Pay of mortgage ?

Originally Posted by JB

I'm not in the (Nords) camp that would put my mortgage money into the stock market. That's too risky.* *But paying off a 4.5% loan off make no sense when you can easily and conservately get 5%.* It's lower risk to keep the mortgage.

I agree.* Granting that you'd get some significant psychological comfort from being free of the monthly mortgage payment, wouldn't you get even greater comfort from knowing that you were making more money through safe investments?

[renferme]

Most examples here are using a 4.5% interest rate for 30 years. Didn't know you could get that ! ! !?
.
My example, and I refinanced 2.5 years ago, is 5.25% for 15 years. We're paying the loan as if it were a 12 year mortgage (paying extra principle every month). So it will be paid off in 9.5 years from now, unless... we pay it off. My thinking is to pay it off when I turn 62 (about 3 years from now), and start drawing Soc. Sec. Don't know where CD rates will be in 3 years or so, but you can't get better than 5.25% right now, not even with Pen Fed. And most 'experts' seem to think the stock market may move sideways or up very little for the next many years. But who knows ? OH, almost forgot to mention, I have about 30k in CDs right now, half will mature in 1.5 years and half in 2.5 years. If I pay off the mortgage in 3 years, I would use that CD money as part of the payoff, so.... the question is: What to do with the 15K in 1.5 years and the next 15k in 2.5 years ??
Ray

[moghopper]

Originally Posted by bennevis

Most examples here are using a 4.5% interest rate for 30 years. Didn't know you could get that ! ! !?

I have 4.5% on a 7 year balloon with 30 amortization - originated ~25 months ago.

My brother has 4.5% on a 30 year fixed loan - originated ~20 months ago, iirc.

[Chris24]

Sorry been out of town, .. thanks for the posts. The Loan is 4 1/2 % for 15 years, been paying into it almost 3 years, and will for the next 2 while I am working. One of the few if not he only thing i aquired at the "bottom".

I need to look closer at the amortimization schedule more closely, .. ( heading out of town first thing in the morning agian so will be a few days) .. and figure how much interest is left, and also need to figure what tax bracket I'd be in when I start withdrawing from retirement funds, with the mortage paid off , and with out.

The idea of "critical mass" is appealing, as well as not having to wrote ou that 2k check every month. If cd rates head over 6+% in the next few years, quess it would be "case closed" for keeping it. Don't see the paper work being worth it for 1/2% at best , after all is said and done with rates in the 5=% area.

Agian thanks for your responses .. alot to think about. .. Chris

[laurence]

Originally Posted by moghopper

I have 4.5% on a 7 year balloon with 30 amortization - originated ~25 months ago.

My brother has 4.5% on a 30 year fixed loan - originated ~20 months ago, iirc.

Whoa, are you planning on moving? I ask because with historical low rates, why risk having to pay higher rates in the future? How many points did your brother pay?

[sgeeeee]

You should use all the tools available to you to analyze the financial implications of the payoff vs keeping the mortgage decision. You should consider the risk differences of payoff vs keeping and how those risks make you feel. Then you should do what feels right to you.

You should ignore most of the advice you get from others.

[REWahoo]

Originally Posted by - SG

You should ignore most of the advice you get from others.

With the exception, of course, of the advice you get from SG....

REW

[Spanky]

Originally Posted by davidmull

I agree. Granting that you'd get some significant psychological comfort from being free of the monthly mortgage payment, wouldn't you get even greater comfort from knowing that you were making more money through safe investments?

No really if it costs me. Debt free is nice, but if the cost of debt is less than the income from CD, I would not pay off the debt. You can take money out of the CD if needed for mortgage payment.

The idea of "critical mass" is appealing, as well as not having to wrote ou that 2k check every month. If cd rates head over 6+% in the next few years, quess it would be "case closed" for keeping it. Don't see the paper work being worth it for 1/2% at best , after all is said and done with rates in the 5=% area.

Paper work? Just send the mortgage company the check.
If the P&I payment is $2K (@4.5%, 15 year), the loan is about $250K.
The interests over 15 years is $87,977.53 while income earned from a 5% CD over the same period is $176,041. The is a difference of $88,064.
A 0.5% makes a big difference over 15 years.

[Raven]

Here is interesting opinion on the subject:


http://www.ricedelman.com/planning/home/rule21.asp

[cute fuzzy bunny]

Originally Posted by - SG

You should use all the tools available to you to analyze the financial implications of the payoff vs keeping the mortgage decision. You should consider the risk differences of payoff vs keeping and how those risks make you feel. Then you should do what feels right to you.

You should ignore most of the advice you get from others.

I didnt think you could stay out of it. I kept whistling past this graveyard.

These 'sweet' mortage deals almost always have a catch. Either you paid points, you have a baloon, they're adjustable, or they're 15 year, not 30 year mortgages.

Most of the analysis I read above leaves out the tax implications. I also wouldnt think it too worthwhile to leverage your home to make .5-1% float on a hundred thousand or two. While it lasts. The way long term rates are looking on cd's and long bonds, it looks like the broader financial community doesnt expect rates to rise much more, and probably to start falling again in a year or two.

But if it works for you, do it. I think people come into these discussions with their mind already made up and are just looking for validation of that opinion. Dissents are discounted.

I've run the numbers 9 ways from sunday with the best deals I can muster. You can forge those numbers to say that keeping a mortgage makes sense. Any of those forgings with a minor tweak can turn it into saying one doesnt make sense. Every 'makes sense' scenario either required paying a higher tax load, taking on significantly more risk, forcing me to stay in a home longer than I think I'll stay, or some other undesirable factor. In the hopes that I might make a few bucks. Maybe. A few tweaks in the other direction, and I can make MORE money without a mortgage or drop my risk factors through the floor and maintain a good income.