Paying off my mortgage

[99Saturn]

Maybe, but roll the dice? I mean, it sounds as if the OP would regret losing the chance to pay off the house when he can make that happen right now.

OPs case where it is a short term window, yes I personally agree. Not a fan of the risk/reward tradeoff even though it can pan out good.

But if I'm sitting on whats left today of a 30 year mortgage with rates in the 3% range, have to scratch my head and wonder.

 

[andrew_j]

My dad said a freeing moment in his life was paying off all debt age 37 including home , do it.

 

[gfh77665]

The house is my retirement home.

I don't know your personal finances and tax situation of course, but if you don't owe a lot, and /or your loan rate is not too bad, you can keep some strategic debt for a tax write off. Ask a tax pro if it makes sense. Easy for them to see all the angles.
Here are what the experts think 2024 holds:


JP Morgan: 4,200,
Morgan Stanley: 4,500,
UBS: 4,600,
Wells Fargo: 4,625,
Goldman Sachs: 4,700,
Societe Generale: 4,750,
Barclays: 4,800,
Bank of America: 5,000,
RBC: 5,000,
Deutsche Bank: 5,100,
BMO: 5,100,
Capital Economics: 5,500

 

[Donald]

I don't know your personal finances and tax situation of course, but if you don't owe a lot, and /or your loan rate is not too bad, you can keep some strategic debt for a tax write off. Ask a tax pro if it makes sense. Easy for them to see all the angles.
Here are what the experts think 2024 holds:


JP Morgan: 4,200,
Morgan Stanley: 4,500,
UBS: 4,600,
Wells Fargo: 4,625,
Goldman Sachs: 4,700,
Societe Generale: 4,750,
Barclays: 4,800,
Bank of America: 5,000,
RBC: 5,000,
Deutsche Bank: 5,100,
BMO: 5,100,
Capital Economics: 5,500

Some of these may have changed with yesterday's unemployment numbers.

I am thinking 5000.

 

[Astro14]

Some of these may have changed with yesterday's unemployment numbers.

I am thinking 5000.

The math gives you one answer.

The psychology another.

Which is more important to you?

Financial advantage or peace of mind?

For me, personally, with a 3.25% mortgage, and the ability to pay it off, I am keeping the debt while keeping the money invested. My psychology, my “sleep at night” level of risk tolerance, is different than many who have posted here, but I’ve chosen the financial advantage path because that’s what is important to me.

 

[alarmguy]

OPs case where it is a short term window, yes I personally agree. Not a fan of the risk/reward tradeoff even though it can pan out good.

But if I'm sitting on whats left today of a 30 year mortgage with rates in the 3% range, have to scratch my head and wonder.

I understand but the vast majority of the public is not disciplined, they will not invest the left over money that they think they have paying 3%. They will buy other stuff. Its proven when half the country doesnt even know how they would come up with $400 in an emergency.

Ex. even a 400k mortgage, with 80k down (20%) at 3% will pay $165,687.85 in interest over the thirty years. If they pay it off in 15 years they save roughly $77,000 dollars in interest. I think that is a good investment because I KNOW most Americans are not going to invest the extra money they have with the 30 year. They are going to buy more stuff and MOST likely take out loans on that too! *LOL*

But I do understand your point. We just have to remember, most humans are not independent thinkers, they follow and are easily tricked out of their money.

 

[SHOZ]

It's a good thing to do. I did it three times!

 

[99Saturn]

I understand but the vast majority of the public is not disciplined, they will not invest the left over money that they think they have paying 3%. They will buy other stuff. Its proven when half the country doesnt even know how they would come up with $400 in an emergency.

Ex. even a 400k mortgage, with 80k down (20%) at 3% will pay $165,687.85 in interest over the thirty years. If they pay it off in 15 years they save roughly $77,000 dollars in interest. I think that is a good investment because I KNOW most Americans are not going to invest the extra money they have with the 30 year. They are going to buy more stuff and MOST likely take out loans on that too! *LOL*

But I do understand your point. We just have to remember, most humans are not independent thinkers, they follow and are easily tricked out of their money.

In one respect I agree and completely get your point. One has to ask themselves if they are going to save the money and be honest about it. There are all types of variables too like time horizon.

That said, here’s another example to think about. Same person can either pay an additional $320k upfront to not take a mortgage, and then save that mortgage payment every month in an investment that is earning 8%/year… around $1.84M the end of 30 years (that’s probably a bit low since that would be no compounding until the end of year 1 how I calced so for transparency another year would get you to $2M). Or they could invest the same $320k upfront at the same return of 8%/year…$3.2M at the end of 30 years. Have to back the $166k in interest payments from the 3% mortgage so call it $3M after 30 years.

30 years is a long time, there’s a lot of unexpected life changes and that method is not for everyone but it gives me something to think about.

 

[John105]

I have to admit, I've gotten a bit sloppy on these finances. What I mean is I have 4 figures+ now earning no interest at all.

I am not an NFL quarterback, nor a rock star, but, believe it or not, for the first time in my life (2023), the money is coming in too fast. My net income is far more than my expenses.

What compounded this effect, is having no house payment, and effective 1/1/23, my wife picked up the health care. So that saved me about $850/mo.

My direct deposit goes into 4 accounts--none of these earn any interest, yet each one of them are approaching 5 figures. My excuse or justification is I'm simply too busy during the week to even login to move the money. I'm 2 places, either at my desk at work, or in my car driving to work. If I worked from home I'd be moving the money into my online money market which is at 4.4% and probably wandering around aimlessly at Costco shopping on co. time like everyone else I see there during the week.

My home loan was at 3.37%, and I paid it off in July regardless of the online money market being at 4.4%.

I think I mentioned I owned vmWare stock and now there is both Broadcom stock and a bunch of cash in my JPM online account. That cash is also doing nothing. It's 5 figures. It's a pretty fair assessment to say every $10k doing nothing is losing nearly $1.25/day--that isn't nothing to me, but again, I haven't got the time to do anything about it thanks to work. $1.25 is something, it's not nothing, because I pay $5/day for the bridge. I bring my lunch to work, I don't spend $14/day like the kids in the office.

I tell myself if I didn't have to work for a living, I'd have more time to keep up with this stuff. Yes, I'm stubborn, I remember what Jack Bogle said so I refuse to pay.

Three out of four money managers can't beat the market, so why pay them to try? My HS buddy is one of them, his fund was terrible, trailed the market for 30 years. But he has a 6 mil. home in Massachusetts. I'll try harder in 2024, maybe. What you gonna do.

A very small consolation is that I've contributed to the 401k at the IRS max for about 15 years, and that is 100% invested in the S&P. I get alerts that this is too aggressive for my age. So at least I am investing something towards the market regularly.

 

[4WD]

This thread has suffered some mission creep - I responded to a 70 YO with family - and about to retire - and stick with that opinion …

 

[SHOZ]

Gold and silver is always good place to dump excess money.

 

[John105]

Had to go back to the beginning.

OP has cash proceeds and is able to pay off mortgage. Doesn’t matter imho how it came about but he/she sold another house.

This does change things in my mind.

If all one does is buy a house, and get a mortgage, typically for 30 years, sometimes 15, then I would agree that it should never take the entire loan period to repay. I thought I read it typically takes 21 years to pay a 30 year mortgage.

And since we are talking about an equal payment loan, not a minimum payment one such as with a credit card, I do in fact agree with many here I wouldn’t necessarily take all the cash and pay off the loan. If the loan is at 2.5% and I earn 4.4% in the money market, there may be no rush.

I do like to have some wiggle room for the jack and the beanstalk factor. We as humans are often enticed by proposals that are too good to be true, and there’s always the remote possibility of having something go awry. So I think if possible make sensible decisions and stick with them. If they don’t work out then realize why.

But even at 0.005%, it’s generally better to get rid of loans and be free and clear. Don’t borrow more, borrow less, regardless of rate. My aunt sold her 2 mil home in NorCal 5 years ago. My cousin told me she only had about 300k equity. Not knowing all the details her lifestyle from 50-75 has a lot to do with it.

I think the OP is in a great position regardless of what he/she does.

 

[supton]

I have to admit, I've gotten a bit sloppy on these finances. What I mean is I have 4 figures+ now earning no interest at all.

Depends on future needs. I have more than that doing nothing, but I have college to pay for, and car procurement to deal with, and an economic downturn in the forecast.

 

[John105]

Depends on future needs. I have more than that doing nothing, but I have college to pay for, and car procurement to deal with, and an economic downturn in the forecast.

I truly believe time is a factor. A job necessarily interferes with one’s life and what we can do in our spare time.

I’ve recently taken the attitude of Broadcom, GS, JPM, Amazon, google, with the work from home. I have to be in the office. When my son had half days all week before Thanksgiving, I had to take PTO. People who wfh don’t have to. They’ll shop at costco, take a meeting, deal with kids, etc. So if I had more free time I’d get that money working for me.

Honestly. I have no idea what to do with my cash from VMware. So I let it sit. I don’t want to not give it thought and then lose thousands. That’s worse than not gaining say on the S&P. It gets some rate near 0 at JPM.

 

[supton]

I truly believe time is a factor. A job necessarily interferes with one’s life and what we can do in our spare time.

I’ve recently taken the attitude of Broadcom, GS, JPM, Amazon, google, with the work from home. I have to be in the office. When my son had half days all week before Thanksgiving, I had to take PTO. People who wfh don’t have to. They’ll shop at costco, take a meeting, deal with kids, etc. So if I had more free time I’d get that money working for me.

Honestly. I have no idea what to do with my cash from VMware. So I let it sit. I don’t want to not give it thought and then lose thousands. That’s worse than not gaining say on the S&P. It gets some rate near 0 at JPM.

Last I looked, CD’s were paying well. Do a CD ladder if you can be without the money for say 3 months, 6 months, etc.

Last I looked, my cash at Fidelity was making some amount of interest, a percent or two, for some reason. More than our savings account, so we left it there, and transfer as necessary.

 

[Astro14]

Last I looked, CD’s were paying well. Do a CD ladder if you can be without the money for say 3 months, 6 months, etc.

Last I looked, my cash at Fidelity was making some amount of interest, a percent or two, for some reason. More than our savings account, so we left it there, and transfer as necessary.

Well? They were paying inflation, basically…so, not that well if your goal is anything other than capital preservation. A CD that beats inflation by 4% (as was once the case) is paying well. What we are offered now is unattractive at best.

A 5% CD last year lost money compared with the 6.5% inflation rate. A CD this year, at 5%, is just beating inflation. Not by much, a real return of 1% or so.

Personally, I’d rather park short term cash in a money market at 4% (also, losing, but not a big difference) instead of tying it up in a CD. The liquidity allows for action, where a CD is locked in.

 

[supton]

True, except I have short term goals. Semester payments come on a predictable basis, so if I could earmark that money and set it aside, it’d make that much more.

Ultimately indecision on my part left it where it is, making 2% or whatever that Fidelity pays on cash accounts. We wound up floating more there than our savings account, which pays way less (need to keep cash on hand for emergencies).

 

[Vil_Riker]

I would pay off the mortgage rather than keep it and invest the excess amount that could be used for principal payments. I simply do not like debt.

 

[John105]

I would pay off the mortgage rather than keep it and invest the excess amount that could be used for principal payments. I simply do not like debt.

It’s very hard to argue with not liking debt.

You’re not going to starve because you don’t owe a lot.

Again I think with our reverse mortgage mentality today, people who didn’t have lots of debt likely had less material things over a lifetime. Why else would anybody be say 55 yo and have a mortgage? I think because they have a more expensive home and nobody cares what equity exists, just that they have it. On this forum alone people have “revealed” the selling prices of their homes. Rarely have they “revealed” their equity positions. It’s all good, but there really will never be much agreement on this topic and hopefully OP get his/her answer….

 

[tbm5690]

It’s very hard to argue with not liking debt.

You’re not going to starve because you don’t owe a lot.

Again I think with our reverse mortgage mentality today, people who didn’t have lots of debt likely had less material things over a lifetime. Why else would anybody be say 55 yo and have a mortgage? I think because they have a more expensive home and nobody cares what equity exists, just that they have it. On this forum alone people have “revealed” the selling prices of their homes. Rarely have they “revealed” their equity positions. It’s all good, but there really will never be much agreement on this topic and hopefully OP get his/her answer….

On multiple occasions I've seen a large, relatively spendy home sell to a younger couple near my age (early 30s) in my neighborhood. Not once did they have exceptional jobs that allowed them to save up a descent down payment...instead what occurred every time was minimal down and they own barely any part of that house. Even if they have good jobs, the money is usually wrapped up in monthly payments on cars, boats, etc.