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

[ls99]

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]

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]

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.

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).

 

[Spanky]

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]

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]

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.

 

[Alan]

I had an interesting discussion with a friend of mine today on this. He is 62 and ready to retire but he is still uncertain. He works for a small company and a large part of his income comes from his annual bonus based on the company's profits. He is expecting a large bonus this year and was wondering about if he should pay off his mortgage. He has 55% equity and the rate is 5.5%. I said that I assume he has built up a wad of cash to retire next year so 5.5% is a pretty good deal so if I was him that is what I would consider doing.

He will probably pay off his mortgage but for quite a different reason. He has no wad of cash as his wife always finds ways to spend it so paying off the mortgage will keep it out of her hands. He said if an emergency came up he could always borrow against the house later - cash reserves were not an option with his wife

They are a lovely couple, married 35 years with 2 sons and 4 grandchildren but obviously quite different views on money. She has been a teacher all her working life and will retire with a pension, and he will have 401(k) money from his company plus SS so they are going to be fine. DW and I are so fortunate that our views on money are so similar.

I thought I would share this as a different reason for paying off the mortgage.

 

[oldnews]

I'm 43 and just paid off the house, no CC debt, no car loans. Feels great and we went through this same discussion. My reasoning was that a secure certain return was our best bet, ie always invest in your debt with extra cash after funding retirment. We almost invested the 400,00$ in the market in 2007 and I would have a heart attack by now I'm sure. Looking back, it was absolutely the right decision.

 

[Alan]

I'm 43 and just paid off the house, no CC debt, no car loans. Feels great and we went through this same discussion. My reasoning was that a secure certain return was our best bet, ie always invest in your debt with extra cash after funding retirment. We almost invested the 400,00$ in the market in 2007 and I would have a heart attack by now I'm sure. Looking back, it was absolutely the right decision.

Congratulations, - and welcome

I was almost the same age, 44, when we paid off our mortgage and became debt free. I remember the date well as we'd timed it to coincide with the first of our children going to college.

 

[oldnews]

How old are you now?, We started late with the kids, I have a 4yo and a 2 yo.

 

[Alan]

How old are you now?, We started late with the kids, I have a 4yo and a 2 yo.

I'm 55 and it sounds like our kids are a similar age apart. We had our first when I was 26, the 2nd one came 20 months later, with a rather distressing mis-carriage in between.

DW was keen to have our kids close together as both of us have 3 siblings and our parents each had their 4 children over a 16 year period. You can read more about me in the "about me" section in My Profile

You must feel really pleased to be debt free, and retired, with your children so young.