Just paid off the mortgage. Putting the pay off the mortgage question to rest.

[O2Bfree]

My DSO and I bought about half the house we could have afforded. We're frugal, but we also enjoy simplicity. We paid it off in 2006. Neither of us like being in debt, and also job security ain't what it used to be with all the buyouts and outsourcing these days. It was comforting to know that if one of us got laid off, the other could easily handle the bills with neither of us having to dip into our savings.

[eta2020]

Quote:

Originally Posted by O2Bfree My DSO and I bought about half the house we could have afforded. We're frugal, but we also enjoy simplicity. We paid it off in 2006. Neither of us like being in debt, and also job security ain't what it used to be with all the buyouts and outsourcing these days. It was comforting to know that if one of us got laid off, the other could easily handle the bills with neither of us having to dip into our savings.

That is exactly what we did with same line of thinking.

We also selected buying cheapest house in very expensive suburb. I am redneck of the neighborhood ..... though by now we could buy upper 10% house in the town.

If you want to RE don't overspend on house. But in my opinion do not save money on location. Go for best because quality of your life will be more influenced by location then size of house.

[ERD50]

Quote:

Originally Posted by O2Bfree My DSO and I bought about half the house we could have afforded. We're frugal, but we also enjoy simplicity. We paid it off in 2006. Neither of us like being in debt, and also job security ain't what it used to be with all the buyouts and outsourcing these days. It was comforting to know that if one of us got laid off, the other could easily handle the bills with neither of us having to dip into our savings.

That's all well and good, but I get I find it curious that people ignore the fact that they had to 'dig into savings' BIG TIME to pre-pay the mortgage! That doesn't count?

If you think about it, having that stash in an account would probably do more to help you out during a break in employment than the reduced monthly cash flow from no mortgage payments. You could make many, many mortgage payments from your 'stash'. Or buy food, repair the roof, replace the furnace, pay the property taxes, etc - all hard to do if it is tied up in the house.

edit/add: I agree that LBYM on the house itself sure does help in all cases.

-ERD50

[eta2020]

Quote:

Originally Posted by ERD50 That's all well and good, but I get I find it curious that people ignore the fact that they had to 'dig into savings' BIG TIME to pre-pay the mortgage! That doesn't count? If you think about it, having that stash in an account would probably do more to help you out during a break in employment than the reduced monthly cash flow from no mortgage payments. You could make many, many mortgage payments from your 'stash'. Or buy food, repair the roof, replace the furnace, pay the property taxes, etc - all hard to do if it is tied up in the house. edit/add: I agree that LBYM on the house itself sure does help in all cases. -ERD50

ERD if you timed it right and injected that cash into equities in 2008-2009 then you certainly would be many times better off ....

[ERD50]

Quote:

Originally Posted by eta2020 ERD if you timed it right and injected that cash into equities in 2008-2009 then you certainly would be many times better off ....

But I'm not thinking short term or 'timing it right'.

The OP was talking short term (two years?), and he had reasons why the 'stash' would sit in cash (already at/near 100% equities). So I agreed that a pay-off made sense in that scenario.

But if you get a low rate mortgage, and are talking 20-30 years for that 'stash' to stay invested, the odds are very good that you will come out ahead with the investment.

If even those odds are not comfortable for you, then don't do it. But accept it for what it is, don't 'oversell' it.

-ERD50

[eta2020]

Quote:

Originally Posted by ERD50 But I'm not thinking short term or 'timing it right'. The OP was talking short term (two years?), and he had reasons why the 'stash' would sit in cash (already at/near 100% equities). So I agreed that a pay-off made sense in that scenario. But if you get a low rate mortgage, and are talking 20-30 years for that 'stash' to stay invested, the odds are very good that you will come out ahead with the investment. If even those odds are not comfortable for you, then don't do it. But accept it for what it is, don't 'oversell' it. -ERD50

You are right.

Problem is that you kinda don't get those ultra great mortgage APIs when you are 28.

Then when you are pretty well off and 300k mortgage is insignificant in your late 40s or 50s you will get it but it is peanuts at that point so you do not care.

Maybe you got to that point because you payed of mortgage when you were young and rate was not that enticing.

What I am trying to say those great and superb rates are available to people who do NOT need them and not to average person. Once you do not need them.... they will not make difference to your NW. At that point it is just peanuts.

But if you can get lowest 2% mortgage for 30 years at the age of 25....load up on it my friend

[Gumby]

Quote:

Originally Posted by ERD50 If you think about it, having that stash in an account would probably do more to help you out during a break in employment than the reduced monthly cash flow from no mortgage payments. You could make many, many mortgage payments from your 'stash'. Or buy food, repair the roof, replace the furnace, pay the property taxes, etc - all hard to do if it is tied up in the house.

This is a very, very good point. In a bad financial situation, liquidity is golden.

[NW-Bound]

Quote:

Originally Posted by eta2020 ... What I am trying to say those great and superb rates are available to people who do NOT need them and not to average person. Once you do not need them.... they will not make difference to your NW. At that point it is just peanuts...

Yes, but we have on this forum many LBYM millionaires who still like to count peanuts. Old habits die hard.

And then, there are people who are still emotional about being debt free, although total NW is what it is really about.

So, people can do whatever that makes them happy. Beer, wine, or distilled spirits? I like all 3, and alternate them.

[eta2020]

Quote:

Originally Posted by NW-Bound Yes, but we have on this forum many LBYM millionaires who still like to count peanuts. Old habits die hard. And then, there are people who are still emotional about being debt free, although total NW is what it is really about. So, people can do whatever that makes them happy. Beer, wine, or distilled spirits? I like all 3, and alternate them.

Well if you are LBYM millionaire in your 50s....then I must agree with ERD. Yes you 99% could earn money by taking 30 year mortgage at superb rate and investing it in equities.

You still have to time this right Window was big though....

But you may better of spending your energy looking for nice bottle of wine at this point

[NW-Bound]

Quote:

Originally Posted by eta2020 ... you may better of spending your energy looking for nice bottle of wine at this point

I don't even do that. My palate is getting shot. I started to substitute cheaper brandies for the beloved Cognacs, and my taste buds did not complain. I am getting easier to please, and less and less picky all the time.

It doesn't matter any more, as long as I can be self-propelled and still breathing, and even make that 2000-ft climb hike. Everything else is secondary.

[daylatedollarshort]

Quote:

Originally Posted by Gumby This is a very, very good point. In a bad financial situation, liquidity is golden.

For some households, a bit extra in after tax accounts may keep the AGI low, resulting in a five figure ACA tax credit and plus possibly financial aid for those with kids in college.

Fixed 30 year mortgages at low rates may also serve as a bit of an inflation hedge, especially for those of us with non-COLA pensions to use as offsets.

[ERD50]

Quote:

Originally Posted by eta2020 ... Then when you are pretty well off and 300k mortgage is insignificant in your late 40s or 50s you will get it but it is peanuts at that point so you do not care. ... Once you do not need them.... they will not make difference to your NW. At that point it is just peanuts. ...

Well, as others said, it can still be a difference, so why not go for it?

I agree that the difference will likely be small, but a buck is a buck, and I won't say 'insignificant, 'do not care' or 'no difference'.


But that's my point towards all these (silly IMO) dancing, excited, 'no feeling like it', congratulations, posts whenever anyone mentions paying off the mortgage. The difference with a pay-off is likely to be a small difference, and if you have a low rate locked in and a long time frame, the pay-off is very likely to be negative. So why celebrate?

Quote:

But if you can get lowest 2% mortgage for 30 years at the age of 25....load up on it my friend

Yes - yet there are many on this forum who say 'no debt, no way'.

Quote:

Originally Posted by eta2020 But you may better of spending your energy looking for nice bottle of wine at this point

I'll drink to that!

-ERD50

[rayvt]

Quote:

Originally Posted by eta2020 Problem is that you kinda don't get those ultra great mortgage APIs when you are 28. What I am trying to say those great and superb rates are available to people who do NOT need them and not to average person.

Huh??
aimloan{dot}com is currently quoting 3.875% (0 points, 3.925% APR) for a conforming 30-yr fixed loan. Available to all ages of people, 21 to 99.

Quote:

Originally Posted by eta2020 One should be able to pay off house in 3-4 years IMO after putting 20% down. (while maxing out 401k)

Again, huh??
Who are these people who can pay 20%-25% of their house every year, out of their current income? I suppose one should be able to run a 4-mnute mile, too? There's probably many more people in the second category than the first.

Or did I get punk'd?

[eta2020]

Quote:

Originally Posted by rayvt huh?? Who are these people who can pay 20%-25% of their house every year, out of their current income? I suppose one should be able to run a 4-mnute mile, too? There's probably many more people in the second category than the first. Or did I get punk'd?

Inexpensive house in expensive neighborhood of Boston area will be 500k. Two professionals in this area should easily make 250k by the time they are 30. I don't see how it could be difficult to pay off 400k mortgage in 4 years....(On that kind salary I would save 100k plus max out 401k)

Modest house in Colorado Springs will be 300k where such couple makes about 160k. Again I don't see difficulty in paying off 240k mortgage in 4 years.

It probably is not possible in Palo Alto CA

But those kind of couples will usually buy McMansions for 1.2 Million or so and more less never pay it off. Which is perfectly fine if one wants to work into their 60s.

I see and interact with that type of people/couples daily..... It is nothing out of ordinary. Now I know nobody who can run mile in 4 minutes

[dallas27]

Quote:

Originally Posted by eta2020 Inexpensive house in expensive neighborhood of Boston area will be 500k. Two professionals in this area should easily make 250k by the time they are 30. I don't see how it could be difficult to pay off 400k mortgage in 4 years....(On that kind salary I would save 100k plus max out 401k) Modest house in Colorado Springs will be 300k where such couple makes about 160k. Again I don't see difficulty in paying off 240k mortgage in 4 years. It probably is not possible in Palo Alto CA But those kind of couples will usually buy McMansions for 1.2 Million or so and more less never pay it off. Which is perfectly fine if one wants to work into their 60s. I see and interact with that type of people/couples daily..... It is nothing out of ordinary. Now I know nobody who can run mile in 4 minutes

Wow, really cant agree with this veiwpont.


Sent from my iPhone using Early Retirement Forum

[eta2020]

Quote:

Originally Posted by dallas27 Wow, really cant agree with this veiwpont. Sent from my iPhone using Early Retirement Forum

With which part?

[dallas27]

Quote:

Originally Posted by eta2020 With which part?

The numbers and assumptions you are making. In your 20's you have to pay down student debt, earn the masters, buy first car, furnish first home, possible childbirth, adjust to being adult, make a number of mistakes, not to mention switch jobs a few times to find what you love or are good at.


Sent from my iPhone using Early Retirement Forum

[eta2020]

Quote:

Originally Posted by dallas27 The numbers and assumptions you are making. In your 20's you have to pay down student debt, earn the masters, buy first car, furnish first home, possible childbirth, adjust to being adult, make a number of mistakes, not to mention switch jobs a few times to find what you love or are good at. Sent from my iPhone using Early Retirement Forum

I said buying house at 30.

You should not have any student loan. You should not have any car loan. I came to this country alone without parents at 18 and by 26 I had Masters in Computer science and job paying around 80-90k in todays money in cheap Texas and I had no loans.

But I agree I am talking about upper 15% of people. This may be "bad" of me. I suspect those are great candidates for FIRE because they certainly can do it if they do right things.

If you are young and want to FIRE my first advice would be get great education first so you can belong into upper 15% on a income scale. If instead you are paying of student loans and figuring out what you love to do you are already missing train.

[O2Bfree]

Quote:

Originally Posted by ERD50 That's all well and good, but I get I find it curious that people ignore the fact that they had to 'dig into savings' BIG TIME to pre-pay the mortgage! That doesn't count? If you think about it, having that stash in an account would probably do more to help you out during a break in employment than the reduced monthly cash flow from no mortgage payments. You could make many, many mortgage payments from your 'stash'. Or buy food, repair the roof, replace the furnace, pay the property taxes, etc - all hard to do if it is tied up in the house. edit/add: I agree that LBYM on the house itself sure does help in all cases. -ERD50

We didn't dig into savings to pay off the mortgage early. We've each always had enough stashed in savings to last at least a year and cover most emergencies, whether we had a mortgage or not.

[ERD50]

Quote:

Originally Posted by O2Bfree We didn't dig into savings to pay off the mortgage early. We've each always had enough stashed in savings to last at least a year and cover most emergencies, whether we had a mortgage or not.

I'm not sure what you are saying then (BTW, I see I did misquote you, if it makes a difference - should be 'dip' into savings, not 'dig').

You said "It was comforting to know that if one of us got laid off, the other could easily handle the bills with neither of us having to dip into our savings."

So if you didn't need to 'dip' into savings to pay off the mortgage, where did the money come from then? OK, I'm guessing there is some semantics going on here - you paid extra each month from your income stream? Well, that would have gone to savings if you hadn't. And that savings could tide you over a lapse in employment.

And until it is all paid off, you still have the monthly bill.

Like I've said many, many times before - it's such a minor thing either way, but this rationalization to make it seem important just gets me.

-ERD50