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Shrinking our huge mortgage for peace of mind
Old 07-23-2020, 08:48 PM   #21
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Shrinking our huge mortgage for peace of mind

Iím doing the same. Had $156k in mortgage at the beginning of this year. Now $118k. But my home is about $430k-$450k, not a million. Getting a HELOC and bring it down to$95k-$90k by end of this year. A 2.99% Heloc at $95k translates to $400/mo payment. Then down to $80k before summer next year.
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Pay it off
Old 07-23-2020, 09:03 PM   #22
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Pay it off

IMO it doesnít make sense to carry a mortgage when you have the means to not have one. Payoff your debt for peace of mind and everything else will work out.
I just did the same thing (paid off 500k mortgage). My view is you have more risk staying invested especially in the current economy so why not wipe out the debt.
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Old 07-23-2020, 11:03 PM   #23
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Quote:
Originally Posted by Andromeda View Post
It's different in Canada. Standard mortgages have two flexible payment options built in:

1) Prepay up to 15% of your principal per year without penalty, and/or
2) Increase your regular payments by up to 100%.

According to my bank, with respect to payments made in category (2), they are viewed as permitted advance payments on your regularly scheduled payments, so if you need to scale back or stop your mortgage payments for a while, you aren't viewed as being in default. Payments in category (1), however, don't give you this flexibility.

....
For Canada I've used the (1), as it reduces the interest charge after doing it.
I'm thinking you are getting a little ripped off by doing (2), and you might want to check with your bank, what number are they using to calculate the interest when you have already paid $XXX in advance. I suspect they are using the same number as if you had not paid the $XXX.

What I've done is do (1) , then when renew the mortgage, I'd opt for a long amortization (but not a long term), so the regular payments are low (no stress), then each year dump 15% onto the principal using (1).
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Shrinking our huge mortgage for peace of mind
Old 07-24-2020, 06:42 AM   #24
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Shrinking our huge mortgage for peace of mind

This string is starting to divide into the usual opposing, passionate mortgage camps. All I can add is that weíre in the OPís same Catch 22 situation, in which DW loves the house that has a mortgage and I love the fat retirement cushion and no debt.

So, how to compromise? It helps me to think out 10-15 years. In that scenario, yes, painfully for me as the saver/investor, our investments will have been spent down probably 2/3, due to mortgage payments and choosing to spend more on travel while weíre younger and healthier. However, the present market turmoil should have passed, the home equity should have greatly appreciated, we agree we will be looking to downsize the house to get rid of stairs, Social Security will be coming online, and more that we canít anticipate. If something goes wobbly financially or health wise during the next 10-15 years, we should be able to see it coming from far off and have enough investment and home equity cushion to adjust accordingly. Good luck!
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Old 07-24-2020, 07:13 AM   #25
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The OP asked if they should make changes because of their Peace of Mind, not for financial reasons, other than being able to live comfortably if the worst happened.

With $3.7m CAD taking 700k to pay of the mortgage would offer a good dose of peace of mind and save $6k pm (72k pa) mandatory outlay.

$3m goes a long way to maintain one's existence. Perhaps downsizing and retiring would also add more to that $3.0m. TO. prices are astronomical at the moment and with COVID it may be a good time to sell and downsize while the prices are as they are.

Being for or against paying of mortgages in retirement is not relevant here. sounds like the OP would be happier with no $6k per month payment or significantly less. I would too.
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Old 07-24-2020, 07:53 AM   #26
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Perhaps the change they should make is to gain a better understanding of their complete situation, and not just fix the one stress item which may leave them exposed if they both are out of work for a longer time. Put the mortgage pay-off money in something safe which should ease their mind about the mortgage, while staying more liquid and flexible. Sure, that money will earn less than their mortgage rate, but that's a small price for insurance and piece of mind that their whole situation is safer, rather than just addressing one thing
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Old 07-31-2020, 05:55 PM   #27
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Recently my brokerage firm was offering fixed 1, 3, or 5 year loans against Portfolio values. No points, fees etc. so I used some of the cash I was sitting on from pulling about 10-15%out of the market and used this new loan option to pay off the mortgage. Which was at about 4% instead of refinancing.

Loan is at 1.5% interest only. Stashing away the difference between what I was paying in interest and principal to fund partially paying down the loan when it comes due. Can always pay off the rest at that time if needs be but the new 1.5% rate is less than any return I am getting on my bond holdings and real estate investments. The no fee or points make it a no brainer.
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Old 07-31-2020, 07:11 PM   #28
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I would recommend you take the $700K and put it in a separate IRA account with automatic payments to your mortgage bank. If you could get a longer term mortgage at <3%, that would even be better. Do not pay any extra with the interest rates so low.
The $700K should be invested the way other funds have been according to your AA plan. It is almost like paying it off, but you still have access to the funds for emergencies. You sleep at night...you never make another payment...what could be better.

At the end of your mortgage period, you should have some extra funds to have a small party, or make charitable donations. Please don't be in a rush to get rid of a low interest loan.
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Old 07-31-2020, 07:53 PM   #29
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Originally Posted by Retired Expat View Post
Recently my brokerage firm was offering fixed 1, 3, or 5 year loans against Portfolio values. No points, fees etc. so I used some of the cash I was sitting on from pulling about 10-15%out of the market and used this new loan option to pay off the mortgage. Which was at about 4% instead of refinancing.

Loan is at 1.5% interest only. Stashing away the difference between what I was paying in interest and principal to fund partially paying down the loan when it comes due. Can always pay off the rest at that time if needs be but the new 1.5% rate is less than any return I am getting on my bond holdings and real estate investments. The no fee or points make it a no brainer.

Which brokerage was this?? 1.5% is great. And how much couldnít borrow? Sound like a good plan (for me) since Iíve been toying with paying off my mortgage as well since I have excess cash earning between 0.5-2% in money market and bonds I was debating between that or paying off my 3.75% mortgage. At 1.5% thatís even better since it is lower rate and frees me up in case the market free falls and I can put the cash to work buying equities.

I know I am moving in 1-2 years which is why it makes sense. Otherwise Iíd refinance since rates are so low.
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Old 08-04-2020, 04:09 AM   #30
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Originally Posted by Retireby45ish View Post
Which brokerage was this?? 1.5% is great. And how much couldnít borrow? Sound like a good plan (for me) since Iíve been toying with paying off my mortgage as well since I have excess cash earning between 0.5-2% in money market and bonds I was debating between that or paying off my 3.75% mortgage. At 1.5% thatís even better since it is lower rate and frees me up in case the market free falls and I can put the cash to work buying equities.

I know I am moving in 1-2 years which is why it makes sense. Otherwise Iíd refinance since rates are so low.
UBS. Amount you can borrow is determined by your investment account holdings

I was looking at a refi but didn’t see anything this cheap for just a few years
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Old 08-04-2020, 04:15 PM   #31
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If it were me, I would keep the mortgage and retire today and adjust my other spending, if needed.
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