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Another "pay off mortgage early" question
05-20-2015, 03:26 PM
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#1
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Full time employment: Posting here.
Join Date: Apr 2015
Posts: 580
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Another "pay off mortgage early" question
Long story short, recently retired at 56 and have just over two years left on our mortgage. Balance is $30,000 and if I went the full term I'd be paying out something like $1,400.00 in interest during this period. Although the mortgage interest is very little now, I can certainly use anything I can get in the way of a tax write off.
I have a very comfortable level of cash sitting in the bank, one account is only making 0.20% interest and if I kept that same $30,000 in this account I'd make something like $150.00 in interest over this two year period.
Seems like spending this $30,000. to pay off the mortgage will save me $1,250.00 in the long run. Make sense to you?
Our house value is approximately $600,000 and we easily live off my current retirement, plus I have a good sum in cash and investments.
Thanks!
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05-20-2015, 03:29 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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If it were me I'd pay it off. Opposing opinions will follow shortly...
__________________
Numbers is hard
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05-20-2015, 03:34 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2006
Posts: 11,401
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I would pay it off and have a mortgage burning party.
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05-20-2015, 03:55 PM
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#4
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Recycles dryer sheets
Join Date: May 2015
Location: NorCal
Posts: 333
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Quote:
Originally Posted by Drake3287
Long story short, recently retired at 56 and have just over two years left on our mortgage. Balance is $30,000 and if I went the full term I'd be paying out something like $1,400.00 in interest during this period. Although the mortgage interest is very little now, I can certainly use anything I can get in the way of a tax write off.
I have a very comfortable level of cash sitting in the bank, one account is only making 0.20% interest and if I kept that same $30,000 in this account I'd make something like $150.00 in interest over this two year period.
Seems like spending this $30,000. to pay off the mortgage will save me $1,250.00 in the long run. Make sense to you?
Our house value is approximately $600,000 and we easily live off my current retirement, plus I have a good sum in cash and investments.
Thanks!
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I'm in a similar situation except my balance is twice yours and I'm getting 0.85%. So I'd also be interested in hearing what opinions others have on this.
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05-20-2015, 03:57 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,891
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Or Plan C: Refinance for 30 years (if you can get a low rate), and then invest the money for the long term.
-ERD50
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05-20-2015, 04:06 PM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 13,186
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Quote:
Originally Posted by Drake3287
Long story short, recently retired at 56 and have just over two years left on our mortgage. Balance is $30,000 and if I went the full term I'd be paying out something like $1,400.00 in interest during this period. Although the mortgage interest is very little now, I can certainly use anything I can get in the way of a tax write off.
I have a very comfortable level of cash sitting in the bank, one account is only making 0.20% interest and if I kept that same $30,000 in this account I'd make something like $150.00 in interest over this two year period.
Seems like spending this $30,000. to pay off the mortgage will save me $1,250.00 in the long run. Make sense to you?
Our house value is approximately $600,000 and we easily live off my current retirement, plus I have a good sum in cash and investments.
Thanks!
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Since it doesn't seem to be of any real significance to you financially, do whatever entertains you or makes you feel good for having done it. Some folks go absolutely insane with glee when they get a mortgage paid off and others yawn. At today's low interest rates, it's unlikely that either paying off the mortgage or not paying it off will be of any significant financial consequence one way or the other. It's how it impacts you emotionally.........
For me...... I'd leave the mortgage in place, withdraw $30k from the 0.2% account and buy $30k worth of EFA and see what happens over the next few years. Of course buying EFA fits with getting to my target AA and may not fit your plans.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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05-20-2015, 05:29 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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IMO the $30K balance is small enough in your financial situation that I wouldn't sweat the minute financial details. I'd just pay it off and celebrate.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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05-20-2015, 06:09 PM
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#8
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Recycles dryer sheets
Join Date: Jun 2011
Location: W Colorado
Posts: 481
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I ER'd last year at age 56. I was able to pay off my mortgage (about twice your current balance) before I gave my notice. It is a very good feeling being rid of all debt. One less payment to have to deal with. The psychological benefit for me is huge!
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05-20-2015, 06:17 PM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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+1
I completely agree, on both counts.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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05-20-2015, 06:23 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2008
Location: No fixed abode
Posts: 8,765
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I'm a mortgage arb fan, so I'd go with ERD's plan C. But if you don't want to do that, I'd go ahead and pay it off. You aren't getting any tax break for it, probably less than the standard deduction. Might as well go into retirement without that extra bill to pay.
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Anonymous (not Will Rogers or Sam Clemens)
DW and I - FIREd at 50 (7/06), living off assets
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05-20-2015, 06:29 PM
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#11
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Full time employment: Posting here.
Join Date: Apr 2015
Posts: 580
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Thanks for some of the suggestions. As for just investing the extra $30,000. instead, I'm already pretty well invested and also have a good cash savings.
Basically I guess I'm just saving myself the $1,250. in interest by paying it off early along with the nice feeling of no longer having a mortgage.
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05-20-2015, 06:51 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Mar 2015
Location: philly
Posts: 1,219
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Quote:
Originally Posted by youbet
Since it doesn't seem to be of any real significance to you financially, do whatever entertains you or makes you feel good for having done it. Some folks go absolutely insane with glee when they get a mortgage paid off and others yawn. At today's low interest rates, it's unlikely that either paying off the mortgage or not paying it off will be of any significant financial consequence one way or the other. It's how it impacts you emotionally.........
For me...... I'd leave the mortgage in place, withdraw $30k from the 0.2% account and buy $30k worth of EFA and see what happens over the next few years. Of course buying EFA fits with getting to my target AA and may not fit your plans.
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+1
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05-20-2015, 06:57 PM
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#13
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Thinks s/he gets paid by the post
Join Date: Mar 2015
Location: philly
Posts: 1,219
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Quote:
Originally Posted by Drake3287
Thanks for some of the suggestions. As for just investing the extra $30,000. instead, I'm already pretty well invested and also have a good cash savings.
Basically I guess I'm just saving myself the $1,250. in interest by paying it off early along with the nice feeling of no longer having a mortgage.
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there's your answer. 1200 would not be enough of an incentive for me to do anything especially if you can comfortably make your mortgage.
The "nice" feeling is worth a bunch.
Now me, I've paid off one mortgage and then sold that house to buy my dream house, along with a new mortgage. not a darn thing changed, I have the exact same lifestyle I had with and without a note, so I'm one of those folks who never understand why having no mortgage supposedly is all of a sudden going to make my life nirvana
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05-20-2015, 07:12 PM
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#14
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Moderator
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 25,340
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Quote:
Originally Posted by Drake3287
Basically I guess I'm just saving myself the $1,250. in interest by paying it off early along with the nice feeling of no longer having a mortgage.
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That's about it, really, in your situation. Me, I'd pay it off but we like having zero debt.
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When I was a kid I wanted to be older. This is not what I expected.
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05-20-2015, 08:38 PM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Posts: 17,241
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You never said what the interest rate is.... if it is really low I would just keep paying the mortgage...
The problem is that if you pay it off, your cash balance goes down by $30K.... and you will want to replenish it at some time... which means you sell higher earning assets.... which means the savings is not what you stated...
Now, that is my 'analysis'.... in reality it probably does not make a difference either way.... if you feel like paying it off, then do so.... if you do not... then don't... no bad decision either way....
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05-20-2015, 09:22 PM
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#16
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Moderator
Join Date: Apr 2012
Location: San Diego
Posts: 14,212
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I was in your position last year. I paid off the mortgage - and took out a HELOC (which I haven't used) because that gives me a way to snag back the cash if I need it.
For me - it made the budget simpler for retirement calculations and I sleep well at night. Intellectually, I see the mortgage-arb thing has value... but it was a small enough value and I like simple.
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Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 6%, rental income 20%
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05-20-2015, 09:54 PM
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#17
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Recycles dryer sheets
Join Date: Jul 2009
Posts: 86
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In about 1999 I had a bunch of company stock that was at an all time high and told a co-worker I was going to pay off my mortgage. He thought I was crazy because the company stock was expected to double again in the next or so. My thought was that if the stock price crashed I couldn't bear having to make a mortgage payment every month and having that reminder that I could have been mortgage-free. So I paid off the mortgage and the stock dropped 85 percent from there over the next couple of years and has not yet even reached half of what it was back in '99. Best investment decision I ever made.
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05-21-2015, 01:11 AM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Location: Chicago
Posts: 13,186
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Sounds like your market timing on selling the stock was very fortunate.......... But totally independent of paying off the mortgage.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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05-21-2015, 06:40 AM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,370
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Quote:
Originally Posted by Drake3287
Thanks for some of the suggestions. As for just investing the extra $30,000. instead, I'm already pretty well invested and also have a good cash savings.
Basically I guess I'm just saving myself the $1,250. in interest by paying it off early along with the nice feeling of no longer having a mortgage.
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True, but the savings are probably more like $1,063 after taxes assuming a 15% marginal rate and itemized deductions exceeding the standard deduction.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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05-21-2015, 06:43 AM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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How much is the nice feeling worth?
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