None of us can tell you whether this move will pay off financially
I'm a contrarian. I don't care if it makes financial sense.
There's something calming about never having to be concerned/bothered/whathaveyou with a house payment ever.
None of us can tell you whether this move will pay off financially
I'm a contrarian. I don't care if it makes financial sense.
There's something calming about never having to be concerned/bothered/whathaveyou with a house payment ever.
Why not do something simple and make an additional principal payment each month (and make sure it's applied to the remaining principal). For a few hundred dollars a month additional, you can turn that 30 year mortgage into a near 15 year one and save ton in interest.
That's not really apples-apples, is it?
If those people lost their house when they lost their jobs, they likely were not in a position to be able to pay off the mortgage like the OP, right? Those people were likely living near paycheck-to-paycheck without much/any savings.
Like someone said earlier, $158,000 will make an $800 mortgage payment for lots of months. And the tax payment, and electric bill, and maintenance, and put food on the table, etc, etc. Where does that come from if you lose your job and have little savings?
Pay it off or not, but don't underestimate the value of the liquidity of a portfolio, and don't overestimate the 'freedom' from not having a mortgage, when all those other bills keep coming in.
-ERD50
I'm a contrarian also.....I will keep the banks cheap money thank you.I'm a contrarian. I don't care if it makes financial sense.
There's something calming about never having to be concerned/bothered/whathaveyou with a house payment ever.
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Wont argue your points. Having a war chest is helpful. having zero debt is equally helpful. personal opinion is that being debt free gives more flexibility than being in debt...again, personal opinion.
keep the lights on...feed the baby....gas in the car...insurance...etc. And if that nest egg runs out and you go into foreclosure, you lose the entire house.... including all the equity that you built up too. Also, in bankruptcy, your primary residence (paid off) is protected as I recall.
Compounding this issue was the fact that the asset itself was also depreciating right beneath their feet... Yes...likely a perfect storm but no one can deny that it happened just 5 short years ago....
I wonder where these people live who "can't lose the house" just because their mortgage is paid off. Are there that many places with no property taxes? My taxes are a significant portion of my total housing costs, and if I don't pay them I'll "lose the house" just as surely as if I don't make the mortgage payment.
But take a look at your own example. Now, if stocks drop to 50%, a balanced portfolio won't be down that far. Regardless, we agree there are still lots of other bills to pay. So if all that money is stuck in the house, how do you pay those other bills? Better to have half a portfolio available then almost none.
Going into bankruptcy is pretty extreme, but again, I'm not sure this is apples-apples either. With almost no funds, it would seem you would have to go into BK pretty quickly in order to preserve the primary residence. And I'm not following you when you say when the nest egg runs out you loose the house to foreclosure - wouldn't BK protect that as well? I guess I see your point that if your home is protected in BK, then all the equity in the home is protected (I think that's true, not 100% sure). But then BK has lots of repercussions, not sure that having to jump into that so quickly is a good thing long term either.
You are right, jobs get cut during downturns, so it certainly could happen together.
-ERD50
Now lets imagine the mortgage is paid off and the savings go from 300K to $130K
Once again GRII happens and the savings gets cut in 1/2 to $65K, and lay offs occur.
Now expense are reduced from $7K/month to $6200 but their $65k worth of saving only last 10 months.
+1I would not pay off the house. If you're earning $155k a year, then $800/month is a nit - put it on autopay and forget about it. I think in the long run you will earn more than the 4% mortgage interest that you are paying. You could probably even go out today and buy some muni bonds that pay more than the after-tax cost of mortgage interest (5 and 10 year investment grade munis are paying 3.3% and 4.7%, respectively).
Plus, the capital gains tax you would have to pay on stocks you sell to pay off the house doesn't make it worthwhile IMO.
Unless your job security is poor, you probably have too much cash, but you already know that. Your first step is to decide how much of an emergency fund you want to carry. I would target 12 months of spending.
Another decision is what is your target AA (excluding your emergency fund). When I was 32, it would have been 100% stocks, but you need to decide what is comfortable for you.
If you decide your AA is 100% stocks, then take any excess cash and invest 1/6 of it each month for the next 6 months or 1/12th of it for each of the next 12 months.
Then go play with that 4 month old.
Hi ( i am the OP),
If i don't pay off the house, what would you guys recommend i do with the cash ? As a reminder, i have 95K in cash - i need about 25K for 6-month emergency fund; So essentially what am i to do with 60K ( i am a really hesitant to apply that in the stock market, given it is at all time highs).
Hi ( i am the OP),
If i don't pay off the house, what would you guys recommend i do with the cash ? As a reminder, i have 95K in cash - i need about 25K for 6-month emergency fund; So essentially what am i to do with 60K ( i am a really hesitant to apply that in the stock market, given it is at all time highs).
This $60K is no different from any other savings/investments you have, so include it into the rest of your asset allocation plan. If you don't have such a plan,then this would be a great time to make one. There are lots of variables as to where the best place to put this money would be for you, given your circumstances. You have a long time horizon, so a large portion of this should probably be in stocks. They can spend a >lot< of time at or near their highs, trying to time the "get in" point is not feasible. Just know that when you invest your $60K you'll be buying XX number of shares in a lot of companies, and you'll still own exactly the same number of shares even if the market takes a drop. That is, you'll still own the same percentage of a large number of companies, and you'll still get dividends from many of them. Historically US stocks have nearly always done better than bonds, CDs, etc over a 20 year timeframe. And that type of long timeframe is what matters, not what happens next quarter or next year.Hi ( i am the OP),
If i don't pay off the house, what would you guys recommend i do with the cash ? As a reminder, i have 95K in cash - i need about 25K for 6-month emergency fund; So essentially what am i to do with 60K ( i am a really hesitant to apply that in the stock market, given it is at all time highs).
Or just spent $60K on a new pickup. Amazing how expensive those are these days. Then your decision is much simpler... pick a color. See problem solved just like the majority American consumer.
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