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Old 07-27-2011, 01:31 PM   #41
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This is good stuff. I think the answer comes down to risk tolerance. If you don't like risk, pay off the mortgage as you go to get the guaranteed return and if you don't mind taking some risk, use the sinking fund approach. The lower your mortgage rate and the higher your tax bracket, the greater the argument for the sinking fund. Personally, I do a little of each.
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Old 07-27-2011, 01:55 PM   #42
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Originally Posted by REWahoo View Post
Heck. I was hoping we could finally settle this argument once and for all...
That's easy REW, Suze Orman says:

Pay off your mortgage before you stop working. It’s not nearly as hard as you may think.
Once you are in a home you intend to stay in, I want you to accelerate your mortgage payments so you get the loan paid off well before you retire. Just think about this for a second. For most of us, the monthly mortgage is our biggest financial obligation. So if we can eliminate this cost we are going to need a whole lot less to “make ends meet” in retirement.

Question answered.
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Old 07-27-2011, 02:04 PM   #43
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That's easy REW, Suze Orman says:
"Straight from the horse's financial expert's mouth", is that what you're sayin'...?
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Old 07-27-2011, 02:10 PM   #44
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"Straight from the horse's financial expert's mouth", is that what you're sayin'...?
Yup. Now that her face is in front of me I can hear that awful voice in the quotes I posted.
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Old 07-27-2011, 03:03 PM   #45
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I think the answer comes down to risk tolerance. If you don't like risk, pay off the mortgage as you go to get the guaranteed return and if you don't mind taking some risk, use the sinking fund approach.
There are, of course, different kinds of risk. I think you've addressed the conventional "standard deviation of my investment returns" risk. There are other risks/opportunities that can best be avoided/seized with a wad of readily available cash. When folks no longer have an income stream, it's hard to turn a house into that. When mortgage rates go up it will be expensive to turn a house into that for anyone. On the other hand, a wad of cash can always be used to pay off the house.

Do all these folks who breathe a sigh of relief at finally paying off the house ("now I'll have a home regardless of what happens") live in places without property taxes?
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Old 07-27-2011, 04:18 PM   #46
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When I took flying lessons, my instructor said to keep in mind, "It's better to be on the ground wishing you were up there, than to be up there and wishing you were on the ground."

Cash is king.
You can always turn cash into equity. You cannot always (or cheaply) turn equity into cash.
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