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Old 05-04-2014, 10:16 PM   #21
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Originally Posted by dnorton50 View Post
...What's so funny is the Roadtrek campers start at 60-70,000! That's more that what I paid for my house 27 years ago. I can't see taking out what amounts to be another mortgage for a vehicle. lol
I would say (and I will ), that the real questions are 'can you afford it?', and 'is that the best use of your money?' (and recreation/enjoyment certainly is valuable).

Going into debt or not is not a big deal either way, assuming you can get a decent rate and answer 'yes' to the above questions.

-ERD50
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Old 05-05-2014, 12:36 AM   #22
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I just looked at the N6, and wow, the MSRP of $73K is a lot for this small RV. It does not have a toilet, which is a deal breaker for me.

When I shopped for an RV 4 years ago, I spent a long time over the decision of whether I should pay more for a used class B or a diesel class C, compared to getting a used generic gasoline class C which was quite a lot less. I went with the latter, because I was not sure if I would like this mode of travel. It turned out that I enjoyed it, and a more expensive RV would still be OK as it would not go to waste.

The cheaper and larger used gasoline class C that I got turned out to be not a bad choice, as the price difference pays for a lot of fuel. Even while towing a car, I still get 9.5 to 9.8 MPG, averaged over trips of 3-4K miles and with speed of 60 MPH and in mountainous Western states. Driven over the RV life of 100K miles, the difference between 9.5 MPG and, say, 15 MPG is 3,900 gallons. That is less than the price difference of greater than $25K when I was shopping for mine. Maintenance cost is also less for the gas engine.

The main drawback is that although this is a shorter C of 25', it is more than 8' wide and my wife is afraid to drive it and has never been in the driver seat. Additionally, a smaller RV may not require a toad for excursions. But unless the RV is a class B it is still cumbersome to drive a smaller class C like the Sprinter-based RV into town. Also having to break camp when you want to go sightseeing is a chore when you do not have the toad.
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Old 05-05-2014, 05:27 AM   #23
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Retiring debt free!

We paid off our mortgage over four years ago and have been debt free ever since. I never understood paying $1.00 in interest to a bank to save $0.28 to $0.39 in taxes. I know the stock market has produced some nice returns over the past few years, but buying stocks leveraged with mortgage money can cost a lot of nights of lost sleep when the markets aren't so friendly, a lot of people made bad decisions in 2006-2008 that cost them dearly. Living debt free has been great and we'll never be in debt again except for short term credit card use that gets paid off as soon as it appears on my computer screen.
I know RV use is a lifestyle choice, and I have family that love traveling in an RV for the comfort and experiences they have. But for me, I can spend a lot of nights in nice hotels for the cost of owning and operating an RV. I personally hate driving large vehicles anywhere and prefer a sedan, but if the RV lifestyle is the choice you make, there are lots of high quality used vehicles on the market that you can buy for much less than a new one. Enjoy the lifestyle but don't let it drain your finances.
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Old 05-05-2014, 08:47 AM   #24
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We paid off our mortgage over four years ago and have been debt free ever since. I never understood paying $1.00 in interest to a bank to save $0.28 to $0.39 in taxes. ...
You don't understand it because it actually does not make any sense to pay $1.00 to save $.028-$.39. But that is not the point, and it would be foolish to take on debt solely for the tax deduction.

The tax deduction is an added benefit, it is part of the equation. Not the sole reason.

The odds are highly in one's favor that a 75/25 portfolio will outperform a low-rate mortgage over a 30 year period. Forget the short term, we are talking retirement portfolios here, and long term thinking.

I never lost a moment of sleep due to my reasonable level of debt. Why would I? With a mortgage of less than 10% of my portfolio value, under what conditions could that debt drive me from a 'no-worry' condition to a 'sleepless nights' condition? Now that is something I don't understand. I'll hazard a guess that more sleepless nights have been created by people using too much of their portfolio to pre-pay a mortgage (creating liquidity problems), than it has for those who had the money to pre-pay, but decided to keep it invested. Unreasonable fear of risk, unreasonable carelessness with risk, and unreasonable fear of debt can all lead to unreasonable decisions.

As I've said many times before, the pay-off or not question (assuming reasonable levels of debt at a reasonable rate), discussed so often here, is probably the least important question for a retiree. So if you prefer to pre-pay, do it. But I think the data shows it is a mistake to assign much importance to it. It's not likely to either help nor hurt your retirement in any big way.

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Old 05-05-2014, 08:56 AM   #25
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....Yes, you can make a higher percentage on the money if invested (maybe), but you are taking more risk. All investment decisions are a balance of risk and reward, and this is no exception. Each person will have a different approach based on their own particular risk profile and goals.
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....I know there are individuals who disagree with that but I am just stating what worked for me........
Count me in with the group that disagrees with Kimo. I recently saw an interesting article where the author backtested this for 10 year periods of time based on a view that the average mortgage life is less than 10 years. In 75% of the trials the investment results exceeded the mortgage interest. Since I plan to have my mortgage for a longer period, the probability of coming out ahead become higher than 75%, especially since I started during a period of low interest rates.

See The Retirement Cafe: Investing the Mortgage

Quote:
.....To explain my point, I modeled real stock and bond returns and historical mortgage rates1 for 76 ten-year rolling periods from 1928 to 2013. Each year, I assumed that an investor borrowed a 30-year fixed rate mortgage (FRM) at the average mortgage rate that year and held the mortgage for 10 years. (The average mortgage gets paid off after about 7 years.)

I assumed that the investor then invested the $100,000 in a portfolio of 50% S&P 500 index and 50% 10-Year U.S. Treasury Notes. At the end of ten years, the investor cashes in the portfolio, pays off the mortgage balance and I calculate his profit or loss, as shown in the chart below.

.....
I concede there is some risk, understand the risk and accept it. I'm in a position where if things start to go sideways I can always just write a check and pay of the mortgage which further increases my chance of gain/reduces my risk of loss.
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Old 05-05-2014, 09:17 AM   #26
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.. I recently saw an interesting article where the author backtested this for 10 year periods of time based on a view that the average mortgage life is less than 10 years. In 75% of the trials the investment results exceeded the mortgage interest. Since I plan to have my mortgage for a longer period, the probability of coming out ahead become higher than 75%, especially since I started during a period of low interest rates.

See The Retirement Cafe: Investing the Mortgage



I concede there is some risk, understand the risk and accept it. I'm in a position where if things start to go sideways I can always just write a check and pay of the mortgage which further increases my chance of gain/reduces my risk of loss.
Ahhh, data. How refreshing!

And, that does not even seem to account for the tax deductions at all (which are variable and often over-stated anyway - some people cannot fully deduct, and it must be compared to the standard deduction, not in total isolation).

I'd also love to see that model done for 20 and 30 year periods, probably a better time-frame for retirees consciously making this decision. And note that he shows the risk is lower when mortgage rates are below average levels.

-ERD50
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Old 05-05-2014, 09:39 AM   #27
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Ahhh, data. How refreshing! ....
Sorry to confuse the situation with facts....
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Old 05-05-2014, 11:09 AM   #28
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As I said, there would be intelligent differences of opinion. I will add one thought that I am sure everyone who has paid off their mortgage will probably agree on........until you actually do it, you have no idea how it feels....
Aloha!
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Old 05-05-2014, 11:31 AM   #29
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I actually have had my mortgage paid off at one point in time so I do know how it feels. No big deal IMO. $ in my taxable account that exceed my mortgage feels just as good, if not better because if the financial flexibility.

I'm fine with those who prefer to be debt free other than those who are debt free and fervently insist that it is "best".
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Old 05-05-2014, 11:40 AM   #30
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pb.....I do understand there will always be two sides to this story...and in your situation it sounds like all is well, good for you! Bottom line is we feel good about our decisions....
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Old 05-05-2014, 11:54 AM   #31
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Could not agree more!

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Why be a slave to the lender? A RV isn't that important to us. If we are able to save up for it, fine. If not, it isn't the end of the world. Being this close to debt free-I am not about to go into debt again. That is $1300. per month I WON'T be paying. I get a bit crazy about this. I am a big Dave Ramsey fan. What he teaches is so right on.
We were out of debt by 1999, so saved the old "house payments" in our retirement accts. instead. This was one reason why we were able to RE.
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Old 05-05-2014, 12:25 PM   #32
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Count me in with the group that disagrees with Kimo. I recently saw an interesting article where the author backtested this for 10 year periods of time based on a view that the average mortgage life is less than 10 years. In 75% of the trials the investment results exceeded the mortgage interest. Since I plan to have my mortgage for a longer period, the probability of coming out ahead become higher than 75%, especially since I started during a period of low interest rates.

See The Retirement Cafe: Investing the Mortgage



I concede there is some risk, understand the risk and accept it. I'm in a position where if things start to go sideways I can always just write a check and pay of the mortgage which further increases my chance of gain/reduces my risk of loss.
Interesting article. At the end of it, the author says,
Quote:
This is not ground-breaking analysis. I present it for two reasons. First, many readers will not have read the previous studies and should be advised of the risks. And, second, this example builds the foundation for what I really want to talk about: the difference between implementing this strategy while you're still working and executing it after you retire.
In his next post, here:
The Retirement Cafe: Selling Stocks to Pay the Mortgage

The so-called conventional wisdom of not having a mortgage in retirement seems to be supported:

Quote:
?..
Regardless, as I mentioned in Investing the Mortgage, this strategy increases the chances both before and after retirement that you will lose your home to foreclosure risk, which, in my opinion, trumps any other home financing risk.

I have another basic concern with this strategy after retirement. While it makes perfect sense to borrow a mortgage when we are young, expecting to pay it back with future job earnings, it is a riskier proposition to borrow a mortgage and expect to pay it back with future stock market earnings.

I often point out that our finances change significantly after we retire and we can't view them through the same set of guidelines as before. This is a prime example.
We are a lucky group here to be financially able to make the "pay off or carry a mortgage" choice.
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Old 05-05-2014, 12:52 PM   #33
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We are a lucky group here to be financially able to make the "pay off or carry a mortgage" choice

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Old 05-05-2014, 01:15 PM   #34
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There is a great way to finalize this post....IMO.....

1. No one will be able to say anything to me that will change my mind about paying my mortgage off early.

2. There is nothing I nor anyone else can say to change the opposing opinion of someone else.

This is one of the large, important decisions that most people will ultimately make there own mind up depending on how they are wired.......
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Old 05-05-2014, 01:21 PM   #35
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+1 except item 1 would be keeping my low interest mortgage
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Old 05-05-2014, 01:30 PM   #36
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Actually, you really help me make that point....I could have an interest free mortgage and I would still pay it off...I just don't want the debt. That is what I was attempting to find the proper way to define "wired"
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Old 05-05-2014, 01:50 PM   #37
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We funded Roth IRAs to the maximum every year in lieu of putting the same money to our mortgage.

This worked out very well for us as the return far outpaced the mortgage interest. Also we now have flexibility in retirement with a big pot of tax free money.

The 3.35% rate is low enough that I am indifferent as to whether I pay it off or not. Probably will delay the gratification of paying it off until I retire.
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Old 05-05-2014, 02:03 PM   #38
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My decision is helped by the fact I can live comfortably with my investment income, rental income and annuity income combined, all with less risk than having a larger portion of my total investment money in the market.

I also have two fall back positions in an unforeseen emergency, sell the Hawaii house and net after commissions and selling expenses 1 million dollars as well as the fact I am eligible but not taking SS at my current age (62)

If I had a mortgage I would need more income, therefore I would need more money in the market thereby taking on more risk that I currently am.
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Old 05-05-2014, 02:09 PM   #39
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. . .until you actually do it, you have no idea how it feels....
Aloha!
I've had a paid off mortgage, know how it feels (meh). I am now happy to have a low-interest mortgage and only wish I'd gone for a 30 year loan instead of 15.

As far as the risk of "losing the house", unless the owner lives somewhere that charges him/her no property taxes, the home will always be at risk of being "lost" as long as it is standing. (And--where do these "lost houses" go? I'd check under the sofa first, that's where all my other lost stuff ends up!)

Anyway, if a person understands the math, the historical record, and the risks and still wants to pay off the mortgage because it makes them feel better for some reason, they should go ahead and do it.
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Old 05-05-2014, 02:12 PM   #40
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Anyway, if a person understands the math, the historical record, and the risks and still wants to pay off the mortgage because it makes them feel better for some reason, they should go ahead and do it.

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