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Repressed |
Right now, I can pay sub 4% interest on my mortgage, and let the funds I have make 7-8% or more in the markets. I have some accounts that have earned better than 10% over this last year. I'm ahead to let the money I have in my account earn more for me while I pay pretty minimal interest. Unless your home mortgage has a very high interest rate (and you're not interested or able to refinance into a lower rate), you could be doing the same. -ShneaSIG Oh, by the way, which one's "Pink?" | |||
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| Just because you can, doesn't mean you should |
I don't know of any guaranteed investment that pays 10-15% every year, no matter how well the economy does and is tax free, and my crystal ball is cloudy at best. Many people overestimate the tax benefit too. You can take the standard deduction of $12,700 for married couples. So only a deduction above that amount offers you a benefit and look at the cost. That deduction will double next year onward. Only people in very high income or special circumstances really benefit from the mortgage deduction when all the numbers are figured in. ___________________________ Avoid buying ChiCom/CCP products whenever possible. | |||
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| I believe in the principle of Due Process  |
Very few people, even Nobel Laureates in Economics and Finance, have a real understanding of risk, or rather, how to measure, or assess risk. Huge banks spend zillions on measuring and managing their risk exposure, and still are often standing when the music stops. I guess one way to face it is what happens if the worst happens. If your investment goes to zero, where does that leave you? If you lose the house, or have to take a second job, or there is divorce, etc. maybe it’s not a good idea. Be careful out there. I know several dozen couples who lived very well on the interest they received on real estate loans, secured by California real estate. When that market collapsed, those loans were not repaid, and the security was unsaleable for awhile and only at minor fractions of what had been owed thereafter. A few lost THEIR homes as a consequence. These couples had been successfully lending for years, decades even, with perfect results. Luckily, I have enough willpower to control the driving ambition that rages within me. When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson "Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown | |||
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| Member |
Pay penalties? It sounds like you are thinking of raiding your retirement money or breaking bank notes early. Bad idea. Best idea if you are serious is to eliminate all other debt first. Guaranteed you pay higher rates on your other consumer debt. Then eliminate or seriously curtail your discretionary spending. That money then goes directly to principal. If you are serious and have the requisite self control your mortgage will shrink at an impressive rate. Don’t pay any penalties. That is just plain numb. Also, don’t spend every liquid dime you have. Having a cash/liquid safety net will keep you from adding debt if something bad happens. Stop spending money you don’t need to spend and apply it to your mortgage. That is the best idea. Then when you are paid off don’t fall back into bad habits and keep investing some portion of your new found liquidity into some form of investment vehicles. Good luck. Debt free is the single biggest aid to ensuring a worry free retirement. | |||
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| Ammoholic |
The market is on a tear. Several stocks are hitting all time highs. It couldn’t possibly go the other way, could it? Getting completely into cash because the market is due for a correction is likely imprudent. Borrowing money to invest in a market regularly making new all time highs might not be the best course either... | |||
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| Conveniently located directly above the center of the Earth  |
we paid ours off a couple decades ago; still the feeling is  **************~~~~~~~~~~ "I've been on this rock too long to bother with these liars any more." ~SIGforum advisor~ "When the pain of staying the same outweighs the pain of change, then change will come."~~sigmonkey | |||
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thin skin can't win |
I believe he's talking about penalties on the "cash some stuff in" part of equation. If so, absolutely not in my opinion. You only have integrity once. - imprezaguy02 | |||
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Step by step walk the thousand mile road |
PAY IT OFF. I'm working hard to pay mine off. That way my spouse and daughter will always have a home. It is the last personal obligation to them I have to fulfill. Nice is overrated "It's every freedom-loving individual's duty to lie to the government." Airsoftguy, June 29, 2018 | |||
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| Big Stack |
The point your not thinking about is what the government subsidy makes the effect rate of the debt, what else you can do with that money, and how much that can pay. If you have a 4% mortgage,and can write off the interest on that mortgage, your effective rate is somewhere in the 3-ish% range, depending on tax bracket. The long term return on the stock market for the last 20 years is right around 7.7%. Now, when you sell stocks, you're going to have to pay tax on the gains, but that's only when you sell. Buy some good stocks, and let them run for years, that gain will compound tax free until you need the money. I know people like the feeling of getting rid of debt, but it's not always the smart play. What counts is net worth, and what increases it the most. Also not all debt is created equal. If you have CC debt that's costing you 14+% totally non-deductable, that's a completely different story. Do whatever you have to in order to dump it, because it's bleeding you dry. Mortgage debt at 3-4.5% that's deductible is a different animal.
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| A day late, and a dollar short  |
Pay it off only when you do not have to pay a penalty to do so. ____________________________ NRA Life Member, Annual Member GOA, MGO Annual Member | |||
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This Space for Rent |
How much of your savings will it take to pay it off? More than 50% then I would wait. We can pay off our mortgage but I prefer to have the cash liquid for the emergency situation. If you pay off the house and have no savings, then you are stuck and may be forced to sell the house to get the money. Sometimes it’s better to be cash rich and house poor. We will never know world peace, until three people can simultaneously look each other straight in the eye Liberals are like pussycats and Twitter is Trump's laser pointer to keep them busy while he takes care of business - Rey HRH. | |||
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| Member |
O No X yes Safety, Situational Awareness and proficiency. Neck Ties, Hats and ammo brass, Never ,ever touch'em w/o asking first | |||
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eh-TEE-oh-clez |
1) Most of the interest you'll pay on your mortgage is done at the beginning. If you intended to pay your mortgage early, you were better off either getting a shorter loan period, or making extra payments at the beginning. Paying off your mortgage at the end means you spent all that money on interest for the borrowed money, but in the end didn't even borrow it for all that long. 2) 3%-4% for borrowed money is pretty dang low. Your investments should be returning 8-12% in the long term. 3) Paying off your house doesn't put you in much better of a position than sitting on a lump of money equal to your house payment, as far as risk goes. Having cash on hand gives you flexibility. If you lost your job, having cash on hand allows you to continue making payments on your house, pay your property taxes, fix up the house to sell it, give you money to float by while you look for a new job, etc. If you lost your job and all you had was a paid off house, you are basically stuck with an asset that you have to sell to get value out of, and you may not have the opportunity to wait for the best price/make necessary repairs to sell it. If you've lost your job because of an economic downturn, you'll probably take a huge hit on the house too. Better to have cash on hand to ride out the downturn. 4)Inflation guarantees that house payments in future dollars will be cheaper than house payments in current dollars. Your $1000 a month mortgage payment from the 1990's is basically peanuts in 2020 dollars. 5) Are you maxing out your savings for retirement? Tax advantaged retirement accounts have contribution limits. If you miss putting money in it this year, there's only very limited opportunity to make up for it down the road. My personal strategy is to allocate money to things in this order: Emergency Funds, High Interest Revolving Debt, Tax Advantaged Retirement Accounts, Installment Debts, Investment Accounts, then Mortgage. | |||
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| Member |
I think this can only be answered as part of your overall financial plan. Is having a paid off house your priority? Or fully funded retirement accounts each year? Or college savings for kids? I suggest that you either undertake planning on your own, or seek out a professional so that you take an organized, prioritized, approach to what you should use your money for. | |||
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| Repressed |
And we can pretty much end the thread after this post. Well put, Aeteocles. -ShneaSIG Oh, by the way, which one's "Pink?" | |||
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| Go ahead punk, make my day |
Succinct and well put. | |||
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| Eschew Obfuscation |
This is the key for me. My mortgage interest rate is 3.125%. So, I would only put more money into paying off my mortgage if I could not get more than a 3.125% return investing my money elsewhere. It's not hard to do better than 3.125%, so that's where I put my extra $$. _____________________________________________________________________ “One of the common failings among honorable people is a failure to appreciate how thoroughly dishonorable some other people can be, and how dangerous it is to trust them.” – Thomas Sowell | |||
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At Jacob's Well |
+1 for Aeteocles' advice. We have enough money sitting in our emergency fund to write a check for the rest of our mortgage and be done. However, at this point (3 years from payoff), we'd be paying primarily principle with little savings on interest. Extra money coming in is better used for other investments. We paid extra early in the mortgage when it saved us a ton on interest, but now there's no point. In other words, why not use their money for a few more years since I've already paid the fee (interest) on it? J Rak Chazak Amats | |||
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| Member |
Just wanted t give more perspective so I numbered these above... 1. Yes it would be 'some' from a retirement account. The account is substantial and would have ample remaining based on my age / amount / current savings rate. Plenty saved for retirement based on my age / income / savings rate and also eligible for a pension in a few years. Effectively - retirement is covered. As far as the penalty - it would amount to about 2.5% of net worth. 2. No other debt. I have a truck payment but its at 0%. 3. I hear ya. But the raise in the standard deduction IMO has made me re-consider the mortgage interest. 4. I have teenage+ kids so we have some expenses that just 'are what they are'. Not living extravagantly but I don't pinch pennies either. We live within our means - trust me on that. 5. This is what is driving this conversation. The interest amortized out the remaining 20+ years is not small (in total dollars) - although the rate is sub-4%. The recent significant gains of the stock market are also driving this based on several accounts making big gains. Thanks for all the responses so far. Lots of good perspective. --------------------------------- Proverbs 27:17 - As iron sharpens iron, so one man sharpens another. | |||
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| Member |
I got about 6 months and the house will be paid off, can't wait. | |||
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