You made extra principal payments on your mortgage leading up to your age 55 retirement. If you had instead invested that money and not made extra principal payments you would have had plenty of $ to continue making your mortgage payment AND pay for your health insurance. The math works both ways. Am I missing something?
What to do with big payoff?
- Thread starter Z3Dreamer
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You made extra principal payments on your mortgage leading up to your age 55 retirement. If you had instead invested that money and not made extra principal payments you would have had plenty of $ to continue making your mortgage payment AND pay for your health insurance. The math works both ways. Am I missing something?
The S&P 500 is up 24% YTD.
That beats the heck out of my 2.5% mortgage.
I consider having a mortgage as similar to having a balance on the credit card that you pay off every month.
It's not a debt-debt if you can pay it off completely any time you want by just calling your broker and letting them to cut a check.
Over the last 10 years, SPY is up 272%.
If you had taken out $100,000 to pay off your 5% mortgage 10 years ago you would have saved $27,300 of interest.
Whereas it would be worth $372,000 if left invested.
That beats the heck out of my 2.5% mortgage.
I consider having a mortgage as similar to having a balance on the credit card that you pay off every month.
It's not a debt-debt if you can pay it off completely any time you want by just calling your broker and letting them to cut a check.
Over the last 10 years, SPY is up 272%.
If you had taken out $100,000 to pay off your 5% mortgage 10 years ago you would have saved $27,300 of interest.
Whereas it would be worth $372,000 if left invested.
What the S&P 500 did the last 12 months or last 10 years is not relevant.
What it will do in the future is, but nobody knows what that is.
corn18
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As long as I believe that inflation will be at 2.25% for the next 30 years, my 2.25% 30 year fixed rate mortgage is free money. The Net Present Value of a $500,000 mortgage @ 2.25% fixed rate using a 2.25% discount rate is $500,000. Pretty simple math.
No need to complicate things with market returns.
corn18
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Firecalc uses the past to give us an idea of the future. We make decisions based on that. At some point you have to stop hiding behind the "you can't predict the future" and make real decisions.
Sure. All I'm pointing out is that you can't bank on your mortgage rate being 0% real.
COcheesehead
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
When the dodo hits the air moving home appliance, would you rather have the money in your account or in your house?
corn18
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Sure. I'm not banking on anything of the sort. If inflation is not 2.25% over the next 30 years, then I have a backup plan. The lowest real return over 30 years on a 60/40 portfolio was 2.92%. As long as that is above 2.25%, my mortgage is free.
So, I can either have inflation average 2.25% or greater over the next 30 years OR I can have my real return on my portfolio average 2.25% or greater over the next 30 years.
Again, at some point you have to make a decision based on the information available. Easy to throw darts when you're not in the arena.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
As are almost all of our decisions. The financial decisions would be to live in a rented single-wide trailer house, to have a rolling wreck for a car, and to emphasize cuisine from the sample ladies at Costco and from the Costco hot dog counter.
lem1955
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Has anybody asked the OP whether he/she is retired or not? I was happy to have a low interest mortgage and a little higher interest rate HEL until I was retired. At that point I was anxious and eager to retire the last debt I had. It was a few years ago so inflation was a non-issue.
You said not to complicate things with market returns, and now you're talking about market returns...
corn18
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You said I can't predict the inflation so I said I don't need to. Whatever. The "you can't predict the future" crowd irritates me. That's the answer for everything. At some point, you have to hit the "I believe" button and enter the arena. Or just work the rest of your life because you can't predict the future.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Yes but, knowing that you don't know, you can try to enter the arena with a strategy that is resilient. Try Nassim Taleb's book "Antifragile." I am still studying his ideas there.
One of his concepts is discussed here: https://vantagepointtrading.com/nassim-talebs-barbell-portfolio-investment-strategy/ though I'll admit TLDR.
corn18
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Agree.
Especially a flightless oneWhy would there be an extinct bird flying around your house?
If inflation goes up, holding a 2.5% mortgage will be a winner for you.
If inflation goes down and mortgage rates go down, you can refinance at the lower rate.
We had a 7% mortgage when we retired. Several years and several refi's later we are now at 2.5%
Having a 30-year fixed low rate mortgage is truly "Heads you win, tails you don't lose."
Z3Dreamer
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OP here. Yes, happily retired for many years. Had the same situation with my DF many years ago. He had a 3% mortgage and some money in mutual funds. I talked him in to keeping the mortgage and the mutual funds. Of course, at some point, he decided to pay it off.
I will invest the bulk.
I'd be willing to bet nobody will ever have a mortgage for less than 2.5%
The lender has to have some return on their money.
corn18
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I have a 30 year 2.25% fixed rate mortgage with 30 years left.
I refinanced in July, 2.23% for 30 year fixed rate. No points or loan origination fees.
TheWizard
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Not sure this is a good idea; the parameters are all wrong.
Instead, refinance that mortgage for fewer years, at a lower interest rate and somewhat higher monthly payment, for the lowest fee you can find...
The rule of thumb is borrow as much money as you can at the lowest fixed rate you can for the longest amount of time you can.
Restarting the 30 year clock each time you refi at a lower rate gets you that.
All you have to do to be safe is make sure to make the required monthly every month.
Once you get to a certain age, that low payment is locked in for the rest of your life. At my Mom's 55+ village, even 80 year olds were getting 30 year mortgages.
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