I think if you have a big and long mortgagee especially, this is something that I would encourage those to give serious thought to incorporating into the budget.

Not trying to go all D. Ramsey on you. I have never gotten into his line of thinking. I think this is just a practical and effective tool to help get more equity and less debt in your tool box.

https://www.forbes.com/sites/j...-early/#69ed4752da87

This is good stuff and something most folks don’t understand.

You can set up scenarios in Excel, find online calculators or pickup a financial calculator. I’ve used a HP12C for years and highly recommend learning one of these if you seriously want to solve answers to savings or loans.

Mike

lots of useful financial calculators here:

https://www.dinkytown.net

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I think the problem really isn't math. Folks call these financial gurus with dreams of finding a magic bullet or process. They typically try to convince themself that moving one loan to another at x% lower interest will help them get out of debt faster and they think they have done something. It may help the timing, but this isn't the root of the problem.

The issue seems to be behavioral. If you want to get out of debt, stop yourself from buying all the crap that everyone says you need. If you still don't have enough to pay your bills and reduce the principle, move to a cheaper place, sell stuff you don't need, and/or get a second (or third) job until you get yourself under control.

--K

Once you determine a monthly additional payment to principal, and easy way to follow thru is to set up automatic payments. I found after a couple of months you don't really notice. Sometimes it's hard to force yourself to write another check.

But why pay the mortgage off early?? Stupid question I know but what says the brain trust. I would love to pay mine off but the wife and Financial Planner are not keen on it. They say we can use house as a write off for taxes. I say pay it off and all that extra money is mine every month. Advantages? Disadvantages??

Lots of variables in your question. Does your interest still count with the new standard deduction on our personal taxes?

But, the dumbest reason I’ve heard for paying interest is to save on taxes. You spend a dollar, how much do you get back?

My wife and I worked very hard to payoff our house. We have no regrets.

Have your financial planner figure your taxes both ways and then decide which way to proceed.

Mike

Urabanwarrior -- fire your FP, and get rid of the whole life insurance policy he sold you while you are at it.


--k

It’s a very interesting question and as a money geek and being mortgages for the last 20 years or so I can argue it both ways. Paying off is great as you have no debt but the taxes and upkeep but no write off. The argument is paying a dollar if interest so you can deduct .30c seems weak to me especially since the tax law changes last year. But if you have a nice 30 fixed why not pay it off with ever cheaper dollars ( if we assume inflation is real).

One way to think about it is every dollar extra toward principal is an immediate 3.5% ( or whatever your rate is) return. But it’s more than that it’s a tax favored deal so say 30% round numbers and your really getting a return of 2.5% give or take. Again ignoring inflation which even if we say is 1% inflation that makes the real cost of your money 1.5%. Now. The stock market wasn’t great in the last few months but since were are dealing in decades here, we can pretty much bet the house that your long term 10-20+ years return will be well more than 1.5%. paying off to coincide with retirement I get. So paying a 30 year in 20 or 25 years. I could buy that.

One last thing to remember is your banker wants his mortgage payment every month on the 1st. He doesn’t care if you’ve paid extra for a decade. You lose your job and you have minimal cash savings he still wants that nut. If for last 10 years you’ve been throwing extra 100-1000 into a savings account or mutual fund you have anywhere from 12,000 to who knows how much ?? cash on hand. Not a paid down mortgage that’s in default in as little as 30 days

If your obsessed with being debt free ( which in general I agree with) but a house is the only thing we finance for 30 years and is heavily subsidized by Uncle Sam. I wouldn’t recommend borrowing on a credit card at 25% or financing a car for 7 years at double digits either.

I like Dave Ramsey. I listen to him in my ride home every night and some people need his tough love as they are a wreck. But i don’t see eye to eye with him on several issues. This is one.

Spending habit is the key for me, i spend as less as i can, save more, don't buy what i don't need....Ever. before i was 30 i has good credits and qualified to get loans etc.

My mortgage interest rate is 2.75% fixed.

I am not paying it off early.

But - the theory and math work out and if you are disciplined and are paying a higher rate of interest than you can earn in a conservative account.

quote:

Originally posted by urbanwarrior238:
But why pay the mortgage off early?? Stupid question I know but what says the brain trust. I would love to pay mine off but the wife and Financial Planner are not keen on it. They say we can use house as a write off for taxes. I say pay it off and all that extra money is mine every month. Advantages? Disadvantages??

If (and only if) you live somewhere with stupid high state taxes and you make enough money to be in the top federal tax bracket, then your marginal tax rate is in the ballpark of 50%. Of course, recent legislation limited the amount of state taxes and interest you can write off, so your write-off may be lower still, but for argument’s sake, let’s say between the state and federal government they are paying half your interest (it is almost certain to be lower). Guess who is paying the other half? You! So you are paying a bunch of interest to some lender just so you can say that, “the government is paying for half (or more likely some lesser percentage).” Doesn’t seem like a good deal to me. Further, paying off your house significantly reduces your “monthly nut,” leaving you with a whole lot less stress if “life happens.”

All these calculators and spreadsheet formulae are based on a simple set of basic equtions. If you can find the equations you can answer many types of questions like that. I used to have a list of them but have since lost it. But all those equations are listed on the internet. Look for things like 'present value of terminating periodic annuity' etc. Lots of fun you can have with those equations and a spreadsheet. There are also financial type formulas included with all spreadsheet programs. Financial planning, managerial accounting, and microeconomics are fascinating subjects.

quote:

Originally posted by Graniteguy:
My mortgage interest rate is 2.75% fixed.

I am not paying it off early.

Well, at that right I can only assume you have a 15 or 10 year mortgage. Compared to a standard 30 year mortgage, you are paying it off early.

quote:

Originally posted by urbanwarrior238:
But why pay the mortgage off early?? Stupid question I know but what says the brain trust. I would love to pay mine off but the wife and Financial Planner are not keen on it. They say we can use house as a write off for taxes. I say pay it off and all that extra money is mine every month. Advantages? Disadvantages??

I'm going to ask a different question. Does your financial planner get a percentage of how much you have invested?

The advice seems sketchy and when in doubt follow the money (i.e. if you spend more money paying your mortgage you have less money to invest with the financial planner).

quote:

Originally posted by Balzé Halzé:

quote:

Originally posted by Graniteguy:
My mortgage interest rate is 2.75% fixed.

I am not paying it off early.

Well, at that right I can only assume you have a 15 or 10 year mortgage. Compared to a standard 30 year mortgage, you are paying it off early.

Your assumption is correct.

That's a handy calculator, will save it for future use.

I've used the following spreadsheet:

https://www.vertex42.com/Calcu...gage-calculator.html

The advantage is not having to be online to use it.