Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 02-09-2021, 06:05 PM   #61
Thinks s/he gets paid by the post
 
Join Date: Oct 2014
Posts: 1,219
Quote:
Originally Posted by troutnut1 View Post
That would be a painful and short conversation at my house:

“Honey, I mortgaged the house today to play the stock market.”
This would be a painful and short conversation at my house:

"Honey, I took 80% of our investable and paid off the mortgage." "But dear, didn't you just tell me our investments were up almost 20% in 2020?" "Yes honey. I did tell you that." "Then why in the h### did you give up an almost 20% to pay off a 2.75% loan?" "Because ER.org told me too."
__________________
-Big Dawg-FI since 9/2010. Failed ER in 2015. New target 202?.-

-"Blow that dough"-Robbie

" People say I'm lazy, dreaming my life away Well, they give me all kinds of advice designed to enlighten me When I tell them that I'm doing fine watching shadows on the wall "Don't you miss the big time, boy. You're no longer on the ball" -John Lennon-
Bigdawg 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 02-09-2021, 06:31 PM   #62
Recycles dryer sheets
 
Join Date: Jul 2020
Posts: 263
Quote:
Originally Posted by Exchme View Post
Well the mortgage can be thought of as a loan to let you buy stocks. That would be extremely risky as markets do not always go up, but it at least would be a logically consistent bet.
Depending on your situation that may be a good way to look at it. But say for arguments sake you are coasting along with mortgage payments staying right at or a little above the top of the 12% tax bracket and/or just under the AGI required for a 25K ACA subsidy? Are you going to take a 22%+ hit with an IRA withdrawal to pay off your mortgage, plus a one time 25K hit by forgoing your subsidy when you could continue to coast along paying taxes at the 12% for years to come? While this may be the extreme case, most of us are somewhere in the middle, so where is the cutoff point?
cat4ever is offline   Reply With Quote
Old 02-09-2021, 06:49 PM   #63
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 12,381
Quote:
Originally Posted by Exchme View Post
Well the mortgage can be thought of as a loan to let you buy stocks.
In more cases, it's a loan to let you hold stocks. That's mostly a psychological difference, but there is a tax difference as well.

Quote:
Originally Posted by troutnut1 View Post
That would be a painful and short conversation at my house:

“Honey, I mortgaged the house today to play the stock market.”
Most of us here don't "play" the stock market.
RunningBum is offline   Reply With Quote
Old 02-09-2021, 06:55 PM   #64
Recycles dryer sheets
troutnut1's Avatar
 
Join Date: May 2014
Location: Big Sky Country, Montana
Posts: 201
Quote:
Originally Posted by Bigdawg View Post
This would be a painful and short conversation at my house:

"Honey, I took 80% of our investable and paid off the mortgage." "But dear, didn't you just tell me our investments were up almost 20% in 2020?" "Yes honey. I did tell you that." "Then why in the h### did you give up an almost 20% to pay off a 2.75% loan?" "Because ER.org told me too."
That was my first wife. She was in the mortgage business. She mortgaged the rental property too. The she R U N N O F T like Mrs. Hoggwallop in the movie “Oh Brother” It was 1983. (True story)

I did better the second time.
troutnut1 is offline   Reply With Quote
Old 02-09-2021, 07:28 PM   #65
Recycles dryer sheets
 
Join Date: Feb 2014
Posts: 92
Quote:
Originally Posted by RunningBum View Post
In more cases, it's a loan to let you hold stocks. That's mostly a psychological difference, but there is a tax difference as well.
Bingo! There is no replacement for time. A mortgage allows you to pay off the house slowly AND buy/hold stocks. You need to start early saving for retirement.
thefist is offline   Reply With Quote
No visible mortgage
Old 02-09-2021, 07:50 PM   #66
Dryer sheet aficionado
 
Join Date: Feb 2020
Location: McMurray
Posts: 30
No visible mortgage

DW is retired, me (62 y.o.) still working. I like my job as an Occupational Therapist and I feel I’m giving value to my clients. We sold our last home built a townhome and took out a mortgage. Our mortgage rate is 2.6%. We have several investments that cover our mortgage and gives us interest income. Our financial firm cuts a check once a month to our bank account and the mortgage is automatically deducted. No stress for us and a win-win.
Jakob is offline   Reply With Quote
Old 02-09-2021, 08:02 PM   #67
Thinks s/he gets paid by the post
corn18's Avatar
 
Join Date: Aug 2015
Posts: 1,883
Paying off the mortgage appeals to me because I don't need any savings after SS kicks in @ 70. My COLA pension + SS covers all of our expenses. If I carry the mortgage to 84, that isn't the case. The mental aspect of needing no savings after is very appealing.
__________________
Consistently sets low goals and fails to achieve them.
corn18 is offline   Reply With Quote
Old 02-09-2021, 08:11 PM   #68
Dryer sheet aficionado
 
Join Date: Feb 2020
Location: McMurray
Posts: 30
Do what makes you happy, it is your choice. I grew up in a modest home. The fact that I can pay my mortgage off and continue to make money on my investments makes me happy. These are our glory days, enjoy them to your fullest. Wishing you the best, Bruce
Jakob is offline   Reply With Quote
Old 02-10-2021, 06:04 AM   #69
Recycles dryer sheets
 
Join Date: Dec 2018
Location: Waterloo
Posts: 53
Quote:
Originally Posted by Markola View Post
Maybe isolate enough dough to pay off the mortgage in a separate account then, like bada bing, invest it at 60/40 or whatever the rest of your portfolio’s AA is. Have the payments withdrawn from that separate account. Pretend it’s not there and don’t look at it for ten years or more. Your future self might then start to actually enjoy seeing your separate account balance eventually outpacing the mortgage balance.
Excellent idea! You'll have a lot more "utility" with a ready supply of money, available any time you need it, rather than having your money stuck in a house. You'd have to mortgage it again to get the money out of that thing (the house), or perhaps you'd even be forced to sell it. You're making a decision to put your money to work in a more efficient way, by having it in the market.
Skitso999 is offline   Reply With Quote
Was never about the rate
Old 02-10-2021, 06:28 AM   #70
Recycles dryer sheets
 
Join Date: Nov 2010
Location: Crossville
Posts: 281
Was never about the rate

Or anything else from a financial standpoint. We have owned three primary homes in our lives. The first we were in only about eight years and since we were young and starting out it wasn't paid off completely by the time we moved. The second was a nice upgrade in all areas and I paid it off after going from a 30 year mortgage to a 20 to a 15 (money was easy back then, and the lenders did the 20 and 15 with no fees). I paid off the 15 year early. Our third and current home was a big upgrade for us but since I was doing well we paid it off after only six months.

It was never about the financial aspect of whether a mortgage was worth it or not. It was strictly peace of mind knowing that the roof over our heads was totally paid for. Now taxes are a subject for another post.
ychuck46 is offline   Reply With Quote
Old 02-10-2021, 07:13 AM   #71
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Location: Crownsville
Posts: 3,004
I think it's just human nature to hate your mortgage. Every once in awhile, I get the urge to pay it down more quickly, just for the peace of mind. I hate thinking about it, every time it comes around. All ~$2460 of it.

I keep thinking about how nice it would be to get rid of that payment, as it's a pretty big chunk. I think the human brain is just wired to look at small numbers differently from big ones, though. On one hand, it feels like a big number, but then when I compare it to my total net worth, suddenly it seems inconsequential.

Then, there's the fact that that number will never, 100%, go away completely, because it includes taxes and insurance. If I was mortgage free though, I'd pay the taxes and insurance once per year, and then forget about it. But, would still average out to around $520/mo, so the principal/interest part of the mortgage is around $1940.

Just this morning, I was thinking about if I hit a certain threshold, maybe I'd pay down 1/4 of the mortgage, just to get a jump start. But, I'd take an income tax hit if I did that. And that money wouldn't be working for me anymore, earning interest, dividends, appreciation, etc. And then, even if my mortgage was only 3/4 the original size, the monthly payment is going to be the same, unless I refinance.

Then, there's the effects of inflation. While I don't like that $1940/mo principal/interest payment, it will stay the same for the next 29 1/2 years (I bought the house about 2 1/2 years ago, but refinanced last year). Nobody can predict what inflation will do in the future, but if the past is any indication, it took roughly 30 years for prices to double. And around 20 years for prices to rise 50%. So if we take the same route, in 20 years, it should be somewhat like having a ~$1300/mo mortgage in today's dollars. And by the time I make the last payment, it should hurt about as much as a ~$960/mo payment would, now.

So, in my case at least, I think the best thing to do is nothing at all. The peace of mind of a paid off house would be nice, but I've had mortgages and/or HELOCs in my life since 1994 now. I was mortgage-free for about 7 months in 2018. I had paid off my old house at the beginning of the year, and bought a new place in September. I guess the biggest factor in paying off a mortgage, is how important is that free-and-clear peace of mind worth to you?
Andre1969 is offline   Reply With Quote
Old 02-10-2021, 07:17 AM   #72
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 32,247
Quote:
Originally Posted by corn18 View Post
We paid off our house in TX in 2019. Then we moved to OH in 2020. We could have paid cash for the OH house, but decided to take a 2.75% 30 yr fixed rate mortgage on the new house. We put the cash from the TX house into the market in May 2020. That turned out to be a great move. Made $56,000 net of mortgage interest. Yeah us!

But now, as we are 57 days and a wake up from retirement, I have come to hate this mortgage. All the models say keep it. And now that the invested cash from the TX house has giant short term cap gains, it isn't as simple as just paying it off. I'll have this boat anchor until age 84.

No real action, just a rant.
I didn't read all the responses... just responding to the OP. If you change your AA along with paying off your mortgage then it makes more sense. Paying off your mortgage is then like buying a 2.75% long-term bond. But you're right... if you pay off your mortgage and keep your current AA then paying off you mortgage doesn't make sense because in the long run a 60/40 portfolio is likely to earn more than 2.75%..

So for example, let's say you have $1m that is 60/40 and a $200k mortgage. So your portfolio would be $600k stock and $400k bonds. If you pay off the mortgage and then rebalance to 75/25 then paying of the mortgage makes more sense than if you payoff and stay at 60/40.

For a few years prior to 2019, my AA was 60/35/5. The 5 in cash had declined to earning 1.7% and my mortgage was costing me 3.375%. Since I had my mortgage payment son autopay, I was indifferent to having a mortgage or not. I decided to use the 5 in cash to pay off the mortgage and revised my AA target to 65/35 ((60/95)/(35/95)/0 but rounded to the nearest 5%). I think it was a good decision.
__________________
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
pb4uski is offline   Reply With Quote
Old 02-10-2021, 09:56 AM   #73
Confused about dryer sheets
 
Join Date: Apr 2019
Location: NY Metro
Posts: 5
Quote:
Originally Posted by Andre1969 View Post
I think it's just human nature to hate your mortgage. Every once in awhile, I get the urge to pay it down more quickly, just for the peace of mind. I hate thinking about it, every time it comes around. All ~$2460 of it.

I keep thinking about how nice it would be to get rid of that payment, as it's a pretty big chunk. I think the human brain is just wired to look at small numbers differently from big ones, though. On one hand, it feels like a big number, but then when I compare it to my total net worth, suddenly it seems inconsequential.

Then, there's the fact that that number will never, 100%, go away completely, because it includes taxes and insurance. If I was mortgage free though, I'd pay the taxes and insurance once per year, and then forget about it. But, would still average out to around $520/mo, so the principal/interest part of the mortgage is around $1940.

Just this morning, I was thinking about if I hit a certain threshold, maybe I'd pay down 1/4 of the mortgage, just to get a jump start. But, I'd take an income tax hit if I did that. And that money wouldn't be working for me anymore, earning interest, dividends, appreciation, etc. And then, even if my mortgage was only 3/4 the original size, the monthly payment is going to be the same, unless I refinance.

Then, there's the effects of inflation. While I don't like that $1940/mo principal/interest payment, it will stay the same for the next 29 1/2 years (I bought the house about 2 1/2 years ago, but refinanced last year). Nobody can predict what inflation will do in the future, but if the past is any indication, it took roughly 30 years for prices to double. And around 20 years for prices to rise 50%. So if we take the same route, in 20 years, it should be somewhat like having a ~$1300/mo mortgage in today's dollars. And by the time I make the last payment, it should hurt about as much as a ~$960/mo payment would, now.

So, in my case at least, I think the best thing to do is nothing at all. The peace of mind of a paid off house would be nice, but I've had mortgages and/or HELOCs in my life since 1994 now. I was mortgage-free for about 7 months in 2018. I had paid off my old house at the beginning of the year, and bought a new place in September. I guess the biggest factor in paying off a mortgage, is how important is that free-and-clear peace of mind worth to you?

This is a great way to think about the long-term payments of a mortgage, re: inflation.



I personally paid off my home a couple years ago, and I am in my 30's. It was a great feeling, and still is, but I can't ignore the stats of the market since then. In hindsight, particularly for someone a few decades off of retirement (most likely), it seems to be wiser to invest vs pay off the mortgage over the long term. Tax deductions, etc. also factor.



I'm planning to move to (another) HCOL/VHCOL location in the next 2 years, and will be in the mortgage "game" again, but not planning to pay it down quickly. Perhaps make a few early-payments to lessen the monthly amount. Overall, the house is generally considered an "unproductive" asset, so the incentive is to put money into something like stocks/bonds.


All that said, it truly is whatever makes you sleep well. Feeling free of a mortgage is something many people strive for, but don't achieve at a relatively younger age. I don't believe it makes sense from a numbers perspective, but it is so liberating.
slagle is offline   Reply With Quote
Old 02-10-2021, 10:16 AM   #74
Thinks s/he gets paid by the post
Al in Ohio's Avatar
 
Join Date: Jun 2013
Location: Columbus
Posts: 1,103
At the time you made the decision to get the mortgage, why on earth didn’t you get an even lower rate 15 year mortgage since you certainly could afford the higher monthly payments?
__________________
Ohio REFI PE ENG and Investor as of 2016
Al in Ohio is offline   Reply With Quote
Old 02-10-2021, 10:19 AM   #75
Thinks s/he gets paid by the post
corn18's Avatar
 
Join Date: Aug 2015
Posts: 1,883
Quote:
Originally Posted by Al in Ohio View Post
At the time you made the decision to get the mortgage, why on earth didn’t you get an even lower rate 15 year mortgage since you certainly could afford the higher monthly payments?
Not really sure. I figured if I was going to leverage, I was going all in. ENTJ type of thing to do, I guess.
__________________
Consistently sets low goals and fails to achieve them.
corn18 is offline   Reply With Quote
Old 02-10-2021, 11:07 AM   #76
Thinks s/he gets paid by the post
 
Join Date: Jun 2017
Location: Western NC
Posts: 3,640
Quote:
Originally Posted by Bigdawg View Post
This would be a painful and short conversation at my house:

"Honey, I took 80% of our investable and paid off the mortgage." "But dear, didn't you just tell me our investments were up almost 20% in 2020?" "Yes honey. I did tell you that." "Then why in the h### did you give up an almost 20% to pay off a 2.75% loan?" "Because ER.org told me too."
Maybe it's easier for those of with cheap housing...when I appealed based on 2008-2009 comps I got the tax value of our place down to ~$150k.

Would probably be more tempted to pull money out had I bought in a HCOL area like an old college roommate of mine who has seen their home's value go from $300k to $1500k.
ncbill is offline   Reply With Quote
Old 02-10-2021, 11:47 AM   #77
Full time employment: Posting here.
RetiredAt55.5's Avatar
 
Join Date: May 2017
Location: Philly Suburbs
Posts: 674
Quote:
Originally Posted by Al in Ohio View Post
At the time you made the decision to get the mortgage, why on earth didn’t you get an even lower rate 15 year mortgage since you certainly could afford the higher monthly payments?
Though that question wasn't directed to me, I'll answer it.

In 2011, I opted for a 30 year 3.99% mortgage over a 15 year 3.25% mortgage.

Why? Because everyone kept saying interest rates were bound to go up, and I figured I'd look like a genius once that happened - I'd be making more keeping the money in CD's than the interest payments. Plus, at the time I could still itemize and deduct the interest (before the tax code changes).

Didn't quite pan out that way.
RetiredAt55.5 is offline   Reply With Quote
Old 02-10-2021, 11:52 AM   #78
Thinks s/he gets paid by the post
corn18's Avatar
 
Join Date: Aug 2015
Posts: 1,883
Quote:
Originally Posted by RetiredAt55.5 View Post
Though that question wasn't directed to me, I'll answer it.

In 2011, I opted for a 30 year 3.99% mortgage over a 15 year 3.25% mortgage.

Why? Because everyone kept saying interest rates were bound to go up, and I figured I'd look like a genius once that happened - I'd be making more keeping the money in CD's than the interest payments. Plus, at the time I could still itemize and deduct the interest (before the tax code changes).

Didn't quite pan out that way.
A $500k mortgage @ 3.99% over the first 10 years would cost you $170k in interest paid (not including any tax breaks).

$500k invested in a 60/40 portfolio in 2011 would have made $451k.

How did that not pan out?
__________________
Consistently sets low goals and fails to achieve them.
corn18 is offline   Reply With Quote
Old 02-10-2021, 12:16 PM   #79
Full time employment: Posting here.
Retch The Grate's Avatar
 
Join Date: Jul 2010
Location: San Francisco
Posts: 792
I just got a mortgage in December, was hoping to borrow the max we could (after a 20% downpayment) but DW's job/visa issues meant the jumbo lender wouldn't give us one and we had to switch to conforming. I mourn the extra $700k of equity that I have in the house instead of the markets. :P

Having said that, I'm not sure that after DW has been back at Google for at least a year that I'll refi to a max size loan to pull money out and invest in the stock market... Maybe if we can get an even better rate than our 2.56%.

Just remind yourself that the mortgage is well below your expected return on your investments that you literally plan for for FIRE purposes, so every dollar is slowly giving you more and more investment returns over time.
Retch The Grate is offline   Reply With Quote
Old 02-10-2021, 12:20 PM   #80
Full time employment: Posting here.
RetiredAt55.5's Avatar
 
Join Date: May 2017
Location: Philly Suburbs
Posts: 674
Quote:
Originally Posted by corn18 View Post
A $500k mortgage @ 3.99% over the first 10 years would cost you $170k in interest paid (not including any tax breaks).

$500k invested in a 60/40 portfolio in 2011 would have made $451k.

How did that not pan out?
That's a good question!

And I don't have a good answer. You point is well taken, and I have no way of knowing.

I didn't carve out the difference between the 2 interest rates, and put the difference in a 60/40 portfolio. Rather, my money is fungible, so I don't slice it and dice it that fine.

I did build up a fair amount of money in safer CD's/MM's and that has served me well, since I retired, for keeping my income within the ACA subsidy limits.
RetiredAt55.5 is offline   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
5 reasons men shouldn't blow off going to the doctor easysurfer Health and Early Retirement 43 04-29-2011 10:09 AM
What would you do - pay off student loan or pay down mortgage? bank5 FIRE and Money 27 07-27-2009 05:30 PM

» Quick Links

 
All times are GMT -6. The time now is 02:43 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2022, vBulletin Solutions, Inc.