veremchuka
Thinks s/he gets paid by the post
I listen to Ric Edelman each weekend because I like financial talk shows but he drives me crazy with his have a big mortgage advice. Whether you are 25 or 75 get as large a mortgage as you can afford just don't buy a house you can't afford. He claims that the extra money you have available for investing over 30 years (with him no doubts!) will grow so much that it makes no sense to pay it off early or give up the cash to buy it free and clear. It doesn't matter if you are 5 years from retirement he says get a big mortgage or keep the mortgage, don't make a big down payment though he may say 20% to avoid PMI.
I paid my mortgage off 2 years ago and I thought it was the best thing to do. It was a 5.25% fixed 30 year, 7 years old with a $123k balance. So I had to give up $123k in cash but I am getting a guaranteed return of 5.25% by not paying interest on the loan. I did itemize as my prop tax and mortgage interest was way above the standard deduction but that was decreasing as each year passed and it isn't a 1 for 1 deduction, I was in the 25% bracket when working and 15% when retired. In my case giving up the $123k did not mean I need to take distributions from any investments as my pension covers everything but when I was paying the mortgage I had to take cash from a taxable account to cover expenses each month due to a $1225 mortgage payment, that bugged me. But imagine if I had that $123k in the market with the rebound since 3/9/2009!
I think this is the type of thing that you have strong feelings one way or the other. So is it better to keep the cash and pay the mortgage each month or be free and clear if your monthly expenses are covered like mine by a pension? Too late to change it but I am curious what others think. Like I said I hear this every week as Ric and his 2 parrots squawk about this endlessly.
I paid my mortgage off 2 years ago and I thought it was the best thing to do. It was a 5.25% fixed 30 year, 7 years old with a $123k balance. So I had to give up $123k in cash but I am getting a guaranteed return of 5.25% by not paying interest on the loan. I did itemize as my prop tax and mortgage interest was way above the standard deduction but that was decreasing as each year passed and it isn't a 1 for 1 deduction, I was in the 25% bracket when working and 15% when retired. In my case giving up the $123k did not mean I need to take distributions from any investments as my pension covers everything but when I was paying the mortgage I had to take cash from a taxable account to cover expenses each month due to a $1225 mortgage payment, that bugged me. But imagine if I had that $123k in the market with the rebound since 3/9/2009!
I think this is the type of thing that you have strong feelings one way or the other. So is it better to keep the cash and pay the mortgage each month or be free and clear if your monthly expenses are covered like mine by a pension? Too late to change it but I am curious what others think. Like I said I hear this every week as Ric and his 2 parrots squawk about this endlessly.