Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 01-11-2019, 01:36 PM   #21
Dryer sheet aficionado
 
Join Date: May 2017
Location: Baytown
Posts: 38
Quote:
Originally Posted by retired1 View Post
Very simple. It makes me very happy when I owe nothing to nobody. Zero debt makes me happy
This idea is very inviting, probably the biggest tug along with financial freedom to invest and a little less risk hanging over our heads as life with 3 children carries on.
__________________

Penny6 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 01-11-2019, 01:38 PM   #22
Dryer sheet aficionado
 
Join Date: May 2017
Location: Baytown
Posts: 38
Quote:
Originally Posted by Lienlord View Post
This is a timely topic for me, as I was just sorting through a box of old files and came across the payoff letter from my mortgage company sent in 2007. It brought back memories of sending that last payment after several years of attacking the mortgage with every bit of spare change we could scrape together each month. We'd paid off our other debts, so rolled the debt snowball into the mortgage. We were so happy and celebrated with our young (at the time) sons this huge milestone.
Once that was done, we started investing that debt snowball (plus our old mortgage payment) into mutual funds for the next several years. This investment was the basis for later purchasing our first rental property, which then grew to over 20. We then branched out into apartments, commercial, and syndications. We are now (modest) millionaires, and will FIRE next year at age 55. Whether we would have done all that with a mortgage I can't say. But it provided a huge psychological lift to us that let us "bet the farm" with investments and take calculated risks we might not have otherwise. So I say pay that sucker off and set yourself free!
This is encouraging and inspiring. I hope the house payoff will be the basis of many future financial wins for our family as well. The truth is the least it will do is give us more options for our future endeavors.
__________________

Penny6 is offline   Reply With Quote
Old 01-11-2019, 01:58 PM   #23
Dryer sheet aficionado
 
Join Date: May 2017
Location: Baytown
Posts: 38
Quote:
Originally Posted by ERD50 View Post
I keep seeing this as a reason to pre-pay a mortgage. Are you serious? It does not make any sense at all, does it?

The money was already invested in the market. To prepay, and then use the cash flow to invest only delays the investment.

If you are serious, please explain what I'm missing here. Maybe I'm losing my mind.

-ERD50
The "invested" stock be sold one portion is from a stock purchase which he contributes to during the year and gets a 15% gain/ discount on the lower price of the yr. Second sell off is a 3yr payoff of a part of his bonus package (stock options from 3yrs ago) which has according to some amazing formula he will be receiving 150% of the original valuation. It isn't from long term investments. We will be paying the house off! The cashflow and options generated by doing it in the now outweighs a future intangible gain. We will just be upping the contributions with the 3000mo after payoff and continue riding the wave.
Penny6 is offline   Reply With Quote
Old 01-11-2019, 03:18 PM   #24
Full time employment: Posting here.
Luck_Club's Avatar
 
Join Date: Dec 2016
Posts: 655
Quote:
Originally Posted by ERD50 View Post
I want to know too. I must be doing it wrong. Here I was all ready to sleep well tonight, and now I'm worried! What's going to happen to that mortgage 'over my head'?

I just checked, and all the screws holding my mortgage are tight and torqued properly. I don't think it will fall down on my head tonight. Am I wrong?


OK, I don't care if someone want to prepay their mortgage or not, do what you want, in most cases it isn't a big deal. But some of the 'reasons' are just beyond me.

-ERD50
CASH FLOW

Mortgage of $12,000 per year requires earnings of $15,000, if you can show me how $59,000 can generate that every year I'm all ears....

Who knows it may cost you your healthcare subsidy having to pull that extra $15K out of your portfolio.
__________________
2017 dry run spending: 2018 accelerate debt elimination: 2019 RV procurement & 1MY begins: 6/19 DW last month went early: 9/19 start cross country loop: 1/20 first reinforcements arrive. 6/20 sell business or shut doors. 9/20 begin globe trot: 4/26 401K reinforcement.
Luck_Club is offline   Reply With Quote
Old 01-11-2019, 03:27 PM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 20,853
Quote:
Originally Posted by retired1 View Post
Very simple. It makes me very happy when I owe nothing to nobody. Zero debt makes me happy
What makes me happy is earning more than 3.375% and paying 3.375%. Over the last 8 years since I refinanced, I am ahead $37k. Not chump change.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...60/35/5 AA
pb4uski is offline   Reply With Quote
Old 01-11-2019, 07:52 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 20,813
Quote:
Originally Posted by Penny6 View Post
The "invested" stock be sold one portion is from a stock purchase which he contributes to during the year and gets a 15% gain/ discount on the lower price of the yr. Second sell off is a 3yr payoff of a part of his bonus package (stock options from 3yrs ago) which has according to some amazing formula he will be receiving 150% of the original valuation. It isn't from long term investments. We will be paying the house off! The cashflow and options generated by doing it in the now outweighs a future intangible gain. We will just be upping the contributions with the 3000mo after payoff and continue riding the wave.
Sounds like "shell game" accounting to me.

What difference does it make (outside of taxes) where the money comes from? Money is fungible, if it is coming in, it can be used for anything.

Maybe I'm just not following you. But it sounds like you are using these stock sales to fund paying off the mortgage, and then you say you can invest with the added cash flow from not having a mortgage. But you could invest with the stock sales now, not over time with the added monthly cash flow.

It seems you are mixing and matching in ways that may not be helping you see the options clearly.

-ERD50
ERD50 is online now   Reply With Quote
Old 01-11-2019, 09:27 PM   #27
Full time employment: Posting here.
 
Join Date: Dec 2006
Posts: 505
In my case, after much though. Paid off the house. Making monthly payments a nuisance. And the " good feeling " is worth more than you think. Makes future investing much easier.

Difficult to explain, but I'm sure others who paid off their house, understand the feeling.
wolf is offline   Reply With Quote
Old 01-11-2019, 09:45 PM   #28
Thinks s/he gets paid by the post
Just_Steve's Avatar
 
Join Date: Apr 2016
Location: Dutchess County
Posts: 1,223
The only reason I want the house paid of is that puts another 1k a month into our slush fund. Blow that Dough.
Just_Steve is offline   Reply With Quote
Old 01-11-2019, 10:07 PM   #29
Dryer sheet aficionado
 
Join Date: May 2017
Location: Baytown
Posts: 38
Quote:
Originally Posted by ERD50 View Post
Sounds like "shell game" accounting to me.

What difference does it make (outside of taxes) where the money comes from? Money is fungible, if it is coming in, it can be used for anything.

Maybe I'm just not following you. But it sounds like you are using these stock sales to fund paying off the mortgage, and then you say you can invest with the added cash flow from not having a mortgage. But you could invest with the stock sales now, not over time with the added monthly cash flow.

It seems you are mixing and matching in ways that may not be helping you see the options clearly.

-ERD50
This is what we are trying to weigh in on. It's a single stock sell off. We are still investing now and could plow this money into the market or gear toward house payoff. Not in an effort to be a market timer, just wanted to see what others would choose given the option.
Penny6 is offline   Reply With Quote
Old 01-12-2019, 08:50 AM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 20,813
Quote:
Originally Posted by Penny6 View Post
Quote:
Originally Posted by ERD50 View Post
Sounds like "shell game" accounting to me.
This is what we are trying to weigh in on. It's a single stock sell off. We are still investing now and could plow this money into the market or gear toward house payoff. Not in an effort to be a market timer, just wanted to see what others would choose given the option.
What is your mortgage rate?

Market timing is a separate issue, you seem to keep blending things. Think of each separately, unless there really is a tie in.

If dumping in all at one time concerns, then don't do it (though it is the 'right' thing to do based on history). Put it in over 6 months or a year.

If you decide to prepay the mort, will you have sufficient liquidity?

-ERD50
ERD50 is online now   Reply With Quote
Old 01-12-2019, 08:59 AM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 20,813
Quote:
Originally Posted by wolf View Post
In my case, after much though. Paid off the house. Making monthly payments a nuisance. ...
I'm on auto-pay. No nuisance at all. It would actually be more of a nuisance to pre-pay it.

Quote:
Originally Posted by wolf View Post
... And the " good feeling " is worth more than you think. ...
Who is this "you" you mention? I get a good feeling from keeping my money working for me with a low rate mortgage. Not everyone feels this way, speak for yourself. More detail below...

Quote:
Originally Posted by wolf View Post
...Makes future investing much easier. ...
As I posted earlier, this makes no sense to me. If you don't pre-pay, your money is already invested. How can taking it out, and then putting it back in slowly with the added cash flow be of any advantage to investing?

Quote:
Originally Posted by wolf View Post
... Difficult to explain, but I'm sure others who paid off their house, understand the feeling.
Well, others understand the feeling of holding a mortgage and keeping their money working for them. Like pb4uski said, ahead $37k in 8 years. IIRC, my number was $57K since 2003.

Now that is something anyone should be able to understand! Like the song says "Oh, what a feeling!".

-ERD50
ERD50 is online now   Reply With Quote
Old 01-12-2019, 09:15 AM   #32
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 4,643
Quote:
Originally Posted by Penny6 View Post
The "invested" stock be sold one portion is from a stock purchase which he contributes to during the year and gets a 15% gain/ discount on the lower price of the yr. Second sell off is a 3yr payoff of a part of his bonus package (stock options from 3yrs ago) which has according to some amazing formula he will be receiving 150% of the original valuation. It isn't from long term investments. We will be paying the house off! The cashflow and options generated by doing it in the now outweighs a future intangible gain. We will just be upping the contributions with the 3000mo after payoff and continue riding the wave.
Quote:
Originally Posted by Penny6 View Post
This is what we are trying to weigh in on. It's a single stock sell off. We are still investing now and could plow this money into the market or gear toward house payoff. Not in an effort to be a market timer, just wanted to see what others would choose given the option.
This isn't market-timing. First, subtract taxes. Second, make sure your emergency buckets are full. Third, max 401(k)s. Fourth, max Roth contributions. Fifth, pay down debt.

For #5, set your payoff date, and decide if you want to go all at once, or make additional periodic payments (like 12 or 24) that get you there.

Should also look at what you're doing with the investment. Depending on the company, it may make sense to keep some invested.

The mortgage rate is important. If a lot more than rising interest rate at the moment, gives you more reason to pay down quicker.
target2019 is offline   Reply With Quote
Old 01-12-2019, 09:22 AM   #33
Thinks s/he gets paid by the post
 
Join Date: Nov 2016
Posts: 2,148
Quote:
Originally Posted by Lienlord View Post
This is a timely topic for me, as I was just sorting through a box of old files and came across the payoff letter from my mortgage company sent in 2007. It brought back memories of sending that last payment after several years of attacking the mortgage with every bit of spare change we could scrape together each month. We'd paid off our other debts, so rolled the debt snowball into the mortgage. We were so happy and celebrated with our young (at the time) sons this huge milestone.
Once that was done, we started investing that debt snowball (plus our old mortgage payment) into mutual funds for the next several years. This investment was the basis for later purchasing our first rental property, which then grew to over 20. We then branched out into apartments, commercial, and syndications. We are now (modest) millionaires, and will FIRE next year at age 55. Whether we would have done all that with a mortgage I can't say. But it provided a huge psychological lift to us that let us "bet the farm" with investments and take calculated risks we might not have otherwise. So I say pay that sucker off and set yourself free!
Very well said, and exactly my thinking also, it worked well for you, as it did for me.
street is online now   Reply With Quote
Old 01-12-2019, 09:52 AM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 20,813
Quote:
Originally Posted by target2019 View Post
This isn't market-timing. ....
That's a good point that I missed. If the money is in stocks/stock options now, it is a 'sideways' move (though from a single stock to broad market, but still equities-to-equities). Market timing really isn't an issue - dump it in.


Quote:
Originally Posted by target2019 View Post
... pay down debt. ...
I'd say, "pay down any bad debt".


Quote:
Originally Posted by target2019 View Post
... The mortgage rate is important. ...
+1.


-ERD50
ERD50 is online now   Reply With Quote
Old 01-12-2019, 10:03 AM   #35
Full time employment: Posting here.
 
Join Date: Sep 2011
Location: Placerville
Posts: 740
My understanding of a mortgage is, like any conventional loan, it is serviced with paying the interest at front end of the payment schedule and towards the end, most of the payment is towards principal. Meaning; with only around $50K left on the loan, little of that is going toward interest, making this $50K nearly interest free at this point.

Paying off a home early is a good bet IF those extra payments are made at the onset of the loan, not at the tail end. Early in the loan, it reduces the total time and amount paid back. Toward the end of the loan, the bank already made it's money on the interest and there just isn't the financial motivation to pay it off any sooner.
skipro33 is online now   Reply With Quote
Old 01-12-2019, 11:15 AM   #36
Full time employment: Posting here.
Luck_Club's Avatar
 
Join Date: Dec 2016
Posts: 655
In addition to the positives on your personal cash flow statement, as others have said interest rate and tax rate matter.... How much so..

4.5% MTG rate=6.7% return required @33% tax rate. So unless you can get a risk free return of 6.7% return in the market, the answer would be pay off the mortgage.

4.5% MTG rate = 6% return required @25% tax rate

Formula to calculate = MTG rate/(1-tax rate)

Last I looked treasuries are paying 2.5%, and many dividend paying stocks are paying similar rates.

VTI the darling of the "buy the market always goes up crowd is down nearly 9% in the last 12 months. Not exactly what I would call stable safe investing.
__________________
2017 dry run spending: 2018 accelerate debt elimination: 2019 RV procurement & 1MY begins: 6/19 DW last month went early: 9/19 start cross country loop: 1/20 first reinforcements arrive. 6/20 sell business or shut doors. 9/20 begin globe trot: 4/26 401K reinforcement.
Luck_Club is offline   Reply With Quote
Old 01-12-2019, 11:17 AM   #37
Full time employment: Posting here.
Luck_Club's Avatar
 
Join Date: Dec 2016
Posts: 655
Quote:
Originally Posted by skipro33 View Post
My understanding of a mortgage is, like any conventional loan, it is serviced with paying the interest at front end of the payment schedule and towards the end, most of the payment is towards principal. Meaning; with only around $50K left on the loan, little of that is going toward interest, making this $50K nearly interest free at this point.

Paying off a home early is a good bet IF those extra payments are made at the onset of the loan, not at the tail end. Early in the loan, it reduces the total time and amount paid back. Toward the end of the loan, the bank already made it's money on the interest and there just isn't the financial motivation to pay it off any sooner.
Yes your payments are more heavily applied to principle, but the interest rate is applied to the principle balance, so the bank is still making money, and you are still paying interest.
__________________
2017 dry run spending: 2018 accelerate debt elimination: 2019 RV procurement & 1MY begins: 6/19 DW last month went early: 9/19 start cross country loop: 1/20 first reinforcements arrive. 6/20 sell business or shut doors. 9/20 begin globe trot: 4/26 401K reinforcement.
Luck_Club is offline   Reply With Quote
Old 01-12-2019, 11:27 AM   #38
Full time employment: Posting here.
Luck_Club's Avatar
 
Join Date: Dec 2016
Posts: 655
DEBT IS DEBT

OP-Ask your self this question.

If you owned your home free and clear, would you borrow against it to buy the investment? If so plow the money into the investment, if not pay off the debt.

I over the years have leverage my house to buy rental properties. The returns were greater than the risk plain and simple. I'm unaware of any marketable security investment that would be worth leveraging my home for at this point in time, and probably never.
__________________
2017 dry run spending: 2018 accelerate debt elimination: 2019 RV procurement & 1MY begins: 6/19 DW last month went early: 9/19 start cross country loop: 1/20 first reinforcements arrive. 6/20 sell business or shut doors. 9/20 begin globe trot: 4/26 401K reinforcement.
Luck_Club is offline   Reply With Quote
Old 01-12-2019, 11:31 AM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 20,813
Quote:
Originally Posted by Luck_Club View Post
Quote:
Originally Posted by skipro33
My understanding of a mortgage is, like any conventional loan, it is serviced with paying the interest at front end of the payment schedule and towards the end, most of the payment is towards principal. Meaning; with only around $50K left on the loan, little of that is going toward interest, making this $50K nearly interest free at this point.

Paying off a home early is a good bet IF those extra payments are made at the onset of the loan, not at the tail end. Early in the loan, it reduces the total time and amount paid back. Toward the end of the loan, the bank already made it's money on the interest and there just isn't the financial motivation to pay it off any sooner.
Yes your payments are more heavily applied to principle, but the interest rate is applied to the principle balance, so the bank is still making money, and you are still paying interest.
Correct. I had to verify this for myself recently, to be sure my head was screwed on right. You can see it on an amortization table. The interest is based on remaining principal.



Quote:
Originally Posted by Luck_Club View Post
In addition to the positives on your personal cash flow statement, as others have said interest rate and tax rate matter.... How much so..

4.5% MTG rate=6.7% return required @33% tax rate. So unless you can get a risk free return of 6.7% return in the market, the answer would be pay off the mortgage.

4.5% MTG rate = 6% return required @25% tax rate

Formula to calculate = MTG rate/(1-tax rate)

Last I looked treasuries are paying 2.5%, and many dividend paying stocks are paying similar rates. ...
Not sure where you get those tax rates from. If I invest income, the income is already taxed, whether I invest it or pay a mortgage with it is irrelevant.

If I invest it, I'll pay 0%~15% LTCG rates, and only on the gains, not on the entire amount.

I don't expect a risk free investment to beat a mortgage, that's not the 'deal'. The 'deal is' that long term market returns have historically beat low rate mortgages almost every time. I posted on this recently, IIRC every time for 30 year periods and all but maybe 1 or 2 times on 20 year? Against a 3.5% mortgage? I'd have to find the post for the details. And the times the market didn't beat the mortgage, it was very close.

Now, if you don't like those odds, don't take them. It's a personal decision. But don't overstate the risk either.


Quote:
Originally Posted by Luck_Club View Post
I... VTI the darling of the "buy the market always goes up crowd is down nearly 9% in the last 12 months. Not exactly what I would call stable safe investing.
Straw man argument. No reasonable investor thinks the market always goes up, that's just silly. And resorting to silly arguments just makes your case look weak. And 12 months is not 10, 15, 20 or 30 years. I'm happy with my > $50K gain with the mortgage.

-ERD50
ERD50 is online now   Reply With Quote
Old 01-12-2019, 11:39 AM   #40
Full time employment: Posting here.
 
Join Date: Sep 2011
Location: Placerville
Posts: 740
Something else to consider is your credit rating. Usually based on some formula of how much you use against how much you have available. CreditKarma can do 'what if's' and let you know what if you paid off your mortgage and how it would affect credit rating.

Even if you don't think you'll ever need a loan, it comes in handy having a good one. My last new car had 0% interest for those with high credit score.
__________________

skipro33 is online now   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
Pay off or not to pay off? brownred FIRE and Money 16 03-13-2017 05:28 PM
Just paid off the mortgage. Putting the pay off the mortgage question to rest. FUEGO FIRE and Money 65 06-08-2015 05:08 PM
What would you do - pay off student loan or pay down mortgage? bank5 FIRE and Money 27 07-27-2009 05:30 PM
Question for those planning to dump extra cash into the market when we hit "bottom" CompoundInterestFan FIRE and Money 25 10-10-2008 01:18 PM
pay off house vs stock market investment lightspeed FIRE and Money 62 10-06-2008 06:42 PM

» Quick Links

 
All times are GMT -6. The time now is 08:35 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.