A new debate on paying off the mortgage (or not).

[Texas Proud]

Quote:

Originally Posted by cjking It won't help you, as it's British. (Technically it's not a REIT either, even though it is an Investment Trust that invests in Commercial Property.) If you are curious, Google Foreign & Colonial Commercial Property Trust, ticker FCPT. If you look at figures over the last year, it won't look that safe. However I would say the current yield should make it safe. Mind you I would have said the same thing at the beginning of June, and the sector fell another 20% in the last two weeks of June. It has relatively little borrowing and the dividend income is covered by rental income from leases that extend several years, on average. (Actually the dividend yield is currently 8%, for my decision making purposes I like to use a slightly different figure, calculated from the accounts, which is where I got 7.8%.) The following link shows the share price is down 52% on a year ago. (As I write I realise you might be starting to doubt my grasp of the meaning of the word "safe." Well it's safer at the current price than at its previous one!) Details for F&C COMMERCIAL (FCPT) / Market data / Selftrade The following link contains more information. (You can also use it to link to a list of other funds in the sector, which should demonstrate it's the sector as a whole that's fallen out of favour, the share price fall isn't a result of any particular problem with this fund.) Trustnet Investment Trusts / Fund factsheet

The problem is RENT is only as good as the underlying company that is paying it.... but once that company (such as Enron etc.) stop paying their over inflated rent... you are now back to market rent... or NO rent.... and that is the problem with commercial real estate.... and safe....

[Ultimate Cheapskate]

Golly. My advice: Just pay off your &^%#$# mortgage ASAP and get on with enjoying life and the home you OWN, rather than living your life in a spreadsheet.

It's always interesting to talk with people about this issue (and I do, a lot), as the ones who have never experienced the joy of life without a mortgage hanging over their heads generally seem preoccupied with the math, alternative investments, etc., while those without a mortgage seem to be smiling a lot, particularly lately. You only have so much time to worry about this stuff, so what's that time worth?

Stay Cheap!
-Jeff Yeager

[Nords]

Quote:

Originally Posted by cute fuzzy bunny If you went higher on the risk scale you'd have felt like an idiot and kicked yourself from 2000-2003, felt like a genius from 2003-2005, and you feel like an idiot again this year. I hate plans like that.

We're keeping ours until 2034. How do we feel over the next 26 years?

Clearly we'll have to come up with enough deductions until then to overcome the standard deduction...

[ls99]

Quote:

Originally Posted by Ultimate Cheapskate Golly. My advice: Just pay off your &^%#$# mortgage ASAP and get on with enjoying life and the home you OWN, rather than living your life in a spreadsheet. what's that time worth? Stay Cheap! -Jeff Yeager

We did exactly that. Paid off mortgage 2 years ago. Looking at the real estate gyrations is now just amusing.
Of course if we had to sell then buy, it would not be amusing. Without a mortgage life is good.

[Ronstar]

Quote:

Originally Posted by Ultimate Cheapskate Golly. My advice: Just pay off your &^%#$# mortgage ASAP and get on with enjoying life and the home you OWN, rather than living your life in a spreadsheet. It's always interesting to talk with people about this issue (and I do, a lot), as the ones who have never experienced the joy of life without a mortgage hanging over their heads generally seem preoccupied with the math, alternative investments, etc., while those without a mortgage seem to be smiling a lot, particularly lately. You only have so much time to worry about this stuff, so what's that time worth? Stay Cheap! -Jeff Yeager

Great advice! We paid our house mortgage off 10 years ago and it really made saving a lot easier - to the point where FI came faster. Its a great peace of mind knowing that I can quit work any time I want without a mortgage hanging over my head. I now work because I want to - not because I have to.

[W2R]

Quote:

Originally Posted by Ronstar Great advice! We paid our house mortgage off 10 years ago and it really made saving a lot easier - to the point where FI came faster. Its a great peace of mind knowing that I can quit work any time I want without a mortgage hanging over my head. I now work because I want to - not because I have to.

I know what you mean - - I can hardly believe how fast the money has been piling up since I paid off my mortgage.

Still, despite the fact that most of the retirees on this board do not have a mortgage (as I recall, according to a poll on that topic), paying off a mortgage is still a matter of contention and not something we all agree is best. Many on this forum feel they do better maintaining a mortgage, or even paying rent, to increase their available funds for investing.

We have had many threads on this topic and despite the fact that I still love to talk about how I paid off my mortgage, some of the long-time members of the ER board tire of posts about paying off mortgages pretty easily.

Quote:

Originally Posted by Bestwifeever Question for those who are in the pay-off-the-mortgage campe--would you take the tax hit from a traditional IRA to pay off a $250K mortgage at one fell swoop?

I wouldn't take money out of an IRA to pay off a mortgage, tax hit or not. I am in the accumulation phase, which to me means maximum contributions to my (Roth) IRA and 401K (TSP) while I paid off my mortgage. I did not, and would never take money from my tax advantaged accounts to pay off the mortgage. You will need that tax advantaged account after ER, as a place to keep funds that are not tax efficient. It is not easy to pay off a mortgage, but that is no reason to take a short-cut that will amount to shooting yourself in the foot (in my opinion).

[cute fuzzy bunny]

I imagine you'll have some years where you feel like geniuses and some years where you're feeling alright because you're paying the bills with a COLA'd pension and have good investing discipline?

I cant come up with enough deductions to break even with the standard deduction. Even pushing it a little the best I can cough up is about 8k worth.

[Bestwifeever]

Question for those who are in the pay-off-the-mortgage campe--would you take the tax hit from a traditional IRA to pay off a $250K mortgage at one fell swoop?

[Frugality_of_Apathy]

Quote:

Originally Posted by Bestwifeever Question for those who are in the pay-off-the-mortgage campe--would you take the tax hit from a traditional IRA to pay off a $250K mortgage at one fell swoop?

Actually that's not a bad idea. Not putting it in an IRA, of course, but instead of paying extra on the principle just store up the money in other investments until you have enough to pay off the house. That way you get the maximum income deductions by having mostly interest and before the interest drops below the standard deduction you pay it off in full.

[Alan]

Quote:

Originally Posted by Bestwifeever Question for those who are in the pay-off-the-mortgage campe--would you take the tax hit from a traditional IRA to pay off a $250K mortgage at one fell swoop?

As we approached RE and started the re-allocation process of building cash/low risk buckets it was obvious (to me at least) that paying off the 6.5% mortgage was a good approach before I really started building the cash up.

We are still under age 59.5 so the tax hit of cashing a traditional IRA to pay a mortgage would not make sense to me and I wouldn't do it.

[cute fuzzy bunny]

I agree. I wouldnt take a big tax hit just to make the mortgage go away.

Before I er'd I kicked a little extra principal payment in every month and didnt worry about bond allocations. Shortly after I ER'd I paid off the dang mortgage like Jeff said and stopped worrying about a bunch of things.

7 years later, I'm still not worrying about a bunch of things.

If the little bit I could have arbed from having a mortgage would have made or broken my retirement, I'd have stayed at work another year.

If it didnt really make a difference, why worry about it?

[chinaco]

I intend to pay off our mortgage by the time I ER in 3 years.

We also have plans of downsizing... but that depends on how the housing market is in 3 years

[Spanky]

Quote:

Originally Posted by Bestwifeever Question for those who are in the pay-off-the-mortgage campe--would you take the tax hit from a traditional IRA to pay off a $250K mortgage at one fell swoop?

We chose to pay off our mortgage 2 years ago. Our saving accounts pile up pretty quickly. Conventional wisdom would say to not touching an IRA unless it is absolutely necessary. However, you have to do the math. It depends on the tax rate, mortgage rate, portfolio return rate, duration, etc.

[Bikerdude]

I'm retired and I have a mortgage. I didn't really plan to have one when I retired but some life events dictated that I would have one. That being said I see the logic in not having a mortgage.

My mortgage is a fixed rate so the payment is the same every year so I don't have to adjust for inflation on that amount. If I was to pay it off it would cost me the mortgage balance plus 30% taxes. The mortgage allows me to deduct health care expenses, property taxes, charity and state taxes. The funds I would pay off the mortgage with are invested tax deferred and earn say 5%. The mortgage is 5.5%.

I see this as pretty much a wash for me. Other peoples situation may be different.

[JustCurious]

Quote:

Originally Posted by Bikerdude The mortgage allows me to deduct health care expenses, property taxes, charity and state taxes.

You make some good points, but remember that property taxes are now partially tax deductible (at least for 2008 ) even for those who take the standard deduction.

[unclemick]

Sooo - I take it nobody is telling me to exactly time the housing bottom - buy a house with a humongous mortgage - live in it two years while I do Roth conversions - then sell and downsize with the profits.

Still with the rent idea - in fact though I don't do it.

heh heh heh - this is a fun thread - even though I bought a small house(aka the right size) post Katrina with a 30 yr fixed - cause I couldn't find a rental I liked.

[W2R]

Quote:

Originally Posted by unclemick Sooo - I take it nobody is telling me to exactly time the housing bottom - buy a house with a humongous mortgage - live in it two years while I do Roth conversions - then sell and downsize with the profits. Still with the rent idea - in fact though I don't do it. heh heh heh - this is a fun thread - even though I bought a small house(aka the right size) post Katrina with a 30 yr fixed - cause I couldn't find a rental I liked.

'Twas ever thus. I am hoping to find something bearable to rent for my first year in Springfield, after we move up there in 2010. That would be the sensible thing to do in a new location. I am counting a year's rent as part of the moving expenses.

But I might end up buying right off the bat, because most rentals don't really knock my socks off. And gosh - - I can buy a house with everything I want or need for nearly nothing. Resale in Springfield could be a huge problem, though, if we ended up having second thoughts about moving there.