Talked to 2 Retired Neighbors .. They didn't pay off mortgage, but both have pensions

[tulak]

I never have escrow with my mortgage.

I prefer to pay property taxes and insurance directly. It’s easier and I get to invest the cash instead of it sitting in an escrow account doing nothing for me. It’s also more work to have an escrow account, since I have to make sure the escrow balance is correct.

 

[Time2]

All the HELOC talk makes me want to see what options I have now for buying Bitcoin with house money

Who is with me?

Great idea, let's do it on 7-2-21! We will double our money today only 87 days later. You in?

 

[MarieIG]

I agree with your strategy of making additional payments to pay off your mortgage as soon as possible. Paying a mortgage payment is like putting money into a “forced saving account”. This is because part of that mortgage payment is equity. I also agree that some people buy toys with their extra money and ended up worst off than people who pays a monthly mortgage payment and use their extra money to invest. This is why carrying a mortgage into retirement can be a good thing because it also forces people to live below their means. Without paying a mortgage payment after the house is free and clear, it is human nature to spend the extra money on something else. Unfortunately that something else may not have a return of investment.

The euphoria of paying off your house can be a mirage if people are not careful. My own euphoria is increasing my net worth which may involve increase my debt while also increasing my assets at the same time. I also believe inflation may be coming and inflation actually helps people with debts because their debts tend to be fixed while the value of their assets tend to rise with inflation depending on what type of assets you own. Unfortunately stock and bonds do not rise with inflation as much as hard real estate
properties.

In my case, some of the funds which would have gone to mortgage payments were redirected toward education costs for my kiddos. Tuition/ tutors when necessary/ books, etc. So, that did not increase my/ our net worth, but none of the kiddos were saddled with loans. A different type of return on investment, I suppose.

 

[daylatedollarshort]

Great idea, let's do it on 7-2-21! We will double our money today only 87 days later. You in?

Or one could follow the advice of George S. Patton: "Take calculated risks. That is quite different from being rash."

 

[albireo13]

Just noticed this ...
Last year we just refinanced our $250K+ mortgage to a 30year, fixed 2.625%.
I am retired now at 65 so, it won't be paid off until I am north of 90yo. Yes, it would have been nice to have a paid off mortgage but, not necessary. We have a good amount of equity in the house. Our retirement budget includes the mortgage payment and we are just fine.

To me it's just another monthly bill, like my internet or cell bill. As long as the numbers work, it doesn't matter.

 

[Out of Steam]

Roughly half our current income is a pension. I'd like to pay off our small mortgage from retirement accounts over several years, but would like to see if inflation is persistent before making prepayments with a rate under 3%.

Because the survivor would have to pay extra for Medicare Part B under IRMAA if one of us dies, I believe it does need to be paid off before we reach the age where we have to take RMDs.

 

[brett]

If my after tax income from investments was higher than the after tax benefit of paying off my mortgage I would keep the mortgage.

Most especially if my mortgage rate was locked in and rates were going up.

 

[jazz4cash]

Just noticed this ...

To me it's just another monthly bill, like my internet or cell bill. As long as the numbers work, it doesn't matter.

Exactly. Just another monthly expense, but if we live long enough it’ll go away.

 

[Starsky]

We have about $500k owing on our home and although we could pay off the mortgage, it works out to be much cheaper and more profitable to hold those assets than to sell them. If we had done that at retirement, we would be down a minimum of $250k from where we are today since we would have sold rental real estate to do it.
Having a zero mortgage with such low interest rates seems like a poor leverage strategy in the current environment. Money is worth much more than 3.75% when inflation is almost double that.
PS Gaining more leverage in retirement is tougher these days. IMO, it’s better to keep your cash and use as much of the banks money as you can handle.

 

[kgtest]

I am in the camp that the sooner I pay off one mortgage, the sooner I can acquire another. It's not a one mortgage life into retirement for me. I will have multiple homes by the time I pass along. I can understand how many feel like keeping a mortgage into retirement...I too will have a third and possibly fourth mortgage as I age. Along with my primary home. Income producing properties if you will.

 

[Koolau]

I am in the camp that the sooner I pay off one mortgage, the sooner I can acquire another. It's not a one mortgage life into retirement for me. I will have multiple homes by the time I pass along. I can understand how many feel like keeping a mortgage into retirement...I too will have a third and possibly fourth mortgage as I age. Along with my primary home. Income producing properties if you will.

It sounds like you are using leverage to make money.

My BFF is 78 and is in debt half a million (and he has no invested assets - unless you count his Corvette build project) His feeling is that, as soon as he has enough equity in his home, he can take it out as a loan to buy more toys. As my condo is paid for, BFF often criticizes me for NOT pulling out equity to have "fun." YMMV

 

[kgtest]

It sounds like you are using leverage to make money.

My BFF is 78 and is in debt half a million (and he has no invested assets - unless you count his Corvette build project) His feeling is that, as soon as he has enough equity in his home, he can take it out as a loan to buy more toys. As my condo is paid for, BFF often criticizes me for NOT pulling out equity to have "fun." YMMV

That's the goal. We have a townhome that when we moved into our first single family home we kept and rented out. Its paid off. Our mortgage on current home is down to 278,000 and we paid $377,777 for it 8 yrs ago so about 10 years left on it at this point as we switched to a 2.75% 15 yr note. I will admit we are somewhat choosey on our "toys" and I don't have any honestly. A nice truck and we take nicer vacations but certainly not flying private or first class. We have about 20k of 0% interest debt coming due this next year after putting $40,000 into a super nice deck, a super nice patio, new landscape and an irrigation system. Some of that might amount to equity though. We try really hard to avoid as much interest as possible. Once our primary mortgage is paid off, I feel like the bank will easily approve us for a third since our DTI ratio will be very attractive. Then, the tenants will eventually pay down the mortgage (I will refi into a 15 yr when it makes sense) and then we will have three properties. If I have enough time on this earth, like I said I would try to snag a fourth property as well. I will inherit 1 or 2 from DF and will need to figure out what to do with those. He mentioned he might upgrade here when his RMDs start coming in to reset his basis and get a newer income property. Lots to be thankful for. My family is kinda into real estate though so it comes a little more natural. My sister who just passed away at 47 had 4 properties herself so we are a little busy managing those. The one thing I can't stand about the rentals is the emotional side of the investment. As much as we want it to be emotionless, we run into snags where right now 1 tenant hasn't paid over 2 months of rent using the COVID card and now facing eviction, and another is on county assistance after being out 2 weeks of work due to COVID. I always joke with my father that my equities never threaten me, and they always pay the dividends versus a deadbeat tenant who can at times be threatening and not pay rent. It's a long game though.

Hopefully your BFF can put the toy buying to bed and focus on wealth building. Its very important and super easy in the land of the free, home of the brave. Just gotta be brave about it. Its really hard to teach an old dog new tricks though so they might be running outta time. Having debt in retirement is fine if its "good debt" that can be leveraged as you mentioned. If you are using debt to buy consumables like boats, sports cars and assets that depreciate quickly its not the best choice IMHO.

 

[aja8888]

It sounds like you are using leverage to make money.

My BFF is 78 and is in debt half a million (and he has no invested assets - unless you count his Corvette build project) His feeling is that, as soon as he has enough equity in his home, he can take it out as a loan to buy more toys. As my condo is paid for, BFF often criticizes me for NOT pulling out equity to have "fun." YMMV

I wish I had the guts to be in debt $500 K! at my age (78). I'd have a new Vette sitting in the driveway right now! But DW would be unpleased....

Does your BFF have family? Job? How does he pay for this much debt?

 

[Koolau]

I wish I had the guts to be in debt $500 K! at my age (78). I'd have a new Vette sitting in the driveway right now! But DW would be unpleased....

Does your BFF have family? Job? How does he pay for this much debt?

Odd that you mention DW. BFF's DW "competes" with him in buying "stuff." If she can't buy something for herself, she buys for her kids. He buys a few expensive toys but she buys dozens of lower-cost items.

BFF w*rked at same place I did and retired with 13 years less service than I had. He and DW both have SS and pensions SO, they can live and pay (most) bills on time. It's just that they never pay down their debt - they simply add more (sounds like us - whoops! I mean THE U. S. ) YMMV

 

[joedila]

because everyone does not have 75K to pay down their mortgage in one year

Your approach is paying off a (relatively speaking) high interest loan. Why is that not for everyone?

Just noticed this comment on my post from several months ago. The point I was trying to make was that not everyone would have 75K to pay down their mortgage in one calendar year or would choose to do so....

Since I posted several months ago, we made another 20K payment on our mortgage, which means that we have brought the balance down from 95K to 20K in one calendar year...we plan to pay the remainder off first quarter next year. The interest on this was high, (5.0) but I am looking forward to no debt, a condo with about $550K equity, and no more stupid escrow accounts....I think we will be able to handle the payment of our property taxes and insurance ourselves.

 

[Al in Ohio]

I paid my mortgage off in my late 40’s and retired at 55 so imo that’s radical, but ymmv. I get great peace of mind being debt free.

 

[Cantwaitanylonger]

One of the main goals for the money I've saved is just for it to make me happy......And it just makes me happy to think that my mortgage is paid off. It's the gift that keeps on giving.

 

[bikeFI]

My plan is to have pay off my mortgage before retirement. Currently 3% 15 yr with about 7 years to go officially but as it gets closer to the end, plan to pay off the balance early to coincide with RE.

Mortgage payment represents about 100% of personal monthly expenses so not having a mortgage makes a big difference in my RE budget. It could be covered with discretionary funds but that would be no fun.

I did put in some extra principal payments early on but decided to invest it instead and it has grown a good amount- definitely higher than 3%.