Pay off mortgage? (yes this old question)

[rayvt]

Ditto on the recommendation to *not* make extra principal payments. You either have a mortgage or you don't. If you have a mortgage you are always at risk of being foreclosed. If that happens, the bank will not refund you the extra principal you gave.

Keep the money in a separate account until you have enough to pay the mortgage off completely.

Back when I was doing real-estate investing, I saw houses go into foreclosure with as little as $5000 principal balance.

 

[AreWeThereYet0]

@rayvt I don't think it's funny that they gave your mom a 30 year loan and she expects to not live long enough to pay it. If you are an heir that will become your problem. Were you not aware of that? I would not be too happy about that.

 

[pb4uski]

A couple of things: i
1) You are not earning 3% by paying off the mortgage, any more than you are earning 18% by paying off your credit card balance each month. What you are doing is eliminating an expense--which is not the same thing as making a return.....

3) We haven't seen much in this thread, but there are plenty of 65+ retired FIRE people who have or get a new 30 year 3.25%-3.5% FRM. The long-term average growth of a well-balanced investment portfolio is around 10.5%. Even half that is well above the rate you can lock in a mortgage for. Think long term. Just about everybody here plans on living longer than the mortality tables say.

FWIW, my Mom got a new 30 year mortgage at 70. She thought it funny that they would give her a loan that would last longer than her lifetime.

Ray, WADR, I disagree on the first part. Avoiding a cash outflow is as good as a cash inflow. Avoiding paying 3% is as good as earning 3% all else being equal.

In this case, the OP has cash earning ~1% that would be used to pay off the 3% mortgage... so he would be ahead of the game by 2%. In this case, he is using cash and effectively changing his overall AA, so the earnings rate on the cash that would be used is the relevant rate to consider.

On the last part, the borrower's age or health isn't a relevant factor, what is relevant is the amount of collateral and cash flow to service the loan.

https://www.early-retirement.org/fo...y-other-disadvantages-104389.html#post2447419

 

[sergio]

In some states, home equity is protected from creditors. This could be a good reason to pay of your mortgage ASAP, in the very rare event you get hit by some lawsuit or judgment. As far as I know, taxable accounts are totally up for grabs by creditors.

 

[pb4uski]

^^^ Not a good reason to pay off mortgage...but a good reason to carry umbrella insurance.

 

[Sunset]

In some states, home equity is protected from creditors. This could be a good reason to pay of your mortgage ASAP, in the very rare event you get hit by some lawsuit or judgment. As far as I know, taxable accounts are totally up for grabs by creditors.

I remember reading about a fellow in FL, had a huge judgement against him but the winner of the lawsuit complained they were unable to collect the full amount. The loser of the lawsuit had a $5 Million home in FL.

Definitely house poor

 

[AreWeThereYet0]

To update I haven’t done anything yet, however today I was gifted 25K by my father. So that puts me back to thinking about this again...

 

[thepalmersinking]

Sold my biz in 2007 and paid off $250K balance. Been sick about that decision ever since. A house is not an investment, it’s something you live in.

 

[freedomatlast]

Bought my first house with a mortgage 36 years ago and paid it off 30 years ago. That freed up a tremendous amount of cash flow each month to invest in the stock market. I also invested much more aggressively knowing I had a paid for house. Over the last 30 years, this strategy worked out very well and allowed me to retire at 59 1/2. I imagine there are other scenarios which could have worked as well or better, but this worked for me.

 

[TechLead]

Bought my first house (So far last) more than 2 decades ago. Payed it off almost 2 decades ago.

 

[TechLead]

^^^ Not a good reason to pay off mortgage...but a good reason to carry umbrella insurance.

If you have Net worth of 3 million (With no asset protection) and umbrella policy for 3 million that does not mean creditors cannot collect your 3 million. All they need is a judgment for 6 Million.

If you have a 10 million dollar house in FL. Creditors will not get hold of that asset.

BIG difference.

 

[pb4uski]

If you have Net worth of 3 million (With no asset protection) and umbrella policy for 3 million that does not mean creditors cannot collect your 3 million. All they need is a judgment for 6 Million.

If you have a 10 million dollar house in FL. Creditors will not get hold of that asset.

BIG difference.

Tell us something that we don't already know. It still does't make it aod reason to pay down a mortgage. Especially given that the chance of your getting in a situation like that with a judgement that exceeds your umbrella is somewhere between less than slim and none.

As a practical matter it is rare that a plaintiff would go for a judgement more than the umbrella unless you did something really stupid and egregious. My umbrella insurer has 2 million good reasons to provide the best possible defense, including appeals.

 

[TechLead]

Tell us something that we don't already know.

Have a plan. Don't sell after market drops 40%.

 

[bada bing]

Has anyone EVER heard anyone say they regretted paying off their mortgage?

I didn't pay off my mortgage - or rather, I choose to get one when I had the cash available to purchase outright. If I had not taken the mortgage, it would have been one of the largest financial misteps in my life. My anecdote:

In Nov. of 2009 I bought a "new", never occupied short sale in Tucson, AZ for $162K. It was/is a second home intended as a retirement home for my winters. I had the cash sitting idle at the time to pay cash. Instead, I elected to take a 2.95% 30 year mortgage and invest the cash in a portfolio of 60% SCHB (Schwab total US market) and 40% PIMIX (Pimco aggressive short term bond fund). I set up a separate account to hold the money and have made no deposits or withdrawals in the interim. The account balance went from $162K to $470K today. The house value is $359K on zillow today verse the original $162K purchase. I've paid about $40K in interest on the mortgage.

You can't buy the past, but it is far from certain that avoiding/paying off a mortgage is always wise.