Millionaires: do they pay off their mortgages?

[LOL!]

Since the net worth poll shows lots of millionaires around these parts, I thought it would be interesting to see where folks stand with their money and the heated argument of "Pay off mortgage vs Investing".

No need to rant, expound at length, condemn the other side, etc., but please vote. Thanks!

[d]

... but the rants and condemnations are more than half the fun of it!

[macdaddy]

One couple I know in their 50s took out 3 million in 30-yr 5.5% fixed debt by mortgaging a number of investment properties. For every 1% above 5.5% they earn on the money, they make $30k per year. And they have much more flexibility with the money. 30 years is a long time. Over the long haul, it shouldn't be hard for them to earn 7-10%. Of course there is risk too, but that's part of the game.

[lowflyer]

Still have a 60K mortgage at 6% on a $200K+ home. $400/mo P&I. I'll keep the money invested and make the payment. Not that big of a deal.

[wabmester]

I was doing the risk-free arbitrage thing for a while (5% mortgage, 6% CD), but we sold that house, and I haven't bothered leveraging the current home. If fixed rates drop down to 5% (with no points), I'll probably do it again.

[janeofalltrades]

We sold our condo 1.5 years ago and are currently renting. We will probably be buying a home this year and have been talking about putting a large down payment and mortgage the remainder. It really comes down to where we buy and the price of the housing market.

[Craig]

We have a 5.625% fixed rate, 30-year loan, with the option of interest-only payments for 8 more years, plus some paid off investment properties. No logical reason to pay off the home debt ... prefer the liquidity of taking those principal payments and investing.

[uncledrz]

We are paid off where we are now, but would not be opposed to a mortgage depending on rates, pricing, future use of property, etc., in the future.

[dex]

Quote:

Originally Posted by tio z We are paid off where we are now, but would not be opposed to a mortgage depending on rates, pricing, future use of property, etc., in the future.

This is my thought. I have alot of money to put to work in the coming year or so. The plan is to do that and if interest rates fall; take out a mortgage and invest the equity.

[2B]

My home was paid off when I was forced ER'd before I thought it was appropriate to really ER. I now think (thanks to this forum) we could have done fine but that's another story. I found that most of my assets were tied up in my IRA. We had a bit of a liquidity problem. That house was sold and I moved across town to a new j*b. The new house has a 6 1/8% mortgage and the cash is available should I need it in the next few years. My plan is to sell this house soon and pay cash for a less expensive retirement place. I am working on improving my liquidity and now understand 72(t).

[Empty Pockets]

1 year left on a 15 year mortgage. Having the mortgage has let me pay cash for other consumer items (vehicle, home improvements) while continuing to fully fund all my investments in my financial plan. When the mortgage is done next year, the P&I payments will be made out each month to the mutual fund of my choice.

[ScaredtoQuit]

A few years ago I received a windfall and decided to pay off all of my liabilities, including my mortgage. At the time, I had about four years or so to go on a 15 year committment and a balance due of about $65K. Prior to receiving the windfall, I didn't bother to refinance my 7.75% rate because I figured that the benefits of a lower rate would have been eaten up by the costs of refinancing. Anyway, not having to pay a P&I of about $1250 per month, two car payments of about $700 per month, and other consumer debt of about $500 per month has been a real windfall. After paying off all of my liabilities, I have redirected all of that cash to savings which I have managed to increase to somewhere in the $3,000 per month range. This has been invaluable as I come down the homestretch to early retirement. Another side benefit of having no debt is how it has changed my mindset about buying things. Now I think in terms of accumulating the money FIRST for a purchase and then buying it rather than the habitual tendency to go into hock.

I am sure that much of this improvement has only been psychological in nature but I've never been sorry that I did it.

[Cattusbabe]

We continue to pay. The interest on the mortgage is very low as are the monthly payments (under $500/month)We can earn more by investing the money instead of paying off the mortgage early.

[dex]

ScaredtoQuit,
Where did you get your avaitar?

[dmpi]

I paid off my house in the early 90s. The note was at 10.25%. Been mortgage free ever since.

[perinova]

I decided not to vote since I just past the million. I would have voted "renter".

[OAG]

Just cannot abide debt of any kind. Liability is a 4 letter word to me. So no mortgage and no other debt. Earmark funds for major expenses before they become necessary (now saving for a new car to be purchased sometime after 2009).

[lazygood4nothinbum]

i tend to agree with no debt though i still have a $70k mortgage at 5something% on a $4-500k house. currently studying the situation. might pay off this year. not sure if this is the house forever, if i will sell and travel or sell and move onto a boat.

there is a post on this very subject elsewhere on this forum which i found so interesting i hadn't realized until i got into the 2005 stuff that it was started in 2004. i like some of the argument in both directions. personally, i think i might pay off even if i sell soon. it speaks to the inner lazy in me, having one less check to write. even if all my bills are done automatically by the bank anyway, one less thing to think about.

[audreyh1]

One of the first things we did after reaching a 7 digit net worth was to pay off our (small) mortgage! At the time, our net worth was >90% company stock, and we assumed that risk hoping for greater appreciation. By paying off the house, we provided ourselves a little cushion in case things didn't turn out so well.

Of course a financial advisor would have told us to take a lot more off the table than just paying off our house! What we did was very, very risky.

On the other hand our peers thought we were insane at the time to sell ANY company stock at all - especially not to pay off the house!

It was nice having a paid off house for a couple of years while we waited until we could actually RE and then started seriously divesting company stock and building a diversified portfolio to retire on. I'm happy we took the path we did. And of course we were very lucky too!

Audrey

P.S. One of my peers took a very different approach. While employed, he took out a margin loan against company stock to build a $1M plus home! This in a city with low house prices. Boy - I don't think I would have been able to sleep at night!

[Outtahere]

We paid ours off last year and it is one of the best feeling in the world.