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Old 02-01-2020, 11:13 AM   #21
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No doubt. I genuinely love the idea of being mortgage-free but I also know that, if I achieved it, my feeling would switch to “Crap! Look at all that locked up equity growing at just 3%/year if I’m lucky!” [emoji34]

The basis may only grow 3% a year, but the housing cost offset, rent, is like a dividend each month. My home would cost me north of $2,500 a month in rent. I'm 'saving' $2,500 every month with zero risk with an investment that is more than just paper but a hard asset. I think it's all part of my wealth portfolio to have a paid off home.
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Old 02-01-2020, 11:32 AM   #22
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In general, I'm a proponent of considering a mortgage as just another expense, like property taxes. It's not necessarily a bad thing if the rate is low enough.

Not sure I'd ever pay off early a 3% loan.

If it's not just about making the best money decision but sleeping well at night, wouldn't it be even better to keep the money on the sidelines in a 2% money market or CD ladder? Then, you can always write a check to pay off the mortgage anytime or use it for any unexpected expense/emergency anytime? If the money is locked up in a paid off house, you lose this flexibility (aside from taking out a new loan).
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Old 02-01-2020, 11:52 AM   #23
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.... Then, you can always write a check to pay off the mortgage anytime or use it for any unexpected expense/emergency anytime? If the money is locked up in a paid off house, you lose this flexibility (aside from taking out a new loan).
Exactly. Especially in the OP's case where he won't have penalty free access to tax-deferred funds for 20 years.... a lot can happen in 20 years where one might want more taxable funds. OP has a nice pension so he might be able to get a loan, but mortgage loans take time.
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Old 02-01-2020, 12:02 PM   #24
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OP. You are way "over thinking" this. Just pay mortgage off. Be done. Talking to people who have paid off mortgage, they will all say. Great. The feeling is good. Life is good.

Talking to financial planners, bank lenders, etc.....who have something to gain...will
always recommend NO...

Again, just do it.......stop dwelling, I think you already have made up your mind.
Just want encouragement from us posters.....Good Luck....Thanks for your service!
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Old 02-01-2020, 12:06 PM   #25
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Yes, pay it off. No, keep it. I have not got a clue. IMO, it is less about the simple math. It is more about your personal financial strategy. So, my real answer is "it depends". Maximize long term growth? = keep it (assuming that money is invested in equities). Minimize outstanding debt? = pay it off. Reduce monthly expenses = pay it off. Tax deduction? = Keep it (if you can itemize).

There can be so many "right" answers. Only you can determine what fits your style/plan.
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Old 02-01-2020, 12:08 PM   #26
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After an insurance (pain/suffering) settlement from a drunk driver running a stop sign about 6 years, I was able to pay off our mortgage 10 years early. We LOVE the feeling of not having that $1000 a month payment hanging over our heads, and would recommend it to you....Math Smath !At the same time I cranked u my 401k from 6% to 20%, and have averaged far more percentage each year than the mortgage was.
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Old 02-01-2020, 12:11 PM   #27
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The purpose of having money is to use it any way you wish. If paying off the mortgage is how you would enjoy the funds, then I say go for it.

Keeping it simple by reducing outstanding debt is as much a financial goal as net worth in my opinion. It's all about how your finances make you feel. It's not just about numbers. Mortgage free is a great feeling.
This! And it is why I recommended to the OP based on what he described, I would pay it off.

This is in spite of the fact that I, myself have not one, but over a half-dozen mortgages going (rental properties). Math works for me and the debt doesn't bother me at all. That said, if it ever keeps me up at night, I will pay them off in hurry. No profits are worth any sleepless nights IMHO.
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Old 02-01-2020, 12:13 PM   #28
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I paid off my houses very early - definitely no regrets. Of course, I bought my houses when mortgage rates were in the 7% to 9% range.
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Old 02-01-2020, 12:22 PM   #29
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I've never been in debt and despise it,
Go with your gut.

I'm a math nerd so I understand the cheap mortgage rate vs investing idea. But there is nothing like knowing that you own your home. We paid ours off early (only a few years left) when DHs job looked insecure and we were looking at early retirement for him. Because we had no mortgage our cost of living was very low and it made the decision to retire a lot clearer.

If you are hesitant to commit the full amount I like the 1/3, 1/3, 1/3 idea from golfnut.
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Old 02-01-2020, 01:49 PM   #30
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So I've been doing a lot of reading on paying off your mortgage vs keeping those dollars invested. I get it that in almost all situations the math makes sense to continue to pay on the mortgage and keep your money in your investments. On the other hand, the feeling of being debt free and having a paid off house must be a wonderful one.

Lets hear from those that have paid off their house early despite the math. Why did you do it? Why not?
We've been discussing this for well over a decade:
http://www.early-retirement.org/foru...ets-15237.html

Financially, you're borrowing against your future military pension payments by putting your home up as collateral. Your military pension and Social Security deposits are rising with inflation while your mortgage is a fixed payment that will be worth less than half of its value in 30 years.

Emotionally, though, it's a question of sleeping better at night.

Our P&I payments are covered by my pension, and we sleep fine.

In 2017 we refinanced our mortgage to 30 years at 3.50%. I'll make the last payment when I'm 87 years old, unless we refi for less than 3% and restart the 30-year clock again.

We're still a little over 8%/year, and I suspect we'll have longer-term after-tax returns of at least 6%/year.
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Old 02-01-2020, 01:50 PM   #31
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I flipped on this issue. We paid cash for our last house, but rates were higher. We are now in the early stages of building another home (our second retirement home, long story) and I had intended to pay cash again, but I ran the numbers and with rates so low, I plan to get a mortgage. It kind of makes my stomach turn to have debt in retirement, but even with conservative investments, I come out hundreds of thousands ahead and we have so much more in liquid assets which provide flexibility in a uncertain world. I remember in 2008 when my neighbors were not allowed to refinance. So money stuck in your walls at times may have to stay there.

Took me awhile to warm up to the idea, but the difference is the rates I can now get. Now is the time to borrow.
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Old 02-01-2020, 02:01 PM   #32
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The basis may only grow 3% a year, but the housing cost offset, rent, is like a dividend each month. My home would cost me north of $2,500 a month in rent. I'm 'saving' $2,500 every month with zero risk with an investment that is more than just paper but a hard asset. I think it's all part of my wealth portfolio to have a paid off home.

I’m not sure that’s apples to apples, is it? In your dividend have you accounted for taxes, insurance and upkeep that renters don’t have? I know the OP asked to hear from paid off mortgage folks but I guess I don’t understand the renters dividend and would like to.

Due to taxes and insurance not changing one cent, my own $2,600 mortgage payment would only drop by $1,800 if we paid off the mortgage. Within that $1,800 is about $500 right now that goes to principle, building equity, more down the line as the mortgage matures. So the principle amount I pay over time equals the same amount as the OP would have to pay up front. Paying off our mortgage now would only save us $1,300/month, i.e. the interest payment, which declines over time. That $1,300 would be lovely to have available to spend now but it would cost my portfolio growing at a CAGR of 7%+/year $270,000 right now to save $1,300/month while that $270,000 also becomes a hard, illiquid asset that grows at a CAGR of 3% if I’m lucky.

As the OP said, the math dictates keeping the mortgage, so I’d guess the fact that he despises debt is the larger factor, which is fine. Some sleep better with no debt. Of course, others sleep better having every cent invested in stocks and bonds, working hard and accessible if needed, and they like the reasonably safe leveraged equity growth inherent in a mortgage.
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Old 02-01-2020, 02:05 PM   #33
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Yup, does he despise debt more than he likes money?
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Old 02-01-2020, 03:05 PM   #34
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The reason this is discussed endlessly on ALL financial fora is that there is no way to know the right answer ahead of time. And there really is no wrong answer. We paid off our current house last Sep. We did it because we could and to be honest, we were always so broke we never thought in a million years we could own our home. So we did it. It felt good. Now we are moving and building a house and I am looking at whether to take out a mortgage or not. I told my broker that if 30 year rates hit 3% with no points, to lock in a conforming loan and I will probably keep it. Subtract 2% inflation and the tax deduction and the real rate is closer to 0%. That's almost free money. And if inflation goes up, I am making money with a mortgage. Or I may just pay it off on a whim. Neither course of action is wrong.
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Old 02-01-2020, 04:53 PM   #35
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No doubt. I genuinely love the idea of being mortgage-free but I also know that, if I achieved it, my feeling would switch to “Crap! Look at all that locked up equity growing at just 3%/year if I’m lucky!” [emoji34]
But during the stock recession times, I look at my house where the value stays flat and my stock where the value drops 40% and say "Yippee it's paid off".

Even if my paid for house drops 10%, I still get the full value of living in it, while I wipe my but_ with Eron shares.
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Old 02-01-2020, 05:06 PM   #36
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Pay off the mortgage. The return is a guaranteed 3%. Any stock returns are hoped for.... jmho
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Old 02-01-2020, 05:26 PM   #37
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I could have paid cash for my home when I bought it, but rates were fairly low. I think I ended up putting down 30% - enough to avoid PMI, escrow of property tax etc.

I continued to refinance as rates continued to drop and quickly shortened my term from 30 years to 15 years. I realized on this schedule that the house would be paid off 6 months before DW retired (I retired 6 years prior).

For me this worked out really well because it helped to smooth out our cash flow. As DW retired and received a fraction of her paycheck as a pension, the house payment went away also.

Of course the market returns over the prior 17 years were more than 3% so we did okay.

I guess in our case, having the money to pay off the house was just as good as actually paying off the house. The income smoothing was the win for me.

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Old 02-01-2020, 06:55 PM   #38
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We own four homes, one which is a part time beach rental in New Jersey. Living without a mortgage is amazing. I realize with the market rising we could do better leveraging our properties, but we don’t put any of them at risk. We sleep well at night and have no regrets. Your choice, but I hate 𝐃𝐞𝐛𝐭.
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Old 02-01-2020, 09:00 PM   #39
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I've never been in debt and despise it

Not being in debt is a great feeling. We have not had a mortgage for 12 years. There was a deeper sense of security, maybe ill-founded, that we always had a place to live even if the worst happened. Especially since I was the only bread winner at the time. We used the "mortgage payment" to cash flow two DDs through college and continue to fund our retirement via investments. Many of our friends bought bigger houses and moved out of the neighborhood. They still have the mortgages and "have to continue to w*rk". Paying off the mortgage was one of the best decisions we ever made.
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Old 02-01-2020, 10:29 PM   #40
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we retired at 55 and paid off the house several years before that. we had been debt free except for the mortgage for over a decade and we wanted to walk into retirement 100% debt free. besides, the most carefully designed plan can blow up in your face when life happens. with no debt a storm can be more easily weathered. pay it off and do as we did and invest those dollars or build up your emergency fund.
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