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Old 10-12-2017, 03:44 PM   #141
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Originally Posted by ERD50 View Post
And I'm pretty sure that if someone insisted that they would not do anything with the money other than keep it in 2% CDs (even after being shown that a 30-40% stock allocation has proven safer in the past), then the collective feedback would be to prepay the mortgage, if it left them with adequate liquidity. There is no sense in paying 4% on a mortgage if you would keep the payoff money in a 2% account, unless you need the liquidity.

Numbers tell the story. What someone decides to do after seeing those numbers is up to them. But if someone is misusing or misapplying or misunderstanding the numbers, helpful people here will try to explain.

-ERD50
Numbers do tell some of the story, but we operate emotionally and are driven by irrationality. We now have another Nobel Prize winner in Economics with a significant body of his word devoted to financial misbehaving. I have a refinanced 2.75%, 15 year mortgage (with 14 years remaining) with just about enough money sitting in 1 percent CD accounts to pay off the mortgage. I really like, not need, the liquidity, so I'm not paying anything off, right now. In a few years, I might decide otherwise. I'm not making the most optimum financial decision, but it feels right to me. Part of my reasoning is that we're very financially comfortable in not doing anything, for now.
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Old 10-12-2017, 03:45 PM   #142
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Originally Posted by pb4uski View Post
you can't eat a home and you can't get a HELOC when you are unemployed.
Um, possibly not now (I have no idea), but I certainly did just that back in the early 2000's.

I recall a very specific discussion with HELOC the loan guy. "You mean I can write the minimum payment each month using these checks you just handed me?" Yes, you can.

That's when I realized that he had just handed me a loaded gun.

We never had to tap into that HELOC, but he got it for use if we needed it.
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Old 10-12-2017, 04:20 PM   #143
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Below is a good article outlining discussing the advantages of paying off the mortgage vis-a-vis the sequence of returns problem. The summary is that a paid off mortgage can mitigate the effects of a severe drop in the market early in your retirement. For example , you plan to withdraw 5k a month and have a 1k mortgage. If the market tanks and you find it prudent to reduce your withdrawals to 4k a month, your disposable non mortgage spending will actually drop 25% from 4k to 3k.
For the record, I still plan to keep my 29yr 3.5% mortgage but this article makes some good points that our worth considering.
https://earlyretirementnow.com/2017/...in-retirement/
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Old 10-12-2017, 05:02 PM   #144
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Originally Posted by ChrisC View Post
Numbers do tell some of the story, but we operate emotionally and are driven by irrationality. We now have another Nobel Prize winner in Economics with a significant body of his word devoted to financial misbehaving. I have a refinanced 2.75%, 15 year mortgage (with 14 years remaining) with just about enough money sitting in 1 percent CD accounts to pay off the mortgage. I really like, not need, the liquidity, so I'm not paying anything off, right now. In a few years, I might decide otherwise. I'm not making the most optimum financial decision, but it feels right to me. Part of my reasoning is that we're very financially comfortable in not doing anything, for now.
And again, I don't ignore the emotional aspect of this. As I always say, people will do what they decide, either following what the numbers say or not.

But what I try to keep getting across is, emotions don't affect the numbers. Emotions may affect the decision.

-ERD50
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Home Equity Loan
Old 10-12-2017, 06:27 PM   #145
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Home Equity Loan

I confess I haven't followed the complete thread. I would be leary to take out a large amount of pre-tax monies to pay off a mortgage, given the current low rates--but I confess we paid off our mortgage in Houston about 5-6 years ago because we were sitting on taxable cash that was earning .1% or whatever it was.

To get to the point, it looks like DW will be calling it quits next year, so I'm wondering about the advisability of a Home Equity Loan before that occurs--just for the hell of it. We paid off the Reno home about 12 months after we moved here (DW was tired of writing small mortgage checks and we had a lot of cash), but I could see the convenience of being able to tap equity, although I doubt we would need to.

1) Anyone know what a decent rate would be? (I'm aware that the rate is variable).
2) Upfront costs?

This is more an emergency bucket that I don't foresee is likely we would use, but you never know. I will keep working part-time for another two years, but I suspect it would be better to apply now before DW hangs it up.

Responses appreciated.
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Old 10-12-2017, 08:14 PM   #146
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I will pay off the mortgage ASAP!!!!!! Not having any type of debt is the best feeling and you will be able to sleep better at night!!!
Debt is just a tool, not something to get emotional about.

You want to know what gives you the ability to sleep well at night? An investment portfolio that is several times your mortgage balance.

If you have a $200,000 mortgage and a $1,500,000 stock/bond portfolio, you can sleep like a baby. Security is knowing that you can make a phone call to your broker in the morning and have the mortgage paid off via wire transfer before dinnertime.
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Old 10-13-2017, 05:42 AM   #147
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Debt is just a tool, not something to get emotional about.

You want to know what gives you the ability to sleep well at night? An investment portfolio that is several times your mortgage balance.

If you have a $200,000 mortgage and a $1,500,000 stock/bond portfolio, you can sleep like a baby. Security is knowing that you can make a phone call to your broker in the morning and have the mortgage paid off via wire transfer before dinnertime.
I agree. Just as I posted in #69 of this thread, debt is a tool that is used by some real estate investors. Every 5 years, refinance a property to extract appreciation, and five years of principal tax free. Spend or use as a down payment for next property. Rinse and repeat.
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