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Just paid off the mortgage. Putting the pay off the mortgage question to rest.
Old 06-03-2015, 03:24 PM   #1
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Just paid off the mortgage. Putting the pay off the mortgage question to rest.

I've been trying to raise cash for 2017 living expenses and a limit order finally executed today. Then I realized I would have that cash sitting in my money market account earning 1% before tax while I am paying 1.99% interest on my mortgage.

I spent 5 minutes thinking about it and a 6th minute transferring the money to Penfed.

Done.

I figure I won't need the cash I raised till 2017 anyway. Might as well be "earning" me 1.99% tax free by paying off the mortgage.
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Old 06-03-2015, 03:58 PM   #2
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Had a similar epiphany 18 months ago. Had/have as much in equities as I care to. Cash paying little. Bonds not paying much more. So why not get the imputed return of not paying a mortgage payment each month. I'd make the same decision again today.

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Old 06-03-2015, 04:07 PM   #3
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Had a similar epiphany 18 months ago. Had/have as much in equities as I care to. Cash paying little. Bonds not paying much more. So why not get the imputed return of not paying a mortgage payment each month. I'd make the same decision again today.
Other than a year or two worth of cash on hand/short term bond, we are 100% equities. So yeah, this is basically a 1.99% muni bond that pays interest that won't add to my AGI (thereby reducing ACA and other subsidies or tax breaks tied to AGI).
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Old 06-03-2015, 04:48 PM   #4
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Wow, I am 33 and I have a long ways to go. I took out a 30yr conventional with PMI @4% interest. I just started paying extra principle, 6months into the new mortgage. (I had been laid off previously and couldn't afford to do that.)

BY my calculations, throwing extra $500/month at Principle, getting rid of PMI sooner than later and using that to pay extra mortgage payments, and then in 4yrs when our 2 new vehicle loans are paid off using that extra money towards the mortgage, I should have a paid off home in 10yrs.

Any raises or windfalls go into retirement. Seems like a solid plan to retire early at 50.
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Old 06-03-2015, 05:02 PM   #5
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I spent 5 minutes thinking about it and a 6th minute transferring the money to Penfed.

Done.
I hope you feel as elated and free as I did once I paid mine off. Funny, my NW seemed to increase exponentially after I got rid of the mortgage

Congratulations!
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Old 06-03-2015, 05:12 PM   #6
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Originally Posted by FUEGO View Post
I've been trying to raise cash for 2017 living expenses and a limit order finally executed today. Then I realized I would have that cash sitting in my money market account earning 1% before tax while I am paying 1.99% interest on my mortgage.

I spent 5 minutes thinking about it and a 6th minute transferring the money to Penfed.

Done.

I figure I won't need the cash I raised till 2017 anyway. Might as well be "earning" me 1.99% tax free by paying off the mortgage.
Silly question, but that was the cash you were raising for your 2017 living expense? Where will you get the cash you need for those expenses?
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Old 06-03-2015, 05:39 PM   #7
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Silly question, but that was the cash you were raising for your 2017 living expense? Where will you get the cash you need for those expenses?
I'll need $27000 less between now and 2017 since I won't have a mortgage to pay. Cash on hand will last me an extra year roughly.

Edit to add: We could have paid the $27000 in monthly payments over the next 2 years or just pay it all today and skip the 1.99% interest. Either way, after 2 years I'm out $27,000 due to the mortgage payment.
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Old 06-03-2015, 05:42 PM   #8
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BY my calculations, throwing extra $500/month at Principle, getting rid of PMI sooner than later and using that to pay extra mortgage payments, and then in 4yrs when our 2 new vehicle loans are paid off using that extra money towards the mortgage, I should have a paid off home in 10yrs.
We paid it off in 11.5 years. Mostly by going shorter as we refinanced. 30 to 15 to 15 to 15 to 10 to 5 IIRC.

The goal was to have it paid off by the time we ER. Oops, I didn't quite make it that long, but DW's still working (or collecting a paycheck at least) so I'm not saying we failed at this goal completely.
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Old 06-03-2015, 06:30 PM   #9
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The peace of mind after paying off a mortgage is under- rated. You don't realize it until it happens.


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Old 06-03-2015, 07:25 PM   #10
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Other than a year or two worth of cash on hand/short term bond, we are 100% equities. So yeah, this is basically a 1.99% muni bond that pays interest that won't add to my AGI (thereby reducing ACA and other subsidies or tax breaks tied to AGI).
I would normally think it ill-advised to pay off a 1.99% mortgage, but... since you are 100% equities, and this money really would go to cash/something paying < 1.99%, the answer is obvious. Pay it off.

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Wow, I am 33 and I have a long ways to go. I took out a 30yr conventional with PMI @4% interest. I just started paying extra principle, 6months into the new mortgage. (I had been laid off previously and couldn't afford to do that.)

BY my calculations, throwing extra $500/month at Principle, getting rid of PMI sooner than later and using that to pay extra mortgage payments, and then in 4yrs when our 2 new vehicle loans are paid off using that extra money towards the mortgage, I should have a paid off home in 10yrs.

Any raises or windfalls go into retirement. Seems like a solid plan to retire early at 50.
Getting rid of PMI is a good thing. I'd think harder about the rest.

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Old 06-03-2015, 09:28 PM   #11
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I would normally think it ill-advised to pay off a 1.99% mortgage, but... since you are 100% equities, and this money really would go to cash/something paying < 1.99%, the answer is obvious. Pay it off.
I think it makes sense in this limited case. I never thought I would pay off the 1.99% loan early, but I have cash in hand right now and it would otherwise sit in a 1% MM account.

I can also get a 2% loan from one of many credit cards I have if I really wanted the money at a low rate down the road. So I have that as an option and I'm saving money on interest right now.
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Old 06-03-2015, 09:28 PM   #12
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I've been trying to raise cash for 2017 living expenses and a limit order finally executed today. Then I realized I would have that cash sitting in my money market account earning 1% before tax while I am paying 1.99% interest on my mortgage.

I spent 5 minutes thinking about it and a 6th minute transferring the money to Penfed.

Done.

I figure I won't need the cash I raised till 2017 anyway. Might as well be "earning" me 1.99% tax free by paying off the mortgage.
Congrats! I know how it feels. Mine was a loan of 207K@6 7/8% and paid off in just three years on 8/24/2001(Age 37) - Last payment was 12.5K
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Old 06-03-2015, 09:38 PM   #13
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The peace of mind after paying off a mortgage is under- rated. You don't realize it until it happens. ...
It doesn't appear the OP's decision had anything to do with 'peace of mind'. It looks to be a simple cash versus 1.99% mortgage rate calculation.

It happened. I didn't see any expression of elation from him.

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Old 06-03-2015, 09:46 PM   #14
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It doesn't appear the OP's decision had anything to do with 'peace of mind'. It looks to be a simply cash versus 1.99% mortgage rate calculation.

It happened. I didn't see any expression of elation from him.

-ERD50
+1. We just run the numbers. I do what looks good on the spreadsheets. I cannot relate to the peace of mind concept over not having debt. If I could borrow $100 million dollars at 1% interest I would gladly be $100M in debt until the day I died and smile myself to sleep every night over my good fortune.
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Old 06-03-2015, 11:43 PM   #15
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Fuego.... you should know that all you saved was 0.99% if you could earn 1.00% on invested cash....

But I do believe you that you will not sell something now to replace the money like I think most people would...
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Old 06-04-2015, 12:06 AM   #16
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Congratulations, Fuego!
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Old 06-04-2015, 12:15 AM   #17
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Wow, I am 33 and I have a long ways to go. I took out a 30yr conventional with PMI @4% interest. I just started paying extra principle, 6months into the new mortgage. (I had been laid off previously and couldn't afford to do that.)

BY my calculations, throwing extra $500/month at Principle, getting rid of PMI sooner than later and using that to pay extra mortgage payments, and then in 4yrs when our 2 new vehicle loans are paid off using that extra money towards the mortgage, I should have a paid off home in 10yrs.

Any raises or windfalls go into retirement. Seems like a solid plan to retire early at 50.
Ah yes, PMI... long ago we had a 90% loan at 10%, so of course we had PMI. After a few years, read an article in the newspaper about making extra principle payments. Back then, I couldn't find anyone who knew about the concept, it was treated like it was voodoo! We paid something like $10 to the S&L for a printed-out payment book with all of the P and I amounts broken out for each payment step.
Then we made lots of extra payments. Wished we would have known about it earlier, as in the beginning almost all of the regular monthly payment goes for Interest! We made extra Principle payments to the dollar amounts listed in the book (we made it simple for them, no calculations needed with each aggregated payment). As we neared the end of the loan, almost all of the payment goes for principle, so the number of extra P payments we could afford really dropped.
We finished before the 8th year started. It was the only item we ever bought via a loan.

We had a book burning to celebrate the end... but can you believe it... the book wouldn't burn! The plasticky-coated paper pages would char if the match was held right on one, but remove the flame and it would go out. Somewhere in some office far away, some guy was probably having a big laugh.
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Old 06-04-2015, 09:11 AM   #18
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We paid off the last chunk of ours this year with a transfer from a 0% credit card. Finally got one that would do the transfer without any fees so it was a true 0%. We will pay it off over the next 12 months. I expect our health insurance will about equal our mortgage in retirement so we are swapping one for the other--which is much better than stacking one on top of the other!
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Old 06-04-2015, 12:53 PM   #19
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Ah yes, PMI...
We had a book burning to celebrate the end... but can you believe it... the book wouldn't burn! The plasticky-coated paper pages would char if the match was held right on one, but remove the flame and it would go out. Somewhere in some office far away, some guy was probably having a big laugh.
Lol, I think I am going to burn a book when I finally pay mine off. I like that idea heh, I will make sure not to use the plastic coated type.

When I found out paying $500/month in extra principle would save me roughly $127,000 in interest and shave off quite a few years it was easy to see how the savings could compound once PMI was gone. I learned about this when some company was offering (For a fee) to allow me to make bi-weekly payments instead of the once a month payment.

I asked myself, how can I do this myself without a fee...the answer was Billpay through my bank. I will likely refinance at some point down the road if interest rates fall but at 4% that's unlikely. They say if you can save 1% its worth the refinance. I may get into a 15yr but I hate to be locked into a high monthly payment when I can accomplish the same result with a 30yr.
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Old 06-04-2015, 01:13 PM   #20
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We paid off the last chunk of ours this year with a transfer from a 0% credit card. Finally got one that would do the transfer without any fees so it was a true 0%. We will pay it off over the next 12 months. I expect our health insurance will about equal our mortgage in retirement so we are swapping one for the other--which is much better than stacking one on top of the other!
I too paid off the last chunk of my mortgage (about $10,000) with a 0% CC transfer that was good for 15 months. I figured I saved around $800 in interest doing that (yes, I had high interest on the loan).
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