paid off mortgage yesterday

Congrats! In the world of $$$, not much feels as good as owning a mortgage free home. Here in Georgia, it is especially great since if you have a mortgage, you actually have to deed your home to the bank...and to me, that's just something I don't like. I know, it's just a a mental thing, but it's still bothersome to me.
 
Good for you

I remember going to the bank and making the last mortgage payment. No champagne, no balloons, just stamp the check and a thank you from the teller. This process is a give away to an old school lifestyle 30 years ago. :)To tell the truth, I did not know what to expect but it was almost a letdown. But then when my husband got home we just laughed at my feelings and congratulated each other for a job well done.

Twenty five years later, we still live in our home, and being debt free at a young age, just reinforced the frugal habits we had while we were young. It has given us a very stable life and I am forever grateful.

My husband has been retired for many years and I am semi retired. Our financial problems today are.......do we have too much money saved....perhaps we should spend money more frivolously....we have earned the right to just blow money on whatever we want....?

So he has the car he has always wanted and I have a beautiful diamond ring. We are frugal but every once in a while we just blow the budget and indulge....and then go about our frugal ways.

My wish for you is that you have the life that you planned for.....enjoy your financial freedom.
 
Bestwifeever said:
Yes, we consider we now have an allocation in real estate with the house paid off. Interesting re debt free--I never thought of it this way. Does that apply to all obligations as long as one can pay them off whenever one feels like it? We are planning to buy a car soon and may or may not finance it, but it will sure feel like a debt to me if we do take out a loan.
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That is the way we look at it. We have a mortgage and 2 car loans, but they total less than a quarter of cash on hand, so if needed we can pay them off. But the interest rates and payments for these items are so ridiculously low (in my view) I have no problem having them. Eventually we may pay them off early, but it is not a priority.

To the OP, congrats!
 
Awesome feeling, eh? Congratulations.

Second cool experience is paying cash for your next home. Super easy process when you do. Closing took 10 minutes...
 
We paid off our house on 03/21/2001, I remember looking at our account that night after the wire was completed and seeing $0.00 our mortgage account.:D:D Since then we auto-drafted the payment amount into various after tax funds, educated two children (state schools), traveled extensively and retired. Two things: (1) the grass in your yard feels different when you own your house and (2) if you are totally debt free, your options and opportunities are infinite.

Ed
 
Bestwifeever said:
Interesting re debt free--I never thought of it this way. Does that apply to all obligations as long as one can pay them off whenever one feels like it? .
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No, not in my opinion. If you owe money, you are not debt free, whether that be a mortgage, car loan or credit cards.

We recently bought a car and could not pass up the 0% financing. So, for the first time in about 12 years, we are not debt free. The fact that we could pay off the loan tomorrow does not change that fact.
 
38Chevy454 said:
Congratulations, it is always a good feeling to eliminate debt. ...
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Sorry, but this just is not true. You can't say "always".

For me, it is a good feeling to be borrowing money at a very low rate, taking a tax deduction for it, and keeping that money invested. I would not have felt good about paying it off, and losing those market returns.


The financial aspects of whether to do it vs other investing of that money is a personal decision and choice.
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Correct, that why always/never do not apply.

However the peace of mind factor having a fully paid for house is definitely worth something in the long term.
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I get piece of mind knowing I have the liquidity to take on any big surprises. This could be compromised if all that money was toed up in the house.

Obviously, people can do what they want. But some of these reasons really don't hold water.

-ERD50
 
oh no! turn away, pay off mortgage debate be beyond thar shoals! LOL! It's our political debate, isn't it? Politics, religion, early mortgage payoff. Interest rates are extremely low, it's true. It's all about how you want to structure your portfolio, risk aversion, and cash flow and tax considerations. I can't see buying a 0.3% T-bill when you've got a mortgage, but I can see a point along the risk/reward investment "number line" where keeping the mortgage makes mathematical sense. We aren't paying off the car as it's 0.9%, that's for sure.
 
Congratulations! We paid off our debt 6 years ago and I've never regretted it. We then took that the house payment amount and started putting it into our investment account and it's been rocketing ever since.
 
ERD50 said:
Sorry, but this just is not true. You can't say "always".

For me, it is a good feeling to be borrowing money at a very low rate, taking a tax deduction for it, and keeping that money invested. I would not have felt good about paying it off, and losing those market returns.
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I agree with your point, I should have been a bit more exact in my language used. I meant if feels good emotionally to get rid of a debt obligation. Not whether it is always the pure financial best choice. That emotion of eliminating the debt provides a good feeling, the value of that is up to each person. Call it the sleep well factor as mentioned.

FWIW, I have a low interest rate mortgage and no plans to pay it off while still working. Taking the tax deduction help and keep my funds invested to generate more return than the cost of the interest. Whether to pay it off once no longer working is not decided yet. There are many variables in the decision and it is not a pure financial one.
 
Thanks everyone.

I consider myself a Main Street Joe Schmoe. The intent of my post is to motivate those like me to "stay the course." If I can't offer wise financial wisdom, I'd like to be at least a cheerleader for the team. :)

I hope to share my next FIRE milestone in the near future!

Cheers.
 
We're house payment free too except for taxes which are quite high.

In CA, wife inherits house under prop 13. Taxes for the year are only $1500, though house is comparable to ours.

I want to move there, but wife likes where we live.
 
It seems like every year I weigh the pros/cons of paying off my house to join the Dave Ramsey "Freedom!!" crowd. As much as I am debt adverse, my math skills take over and tell me I am giving up too much of a spread in my returns over a 5 - 10 - 15 yr period (assuming historical returns based on my AA). There is a part of me that wishes I had a mortgage rate of 8% so I could justify paying it off, but before tax mortgage rates of 3% sure make it tuff not to keep the cheap $$. Emotionally, I am there with most of you 100% debt free folks, but would agree there is also something somewhat equally satisfying with knowing you could pay off your mortgage if you chose too. No wrong/right answer here.
 
DawgMan said:
It seems like every year I weigh the pros/cons of paying off my house to join the Dave Ramsey "Freedom!!" crowd. As much as I am debt adverse, my math skills take over and tell me I am giving up too much of a spread in my returns over a 5 - 10 - 15 yr period (assuming historical returns based on my AA). There is a part of me that wishes I had a mortgage rate of 8% so I could justify paying it off, but before tax mortgage rates of 3% sure make it tuff not to keep the cheap $$. Emotionally, I am there with most of you 100% debt free folks, but would agree there is also something somewhat equally satisfying with knowing you could pay off your mortgage if you chose too. No wrong/right answer here.
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Agree, but do you use the spread between your mortgage and the FI portion of your portfolio to determine if you are making money? You should because a mortgage is like a "negative bond" Otherwise you are really decreasing the FI portion of your AA and increasing the equity portion. Thereby increasing your risk.

Example: Joe wants an AA of 60/40 based on his risk appetite and retirement goals. He has a $1million portfolio (FI is therefore $400,000) and no mortgage. If he had a mortgage of say $200,000 his AA would in fact be 80/20 (600,000/(400000-200000). If he took out a mortgage of $200,000 and invested the proceeds in his notional AA the actual AA would be 72/28 (600,000+120000)/400,000+80,000-200,000). The only way to keep your AA at 60/40 is to put the whole mortgage proceed into FI. Hardly a profitable trade.
 
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Danmar said:
Agree, but do you use the spread between your mortgage and the FI portion of your portfolio to determine if you are making money? You should because a mortgage is like a "negative bond" Otherwise you are really decreasing the FI portion of your AA and increasing the equity portion. Thereby increasing your risk.

Example: Joe wants an AA of 60/40 based on his risk appetite and retirement goals. He has a $1million portfolio (FI is therefore $400,000) and no mortgage. If he had a mortgage of say $200,000 his AA would in fact be 80/20 (600,000/(400000-200000). If he took out a mortgage of $200,000 and invested the proceeds in his notional AA the actual AA would be 72/28 (600,000+120000)/400,000+80,000-200,000). The only way to keep your AA at 60/40 is to put the whole mortgage proceed into FI. Hardly a profitable trade.
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I must be dense. Not sure I follow. If your $1M portfolio is reduced by $200K then your AA becomes 75/25??

Maybe I am looking at it wrong, but as an example I have 10 yrs left on a mortgage at 3% and my AA is returning avg 8%, what math equation is telling me to pay off my mortgage? Excuse my ignorance.
 
Congrats! It was a good feeling when we paid off our mortgage in 1996! Don't know if it was smart or not, but sure did like the feeling.
 
:nonono:
Mortgage free since the last century! Congratulations.
You can always go get another...
 
DawgMan said:
I must be dense. Not sure I follow. If your $1M portfolio is reduced by $200K then your AA becomes 75/25??

Maybe I am looking at it wrong, but as an example I have 10 yrs left on a mortgage at 3% and my AA is returning avg 8%, what math equation is telling me to pay off my mortgage? Excuse my ignorance.
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Not a problem this is a concept most people don't really understand. To compare apples to apples (and keep your AA constant) you need to allocate the mortgage (which is a negative bond) against the FI portion of your portfolio. Comparing your mortgage rate to the expected return on your whole portfolio isn't fair as your risk and AA have changed. I think, as long as you understand your AA is really quite different with a mortgage, this is really not a big issue.
 
Danmar said:
Not a problem this is a concept most people don't really understand. To compare apples to apples (and keep your AA constant) you need to allocate the mortgage (which is a negative bond) against the FI portion of your portfolio. Comparing your mortgage rate to the expected return on your whole portfolio isn't fair as your risk and AA have changed. I think, as long as you understand your AA is really quite different with a mortgage, this is really not a big issue.
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I don't know that it is really that big a deal to keep things 'apples to apples' in this case.

Consider someone with a $1,200,000 portfolio invested 75/25 and a $200,000 mortgage, versus taking that down to a $1,000,000 portfolio and paying down the mortgage. AA choices like 75/25, or 60/40 or 50/50 are just round number targets. Would that person really adjust their AA after paying down the mortgage (or vice-versa)?

I just don't think it is a material enough change to make adjustments one way or the other.

I also sort of disagree that just because the payoff is considered a 'safe' investment, that one should adjust in turn. OK, it is 'safe' - but was the investor looking for that safety, or is it just a side effect of the nature of the payoff? In the big picture, I think it sort of washes out.

For an analogy, consider the decision between purchasing an annuity or not. We don't say that to keep it 'apples to apples' that one must consider an alternate investment that returns the exact same $ amount each year. No, we consider whether a portfolio can be reasonably expected to outperform an annuity in the long run, with ups and downs.

-ERD50
 
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