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Old 10-06-2008, 06:07 PM   #61
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SecondCor521, that is a good point. I think that if one is not already maxing out retirement savings such as 401K savings, it probably isn't yet time to pay off one's house.

At least that is my thinking. I suppose different situations are different. In my case I maxed out my TSP and paid off my house at the same time, but at the expense of any excess to put into taxable investments. Well, maybe some, but not as much as I would otherwise have accumulated.
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Old 10-06-2008, 06:21 PM   #62
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Originally Posted by SecondCor521 View Post
Sorry if I'm stomping on board etiquette by turning this into "yet another pay off the mortgage" thread, but the above reminded me of another reason I am not paying off my mortgage.

Right now I am paying my regular monthly mortgage payments and am also maxing out many of the typical things: 401(k), Roth IRA, 529, ESA. If I were to divert funding away from those savings vehicles in order to pay off my mortgage, then I could pay it off in about 5 years. But then I would probably be able to max out those savings vehicles again and still have extra cash left over which I would want to save, so I'd probably stick that in a taxable account.

I haven't run the simulations on which is better, but I currently don't like the thought of losing out on the next 5 years of contributions to those savings vehicles because I won't be able to make it up later.

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Old 10-06-2008, 06:42 PM   #63
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Well, I'm no fanatic, but I'm in Animorph's camp and I have the data to back it up.

http://www.early-retirement.org/foru...7&postcount=80

Short story-- 5.44% after-tax APY on a 5.375% mortgage after four years of payments.

Of course if you have the cash to pay off a mortgage the return of the stock market is not the comparison but the amount of shares the future cash flows a DCA from what will be the mortgage payment versus a lump sum investment plus dividends. $6,719.65 per year investments per 100K mortgage. A prolonged downturn below the original price will result in the mortgage being prepaid being better. A big bull market early that holds will make the lump sum a better investment. It is very easily possible that the DCA instead of mortgage payments will cause a need of much greater than the 5.375 rate of the mortgage. A five year bull market at the end could cause both to exceed nine percent...
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