thegarman
Dryer sheet wannabe
Thanks so much! I love your story. It is inspiring to hear stories of how others triumphed over the dreaded monthly payments. Hmmm, a mortgage burning party, now that sounds like something I need to do.
G
The Simple Life vs Mortgage Payoff
- Thread starter thegarman
- Start date
Thanks so much! I love your story. It is inspiring to hear stories of how others triumphed over the dreaded monthly payments. Hmmm, a mortgage burning party, now that sounds like something I need to do.
G
I can still remember the excitement that I felt every month watching the amount that we owed on our house going down. It seems like paying off the house was the last big goal that I had. I am so glad not to have a house payment or any debt.
Surewhitey
Thinks s/he gets paid by the post
Been 7 years since we crossed the line... Still remember that feeling and would do it no different today.
thegarman
Dryer sheet wannabe
Ok, Its DONE. 
A couple things happened last week, so I simply went and paid the mortgage off.
First, We were being so "frugal" lately that the money was actually adding up a little faster then we thought. Second, I had just decided to sell some items on ebay, and as that money was rolling in, it just all started to click.
A little quick math, and we figured we were close enough!
Now, I should tell you, Wells Fargo didn't make it easy. The only two methods of "final payment" they would take are :1) An overnighted cashiers check or: 2) a wire transfer to their office.
So once we made the phone calls, and verified all the amounts, I went to my local bank, and wired over the outstanding balance. (Wells Fargo supplied all the account and routing numbers).
The next day, I called to verify they received the funds (they had), and yesterday, we received our "congratulations" letter in the mail.
One nice thing they are doing, is assisting with information on my taxing escrow, as well as info for our insurance. (Both of which were escrowed, and we are now responsible for paying directly)
When the dust settled, we still have about $5000.00 in "emergency" funds left in the bank.
Yea, so its done. No more mortgage! Add to that that we still have no car payments or credit card debt, and I feel pretty good about setting up for a nice run at ER.
Finally, thanks for those who have followed this thread for the last 5-6 months. I hope you draw some inspiration from our journey.
I'll check back in from time to time.
Thanks again!
Gar
A couple things happened last week, so I simply went and paid the mortgage off.
First, We were being so "frugal" lately that the money was actually adding up a little faster then we thought. Second, I had just decided to sell some items on ebay, and as that money was rolling in, it just all started to click.
A little quick math, and we figured we were close enough!
Now, I should tell you, Wells Fargo didn't make it easy. The only two methods of "final payment" they would take are :1) An overnighted cashiers check or: 2) a wire transfer to their office.
So once we made the phone calls, and verified all the amounts, I went to my local bank, and wired over the outstanding balance. (Wells Fargo supplied all the account and routing numbers).
The next day, I called to verify they received the funds (they had), and yesterday, we received our "congratulations" letter in the mail.
One nice thing they are doing, is assisting with information on my taxing escrow, as well as info for our insurance. (Both of which were escrowed, and we are now responsible for paying directly)
When the dust settled, we still have about $5000.00 in "emergency" funds left in the bank.
Yea, so its done. No more mortgage! Add to that that we still have no car payments or credit card debt, and I feel pretty good about setting up for a nice run at ER.
Finally, thanks for those who have followed this thread for the last 5-6 months. I hope you draw some inspiration from our journey.
I'll check back in from time to time.
Thanks again!
Gar
Sarah in SC
Moderator Emeritus
Fantastic news, Gar! We know how awesome that feeling can be and I hope you'll have a (suitably frugal) mortgage burning party (with a copy, not the original). We had a blast with it, and I feel/hope we inspired some of our friends that it is possible to be mortgage-free.
Enjoy the feeling, next month and for a long time, of not having to send them a check!
Enjoy the feeling, next month and for a long time, of not having to send them a check!
thegarman
Dryer sheet wannabe
Oh, one more thing! Now that we are paying the insurance out of "our pocket" so to speak, our next move toward saving money is to shop our insurance around a bit. Possibly bundling it with our "auto" as well to save some money this summer.
Sarah in SC
Moderator Emeritus
I get mine quoted through a broker every other year, looking for savings. We've been on the pay it out of pocket plan for a long time, so it is always top of mind. A broker can sometimes find you a bundle plan for the auto and homeowners. And don't forget to raise those deductibles! And if you are young(er), get new quotes on the term life insurance every now and again.
harley
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Ok, Its DONE.
A couple things happened last week, so I simply went and paid the mortgage off.
First, We were being so "frugal" lately that the money was actually adding up a little faster then we thought. Second, I had just decided to sell some items on ebay, and as that money was rolling in, it just all started to click.
<snip>
When the dust settled, we still have about $5000.00 in "emergency" funds left in the bank.
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.
Huston55
Thinks s/he gets paid by the post
Congrats Gar! Well done!
Now, you should check in from time to time and tell us how you're saving/investing all the $$$ that used to go for mortgage payments.
Cheers.
Now, you should check in from time to time and tell us how you're saving/investing all the $$$ that used to go for mortgage payments.
Cheers.
obgyn65
Thinks s/he gets paid by the post
Congratulations, Garman.
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.
thegarman
Dryer sheet wannabe
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
Good news Gar - Congratulations.
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.
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.
Correct on the 1099 reporting. However, if you have a gain in your sales you'd need to self report it.
Danmar
Thinks s/he gets paid by the post
Congrats. I didn't pay our mortgage off until I retired. You are doing much better. Great work.
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.
scrabbler1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Nov 20, 2009
- Messages
- 6,699
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.
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.
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.
Huston55
Thinks s/he gets paid by the post
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.
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.
REWahoo
Give me a museum and I'll fill it. (Picasso) Give
You'll get over it...
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.
Huston55
Thinks s/he gets paid by the post
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.
