Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 08-24-2016, 01:20 PM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 16,677
Quote:
Originally Posted by flyingaway View Post
Mortgage should be considered as a negative safe investment. How could you find a safe investment with a guaranteed annual return of 4.99%?
My view on this is, is it really necessary to compare to the 'guaranteed safe' rate? IOW, if the rest of your money is at a 60/40 AA for example, then why not invest this the same?

And if you feel you must be strict in keeping this apples-apples, then you must also feel that no one should have a dime invested until they have paid off the mortgage. But would that be prudent?

-ERD50
__________________

__________________
ERD50 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-24-2016, 02:45 PM   #22
Recycles dryer sheets
 
Join Date: Aug 2013
Location: North
Posts: 474
you need a place to live that's a fact.

You are paying 4.99% interest on a loan...fact.
Current markets being somewhat sideways, lucky if you return 4%.

You are basically taking money that MIGHT ROI 4% in the market, and instead putting it into your own mortgage interest bucket that will guarantee paying yourself the 4.99% interest.

Just shifting buckets...and some tax liabilities is all. I am doing the same thing, I just dialed back my 401k to get rid of this damn PMI.
__________________

__________________
AA (Stock/Bond/Cash ): 95/0/5% MIX (Small/Mid/Large): X/Y/Z% BLEND(US/Foreign): 100/0%, (Value/Growth/Blend): X/X/X% REIT (Real Estate Equity): X% of Assets

FIRE in 2031 @ 50yrs old (+/- 2yrs) w/ a hypothetical $3.5mil portfolio, 3 appreciated homes worth $1.0mil and rental income to fund my gap years until RMD. Assets will go to an inherited IRA where I plan on watching the investments grow until I die or the trust gets executed.
kgtest is offline   Reply With Quote
Old 08-24-2016, 03:12 PM   #23
Full time employment: Posting here.
 
Join Date: Jun 2016
Location: Denver
Posts: 555
Would you pay 100% cash for a house today?
__________________
COcheesehead is offline   Reply With Quote
Old 08-24-2016, 03:46 PM   #24
Recycles dryer sheets
 
Join Date: Oct 2011
Posts: 330
Quote:
Originally Posted by MichaelB View Post
+2 Even more difficult to get that rate of return, guaranteed, zero default risk, and after tax.
This.

Once it's paid off you'll have cash each month and be asking yourself where else you can find a 4.99% guaranteed return.

My suggestion would be to pound the mortgage into the ground reasonably quickly. Maybe not overnight but in a few bite sized chunks timed with bonus payments or perhaps selling under water equities where you can harvest the tax loss and flip the remaining principle onto the mortgage.

I would not incur capital gains or other penalties to pay off the mortgage.

A simple way to advance the ball would be to point that $20k/yr dividend fire hose at the mortgage in addition to your regular payments.

All told, it's nice to have high class financial problems.
__________________
Luck is when Preparation meets Opportunity.
krotoole is offline   Reply With Quote
Old 08-24-2016, 04:19 PM   #25
Full time employment: Posting here.
 
Join Date: Jun 2014
Posts: 913
Any simple spreadsheet cash flow analysis should prove that paying a mortgage early is suboptimal over any long timeline. Mortgage rates of interest are lower than they should be in the market because of FHA, the interest is tax deductable, and inflation devalues the balance. You have put the banks in a position high risk (interest, inflation) and you have none, almost for free, and paying off early "frees" you from this situation. You are being subsidized for god sakes.

Humans may not like math, but that doesn't make math wrong.




Sent from my iPhone using Early Retirement Forum
__________________
dallas27 is offline   Reply With Quote
Old 08-24-2016, 04:37 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 16,677
If someone has decided to pay off the mortgage, I don't understand the rational of making larger payments along the way. Wouldn't it be better to save up the balance, and do it all at once?

I doubt you knock off much interest with the interim payments, you hurt your cash flow in the process, and the money you put in is locked up. Having it invested keeps it liquid, and then, wham!, you're done.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 08-24-2016, 07:23 PM   #27
Dryer sheet aficionado
 
Join Date: Mar 2015
Location: Phoenix
Posts: 30
Quote:
Originally Posted by ERD50 View Post
Having it invested keeps it liquid, and then, wham!, you're done.

-ERD50
If you are gonna keep it invested why would you ever want pay the house off...just keep it invested... what about RISK of a market down turn just when you decide to pay it off....
__________________
JDPascale is offline   Reply With Quote
Old 08-24-2016, 07:35 PM   #28
Full time employment: Posting here.
 
Join Date: Jun 2016
Location: Denver
Posts: 555
I worry about sticking a bunch into something that it is hard to get back out of. Liquid = options.
__________________
COcheesehead is offline   Reply With Quote
Old 08-24-2016, 07:57 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 11,791
Quote:
Originally Posted by JDPascale View Post
If you are gonna keep it invested why would you ever want pay the house off...just keep it invested... what about RISK of a market down turn just when you decide to pay it off....

Who said you need to risk it

There are very safe investments that can be made... no risk of losing principal... not a great return right now, but no risk at all....
__________________
Texas Proud is offline   Reply With Quote
Old 08-25-2016, 08:50 AM   #30
Thinks s/he gets paid by the post
mpeirce's Avatar
 
Join Date: Feb 2012
Location: Columbus area
Posts: 1,359
Quote:
Originally Posted by ERD50 View Post
If someone has decided to pay off the mortgage, I don't understand the rational of making larger payments along the way.
-ERD50
It's not math, it's psychology. I know people who have convinced themselves it good to pay extra on their mortgage, but if they had extra funds sitting in an account would definitely spend it.

Out of sight out of mind.
__________________
mpeirce is offline   Reply With Quote
Old 08-25-2016, 10:17 AM   #31
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,406
I have a vague idea of the area you live in. I think you should shop around for a better mortgage lender. Your property should qualify with a tiny LTV even with no house on the property. You definitely need to get rid of the loan you have. I am looking to do a refi at around 3.0 for 30 yrs at Andrews FCU. NASA FCU has good rates also.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Old 09-06-2016, 08:12 AM   #32
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Posts: 2,020
Hey guys, figured I'd give an update on my mortgage situation. Now that it's over and done with, I feel a lot better about making that $10,000 payment. I think I was just going through a bit of "buyer's remorse" right after making the decision...sort of like the feeling you might get after buying a new car. I remember one of my friends buying a new Cadillac a few years back, and afterwards joking that the buyer's remorse was so bad that he should've been put on suicide watch!

Anyway, I think I'm going to forge ahead with my original plan, where I pay $2000 during a down month, $3000 during an up month, and $10000 in a month where my investable assets hit a new $10M threshold.

I know the month has just begun, but as of right now, it looks like September might be a $3K month. If I can get 1.3% out of the market this month, it'll be another $10-K'er
__________________

__________________
Andre1969 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Just paid off the mortgage. Putting the pay off the mortgage question to rest. FUEGO FIRE and Money 65 06-08-2015 06:08 PM
Pay down existing mortgage or save up for big down payment? Andre1969 Young Dreamers 13 04-29-2010 11:05 AM
big chunk, dollar cost average? Spartacus FIRE and Money 47 11-24-2009 01:28 PM
What to do with a big chunk of change justin FIRE and Money 9 06-23-2005 07:39 PM

 

 
All times are GMT -6. The time now is 02:26 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.