Originally Posted by ERD50
I do think that some of the reasons given for paying off a mortgage are, ...not well thought out, or maybe unsubstantiated?
This could be considered insulting by those of us who took the initiative and payed it off for our substantiated reasons and Based on our own well thought out plans at the time of payoff.
Well honestly, I think one would have to go out of their way and be digging pretty deep to find my comment 'insulting'. We have several posts where people mention the negatives (interest payments) w/o any credit for the potential investment gain in the increased portfolio. I think it is fair to say that is not 'well thought out' - maybe 'not fully thought out' would be better, but close enough, no?
No Debt is good in anyone's eyes, ....
That's not true. It may be true for you, but how can you speak for others? I'm may be a minority here in this regard (not even sure of that), but at least some us welcome debt on the right terms. We wouldn't even be having this discussion otherwise.
Now sometimes even
I wonder why I continue to engage in this tired old debate
But it's funny, sometimes it triggers a new way to look at an old problem, and this just happened to me. Now bear with me, I'm still absorbing caffeine, so maybe this is not 'well thought out', or just plain wrong. But I welcome constructive critique, I would never be insulted by that.
So here's my 'new' thought on this... All along, I've said you have to be reasonably confident that your investments would outpace the cost of the mortgage, or it just doesn't make economic sense (forget the emotional side for now). But I guess it was just a 'gut feel' that I could do better than these historically low rates - is there a way to get data to back that up? Hmmmm, so I looked at a conservative WR over 40 years in FIRECALC - a 3.0% WR gives 100% success (3.4% is on the edge @ 99%), and produces a minimum final portfolio of 56.8% of your starting number (FIRECALC reports this all in 'todays' $). I think it's easier to talk in $s, so I started with a $1,000,000 portfolio and $30,000 Withdraw for the 3%, and that leaves at least $568,000 at the end of 40 years. This is with the default 75% stock AA.
From there, my spreadsheet tells me that in that worst case 40 year scenario, the portfolio would have had to produce an average 2.389% real return in order to support those withdraws and still have $568,000 in 'the bank'. If we add some nominal inflation number to that, say 3%, it seems to tell me
that even the worst 40 year markets returned ~ 6.3% for that AA, which is significantly above current 30 year mortgage rates.
If that is a reasonable way to look at it, (and maybe it isn't - I think some others on this forum are better with these calcs than I am) it makes me feel even better about holding the mortgage. It might even be time for me to refi to a larger amount and lock in these low rates.
If someone else doesn't feel comfortable with that, then a pay-off is probably the right thing for them. As I have said repeatedly, it probably isn't a big deal either way, but I do think we should frame the problem correctly if we are going to discuss it.
-ERD50