Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Paying off the mortgage early grows in popularity
Old 02-15-2012, 03:42 PM   #1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,004
Paying off the mortgage early grows in popularity

OK, maybe 'paying down the mortgage' is more accurate...

Quote:
Americans are paying down their mortgages. According to Freddie Mac, a record 50% of all refinancings in the fourth quarter of 2010 resulted in smaller loans than the previous mortgage. These are "cash-in" refinancings, the opposite of the cash-out refis of the late, lamented housing boom. Until the collapse of housing, cash-in refis never really exceeded 20%, but, since 2009, they have consistently been higher.
Why?

Quote:
...some of this comes from necessity. With reduced home values, refi applicants often need to put in equity to meet loan-to-value requirements. But the bigger factor is thrift. The millions of boomers headed for retirement want to conserve their wealth, and paying down the mortgage can be a good way to do that.
Paying Down the Mortgage - Barrons.com

I thought this quote from a related article was an interesting observation:

Quote:
America's baby boomers, the largest and richest generation in history, are entering a new phase of their lives. With retirement approaching fast, the boomers are adopting the fiscal habits their parents were known for. (We all eventually become our parents, it just took the boomers a little longer than past generations.)
__________________
Numbers is hard
REWahoo 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 02-15-2012, 03:55 PM   #2
Thinks s/he gets paid by the post
Marita40's Avatar
 
Join Date: May 2011
Location: St. Paul
Posts: 1,847
I'm in the "can't wait to pay off the mortgage" camp. Just refinanced and have about three years left--counting down the months!
Marita40 is offline   Reply With Quote
Old 02-15-2012, 04:16 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 10,252
I'm not sure that following the herd is the right thing to do here. Mortgage interest rates are at an all time low. If there was ever a better time to have mortgage, I don't know when it was. Folks should be out there maximizing their borrowing, then waiting for interest rates to go up while sitting on a nice sub-4% mortgage.
LOL! is offline   Reply With Quote
Old 02-15-2012, 04:17 PM   #4
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 47,474
At last, people are starting to see things my way. Next I expect everyone will be ditching their credit cards, too.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.

Happily retired since 2009, at age 61. Best years of my life by far!
W2R is offline   Reply With Quote
Old 02-15-2012, 04:24 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: NC
Posts: 21,205
That last OP quote sounds like good news for the long run (though maybe not for the short run).

We paid off our 30 year mortgage in about 16 years, if was exhilarating. We were fortunate...
Quote:
America's baby boomers, the largest and richest generation in history, are entering a new phase of their lives. With retirement approaching fast, the boomers are adopting the fiscal habits their parents were known for. (We all eventually become our parents, it just took the boomers a little longer than past generations.)
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
Midpack is online now   Reply With Quote
Old 02-15-2012, 04:27 PM   #6
Recycles dryer sheets
 
Join Date: Feb 2005
Posts: 189
I have two months left. It will be a great day when the mortgage is gone.
treypar is offline   Reply With Quote
Old 02-15-2012, 04:33 PM   #7
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,004
Quote:
Originally Posted by W2R View Post
At last, people are starting to see things my way. Next I expect everyone will be ditching their credit cards, too.
They'll do that right after they give up indoor plumbing...
__________________
Numbers is hard
REWahoo is offline   Reply With Quote
Old 02-15-2012, 04:51 PM   #8
Recycles dryer sheets
 
Join Date: Feb 2012
Location: Rochester
Posts: 68
Paying of our mortgage was one of the very best financial decisions I've ever made. I don't care if it goes against what the experts say- debt free is debt free!
freetodream is offline   Reply With Quote
Old 02-15-2012, 05:00 PM   #9
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 47,474
Quote:
Originally Posted by REWahoo View Post
They'll do that right after they give up indoor plumbing...
You still have that?

Quote:
Originally Posted by fishtherainy View Post
Paying of our mortgage was one of the very best financial decisions I've ever made. I don't care if it goes against what the experts say- debt free is debt free!
That's how I feel too, but I think we may be in the minority here.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.

Happily retired since 2009, at age 61. Best years of my life by far!
W2R is offline   Reply With Quote
Old 02-15-2012, 05:27 PM   #10
Dryer sheet aficionado
 
Join Date: Jul 2007
Posts: 25
One consideration before completely paying off the mortgage is whether you think you'll need to borrow again or whether your credit score is used for other purposes. If you pay off a mortgage or other large installment debt, then it may affect your ability to borrow later. Although the pay-off shows on the credit history, the more time passes, the less consideration is given by the creditor because it does not represent your current financial condition or reliability.

We've paid our interest only mortgage down to $72 and now make minimal reductions. The balance is so small, the floating interest rate is easily handled. Yet we've ensured that the mortgage looks great (balance compared to original loan), show ongoing current payment activity, and continues to be reflected in our credit reports.
cocobird is offline   Reply With Quote
Old 02-15-2012, 05:29 PM   #11
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: 36,266
Quote:
Originally Posted by LOL! View Post
I'm not sure that following the herd is the right thing to do here. Mortgage interest rates are at an all time low. If there was ever a better time to have mortgage, I don't know when it was. Folks should be out there maximizing their borrowing, then waiting for interest rates to go up while sitting on a nice sub-4% mortgage.
LOL, we certainly seem to be in the minority. I just refi'd in January for 15 years at 3.375%. If my incremental investments generate more than 3.375% on average over the next 15 years, then I figure that I am ahead. If i can't do that then the mortgage will be the least of my worries. I get the peace of of mind others get by being mortgage free by knowing that I could pay it off with a few clicks of a mouse anytime I want.
pb4uski is offline   Reply With Quote
Old 02-15-2012, 05:40 PM   #12
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,004
Quote:
Originally Posted by cocobird View Post
One consideration before completely paying off the mortgage is whether you think you'll need to borrow again or whether your credit score is used for other purposes. If you pay off a mortgage or other large installment debt, then it may affect your ability to borrow later.
Set up a HELOC to hedge your bets...
__________________
Numbers is hard
REWahoo is offline   Reply With Quote
Old 02-15-2012, 05:50 PM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2009
Posts: 6,682
My original mortgage on my co-op apartment back in 1989 was nearly 11% on a 5-year ARM. Interest rates fell quickly and I did a refi in 1992 to 6% on a 1-year ARM, saving me $200 a month.

By 1997, the interest rate has crept up to around 8% but once I realized that the lost tax savings from paying off the mortgage due to being able to switch to the standard deduction on my state return was nil, I paid of big chunks of the mortgage in 1997, finishing it off in 1998, just 9 years after I first got the loan.

With my salary rising a lot in the mid-1990s (I was still working FT), one biweekly paycheck now easily covered all my monthly expenses with room to spare, enabling me to replenish the accounts used to pay off the mortgage. That and the booming stock market got me back to where I was pretty fast.

I saw paying off the mortgage (becoming debt-free) as a big step toward being able to ER because having such greatly reduced expenses made it easy to switch to working PT starting in 2001, 3 years later.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 02-15-2012, 06:16 PM   #14
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,856
Quote:
Originally Posted by REWahoo View Post
OK, maybe 'paying down the mortgage' is more accurate...
Why?
Well, this might make a really boring article for the media, but maybe the reason refis are cash-in now is because the lender charges more for a cash-out... including an appraisal and a higher interest rate. I remember this issue in at least two of our recent refis. We made sure to set the refi amount low enough that the new balance was less than the old by $1000 or so. With one of them the delays made that problematic.

But I'd rather read articles about the New American Cheap Frugality movement.

I think we Boomers became our parents when we had to start trusting anyone over thirty. Especially when we were over 30.

Hey, should we start a "dead equity" thread to balance out the debate?
__________________
*

Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on E-R.org: "The Military Guide to Financial Independence and Retirement."

I don't spend much time here— please send a PM.
Nords is offline   Reply With Quote
Old 02-15-2012, 06:28 PM   #15
Thinks s/he gets paid by the post
Bikerdude's Avatar
 
Join Date: Jul 2006
Posts: 1,901
Quote:
Originally Posted by LOL! View Post
I'm not sure that following the herd is the right thing to do here. Mortgage interest rates are at an all time low. If there was ever a better time to have mortgage, I don't know when it was. Folks should be out there maximizing their borrowing, then waiting for interest rates to go up while sitting on a nice sub-4% mortgage.
+1..
__________________
“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
Bikerdude is offline   Reply With Quote
Old 02-15-2012, 06:47 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 26,821
Quote:
Originally Posted by REWahoo View Post
Set up a HELOC to hedge your bets...
A thread a while back took the shine off that apple. HELOCs were getting frozen, right when people needed them the most.


Quote:
Originally Posted by fishtherainy View Post
Paying of our mortgage was one of the very best financial decisions I've ever made. I don't care if it goes against what the experts say- debt free is debt free!
I think the experts would agree that 'debt free is debt free'! Little debate there

But if that was one of the very best financial decisions you've ever made, I feel sorry for you. I hope you are selling yourself short with that comment.


Quote:
Originally Posted by W2R View Post
That's how I feel too, but I think we may be in the minority here.
Quote:
Originally Posted by pb4uski View Post
LOL, we certainly seem to be in the minority.
Persecution complex? Funny that people on either side of the issue feel they are in the minority. But we are all above average too, so it's OK.

-ERD50
ERD50 is offline   Reply With Quote
Old 02-15-2012, 06:53 PM   #17
Full time employment: Posting here.
racy's Avatar
 
Join Date: May 2007
Posts: 881
Investing in paying off my mortgage is 5.25% guaranteed return (ok, a bit less with the tax deduction). Looks better to me than alot of other choices lately. 23 months to go!
__________________
"It is better to have a permanent income than to be fascinating". Oscar Wilde
racy is offline   Reply With Quote
Old 02-15-2012, 06:58 PM   #18
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,004
Quote:
Originally Posted by ERD50 View Post
A thread a while back took the shine off that apple. HELOCs were getting frozen, right when people needed them the most.
Mine wasn't - but then that may have been due to the fact my mortgage was paid off.
__________________
Numbers is hard
REWahoo is offline   Reply With Quote
Old 02-15-2012, 07:23 PM   #19
Recycles dryer sheets
 
Join Date: Sep 2007
Posts: 193
I refi'd about 3 yrs ago at 4.5% for 30 yrs. Its the cheapest money I've gotten in years. I'm not paying it off as long as it's subsidized and I'm making 20% in equities with it.
HpRyder is offline   Reply With Quote
Old 02-15-2012, 07:36 PM   #20
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 47,474
Quote:
Originally Posted by ERD50
Quote:
Originally Posted by W2R View Post
That's how I feel too, but I think we may be in the minority here.
Quote:
Originally Posted by pb4uski View Post
LOL, we certainly seem to be in the minority.
Persecution complex? Funny that people on either side of the issue feel they are in the minority. But we are all above average too, so it's OK.
Interesting! Apparently pb4uski is right. I did a search, and found out that according to this bankrate article, most retirees in fact do NOT have mortages and so presumably do not want them.

Quote:
About 25 percent of those of any age who considered themselves retired had a mortgage.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.

Happily retired since 2009, at age 61. Best years of my life by far!
W2R is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
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
Poll: Should Peyton FIRE From the Colts? easysurfer Other topics 49 03-20-2012 04:18 PM
When does the giddy wear off? Tree-dweller Life after FIRE 30 03-13-2012 03:44 PM
27 and dreaming of retirement in 5 years. Am I crazy? ponchoape Hi, I am... 19 02-16-2012 02:47 PM
Am I exempt from 10% early withdrawal penalty?? rdjrn FIRE and Money 8 02-16-2012 07:17 AM
Calgary in the summer? braumeister Travel Information 27 02-15-2012 06:59 PM

» Quick Links

 
All times are GMT -6. The time now is 02:20 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.