 years, and the current interest payment of still below <£250/month is no longer a real burden, so we've been focussing on building out our post-tax investment accounts over the past year or so. For us there was a moment when the monthly payment dropped so much that we felt we could always manage to earn/pay that much, especially as the post-tax investment accounts grew to a point where we could pay this off if needed. That switch has allowed me to not freak out when I got "right-sized" at work.

Maybe reverse-engineer this and say when you want to be rid of it and assign resources accordingly?

LeftA

  • Stubble
  • **
  • Posts: 131
Re: Mortgage Payoff Club!!
« Reply #2334 on: August 30, 2022, 02:30:16 PM »
Hello!

Iíll officially be in this thread in a couple of days when our most recent payment will put us under the $50K mark (somewhere around $48K to be more precise). At most, weíll then have about 10 months of payments left!

@Nick_Miller , we did a combo of increasing our mortgage payments over time and paying A LOT of smaller lump sum payments. Most of our savings are invested in tax sheltered or tax advantaged accounts, so doesnít make sense to use that to pay it off.

sisto

  • Handlebar Stache
  • *****
  • Posts: 1069
  • Age: 54
  • Location: Sacramento, CA
Re: Mortgage Payoff Club!!
« Reply #2335 on: September 01, 2022, 10:48:05 AM »
It's official, I jumped ship. I was formally part of the DON'T payoff club, but my circumstances changed. My FIRE fixed income dropped and I had cash. It made more sense to payoff the mortgage with the cash instead of having to pull from assets to make up the difference. Completely debt free now and it feels great!

Kiwistash

  • 5 O'Clock Shadow
  • *
  • Posts: 6
Re: Mortgage Payoff Club!!
« Reply #2336 on: September 03, 2022, 06:08:09 AM »
Congratulations sisto on your new debt free life! Woohoo!

couponvan

  • Walrus Stache
  • *******
  • Posts: 8339
  • Location: VA
    • My journal
Re: Mortgage Payoff Club!!
« Reply #2337 on: September 03, 2022, 06:47:45 AM »
Congratulations sisto on the payoff! The mental relief in turbulent financial times of a paid off house is eliminating some risk sequences in your retirement plans.

Dicey

  • Senior Mustachian
  • ********
  • Posts: 20617
  • Age: 65
  • Location: NorCal
Re: Mortgage Payoff Club!!
« Reply #2338 on: September 03, 2022, 08:57:18 AM »
It's official, I jumped ship. I was formally part of the DON'T payoff club, but my circumstances changed. My FIRE fixed income dropped and I had cash. It made more sense to payoff the mortgage with the cash instead of having to pull from assets to make up the difference. Completely debt free now and it feels great!
I'm less of an always-have-a-mortgage person than I am a fill-up-all-the-other-savings-buckets-first advocate. Therefore, don't be shocked that I wish you a hearty congratulations, sisto!

Nick_Miller

  • Handlebar Stache
  • *****
  • Posts: 1646
  • Location: A sprawling estate with one of those cool circular driveways in the front!
Re: Mortgage Payoff Club!!
« Reply #2339 on: September 06, 2022, 08:04:38 AM »
It's official, I jumped ship. I was formally part of the DON'T payoff club, but my circumstances changed. My FIRE fixed income dropped and I had cash. It made more sense to payoff the mortgage with the cash instead of having to pull from assets to make up the difference. Completely debt free now and it feels great!

Congrats! I'm glad you made your life simpler.

Carissa22

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Mortgage Payoff Club!!
« Reply #2340 on: September 06, 2022, 08:33:14 AM »
We're buying a house and have found ourselves needing to make a difficult decision. We have the 20% down on a $400,000 house ($80,000), plus an additional $60,000 that we could put towards the mortgage to lower the monthly payment. The monthly payment would be a high percentage of our income if we only put 20% down, up to 40% of take home pay (P & I, insurance, taxes, does not include maintenance). If we put the additional $60,000 towards the down payment (total of $140,000) we would lower the mortgage payment to about 28 - 30% of our take home pay, depending on the house. I'd like to get some opinions on both options

1) put only 20% down, have high monthly mortgage payment, invest the $60,000 in VTSAX

2) put a $140,000 downpayment, lower the monthly payment, miss out on investment opportunity.

I know mathematically it makes more sense to do option 1, but we value paying off the mortgage early. Opinions appreciated!

Askel

  • Pencil Stache
  • ****
  • Posts: 644
Re: Mortgage Payoff Club!!
« Reply #2341 on: September 06, 2022, 08:43:05 AM »
I'd do:

3) Put 20% down, hold onto that extra 60k just in case the house has a surprise or two for you that requires an upgrade or repair. Once you're comfortable in the house- put that 60k towards the mortgage and rebalance to bring down your payment.  (make sure your mortgage allows you to rebalance for free).

I would definitely not do option 1 at 40% of my take home pay.  But I'd also never get into the 28-30% range either, but that's just me and my weird local housing market.

Carissa22

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Mortgage Payoff Club!!
« Reply #2342 on: September 07, 2022, 08:20:03 AM »
Thank you for the reply! Unfortunately the housing market in my area is crazy expensive, so it's been a challenge to find something more affordable. We may consider just renting for a while longer if we can't find something that keeps us under that 30%.

Dicey

  • Senior Mustachian
  • ********
  • Posts: 20617
  • Age: 65
  • Location: NorCal
Re: Mortgage Payoff Club!!
« Reply #2343 on: September 07, 2022, 09:16:02 AM »
Thank you for the reply! Unfortunately the housing market in my area is crazy expensive, so it's been a challenge to find something more affordable. We may consider just renting for a while longer if we can't find something that keeps us under that 30%.
Meh. I've had a mortgage that was half my take home pay before and survived (and continued to save) just fine on the rest, thanks to badass frugality skills. In my case, the property was a small 2+1 condo in the Bay Area that I bought on a short sale. It sold for more than double what I paid just four years later, so it was worth the sacrifice, IMO, but it wasn't easy.

There's the crucial difference in your case. In the current market, prices are expected to fall. There is growing evidence it's already happening. Buying too much mortgage in this environment is not wise. 

Recent data set of one from the East Bay: we bought a 1+1 condo in April in a complex of identical units that were built as condos but operated as rentals for decades. After a small bidding war we paid $425k. Next identical unit sold for $440k. Next one was $427k. Most recent one was $390k. There's another on the market for the same asking price. It's been held open eight times (!) and is finally pending. We're not expecting to see even $390k for that one. Does it bother us? Nah. We're FatFIRE and we're never going to sell it. In fact, we're putting another $25k into it to bring it up to date. We absolutely do not care and it doesn't affect our overall finances.

If this scenario would freak you out, consider mine another vote to WAIT.

trc4897

  • Stubble
  • **
  • Posts: 114
Re: Mortgage Payoff Club!!
« Reply #2344 on: September 07, 2022, 01:32:45 PM »
Just wanted to throw out a tip to anyone who may be interested. I used to pay an extra $400 or so per month on my mortgage, but then covid hit and I lost about 20% of my take home pay due to scaled back hours. I then decided to stop paying extra in case my wife or I lost our jobs, and looked into ways to reduce the required payment even more (besides refinancing as we already had a good rate at 3.25%).

I learned over the last few years we had paid an extra $10k in principal, and we could use that to "recast" our mortgage. Essentially this recalculates your payment so that you pay off the mortgage at your original time (30 years) instead of your reduced time (ex. 22 years due to additional principal payments). This dropped my required payment by $105 per month. You can of course continue to make additional payments if you desire. Chase told me I can recast as many times as I want and there is never a fee.

Just thought this could be a helpful tool if you've paid a lot extra on your mortgage and you or your spouse ends up losing a job and want to lower your payment easily!

Askel

  • Pencil Stache
  • ****
  • Posts: 644
Re: Mortgage Payoff Club!!
« Reply #2345 on: September 07, 2022, 02:21:11 PM »
Ah, that's the word I mean- recast, not rebalance! Thanks!

solon

  • Handlebar Stache
  • *****
  • Posts: 2234
  • Age: 1822
  • Location: CO
Re: Mortgage Payoff Club!!
« Reply #2346 on: September 07, 2022, 03:32:26 PM »
I just checked the recast option with my lender. They require a $5,000 principle payment, and a recast fee of $250, and it can only be done once per loan! Looks like Chase has a pretty sweet option.

talltexan

  • Walrus Stache
  • *******
  • Posts: 5321
Re: Mortgage Payoff Club!!
« Reply #2347 on: September 12, 2022, 07:36:25 AM »
It's official, I jumped ship. I was formally part of the DON'T payoff club, but my circumstances changed. My FIRE fixed income dropped and I had cash. It made more sense to payoff the mortgage with the cash instead of having to pull from assets to make up the difference. Completely debt free now and it feels great!

@sisto , congratulations on achieving your goal!

What is causing the income to drop? Is it something that requires additional planning to protect yourself further?

Alfred J Quack

  • Bristles
  • ***
  • Posts: 392
  • Location: Netherlands
Re: Mortgage Payoff Club!!
« Reply #2348 on: September 18, 2022, 12:35:24 PM »
What method do people prefer to pay down the mortgage?

1) Do you automatically pay extra each month?
2) Or do you fund an investment account hoping to earn gains and then pay off your mortgage when the balance gets high enough?

I can see pros and cons to each; I didn't know if there was a consensus.
I had a automatic transfer every month and did an additional transfer if there was anything left. Then the bank required us to call in for a request to pay extra on the principal. We still made regular transfers but not quite every month.
Some extra here and there were enough to get the principal down quickly and also what killed it in the end. We were done in about 7.5 years (end of 2018 iirc).


sisto

  • Handlebar Stache
  • *****
  • Posts: 1069
  • Age: 54
  • Location: Sacramento, CA
Re: Mortgage Payoff Club!!
« Reply #2349 on: September 18, 2022, 01:28:05 PM »
Thank you all for the kind words. Sorry for the late reply, my FIL lives with us and he broke his hip. We have been in a frenzy to remodel our bathrooms to make them easier for him to use with a walker and/or wheelchair if necessary. I'm pretty handy and doing much of the work myself so I have had very little downtime to check the forum. This was something we had planned to do anyway and thankfully had allocated money for it. It really does feel great to be completely debt free.

@talltexan I had always planned to retire around 55 and take withdrawals from my 401K which would have had plenty of money, too much actually. The mortgage would have had 5 more years left and I would have likely just kept it. The I found MMM and realized I could pull that date in 52 (2021) and would have done a SEPP 72T. In 2018 I was on a business trip and involved in an auto accident. Someone unsafely turned across traffic in front of me. I got a concussion that never fully resolved and left me with debilitating migraines and some vision issues. I ended up on disability. I tried to go back to work a few times, but was not able to perform at the level I had before at megacorp. When it became apparent I would likely not ever be able to I separated. Thankfully I had met the rule of 75 and officially retired and it actually ended up coinciding within a month of what I had planned for some time. My income was all over the place for about 3 years and I also hadn't been able to put much into my 401K during that time either, but I did receive disability. I finally settled my claim, but part of it meant a reduction in my benefit amount. They wanted to just take a lump sum, but I preferred them to reduce my monthly amount instead. That gave me much more control to invest some of it and use some to payoff the mortgage thus also offsetting the monthly loss. The income will remain stable now until Social Security age unless I miraculously get better. Sorry for the long winded reply.