Mortgage payoff experiences

[LoneRanger]

I'm 53. 1st house bought w/ 30 yr fixed rate (can't remember %) as newly wed 26 yr olds in 1989, sold in 1996 and remaining equity less realtor fee plus savings rolled into down payment for 2nd place in a 15 yr fixed rate mortgage. Second place paid off in 2004. 2006 bought next (3rd and current) house on a 15 yr fixed rate. Paid it off last year. It's a personal preference thing in my opinion, some people don't mind carrying whatever amount of debt they're comfortable with. I'm comfortable with as little debt as possible and once I take out a loan of any kind I tend to work aggressively to pay it off asap. If the [censored] hits the fan and need large amount of cash, having a paid off house or at least an aggressively paid down mortgage allows you to obtain that cash via home equity loan very cheaply at today's rates. I tend to roll the lack of any monthly loan payments into savings, a 457b (by being able to payroll deduct larger pre-tax amounts than I would if had debt payments to make), and an IRA. As you can tell by mention of 457b, I am also a public employee.

 

[Cujet]

Originally Posted By: kballowe
Pay off the mortgage.

You can crunch the numbers all you want - but having less debt is a good idea.

Look at it this way - THE MORTGAGE COMPANY thinks that your loan is a good investment......... and I certainly would be happy to get that kind of (virtually guaranteed) interest.



Correct!

You are looking for a "what's the right thing to do" answer. The safest answer for those with modest income is always to avoid debt. For those who make major money in various investments, things may be different, or they might not. My billionaire boss invested huge sums of money building skyscraper-condo's, by financing his jet. He lost millions on each transaction.

 

[Mr Nice]

Originally Posted By: LoneRanger
I'm 53. 1st house bought w/ 30 yr fixed rate (can't remember %) as newly wed 26 yr olds in 1989, sold in 1996 and remaining equity less realtor fee plus savings rolled into down payment for 2nd place in a 15 yr fixed rate mortgage. Second place paid off in 2004. 2006 bought next (3rd and current) house on a 15 yr fixed rate. Paid it off last year. It's a personal preference thing in my opinion, some people don't mind carrying whatever amount of debt they're comfortable with. I'm comfortable with as little debt as possible and once I take out a loan of any kind I tend to work aggressively to pay it off asap. If the [censored] hits the fan and need large amount of cash, having a paid off house or at least an aggressively paid down mortgage allows you to obtain that cash via home equity loan very cheaply at today's rates. I tend to roll the lack of any monthly loan payments into savings, a 457b (by being able to payroll deduct larger pre-tax amounts than I would if had debt payments to make), and an IRA. As you can tell by mention of 457b, I am also a public employee.


That's pretty much my story. Paid off my house at 42 and that gave me lots of extra cash to invest.... on top of the 30% I contribute towards my voluntary pension and 401K. I also have a company pension and maxed out IRA.

If you pay down debt quickly, it gives you tons of cash for other necessities.

 

[Californiabob]

you don't need to justify anything. It's a great goal to pay off your house
and sleep soundly at night.

my input, when you do pay it off (or even earlier) get a line of credit (HELOC).
for kids schooling, put it into your savings, anything designated for the kids
means same amount deducted from scholarships/grants, whereas there's a limit on
savings.

lastly, UW made #11 on Public schools in latest Kiplinger or Money mag (forget which)

Bob

 

[Cujet]

Homes are often off limits to various entities that can confiscate money. None of us expect a lawsuit, but things happen, the home is a safer bet. Furthermore, if employment or health changes, it's entirely possible to use up savings and still have a mortgage.

As mentioned above, once a home is paid off, discretionary money can be invested without as much worry about risk.

 

[emmett442]

Just a follow up on this:


I ended up proceeding with the plan. I put down the $50k and bumped up the biweekly payment by $275 (a mere $137 per paycheck between my wife and myself).


The 15 year $178,400 loan was started June 2014. I now have $98k remaining. At this rate, payoff is fall of 2021. If we decide to also throw in the next 3 tax returns, payoff will be fall of 2020 - not that far away!

If this is successful, I may loosen up for a year as a 'reward'. For example, we never took a honeymoon (bought the house the same month we got married), so perhaps her and I will take a fancy vacation.

After that, I plan on looking into a 4-8 family apartment as an investment. That kind of risk will be a lot easier to take without a mortgage payment on the primary residence. Should be able to absorb any bumps in the road. Plus, saving up an appropriate downpayment should be a breeze.

Thanks for all of the comments.

 

[ArrestMeRedZ]

Good plan. You can justify not paying off the house easily by citing the better returns than 3.25% available elsewhere, but there is no feeling like being completely out of debt.

As to the apartment investment, I want to cite the 3 rules of real estate buying. Location, location and location. Don't pick a bad or declining area and expect to attract good tenants. And once you have tenants, don't put up with liars - people who tell you what they are going to do, then don't do it. Once they get away with it once, it will be repeated behavior. Evict the losers and do what you need to do to keep the good ones.

 

[Virtus_Probi]

Originally Posted By: emmett442
Just a follow up on this:

I ended up proceeding with the plan. I put down the $50k and bumped up the biweekly payment by $275 (a mere $137 per paycheck between my wife and myself).

The 15 year $178,400 loan was started June 2014. I now have $98k remaining. At this rate, payoff is fall of 2021. If we decide to also throw in the next 3 tax returns, payoff will be fall of 2020 - not that far away!

If this is successful, I may loosen up for a year as a 'reward'. For example, we never took a honeymoon (bought the house the same month we got married), so perhaps her and I will take a fancy vacation.

After that, I plan on looking into a 4-8 family apartment as an investment. That kind of risk will be a lot easier to take without a mortgage payment on the primary residence. Should be able to absorb any bumps in the road. Plus, saving up an appropriate downpayment should be a breeze.

Thanks for all of the comments.


My inlaws had rental property in WI and, from my perspective, it was a disaster. Seemed like they were only getting rent about 50% of the time on units because most of the tenants were deadbeats and it took them about 6 months to get people evicted. The scumbags would trash the places before finally having to leave and there would be a lot of work to get them back into shape. They decided to retire to a different part of the country and couldn't sell any of their rental property without taking a huge loss because the market had gone south, so a family member stepped in and spent countless hours on maintenance and repair for them until the real estate market recovered enough for them to get decent selling prices.
At the very least, make yourself very familiar with the laws protecting renters in WI.

 

[Mr Nice]

Why become a landlord ???

 

[supton]

Originally Posted By: Mr Nice
Why become a landlord ???


There will always be those who rent. Either they don't want home ownership, or they haven't gotten far enough ahead to get into a house. Business opportunity.

Set it up right and one can make more in rent than it costs to pay the bills. Then once any mortgage on the place is gone... it's "free" income. Or sell it as the business investment that it is and retire.

 

[MCompact]

We paid off our house and farm in January 2007- @10 years early. Absolutely no regrets.

 

[Triple_Se7en]

Originally Posted By: MCompact
We paid off our house and farm in January 2007- @10 years early. Absolutely no regrets.


We paid off both our auto and home at the same time in 2009. What a relief it brings to your inner self.

 

[MCompact]

Originally Posted By: Triple_Se7en


We paid off both our auto and home at the same time in 2009. What a relief it brings to your inner self.


Exactly!

 

[Wolf359]

Originally Posted By: Mr Nice
Why become a landlord ???


For the money? Like any business, it's not always that simple, charge too high a rent and the only people who will want it will be deadbeats or buy in the wrong neighborhood.

 

[Mr Nice]

Originally Posted By: Wolf359
Originally Posted By: Mr Nice
Why become a landlord ???


For the money? Like any business, it's not always that simple, charge too high a rent and the only people who will want it will be deadbeats or buy in the wrong neighborhood.


Wolf,

You know what you are doing and making $$$.

Other inexperienced people think they can do what you're doing and it becomes a nightmare. It's not the cash cow people originally thought.

 

[Mr Nice]

Originally Posted By: Mr Nice
Originally Posted By: Wolf359
If you're worried about dumping the money in the market because everyone thinks it's overpriced, you should just do automatic monthly investments on a fixed date. Say put the $300 in automatically instead of paying down the mortgage. At one point the market was up 6% since the election. So when the market is high, you buy less shares and when it's low, you buy more. I'd suggest an index fund to start. There are many funds out there that have 10 year returns of 7-8% and they'd be in the 11-12% range with just a 5 year return as that excludes the dump the market took in 2008.


I agree, a million dollar portfolio is not that difficult over a 25 years period.

They should focus on paying off the house, then both max out all retirement contributions / college fund for kids.


Wolf,

I took your advice on investing for the past 30+ years.

 

[emmett442]

Originally Posted By: Mr Nice
Originally Posted By: Wolf359
Originally Posted By: Mr Nice
Why become a landlord ???


For the money? Like any business, it's not always that simple, charge too high a rent and the only people who will want it will be deadbeats or buy in the wrong neighborhood.


Wolf,

You know what you are doing and making $$$.

Other inexperienced people think they can do what you're doing and it becomes a nightmare. It's not the cash cow people originally thought.



Everyone is inexperienced at some point. Gotta start somewhere, right? If experience is required to be successful, where do you obtain the experience?!?!?!

There are risks involved with every investment. I personally feel that the risks associated are manageable. Next guy may not.
This is exactly why I want the primary residence paid off first. Lessens my financial risk. Less risk = less stress = less emotion = wiser choices = greater chance of success. If I go into the land-lording business (or venture into any other unknown), I want to be as comfortable about it as I can be.

Worst case - If it gets overwhelming and I want to bail, I bail and move on. Not a big deal.



A smooth running and mortgage free 8 family would be a great retirement booster when the time comes...




Bottom line here is that I'm working hard, trying to get ahead of the game. If I make this big push now, then just fall off and get comfortable, rewards will be minimized and my efforts will be wasted. I need to keep pushing. Becoming a landlord is a big push.

 

[Wolf359]

Well you can read books and talk to other landlords. There's also other forums out there where people talk about all this stuff.

As for multi families, you don't really want an 8 family, get a couple 4 families. You can get regular financing on a multi up to 4 family, once you hit 5, it's a commercial loan and the rates and terms aren't as good. You'll get lower rent per unit on an 8 family plus your mortgage costs will be higher. And you definitely don't want a 10 family, once you go over 9, if you get someone who's handicapped, the landlord has to pay for modifications to make it accessible, under 10, the tenant pays.

 

[Virtus_Probi]

Originally Posted By: Mr Nice
Wolf,

You know what you are doing and making $$$.

Other inexperienced people think they can do what you're doing and it becomes a nightmare. It's not the cash cow people originally thought.



Worked with a young guy some time ago who started hanging around with an older guy in the office, the second guy had rental property in a nearby state and was constantly putting a bug in young guy's ear about how he could be rich fast...I'm a landlord, nothing to it, hire people to maintain for you, you're stupid to not take easy money, etc. The young guy ends up buying a 3 flat in a small city, tells me the neighborhood is OK with a hospital and high school nearby so nurses and families will want to live there. I asked him if he was going to live in one of the apartments, he says like [censored] he is going to live in that part of town!
Well, of course he bought near the peak of the real estate boom and the value of his property started plummeting before long. The place needed more work than he realized and he couldn't always afford to hire somebody or even find people on short notice, so he's spending his weekends trying to fix things instead of hanging out with buddies and chasing girls. He started hiring questionable contractors to save money or when they were the only people to be found and ended up being beaten unconscious by one of them during an argument. He ended up relocating 2/3 of the way across the country for a better opportunity and had to hire a management company because he still couldn't sell the place...finally dumped it a few years later and wished he had never seen the place.

Obviously, people CAN make good money doing this stuff...you just need to understand what you're getting into and what it will require from you. To me, it's sorta like how everybody thinks it should be so easy to own and run a restaurant and then 90% or whatever of them go bust within 5 years. Had another coworker who learned that one the hard way, he ended up losing his house not so long after the place closed down.

 

[Wolf359]

Yep, there's always horror stories out there that will scare people away. Just like there's tons of horror stories about various cars. No doubt you'll run into issues. I've got a few good stories myself, but I'm still in it and mostly I just collect the rent every month. You never really hear from those that have nothing to report.