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Old 06-07-2015, 06:38 PM   #61
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Originally Posted by ERD50 View Post
I'm not sure what you are saying then (BTW, I see I did misquote you, if it makes a difference - should be 'dip' into savings, not 'dig').

You said "It was comforting to know that if one of us got laid off, the other could easily handle the bills with neither of us having to dip into our savings."

So if you didn't need to 'dip' into savings to pay off the mortgage, where did the money come from then? OK, I'm guessing there is some semantics going on here - you paid extra each month from your income stream? Well, that would have gone to savings if you hadn't. And that savings could tide you over a lapse in employment.

And until it is all paid off, you still have the monthly bill.

Like I've said many, many times before - it's such a minor thing either way, but this rationalization to make it seem important just gets me.

-ERD50
The existence of mortgage especially for someone with great credit/great rate is probably one of the least significant factors to being Financially Independent.

There are much bigger problems like Car loans, student loans, credit card balances, spouse that is big spender, health, education etc etc.

As long as you can pay off mortgage with no sweat ...you are in good shape.
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Old 06-07-2015, 06:53 PM   #62
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Originally Posted by ERD50 View Post
So if you didn't need to 'dip' into savings to pay off the mortgage, where did the money come from then? OK, I'm guessing there is some semantics going on here - you paid extra each month from your income stream? Well, that would have gone to savings if you hadn't. And that savings could tide you over a lapse in employment.

And until it is all paid off, you still have the monthly bill.

Like I've said many, many times before - it's such a minor thing either way, but this rationalization to make it seem important just gets me.

-ERD50
I actually don't think it is minor. I think it is good to point out. Otherwise people reading these threads for financial advice may not accurately consider all the factors to optimize their decision.

There are, of course, pros and cons to either paying off or keeping a mortgage. Paying down the principal usually does not usually impact net worth, since the money to pay it off comes out of the portfolio or could be added to savings, perhaps tax deferred savings. If the payoff money comes out of retirement accounts, then it may create additional taxable income for the year. Is it better to have more money in a liquid account or the house? That again may depend on individual factors. In some states the house may provide the best option for asset protection and others not. In states with natural disasters, it might be better to keep the money in liquid assets.

That leaves the interest portion, which may be tax deductible on a mortgage. Can that money make more some place else, perhaps a 10 year CD with FDIC insurance, held in a tax deferred account? It all depends on the rate differential and tax situations. 10 - 20 year broker CDs at Fidelity are yielding over 3% right now.
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Old 06-07-2015, 06:58 PM   #63
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It all depends on the rate differential and tax situations.
Exactly.
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Old 06-08-2015, 06:35 AM   #64
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Inexpensive house in expensive neighborhood of Boston area will be 500k. Two professionals in this area should easily make 250k by the time they are 30. I don't see how it could be difficult to pay off 400k mortgage in 4 years....(On that kind salary I would save 100k plus max out 401k)

Modest house in Colorado Springs will be 300k where such couple makes about 160k. Again I don't see difficulty in paying off 240k mortgage in 4 years.

It probably is not possible in Palo Alto CA

But those kind of couples will usually buy McMansions for 1.2 Million or so and more less never pay it off. Which is perfectly fine if one wants to work into their 60s...
Or they can choose to keep the mortgage for the interest deduction, and max out their pre-tax savings first. The point is that people may be able to pay off the mortgage, but prefer not to.

But just as often, high-income people have other trappings: bigger home, German luxury cars, children in private school, nice vacations, country clubs, etc...

And then, in a society where a 30-year mortgage is the norm, many people do not think that having the house paid off (or the means to do so if one chooses to keep the mortgage for other reasons) when one is still in the late 30s or 40s is even possible. So, they do not even try.
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Old 06-08-2015, 08:26 AM   #65
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Originally Posted by ERD50 View Post
I'm not sure what you are saying then (BTW, I see I did misquote you, if it makes a difference - should be 'dip' into savings, not 'dig').

You said "It was comforting to know that if one of us got laid off, the other could easily handle the bills with neither of us having to dip into our savings."

So if you didn't need to 'dip' into savings to pay off the mortgage, where did the money come from then? OK, I'm guessing there is some semantics going on here - you paid extra each month from your income stream? Well, that would have gone to savings if you hadn't. And that savings could tide you over a lapse in employment.

And until it is all paid off, you still have the monthly bill.


Like I've said many, many times before - it's such a minor thing either way, but this rationalization to make it seem important just gets me.

-ERD50
The money came from my income stream, and gosh, I had like $60k in savings at the time. I mentioned "at least a year" because that was our minimum safety net for an emergency fund. $60k would have lasted me 3 or 4 years, mortgage included, and without considering unemployment.

Edit: Oh, and I was also maxing out my 401k and IRA contributions, and making other investments here and there while pre-paying the mortgage.
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Old 06-08-2015, 06:08 PM   #66
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I paid off my mortgage in 04' with 9 years remaining at 4.75%. I have no regrets. I have always enjoyed the peace of mind having no debt. I did a cursory calculation comparing paying it off or investing the money. After making a few assumptions, I came out slightly ahead paying it off. I also took out human emotion with respect to staying the investment course (might have come in handy in 08' and 09').
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