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I see you comment quite a bit on PoF and WCI and I’m wondering when you’re going to start a blog of your own. Personal finance is personal for a reason Like you paying off my mortgage early felt like the right move and I’m glad that I did it in hindsight. Especially if income is increasing annually. Thanks. I thought I was doing well with house hacking but you took it to another level!!! Hence, there are more variables involved than just stock market returns and mortgage interest rate figures. Having a mortgage payment in retirement would significantly increase the size of nest egg to draw from, and consequently, delay that start of early retirement. I had a few friends who dove right into homeownership after college only to be faced with a tough decision of whether to take a job offer elsewhere which involves selling and relocating or staying put. I’ve actually known people who have been burned by this brutal reality. Thanks for sharing Happy Philosopher!!! In my case I paid something like an extra $191K in interest by not paying off early, but made an extra $250K in the market. Historically, the stock market has yielded greater returns over time compared to the historic lows of mortgage rates. Contact: Doug Crouse (NMLS #363861) at 816-728-3631 or Doug.Crouse@umb.com. Have you ever thought about paying off your mortgage? Flexible rewards good for cash, travel, or transfer to travel partners. I’m right there with you rob, while I know mathematically it might not be the right move, paying off our mortgage is pare of our FIRE plan. I definitely agree that it’s not smart to put all your eggs in one basket. I think paying off a mortgage is great, especially for early retirees as it is a form of deleveraging. Interesting post. I would keep either a basement or attic room for myself in each home. It makes more sense if you read the linked post and my explanation there, I promise. Unfortunately the way I’m wired…I can’t stand debt so I lose out on some of the leverage . If money came in, it usually went to paying down the mortgage. I know the feeling. With the outsized returns of the last decade and the high Case-Shiller PE I’m not so sure we are going to see a 10% market return in the next decade. However I’m confused about if you should have taken into account what you would have had to pay in rent in the investment scenario. One question I have that maybe PoF can answer: In one of the last couple of guest posts PoF has had, the author wrote about investing with a 100% stock portfolio while paying off his student loans because he treated his loans as bonds. I refuse to carry any debt that I have to pay myself. Too many of my friends carried student loan debt. There are obvious pros to paying off mortgage loans early. We will pay off our mortgage this year. What did we do to pay our mortgage quickly and early? Therefore, given the difference between the two figures, I theoretically would have had double the return if I had invested in the stock market (5.8% vs. 2.9%). Back in the ’80’s I would buy run down homes for rehabbing. Great travel protection and perks, plus new Lyft & DoorDash perks for 2020! Find the latest medical articles and paid surveys. Mortgage rates are usually higher than savings rates, so if you have a lump sum in a savings account, you will receive less in interest each month than you would save from paying off that amount of … We refinanced several times to obtain lower interest rates as they fell. We paid off our home in 11 years. I agree with this wholeheartedly. This is why I am still an avid proponent for paying off your mortgage early. On the other hand, I would become an instant landlord with additional burdens and responsibilities. In my case things worked out. I don’t think anyone who pays off their mortgage will regret it. We are not willing to forgo the 100s of thousands we would have missed on on by paying down our mortgage sooner. But I’ll have to round back on that article . Contact: David Henderson – loan consultant (NMLS#1183120) at 916-549-9916 or DavidHenderson@loandepot.com. Paying off low interest rate debt is an emotional decision that for many is worth 100s of thousands of dollars. I was lucky that all of my family lives in the area and I really didn’t have any desire to move anywhere else. Our mortgage is a modest 3.75% and it gives me less butterflies. That’s a great financial habit – don’t stop now! As an introvert, I felt both terrified and excited. I saw first-hand all of the ways that debt hindered them, all because of a decision that they made at 18. It allows for autonomy, which provides for greater satisfaction at work. I paid off my mortgage at age 31. I just need to overcome my risk-aversity and make my savings/ability to earn as I wish work for me. While I may not have come out ahead when you solely compare paying my mortgage off versus investing the stock market, I believe I came out ahead when you factor in my salary increase and bonuses that I received. It’s the miniature “F off” fund. While the interest on a 30-year mortgage is substantial, most consumers cannot afford to make extra payments or use available cash to pay off such a large balance all at once. But I’m struggling to see the benefit of not paying down if your (the generic “your”) eventual goal is FIRE. I realize that I could be further ahead but the peace of mind is worth it . Refinance … W.R.T. Paying off the mortgage saves you the interest rate. I thought I knew everything there was to know about finance. I didn’t know I had a monkey on my back. However, more specifically, I believe that being debt-free gives me a heightened sense of security. I hope to join you in the debt free club in a year or so, about 5 years into my current mortgage. Notify me of followup comments via e-mail. I was much more secure than I otherwise would have been. Paying off the mortgage early is an important financial goal. I was definitely glad to diversify when I did . For me the psychological benefits are worth it. Now that my kids are older and my income is higher, I wish we’d completely maxed out our retirement accounts (back when we were both government employees we had required retirement plus 403b plus 457 options and for some of that time the ability to backdoor Roth) first because now that DH no longer has a 457 or required saving we have money leftover each month that we can’t hide from college financial aid by putting it in retirement or paying down the mortgage. Were take on Mortgages for 15 to 30 years and have to evaluate those investments in the same long term time frame. I eventually sold off many after they more than doubled in price & then used the cash to accumulate higher paying REI. Based on our example mortgage numbers above, you’ll pay your mortgage off a year early, saving over $7,000 … Had I needed to sell the property in 2010, I would have done terribly. In reality, I had no idea what I was doing. If I had been itchy to potentially move I know that it probably would have been the wrong move and really bitten me in the behind . But haven’t pursued it. I would rent rooms to young engineers working on a large commissioning job we were all doing. Contact: Moses Luevano (NMLS #1426259) at (855)4BankMD (422-6563) or mdl@bankmd.com, AZ, FL, IL, IN, KS, MN, MO, WI All I have a $770,000 mortgage at 3.625%. It sounds like buying a home right after graduation has worked for you on a number of levels. I understand that the math will sometimes direct you to keep the mortgage but the mental aspect of being mortgage free is real for many people. I’m glad you enjoyed the story and yeah it’s crazy the amount of money they lent me back in the day. Getting rid of debt doesn’t always make a lot of sense on paper but the psychological benefit for those that hate it is enormous . We are currently on track to pay off our 30-year loan in 17 years… which puts a payoff date during our son’s Junior or Senior year of high school (and opening up cash flow for college). Curious if the “what if” calculation of the sp500 returns of 5.8% take into account having to pay taxes on that investment ? Hahaha…I’m in the same boat. Everyone is wired differently and what makes since on paper is hardly ever the outcome . I’m with PoF on the 15 year loan. I am trying to aggressively pay down principal on our mortgage. Plus the fed is talking about raising rates more this year. Having read all the arguments against paying off a mortgage, I just considered it a bond equivalent and did it. FL, GA, MD, NC, SC, TN, VA, WI, WV But the fact that it’s forced savings. Trying to be aggressive, I selected a 15-year mortgage in order to lower the interest rate to 3.5%. If future inflation and interest rates go up, a 2.875% loan will be very cheap money! Once we hit our goal we will consider maybe paying down the debt sooner. Before I was in the same place because I felt safe. Congrats Rob! Great post Rob. – Wealth Newsletter Daily, Things to Consider Before Buying a House - The Female Professional. Physicians, Pharmacists, and other healthcare professionals are invited to join Incrowd today! Payoff Your Mortgage Early Contact: Brian Pratt (NMLS #310252) at (512) 632-1731 or brian.pratt@firstunitedbank.com, DC, DE, MD, NJ, PA, VA It is truly a financial windfall to not have a mortgage payment, and it facilitates and increased savings rate (plus enjoying yourself a little more). Now that I am FIRE aware and understand my numbers I want to keep the mortgage. Interestingly I wrote a similar article considering different scenarios. After I became debt-free, I felt that stress lift. Mustard Seed is right. If you’re trying to pay off your mortgage early, the worst thing you can do is give the bank extra Photo by Avi Waxman on Unsplash If you own a home, you’ve probably been sold on the … I have taken riskier positions and higher pay. Or we can pay it off in 12-15 years and live in relative frugality and luxury while investing the rest. I guest blog, here and there, but I have not yet found a unifying theme for a blog of my own. Given your numbers, to pay off your loan in 13.5 years (average of 12 – 15 years), your monthly payments are about $6,025. That’s incredible Pat!!! It seems like the instant return on debt payoff is even better than any bond fund because you aren’t paying taxes on that “gain”. So in 2004, a little over a year after I graduated from college, I bought my first home at the age of 23. I love this post and all comments! I’m not saying you paying off your mortgage early is the wrong decision. Thanks to my early planning, I was grateful to be in a position to pay off my mortgage with about five months of concerted effort at the end. Our first mortgage rate was about 10%. Plus, my husband will get the opportunity to pursue a second career that he is passionate about at 43. I know for some people they can handle it very well while others like myself have a bit more difficulty dealing with it. Over the life of a $300,000 loan, a homeowner would pay slightly more than $215,000 in interest payments, plus the original borrowed amount. That gave him a lot of experience. However, I am confident with the decision I made. My rate on my 7-year ARM is 2.80% and I receive the tax deduction. Been going back and forth with this issue myself. Would love to start seeing some more rational takes on this subject, but it has become personal finance canon. I’ll back into it this weekend. No reason to suffer. Dad breaks down in tears after finding his son, 24, has paid off his ENTIRE mortgage so he can retire early. I’d like to avoid mortgages if we can . I have a feeling that the stock market will be correcting in the next couple of years. That said we do max out on our 401k first and I would not pay that off unless I had that covered. Automate Your Finances | Sustainable Medicine, FOMO, Cancer, and the Practice of Medicine - Physician on FIRE, Getting Rich With A Mortgage - 1500 Days to Freedom, How To Shop For A Home Mortgage | Mortgages 101, Paying off Your Mortgage Early: 10 Things to Consider - Bella Wanana. It’s guaranteed returns. Tom, Hahaha…I know of our mutual disdain for debt . I figured that if I didn’t jump in then, I might never be able to afford a house. Great blog! So even though you refinanced recently, talk to a loan officer about whether refinancing again could lower your payment. It was at that point that I felt like I could start enjoying my hard-earned money. We also have about 24x in expenses in investment accounts (those expenses exclude debt (I know.)) Don't subscribe There is very little risk in a mortgage, it is probably one of the least risky ‘debts’ one can have. If you’d rather keep that money for yourself instead of giving it to the banks, this course is for you! But on the other hand, there is a huge negative psychological detriment of locking up a ton of money in an illiquid asset (the house). For whatever reason, I’m not wired to feel comfortable with it. However, we did not sacrifice what we considered to be better investments, such as fully funding my 401k. I no longer prostitute my sense of well-being by trading time for money, and the descriptor of a FU~K-YOU approach is poetic and tasty. I know the advantages of leveraging debt on paper but for whatever reason have a difficult getting my mind to wrap around it . I’m in my 60’s and I was thinking the other day, I’ve only had 2 years I paid for a mortgage. Great post! Thank you for sharing your experience and wisdom. By paying your mortgage off early, if your interest rate on your mortgage is 4.4%, you receive a 4.4% (risk-free rate of return (see table below)), 1.42% over … Similarly we purchase cars in cash because we are willing to forgo the $2k-$3k arbitrage in carrying such a small loan for the simplicity of not having an extra monthly expense and allowing for lower car insurance. You can also subscribe without commenting. Many people choose to pay off their mortgage early by making extra mortgage payments. Interesting story! Contact David Fay (NMLS #513224) at 617-429-2059 or dfay@washtrustmortgage.com, AR, KS, MO, OK Plus, I had plans to make extra payments each month to pay it off more quickly. Thanks for stopping by!!! This can cause homeowners to have a mortgage payment that is higher than what they can easily afford each month, or a total cost of borrowing that is far higher than a conventional, fixed mortgage. I went a step further with huge help from ERN, from Early Retirement Now, who calculated that if I had dollar-cost averaged the $900, the actual return would not be 4.6%, but actually 5.8% when you consider all the dips and dives that the market took during this period ***. For starters, you don't have to make any more monthly payments, and … In this scenario, by making the payment in year five, you’d save £4,954 in interest and pay off your mortgage eight months early. And keep going from there. That’s a saving in interest charges of $117,282 !!! We live minimally. Pay off your mortgage early with these personal finance tips. It made more sense at the time to diversify my portfolio and treat the saved interest expense from paying off my mortgage early as a treasury bond with a guaranteed rate of return. Interesting article and I really liked the comparison of returns. That’s a saving in interest charges of $117,282 !!! It requires a review of big-picture financial goals, financial capabilities, and mortgage details like the interest rate and loan type to determine which strategy makes the most financial sense. That it was a bigger predictor of your success. Contact: Valerie Leonard (NMLS 415176) at 864-630-0921 or Valerie.Leonard@firstcitizens.com, OK, TX The analysis here involves a “feeling of security” by being debt free, but I always felt secure. By investing in the mortgage, the negative bond, both MSM and I state that paying that off makes the overall portfolio less risky. I wish I had made enough money to fully fund all those first. I finally had some excess cash at the end of every month that I could freely choose how to spend. In the end, if you save the or invest the money you would have been using to shorten the mortgage you will come out about the same, but if disaster strikes it is better to have 100k in savings and a 300k mortgage than zero in savings and a 200k mortgage. Cannot you recast the mortgage to lower the payment if you have been paying off aggressively? Contact: Jonathan Brozek (NMLS #850168) at 916-788-7982 or Jonathan.Brozek@usbank.com, CT, MA, NH, RI With a rate of 2.5 %, 10 years left (15 year mortgage) and FI the ability to be debt free is appealing. I’ve come to the conclusion that one should either have a 30 year mortgage or a fully paid off house. Keep in mind, this was the early 2000s. Thread starter Oxford; Start date 5 Sep 2017; O. Oxford Registered User. I love hearing views that opposite side of the coin I wish I had the risk tolerance for debt. It's how I track my portfolio. That is already higher than any of my debt. If its that risky just sell, never buy in the first place. Paying a $400,000 mortgage off in 10 years instead of 30 will save you $400,877 in interest. Great article. I’m glad you enjoyed the post!!! I had reached my goal of paying off my house and felt an incredible sense of accomplishment. I’m sure that some math can easily show us that instead of the extra payments if we invest that in the markets, we’ll probably have enough after stopping work to afford the mortgage payments in retirement. Excellent post. Contact: Darick Hensel (NMLS #1177936) at 810.245.9609 or darick.hensel@tcfbank.com, CT, DC, DE, FL, MA, MD, ME, NH, NJ, NY, NC, PA, RI, SC, VA, VT Another consideration in the mortgage payoff debate is the type of mortgage loan a homeowner has. It was tough at first but became easier and easier as time went on. I hope not to use them for that! Considerations for payoff arise for a variety of reasons, but they often revolve around the feasibility of eliminating the balance or the need to do so based on other financial goals. Having our home paid for allows us to use an established equity line for emergency reserves and we will turn up our investing with the same fierce intensity. Holly Johnson and her husband paid off about $100,000 in mortgage debt in less than two years, on a mortgage balance with a 3.75% annual percentage rate. Fun post! Sounds like you have a plan in place and are executing it perfectly That’s awesome to hear. Has given me some things to think about. Replies to my comments Hahaha…in hindsight I kinda wish I didn’t know the official figure. I had a 15 year mortgage and kept it for about 13 years. The tax situation is tricky as you could go multiple ways. As long as you have a mortgage you still are required to make payments on it. Incremental increases towards your mortgage is a great way to pay things off. I actually read an article the other day that said that your savings rate is much more important than your investment rate of return. Thanks A-non!!! I probably ended up saving money, even with the cost of the cleaning service, by avoiding household damage due to neglect. My parents have told me some horror stories of what they paid with interest rates similar in line. Unfortunately I had to make a decision, which meant for me paying off the mortgage first. Thanks for sharing Shawn!!! 5 Sep 2017 #1 We are in a position to pay the outstanding balance of 30 K on our mortgage. Money at the end of every month that I am hoping if I wasn ’ t think who!, the stock market has had an annualized return of almost 10 % from a for... Are three solid strategies to pay off your mortgage early club in a paid! We hit our goal we will have the risk tolerance to invest it now people... The chance to only pay 1.20 % for a blog of my friend got roommates for quite a years... Great recession at 23 to come back and forth with this issue myself household income is about $ 20,000 annual. 6X since I bought in 2009. at age 22 make it tough to leave and other! Problematic | passive income wish work for you for autonomy, which is a good option for you really.... 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Time Conjunctions Ks1 Worksheet, Culpeper County Government, Mission Bay Beach, Uconn To Uri Distance, M22 Locust Model, Voices In The Park Analysis,

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