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Old 04-12-2012, 05:42 AM   #61
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Congratulations, Garman.
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Old 04-12-2012, 07:12 AM   #62
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One thing I also did after I paid off my mortgage: I put the proof of cancelled mortgage in my safe deposit box. One never knows, years after the fact, when that might be needed, so I wanted to be sure it was in a really safe place.
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Old 04-12-2012, 12:38 PM   #63
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Depending on the amount you sold on eBay, you may need some of that emergency money to pay taxes. The IRS is starting to track and target eBay sellers. Just fyi.

But congratulations on paying off the mortgage.

Good Point,

No worries here though, we sold off a few items, and made a quick $2000 or so.

If I understand correctly, anyone who does more then 200 transactions OR $20,000 will be sent a 1099 this year.

Gar
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Old 04-12-2012, 01:42 PM   #64
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Good news Gar - Congratulations.


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One thing I also did after I paid off my mortgage: I put the proof of cancelled mortgage in my safe deposit box. One never knows, years after the fact, when that might be needed, so I wanted to be sure it was in a really safe place.
I also made a trip to the appropriate State offce in our town to verify that the records showed that our names were on the deeds with no mortgage owing.
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Old 04-16-2012, 03:54 PM   #65
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Good Point,

No worries here though, we sold off a few items, and made a quick $2000 or so.

If I understand correctly, anyone who does more then 200 transactions OR $20,000 will be sent a 1099 this year.

Gar
Correct on the 1099 reporting. However, if you have a gain in your sales you'd need to self report it.
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Old 04-16-2012, 08:04 PM   #66
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Congrats. I didn't pay our mortgage off until I retired. You are doing much better. Great work.
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Old 04-16-2012, 08:24 PM   #67
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Congrats Gar! Well done!

Now, you should check in from time to time and tell us how you're saving/investing all the $$$ that used to go for mortgage payments.

Cheers.
+1

That was where my FI really started to happen.

Heartiest congrats on a great job.
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Old 04-16-2012, 08:35 PM   #68
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One thing I also did after I paid off my mortgage: I put the proof of cancelled mortgage in my safe deposit box. One never knows, years after the fact, when that might be needed, so I wanted to be sure it was in a really safe place.
When a mortgage is paid off, the event is supposed to be recorded in the city/county public records. If you don't see a receipt of that within six months of the payoff then it's worth tracking it down and getting it recorded.
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Old 04-16-2012, 11:59 PM   #69
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Sorry I did not comment on your thread a few months ago, thegarman. But I will tell you that I did something similar to what you did when I paid off my mortgage back in 1997-1998. I paid it down (I owed about $49k) in chunks of ~$15k several months apart in the 12 months before I finally paid it off in April, 1998.

I had a much larger investment portfolio at the time so bringing it down to a dangerously "low" level was not an issue. What I had been monitoring in the years leading up to my decision was the slowly rising interest rate on my 1-year ARM and a homemade spreadsheet which compared the net interest forgone by using some of my investments to pay it off versus the net reduction in mortgage interest deduction on both my federal and state taxes. What I discovered was that there would be no significant reduction in my mortgage interest deduction on my state income taxes because I would hit the standard deduction amount first. This turned my "not a big difference either way" outcome into a "pay it off now" outcome.

I did not have to worry about incorrectly designating those extra payments because I used the payment coupons from the payment book (I had been using automatic payments fo several years so the payment book went otherwise unused). A few months before I paid it off, my mortgage holder sold the loan to another institution. I set up the automatic payment with them but when the time came to make the final payoff, they let me authorize the payoff amount (via fax) to replace the monthly amount so I did not need to get a bank check. Nice.

It took a few weeks to finally get the original stock certificate from the bank (this was a co-op apartment) but I was not in any rush. I recall having to file something with the county clerk's office to designate that the mortgage had been paid off.

I had just turned 35 and this was a big step towards reducing my monthly expenses. WIth the booming stock market of the late 1990s, I quickly made up the reduction of my portfolio from market gains. Three years later, I was able to swich to working part-time, as a 40% reduction of pay still more than covered my greatly reduced monthly expenses. And in 2008 I was able to fully ER. I hope you can get there too, eventually.
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Old 04-25-2012, 06:58 PM   #70
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Congratulations (Belated!). I did not really feel like I was totally FI until my mortgage was paid off. I don't know what the rules are in your State but in mine, the property taxes can remain unpaid if your are 62+ until one passes (of course the state recovers its taxes after the sale of the house). So since I'm there age wise, I finally feel I really own the house no matter what.
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Old 05-13-2012, 08:21 AM   #71
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Bit the bullet, and wrote the check.

I had been reading this and other threads on the subject of mortgage payoff, while considering what to do with our only remaining Mtge. We decided to pay it.

There was ("is" since I haven't received the return payoff confirmation in the mail yet) $150k remaining on the mortgage of a 2bed/2bath condo in Maryland that I lived in for two years then turned into a rental. It had a 30yr fixed Mtge @ 5.75%. I'd toyed with a refi but, didn't want to pay the fees, and would have also suffered the rental property Mtge rate on a refi since I'm not living in it now. We still have well more than a year's expenses in the emergency fund.

Paying the Mtge is the equivalent of a guaranteed 5.75% return, which I can't find anywhere else. Plus, the net income now equates to >5% return, with the bonus that it is essentially tax free due to depreciation of the property.

We rent our current residence so, this leaves us mortgage free for the first time since 1993. I think my only regret will be missing the deduction come tax time.
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Old 05-13-2012, 08:22 AM   #72
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I think my only regret will be missing the deduction come tax time.
You'll get over it...
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Old 05-13-2012, 12:20 PM   #73
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There was ("is" since I haven't received the return payoff confirmation in the mail yet) $150k remaining on the mortgage of a 2bed/2bath condo in Maryland that I lived in for two years then turned into a rental.
Paying the Mtge is the equivalent of a guaranteed 5.75% return, which I can't find anywhere else. Plus, the net income now equates to >5% return, with the bonus that it is essentially tax free due to depreciation of the property.
We rent our current residence so, this leaves us mortgage free for the first time since 1993. I think my only regret will be missing the deduction come tax time.
A couple of comments on this decision. It's your decision, but you want to know that you're doing it for the right reasons.

You've essentially converted $150K of liquidity into "dead equity". You've traded the expense of debt service for less flexibility. Of course with less debt on the rental property you might be able to obtain a line of credit.

A few years ago when interest rates were higher than they are today, BofA gave us a 4.625% "investor" rate on our rental mortgage. Other landlords have been paying even less on ARMs whose rates have been fixed for as long as five years. 5.75% was higher than you needed to be paying, but would you have kept a 4.5% rental mortgage?

You claim that your depreciation is essentially tax free, but the reality of the situation is that when you sell the place you'll pay a 25% tax on depreciation recapture. So perhaps a better term would be tax-deferred. Of course I have yet to meet a landlord who's actually sold a property, so perhaps this is a tax deferral handled by probate.

You could have raised your deduction a little by refinancing, since the costs can be deducted on Schedule E.

But all of those factors raise the carrying costs of the property, which leaves a landlord in a riskier position during bad rental markets.
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Old 05-13-2012, 02:01 PM   #74
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Mortgage paid off about six years ago. It was a psychological decision - just made me feel better to be completely debt-free.
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Old 05-13-2012, 08:53 PM   #75
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A couple of comments on this decision. It's your decision, but you want to know that you're doing it for the right reasons.

You've essentially converted $150K of liquidity into "dead equity". You've traded the expense of debt service for less flexibility. Of course with less debt on the rental property you might be able to obtain a line of credit.

A few years ago when interest rates were higher than they are today, BofA gave us a 4.625% "investor" rate on our rental mortgage. Other landlords have been paying even less on ARMs whose rates have been fixed for as long as five years. 5.75% was higher than you needed to be paying, but would you have kept a 4.5% rental mortgage?

You claim that your depreciation is essentially tax free, but the reality of the situation is that when you sell the place you'll pay a 25% tax on depreciation recapture. So perhaps a better term would be tax-deferred. Of course I have yet to meet a landlord who's actually sold a property, so perhaps this is a tax deferral handled by probate.

You could have raised your deduction a little by refinancing, since the costs can be deducted on Schedule E.

But all of those factors raise the carrying costs of the property, which leaves a landlord in a riskier position during bad rental markets.
I know that many use the term "dead equity" for equity in real estate but, I don't think it's appropriate when the real estate is a rental returning >5%/yr. We wouldn't call it dead equity if it was income from another type of investment which can be sold.

Regarding tax "free" versus tax "deferred", it can be either. We can keep the property and continue to earn income from it (without taxes for about as long as we will live based on depreciation schedules) or, we can exchange it (1031 exchange) to extend that period or, I've heard of those that exchange then decide to reside in their former rental properties, essentially avoiding the tax on the depreciation recapture...until probate, as you say. I have to check out the last bit to see how it works.

I know there are basically two camps here on this subject. I chose the camp that pays >5% return with a very high degree of certainty.
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Old 07-02-2012, 01:07 PM   #76
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Now, you should check in from time to time and tell us how you're saving/investing all the $$$ that used to go for mortgage payments.
Original poster checking back in:

Its been almost three months since the dust settled on our mortgage payoff. Here are some details, as well as a few status updates from previous questions. As a reminder, we are a 42 y/o married couple, one grown child , no credit card debt, no car payments.

The Good:

1)Obviously, not having a mortgage payment feels pretty good! Most of my peers are amazed when I tell them we have paid our house off. They cant believe it can actually be done.
2) My "savings rate" is now much higher. We have been able to bank several thousand dollars very quickly. The "rainy day fund" is once again pretty healthy.
3) At the recommendation of someone here, I have an appointment tomorrow to review / shop around my homeowners insurance.

The Bad:

1) The simple act of "saving money" has kind of taken over my life. I have become almost too frugal. I have recently found myself pushing off a much needed vacation, probably because I don't want to "break my momentum" on my great streak of banking paychecks.
2) Because I was saving to pay off the mortgage, it has been months (years?) since I bought anything of value. I lately find myself drawn to old muscle cars. Like a sailor who has been at sea too long, I am afraid I am about to hit shore, and bust loose.
3) I hate my job. My high rate of savings could come to an end, if I make a change in employment someday.


All in all, life is pretty good right now. I wouldn't change a thing! I just need to learn to enjoy what we have accomplished, and find a nice balance.

Till next time...

The-Gar-Man
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Old 07-02-2012, 01:14 PM   #77
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Old 07-02-2012, 01:39 PM   #78
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Original poster checking back in:
The Bad:

1) The simple act of "saving money" has kind of taken over my life. I have become almost too frugal. I have recently found myself pushing off a much needed vacation, probably because I don't want to "break my momentum" on my great streak of banking paychecks.
2) Because I was saving to pay off the mortgage, it has been months (years?) since I bought anything of value. I lately find myself drawn to old muscle cars. Like a sailor who has been at sea too long, I am afraid I am about to hit shore, and bust loose.
3) I hate my job. My high rate of savings could come to an end, if I make a change in employment someday.


Till next time...

The-Gar-Man
That balance of which you speak...we all teeter on the line between saving very enthusiastically and putting off buying stuff that would actually make our lives better. I'll put into that second category both vacations and muscle cars!

I don't have a good answer to how to come down on the "right" side of saving too much or not saving enough, but the fact that you are asking the question means you are probably doing pretty well at the balancing act. And nothing quite like having a pile of money saved for making that job you hate seem not so bad, or finally, not worth keeping, even with banking the checks.

Congrats on the new mortgage-free life. And maybe the new car.
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Old 07-02-2012, 01:47 PM   #79
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Yes, we do need that balance in life. I always viewed vacation as a "necessary" expense - family bonding, emotional and physical recharging, and simply a reminder that money is not an end unto itself but a means to an end.
Sure, the type of vacation may vary according to your personal likes and budget, but I would urge you to take some sort of away-from-home vacation.
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Old 07-02-2012, 08:58 PM   #80
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Original poster checking back in:
1) The simple act of "saving money" has kind of taken over my life. I have become almost too frugal. I have recently found myself pushing off a much needed vacation, probably because I don't want to "break my momentum" on my great streak of banking paychecks.

All in all, life is pretty good right now. I wouldn't change a thing! I just need to learn to enjoy what we have accomplished, and find a nice balance.

Till next time...

The-Gar-Man
Gar-Man:

There are lots of folks who'd love to be able to say this. Good on ya!
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