Millionaires: do they pay off their mortgages?

[cute fuzzy bunny]

I had the same luck. Had the run-up money and then things started dropping. Decided paying off the 6.25% mortgage with some of the run-up proceeds was a good idea and a nice diversification plan. Then the bottom fell out. I was a dang genius AGAIN!

 

[bpp]

OK, bpp ... we need your help. Check around in Japan, and see if you can find a mortgage lender for us at 2.6% fixed, in U.S. dollars,

Yup, that's the catch, isn't it? You'll have to borrow and repay in yen, and take on exchange-rate risk. That is true for me, too, to the extent that I hold investments outside Japan, and even my Japanese stocks tend to suffer when the yen rises. So not risk-free, unless we get a few more BOJ rate hikes like the one that appears imminent, in which case I could back up the truck on JGBs. (Oh please, please, please...)

for all the great FICO scores on this board ... we'll even pay a couple points ...

That's the other catch, of course -- your FICO scores don't count for squat in Japan. And nobody does "points" here, as far as I know, so you can't sweeten the deal that way.

 

[StJohnsWood]

I'm with Alex on this one

I plan to have a mortgage until the day I die. A mortgage is nothing more to me than a financial tool. Now if my tax situation changes I may have to reevaluate.

As long as you maintain liquidity then a mortgage can be a good thing and allow you to increase your net worth.

If I have the house paid off, I can't sell a bedroom to raise cash if needed. I could take a home equity loan (mortgage).

Of course the key is not to over extend yourself and have a little control on what to do with your debt.

I try to run my personal finance like a business. A little debt to grow the business is always good. As long as the debt doesn't get out of control.

 

[calmloki]

Mortgage here, but only because we took one out to pay off an investment property. Interest rate on an owner-occupied home was several points better than our commercial loan, and i have all sorts of itemized expenses, so writing off home interest or rental property interest is all the same. Just finishing a PenFed refi and dropping the interest on our home another 1/2 point and some of a 5.75% interest only rental house loan.

 

[aenlighten]

Love mortgages

and kept mine for as long as it made sense. If I still had a stable source of income, I would have kept it. But paying it out of stock returns is high risk. Too high for me any longer.

 

[Ronstar]

I built my house in 1995, used previous home equity and borrowed 115k and made regular payments and additional principal payments until i paid it off in 2000. Then saved everything and bought condo in 2002 in cash.

 

[template]

I paid off my mortgage long before becoming a millionaire. It was my only loan and I didn't like debts.

 

[Meadbh]

Home mortgage: purpose = acquire nice place to live. Paid it off in 18 months. NW neutral. Increased quality of life.

Rental property mortgage: purpose = leveraged investment. Just acquired one. Positive cash flow, NW up $100K.

 

[Pete]

Returns vs psychology

The math all says to keep the mortgage. Your returns have historically been higher than the rates we pay for our mortgages.

Paying off your mortgage has psychological benefits though. I felt much more comfortable retiring early after I paid it off. Funny, I'm taking better care of the house now and picked up some extra insurance to protect it properly.

 

[ls99]

No mortgage, no worry, retired.

 

[willowbeezer]

My NW is 2.3mm. 0.1mm mortgage remaining at 4.875 15yr fixed.

I have always paid extra against principle but have stopped and rationalized that I could earn more in CD's. So I locked in 100k in 6% 10yr CD in IRA account. However, my portfolio consists of 0.3mm more in fixed income / cash yielding much less than 4.875%.

So begun to think that on the margin, it would make economic sense to reduce the cash portion and retire the mortgage debt. The other arguement would be to reallocate the cash portion to equity (long term equity returns should be above 4.875 albeit at a higher risk profile)

Thoughts?

 

[cute fuzzy bunny]

The math all says to keep the mortgage.

My math doesnt say that at all. Perhaps you might learn a few different ways to look at things by reading the mortgage payoff FAQ's.

My math does wonder why someone registers as a new user and then starts resurrecting 6 month to 4 year old threads on mortgage payoffs.

 

[bbbamI]

Jose, perhaps?

 

[Notmuchlonger]

Jose, perhaps?

Cuervo?

 

[cute fuzzy bunny]

Can you see....

 

[superdave]

in Canada....

in Canada the math is way different. No ability to deduct any mortgage interest. Pay it off, get nest egg, retire early and live off the government . Hense the obsene taxes do not hurt anymore. Its true!

 

[Meadbh]

in Canada the math is way different. No ability to deduct any mortgage interest.

......unless it's an investment property.

The inability to deduct mortgage interest on one's principal residence probably has been a moderating influence on Canadians' use of home equity as a line of credit.

Hense the obsene taxes do not hurt anymore..

Luckily the taxes have been getting a little less obscene lately.

 

[rogersteciak]

I paid off my mortgage and my home equity line of credit. My math is simple:

Financial Freedom means Investment Income exceeds Living Expenses by a Margin of Safety.

Debt payments increase living expenses. By paying off the mortgage and HELOC loan, I needed less investment income to achieve financial freedom.

While it's true that one can do an arbitrage play (i.e., invest money at a 12% return while paying mortgage interest at a 6% rate), the downside to being leveraged is when Mr. Market becomes depressed. Debt payments continue regardless of what Mr. Market does. Less debt means more room to maneuver when times become tough.

 

[cute fuzzy bunny]

Ding a ding dingly ding!!!