Thinking of paying off mortage instead of investing in mkt (1 Viewer)

[John Mamula]

Having some debt on it will give you some much needed tax breaks and the price on the paper is at historic lows.

Thanks GB...can you elaborate on this? Any other tax breaks than the traditional deducting any interest pmts?

Not paying it off in full will allow you to invest incremental dollars at the bottom of the market over time allow you to dollar cost average. So instead of applying all dollars every month to extra principal paydowns, allocate some to stocks, funds, bonds, whatever.

This is really my main concern about it all. The mkt is so low right now that I'd be missing out.

Also, you may want to look into paying your mortgage every other week instead of once a month as that can accelerate principal paydowns without additional dollars towards it.

This seems like a no brainer no matter what I decide. Do all companies offer this? Do they charge a fee for it?

Regarding liquidity, I would bump that number from 6 months to closer to a year (or at least 9 months).

Any specific reason here...or just mitigating risk?

Knowing doing all of this is not "maximizing" returns on your capital, but there is something to be said for risk mitigation here which is smart.

Also, it is very unlikely you'll live in this house the rest of your life, but regardless, you will have put yourself in a position where you will have the leverage to decide when and how you move, if you ever choose to.

While you're probably right, I'm building this house like it's the last one I'll ever live in. I'm sure when my non-existent kids are all grown up and I can't walk up/down stairs any more I'll downgrade.

In terms of debt vs. no debt that's it (other than points when you initially close but thats not material enough over the life of your investment matrix to warrant consideration).Not sure about what banks do or do not do it, or if it costs more (I don't think so, but have no idea...I think the catch is you get is automatically taken out of your checking account every time so it saves them processing costs).Re: 9-12 months, just additional risk mitigation. Most people looking for jobs right now are taking them close to 6 months a lot of times. Seeing all of this up close and personal having a few extra months worth of living expenses liquid is just as valuable (if not more so) than paying down extra principal. My dad worked for big oil a geologist for Unocal back in the day and I've seen how bad that industry can be as well in cycles. I really think investing at the market now and over time at 12 year lows and having some debt at interest rates at historic lows is a nice combination for people in solid financial situations.While a lot of people are struggling mightily, these are the times where people have opportunities to become very wealthy.

 

[Chaos Commish]

It is very easy to have your mortgage paid off and have your money liquid. We have a line of credit on our house where we can draw up to $250K just by writing a check. That's pretty darn liquid. And at 4.5%, it's pretty tough to find a better short-term loan.

So if liquidity is your main concern, pay off the house and get a LOC that you can draw from if needed.

I can almost guarantee that rates on your LOC in the future are going to be higher than they are now. Not to mention the fees involved. He can lock in a spectacular rate NOW. If he goes 15 year fixed (which is what I'd do if I were him) it gets that much better.In this day and age, liquid cash has a much higher peace of mind factor than the paid off illiquid asset. IMHO, of course.

We're doing fixed rate helocs on folks like kutta (good credit unencumbered property or very small balances) at 5.5 and 10 years. Most home equity lines have a 10 year fixed rate. You can lock 5.85 for 15 years. Also many people with adjustable rate helocs are converting to fixed for a small fee. Others are sitting on sub 4% adjustables with rates so low. And any access to the very easy liquidity carries the interest rate tax benefits. I'm another vote for pay off the house. I'm just not excited about the financial aspects of building your own. I meant to comment in the other thread Tiger started on that, but he seems to have looked around enough to feel only building will satisfy him. Shame.

Can you expand on this? Legitimately curious. I'll take a PM if necessary.

Please post...willing to listen (even though I have no other option - i own the empty land and have to build on it)

This isn't a big deal. As TGunz has pointed out many times in the long RE thread, the economics of real estate is regional, so what I have to say may not even apply. But with so many REOs on the market being sold 40%+ below 05-06 values, it seems like someone buying in this market would be focussed on finding a steal. In hard hit regions home sales are actually very brisk driven 50%+ by foreclosures, distressed and short sales and the bargains are real. I am very close to buying one or two homes in such a region because I can get a positive cash flow instantly. The price-rent ratio is finally in line and the deflation may have overshot the bottom (mathematically). My hesitation is based on the possibility of rents crashing in the area (Temecula CA). So, I'm watching closely. It isn't like I will lose the opportunity. If I had the money I could buy ten tomorrow. Inventory is sky high. All of this downward pressure on housing has new home sales at levels not seen since the 50s and new construction is stalled. The material cost of building hasn't deflated while used home prices have. In some areas brand new construction is being sold for a loss just to keep the cash flow moving. But the point is, the best deals are in existing homes, not new construction.

All that said, build away if you have the land and use the economy as leverage with your builder. Good luck.

 

[menobrown]

I had this exact conversation with my brother a few years ago. He is a self-employed Chiropractor who was making a little over $500,000 a year the past few years. His house was his only debt and he owed about $330,000 on it and wanted to know if he should pay it off or invest. His GF at the time told him he was stupid for not investing his money. I disagreed. I told him he should pay his house off and live debt free. That he never could know if his business might fall in the toilet but since he has no wife or kids that even if his business crumbled he would still be fine and no matter what happened he would have a sweet house. We called it the Taco Bell plan. Basically get your monthly obligations down to the point that even if you had to get a job at Taco Bell you could still pay your bills. He took my advice and wrote paid his mortgage off with one check. This was about 5 years ago. His business started going in the toilet about 2 years after his and while I'm sure he missed the big paydays he really is not stressed or worried about it.

When you have a lot of debt you become a slave to it, even it the debt is manageable and you find yourself with a large amount of discretionary income. When a person becomes debt free or very little monthly debt I think it changes your outlook on life and allows you more freedoms in what you want to do with your life/job.

So my vote is pay it off.

 

[John Mamula]

It is very easy to have your mortgage paid off and have your money liquid. We have a line of credit on our house where we can draw up to $250K just by writing a check. That's pretty darn liquid. And at 4.5%, it's pretty tough to find a better short-term loan.

So if liquidity is your main concern, pay off the house and get a LOC that you can draw from if needed.

I can almost guarantee that rates on your LOC in the future are going to be higher than they are now. Not to mention the fees involved. He can lock in a spectacular rate NOW. If he goes 15 year fixed (which is what I'd do if I were him) it gets that much better.In this day and age, liquid cash has a much higher peace of mind factor than the paid off illiquid asset. IMHO, of course.

We're doing fixed rate helocs on folks like kutta (good credit unencumbered property or very small balances) at 5.5 and 10 years. Most home equity lines have a 10 year fixed rate. You can lock 5.85 for 15 years. Also many people with adjustable rate helocs are converting to fixed for a small fee. Others are sitting on sub 4% adjustables with rates so low. And any access to the very easy liquidity carries the interest rate tax benefits. I'm another vote for pay off the house. I'm just not excited about the financial aspects of building your own. I meant to comment in the other thread Tiger started on that, but he seems to have looked around enough to feel only building will satisfy him. Shame.

Can you expand on this? Legitimately curious. I'll take a PM if necessary.

Please post...willing to listen (even though I have no other option - i own the empty land and have to build on it)

This isn't a big deal. As TGunz has pointed out many times in the long RE thread, the economics of real estate is regional, so what I have to say may not even apply. But with so many REOs on the market being sold 40%+ below 05-06 values, it seems like someone buying in this market would be focussed on finding a steal. In hard hit regions home sales are actually very brisk driven 50%+ by foreclosures, distressed and short sales and the bargains are real. I am very close to buying one or two homes in such a region because I can get a positive cash flow instantly. The price-rent ratio is finally in line and the deflation may have overshot the bottom (mathematically). My hesitation is based on the possibility of rents crashing in the area (Temecula CA). So, I'm watching closely. It isn't like I will lose the opportunity. If I had the money I could buy ten tomorrow. Inventory is sky high. All of this downward pressure on housing has new home sales at levels not seen since the 50s and new construction is stalled. The material cost of building hasn't deflated while used home prices have. In some areas brand new construction is being sold for a loss just to keep the cash flow moving. But the point is, the best deals are in existing homes, not new construction.

All that said, build away if you have the land and use the economy as leverage with your builder. Good luck.

The other side of the coin though is that building your own home today you have an equal amount of leverage with your general contracter and subs since they have no work to do.TF also gets a home exactly to his specifications, compared to buying a short sale or foreclosure that may need significant work done to it and no leverage in getting it fixed other than on your own dime.

Your standard production builders in Phoenix were building for $60 PSF near the peak. Now it is in the mid $30s.

You're probably getting a similar price break in construction costs with a home exactly how you want it when you compare it to foreclosures that are in any decent condition.

 

[Chadstroma]

The upcoming inflation we will see will make investments worth less, cash worth less and the mortgage you are paying down less of a burden.

The market is so low now that it is worth thinking buying for long term investment but being debt free is freedom. I do not think there is a wrong or right answer here. In the end, I think you should pick whatever you feel the most comfort with.

 

[mr. furley]

TF> what do you do for a living that you can pay off a new construction in 4-5 years?DO YOU HAVE ANY JOB OPENINGS?

Wife/I have pretty good middle class jobs (not "HEY LOOK AT ME" $ by any means), but a majority of this is coming from money we made off of selling our house and getting extremely lucky on a real estate deal. We wouldn't be in this situation if it weren't for that.

congrats

 

[Tiger Fan]

It is very easy to have your mortgage paid off and have your money liquid. We have a line of credit on our house where we can draw up to $250K just by writing a check. That's pretty darn liquid. And at 4.5%, it's pretty tough to find a better short-term loan.

So if liquidity is your main concern, pay off the house and get a LOC that you can draw from if needed.

I can almost guarantee that rates on your LOC in the future are going to be higher than they are now. Not to mention the fees involved. He can lock in a spectacular rate NOW. If he goes 15 year fixed (which is what I'd do if I were him) it gets that much better.In this day and age, liquid cash has a much higher peace of mind factor than the paid off illiquid asset. IMHO, of course.

We're doing fixed rate helocs on folks like kutta (good credit unencumbered property or very small balances) at 5.5 and 10 years. Most home equity lines have a 10 year fixed rate. You can lock 5.85 for 15 years. Also many people with adjustable rate helocs are converting to fixed for a small fee. Others are sitting on sub 4% adjustables with rates so low. And any access to the very easy liquidity carries the interest rate tax benefits. I'm another vote for pay off the house. I'm just not excited about the financial aspects of building your own. I meant to comment in the other thread Tiger started on that, but he seems to have looked around enough to feel only building will satisfy him. Shame.

Can you expand on this? Legitimately curious. I'll take a PM if necessary.

Please post...willing to listen (even though I have no other option - i own the empty land and have to build on it)

This isn't a big deal. As TGunz has pointed out many times in the long RE thread, the economics of real estate is regional, so what I have to say may not even apply. But with so many REOs on the market being sold 40%+ below 05-06 values, it seems like someone buying in this market would be focussed on finding a steal. In hard hit regions home sales are actually very brisk driven 50%+ by foreclosures, distressed and short sales and the bargains are real. I am very close to buying one or two homes in such a region because I can get a positive cash flow instantly. The price-rent ratio is finally in line and the deflation may have overshot the bottom (mathematically). My hesitation is based on the possibility of rents crashing in the area (Temecula CA). So, I'm watching closely. It isn't like I will lose the opportunity. If I had the money I could buy ten tomorrow. Inventory is sky high. All of this downward pressure on housing has new home sales at levels not seen since the 50s and new construction is stalled. The material cost of building hasn't deflated while used home prices have. In some areas brand new construction is being sold for a loss just to keep the cash flow moving. But the point is, the best deals are in existing homes, not new construction.

All that said, build away if you have the land and use the economy as leverage with your builder. Good luck.

Understand your points...thxWe're in a different situation here in new orleans, there's lot of construction from Katrina, and the economy really hasn't hit the area (yet). Even though, I hear what you're getting at.

There is something great to be said about building the home exactly the way we want it.

 

[Tiger Fan]

TF> what do you do for a living that you can pay off a new construction in 4-5 years?DO YOU HAVE ANY JOB OPENINGS?

Wife/I have pretty good middle class jobs (not "HEY LOOK AT ME" $ by any means), but a majority of this is coming from money we made off of selling our house and getting extremely lucky on a real estate deal. We wouldn't be in this situation if it weren't for that.

congrats

thx

 

[Chaos Commish]

It is very easy to have your mortgage paid off and have your money liquid. We have a line of credit on our house where we can draw up to $250K just by writing a check. That's pretty darn liquid. And at 4.5%, it's pretty tough to find a better short-term loan.

So if liquidity is your main concern, pay off the house and get a LOC that you can draw from if needed.

I can almost guarantee that rates on your LOC in the future are going to be higher than they are now. Not to mention the fees involved. He can lock in a spectacular rate NOW. If he goes 15 year fixed (which is what I'd do if I were him) it gets that much better.In this day and age, liquid cash has a much higher peace of mind factor than the paid off illiquid asset. IMHO, of course.

We're doing fixed rate helocs on folks like kutta (good credit unencumbered property or very small balances) at 5.5 and 10 years. Most home equity lines have a 10 year fixed rate. You can lock 5.85 for 15 years. Also many people with adjustable rate helocs are converting to fixed for a small fee. Others are sitting on sub 4% adjustables with rates so low. And any access to the very easy liquidity carries the interest rate tax benefits. I'm another vote for pay off the house. I'm just not excited about the financial aspects of building your own. I meant to comment in the other thread Tiger started on that, but he seems to have looked around enough to feel only building will satisfy him. Shame.

Can you expand on this? Legitimately curious. I'll take a PM if necessary.

Please post...willing to listen (even though I have no other option - i own the empty land and have to build on it)

This isn't a big deal. As TGunz has pointed out many times in the long RE thread, the economics of real estate is regional, so what I have to say may not even apply. But with so many REOs on the market being sold 40%+ below 05-06 values, it seems like someone buying in this market would be focussed on finding a steal. In hard hit regions home sales are actually very brisk driven 50%+ by foreclosures, distressed and short sales and the bargains are real. I am very close to buying one or two homes in such a region because I can get a positive cash flow instantly. The price-rent ratio is finally in line and the deflation may have overshot the bottom (mathematically). My hesitation is based on the possibility of rents crashing in the area (Temecula CA). So, I'm watching closely. It isn't like I will lose the opportunity. If I had the money I could buy ten tomorrow. Inventory is sky high. All of this downward pressure on housing has new home sales at levels not seen since the 50s and new construction is stalled. The material cost of building hasn't deflated while used home prices have. In some areas brand new construction is being sold for a loss just to keep the cash flow moving. But the point is, the best deals are in existing homes, not new construction.

All that said, build away if you have the land and use the economy as leverage with your builder. Good luck.

Understand your points...thxWe're in a different situation here in new orleans, there's lot of construction from Katrina, and the economy really hasn't hit the area (yet). Even though, I hear what you're getting at.

There is something great to be said about building the home exactly the way we want it.

Yep. I agree with bagger's response too, thus it isn't a big deal. While where I am it is. I've always wanted to design my own home too --mostly a kitchen and master bedroom. I was fortunate to be able to design the landscaping and backyard where I am. It's nice getting certain things just the way you like them. Good luck again.

 

[Tiger Fan]

It is very easy to have your mortgage paid off and have your money liquid. We have a line of credit on our house where we can draw up to $250K just by writing a check. That's pretty darn liquid. And at 4.5%, it's pretty tough to find a better short-term loan.

So if liquidity is your main concern, pay off the house and get a LOC that you can draw from if needed.

I can almost guarantee that rates on your LOC in the future are going to be higher than they are now. Not to mention the fees involved. He can lock in a spectacular rate NOW. If he goes 15 year fixed (which is what I'd do if I were him) it gets that much better.In this day and age, liquid cash has a much higher peace of mind factor than the paid off illiquid asset. IMHO, of course.

We're doing fixed rate helocs on folks like kutta (good credit unencumbered property or very small balances) at 5.5 and 10 years. Most home equity lines have a 10 year fixed rate. You can lock 5.85 for 15 years. Also many people with adjustable rate helocs are converting to fixed for a small fee. Others are sitting on sub 4% adjustables with rates so low. And any access to the very easy liquidity carries the interest rate tax benefits. I'm another vote for pay off the house. I'm just not excited about the financial aspects of building your own. I meant to comment in the other thread Tiger started on that, but he seems to have looked around enough to feel only building will satisfy him. Shame.

Can you expand on this? Legitimately curious. I'll take a PM if necessary.

Please post...willing to listen (even though I have no other option - i own the empty land and have to build on it)

This isn't a big deal. As TGunz has pointed out many times in the long RE thread, the economics of real estate is regional, so what I have to say may not even apply. But with so many REOs on the market being sold 40%+ below 05-06 values, it seems like someone buying in this market would be focussed on finding a steal. In hard hit regions home sales are actually very brisk driven 50%+ by foreclosures, distressed and short sales and the bargains are real. I am very close to buying one or two homes in such a region because I can get a positive cash flow instantly. The price-rent ratio is finally in line and the deflation may have overshot the bottom (mathematically). My hesitation is based on the possibility of rents crashing in the area (Temecula CA). So, I'm watching closely. It isn't like I will lose the opportunity. If I had the money I could buy ten tomorrow. Inventory is sky high. All of this downward pressure on housing has new home sales at levels not seen since the 50s and new construction is stalled. The material cost of building hasn't deflated while used home prices have. In some areas brand new construction is being sold for a loss just to keep the cash flow moving. But the point is, the best deals are in existing homes, not new construction.

All that said, build away if you have the land and use the economy as leverage with your builder. Good luck.

Understand your points...thxWe're in a different situation here in new orleans, there's lot of construction from Katrina, and the economy really hasn't hit the area (yet). Even though, I hear what you're getting at.

There is something great to be said about building the home exactly the way we want it.

Yep. I agree with bagger's response too, thus it isn't a big deal. While where I am it is. I've always wanted to design my own home too --mostly a kitchen and master bedroom. I was fortunate to be able to design the landscaping and backyard where I am. It's nice getting certain things just the way you like them. Good luck again.

thx

 

[Sand]

It is very easy to have your mortgage paid off and have your money liquid. We have a line of credit on our house where we can draw up to $250K just by writing a check. That's pretty darn liquid. And at 4.5%, it's pretty tough to find a better short-term loan.So if liquidity is your main concern, pay off the house and get a LOC that you can draw from if needed.

I can almost guarantee that rates on your LOC in the future are going to be higher than they are now. Not to mention the fees involved. He can lock in a spectacular rate NOW. If he goes 15 year fixed (which is what I'd do if I were him) it gets that much better.In this day and age, liquid cash has a much higher peace of mind factor than the paid off illiquid asset. IMHO, of course.

We probably define "peace of mind" a bit differently. The few dollars in fees and even a higher interest rate on the LOC really are inconsequential when factored into the entire "peace of mind" equation.

Indeed we do. Cash in hand = peace of mind.I think either way he goes he is ok, but I don't see the point of piling money into the mortgage early when he can have it as liquid funds and then write a check at some point in the future. At least that way he gets his deductions and some interest along the way.I'd still pile it into an FDIC insured account(s) and let it grow there. I'm in a very similar situation to the OP (I'm older, so this isn't a LOOK AT ME) and I'm piling it into the bank.

 

[kutta]

It is very easy to have your mortgage paid off and have your money liquid. We have a line of credit on our house where we can draw up to $250K just by writing a check. That's pretty darn liquid. And at 4.5%, it's pretty tough to find a better short-term loan.So if liquidity is your main concern, pay off the house and get a LOC that you can draw from if needed.

I can almost guarantee that rates on your LOC in the future are going to be higher than they are now. Not to mention the fees involved. He can lock in a spectacular rate NOW. If he goes 15 year fixed (which is what I'd do if I were him) it gets that much better.In this day and age, liquid cash has a much higher peace of mind factor than the paid off illiquid asset. IMHO, of course.

We probably define "peace of mind" a bit differently. The few dollars in fees and even a higher interest rate on the LOC really are inconsequential when factored into the entire "peace of mind" equation.

Indeed we do. Cash in hand = peace of mind.I think either way he goes he is ok, but I don't see the point of piling money into the mortgage early when he can have it as liquid funds and then write a check at some point in the future. At least that way he gets his deductions and some interest along the way.I'd still pile it into an FDIC insured account(s) and let it grow there. I'm in a very similar situation to the OP (I'm older, so this isn't a LOOK AT ME) and I'm piling it into the bank.

One reason to put it into the mortgage is the "human factor" (I just made that up). We are all human, and we want. If you have a couple hundred grand sitting around, it is easy to justify spending a few bucks on a new bike, or a few more bucks on a new lawn mower, or a few more bucks on a new car or a vacation. I know my wife and I went through that for a bit. It is easy to say, "Just don't do that," but it is very difficult when the cash is just sitting there.I completely understand the argument you are making. Believe me, I spent many many nights thinking about the "right" thing to do. But after 40 years of financial struggles, the idea of being completely debt free overrode all the financial analyzes that I did.Each person is different and everyone has different pain thresholds and varying degrees of financial discipline. The "right" solution has many more factors than just bottom-line financial.

 

[Tiger Fan]

It is very easy to have your mortgage paid off and have your money liquid. We have a line of credit on our house where we can draw up to $250K just by writing a check. That's pretty darn liquid. And at 4.5%, it's pretty tough to find a better short-term loan.So if liquidity is your main concern, pay off the house and get a LOC that you can draw from if needed.

I can almost guarantee that rates on your LOC in the future are going to be higher than they are now. Not to mention the fees involved. He can lock in a spectacular rate NOW. If he goes 15 year fixed (which is what I'd do if I were him) it gets that much better.In this day and age, liquid cash has a much higher peace of mind factor than the paid off illiquid asset. IMHO, of course.

We probably define "peace of mind" a bit differently. The few dollars in fees and even a higher interest rate on the LOC really are inconsequential when factored into the entire "peace of mind" equation.

Indeed we do. Cash in hand = peace of mind.I think either way he goes he is ok, but I don't see the point of piling money into the mortgage early when he can have it as liquid funds and then write a check at some point in the future. At least that way he gets his deductions and some interest along the way.I'd still pile it into an FDIC insured account(s) and let it grow there. I'm in a very similar situation to the OP (I'm older, so this isn't a LOOK AT ME) and I'm piling it into the bank.

One reason to put it into the mortgage is the "human factor" (I just made that up). We are all human, and we want. If you have a couple hundred grand sitting around, it is easy to justify spending a few bucks on a new bike, or a few more bucks on a new lawn mower, or a few more bucks on a new car or a vacation. I know my wife and I went through that for a bit. It is easy to say, "Just don't do that," but it is very difficult when the cash is just sitting there.I completely understand the argument you are making. Believe me, I spent many many nights thinking about the "right" thing to do. But after 40 years of financial struggles, the idea of being completely debt free overrode all the financial analyzes that I did.Each person is different and everyone has different pain thresholds and varying degrees of financial discipline. The "right" solution has many more factors than just bottom-line financial.

you guys are both right. and this is precisely why i wanted to "talk it out" via thread. I knew I'd get good arguements from both sides. I'm going to go over the pros and cons with the wife and we'll make the decision from there.....but there are some great points in this thread that I wouldn't have thought of without it.

 

[Sand]

One reason to put it into the mortgage is the "human factor" (I just made that up). We are all human, and we want. If you have a couple hundred grand sitting around, it is easy to justify spending a few bucks on a new bike, or a few more bucks on a new lawn mower, or a few more bucks on a new car or a vacation. I know my wife and I went through that for a bit. It is easy to say, "Just don't do that," but it is very difficult when the cash is just sitting there.

Clairvoyance. I just got word of some extra funds coming my way today and the first thing I thought of was "hey, now I can build that new bike I want." I've got a nice 2k mountain bike all planned out. And I also just contemplated flying off to Australia next week to catch the Midnight Oil reunion concerts.

And like most things like those where I want to spend the desire is there, but I'm a cheapass at heart, so 95% chance it all gets piled into the bank despite all those evil thoughts running through my head.

 

[kutta]

One reason to put it into the mortgage is the "human factor" (I just made that up). We are all human, and we want. If you have a couple hundred grand sitting around, it is easy to justify spending a few bucks on a new bike, or a few more bucks on a new lawn mower, or a few more bucks on a new car or a vacation. I know my wife and I went through that for a bit. It is easy to say, "Just don't do that," but it is very difficult when the cash is just sitting there.

Clairvoyance. I just got word of some extra funds coming my way today and the first thing I thought of was "hey, now I can build that new bike I want." I've got a nice 2k mountain bike all planned out. And I also just contemplated flying off to Australia next week to catch the Midnight Oil reunion concerts.

And like most things like those where I want to spend the desire is there, but I'm a cheapass at heart, so 95% chance it all gets piled into the bank despite all those evil thoughts running through my head.

That Midnight Oil concert in Australia might be worth not paying off the house...

 

[Mark Davis]

Just closed on the sale of my old house this morning. I had debated what to do with the proceeds I had left over when I was done paying off the equity line. I run a business and had considered if I needed the capital, which in this economy I am not figuring on growth so that was out. Next I considered how much I'd lost in the market and whether to use that to replinish my funds lost. I just don't feel comfortable enough in the market to put that money at risk. So basically that left me with a decision of holding the money in case I needed the capital later and collect maybe 2-3% interest or to pay down the balance on my new home, which has a 3 yr ARM on it at 4.625%. I chose to pay the ARM down. It's the one investment I felt was sure in this market.

 

[itriple]

If inflation goes crazy you are better served to invest and not pay off yoru mortgage. I dont mind having a decent sized low interest mortgage.

 

[BR33ZE]

Pay off the mortgage?I didn't think people even made monthly payments anymore. Isn't that what we were bailed out from?

 

[jagbag]

Only other debt I have is about ~$37k in student loans @ 1.9% (currently have this covered in a high yield checking earning 5.25%)

What do you mean by "have this covered"? I understand that the interest rate is higher than the loan rate, but how does that mean that you've got it covered?BTW, I'd love to be in your financial situation.

No ####### ####

 

[TheWalkmen]

Jeeze.I'm 32 and live alone and it will probably take me at least 15 years to pay off my mortgage. It would be so amazing to not have one, I really look forward to that day (whenever it happens).

Update?

 

[Otis]

Jeeze.I'm 32 and live alone and it will probably take me at least 15 years to pay off my mortgage. It would be so amazing to not have one, I really look forward to that day (whenever it happens).

Update?

Wife, kid, and decided that the mortgage referenced above wasn't enough, so I kept that one, rented it out, and have another even bigger mortgage now on what is now our primary residence.Oof.

 

[gmbacm]

 

[Exit 1]

I'd refinance and invest in the market. You can beat the 3% or 4% that you'll get as the mortgage rate (actually less than that when you figure in the tax benefit).

 

[Random]

I'd refinance and invest in the market. You can beat the 3% or 4% that you'll get as the mortgage rate (actually less than that when you figure in the tax benefit).

What about the taxes you'll have to pay on all the money you'll be making in the market?

 

[Exit 1]

I'd refinance and invest in the market. You can beat the 3% or 4% that you'll get as the mortgage rate (actually less than that when you figure in the tax benefit).

What about the taxes you'll have to pay on all the money you'll be making in the market?

Yes, you need to figure this in (currently 15% on long term capital gains and qualified dividends). I still think you can beat the average mortgage rate (3.5% to 4%).When all is said and done, though, I do agree that the difference won't be huge. It does pretty much boil down to preference.

 

[Tiger Fan]

 

[John Bender]

Topical bump.

Thank you

 

[Bob Sacamano]

Congrats?

 

[Tiger Fan]

Congrats?

yessir

 

[SeveredHorseHeads]

Jeeze.

I'm 32 and live alone and it will probably take me at least 15 years to pay off my mortgage. It would be so amazing to not have one, I really look forward to that day (whenever it happens).

How is this coming along?

 

[Buck Bradcanon]

Relevant details:

• 30 y/o...married, no kids (but trying)
• Will be building a house this year and I'm about 95% confident that I can have it paid off in 4 years
• I will have at least 6 mos of expenses in liquid cash for emergencies
• Doing this would likely move all free cash towards the house (i.e. no savings for years)
• The route I would be taking is a 30year mtg and just paying extra towards the principal as much as possible...this way, if anything unexpected pops up, we're still fine....just delays payoff accordingly
• I currently max out both myself and wifes Roth IRA while maxing out my company's ESSP
• Small chance I can pull it off in 5 years while still maxing out our Roth IRA's each year
• Both of our cars will last throughout these 5 years (knock on wood)
• Only other debt I have is about ~$37k in student loans @ 1.9% (currently have this covered in a high yield checking earning 5.25%)Traditionally, I am always in the camp of "If you think the mkt will earn more than your real int rate, then keep it in the mkt"....however the thought of being debt free at 35 intrigues the hell out of me. I would have the house I plan on living in for the rest of my life and just the general freedom is probably very tough to put a value on....especially since I'm sure there will be another economic cycle before I retire.
  
  Talk me in/out of this. I want to hear all sides!
  

Your case makes for an interesting case study for sure.. great feeling paying it off of course. Your OP is timed 3/2/09 which was just about the bottom. S&P closed at 700 that day and 2,100 today. Triple.

Doesn't change the success of course. Many congrats!

 

[kutta]

Congrats?

yessir

Nice work! Feels great, eh?

 

[KCitons]

Welcome to the party, pal.

 

[Random]

Congrats man.

 

[mr roboto]

Random cut my quote out plz. Kind feel like it's not the spirit of the thread.

 

[Tiger Fan]

Relevant details:

• 30 y/o...married, no kids (but trying)
• Will be building a house this year and I'm about 95% confident that I can have it paid off in 4 years
• I will have at least 6 mos of expenses in liquid cash for emergencies
• Doing this would likely move all free cash towards the house (i.e. no savings for years)
• The route I would be taking is a 30year mtg and just paying extra towards the principal as much as possible...this way, if anything unexpected pops up, we're still fine....just delays payoff accordingly
• I currently max out both myself and wifes Roth IRA while maxing out my company's ESSP
• Small chance I can pull it off in 5 years while still maxing out our Roth IRA's each year
• Both of our cars will last throughout these 5 years (knock on wood)
• Only other debt I have is about ~$37k in student loans @ 1.9% (currently have this covered in a high yield checking earning 5.25%)Traditionally, I am always in the camp of "If you think the mkt will earn more than your real int rate, then keep it in the mkt"....however the thought of being debt free at 35 intrigues the hell out of me. I would have the house I plan on living in for the rest of my life and just the general freedom is probably very tough to put a value on....especially since I'm sure there will be another economic cycle before I retire.
  
  Talk me in/out of this. I want to hear all sides!
  

Your case makes for an interesting case study for sure.. great feeling paying it off of course. Your OP is timed 3/2/09 which was just about the bottom. S&P closed at 700 that day and 2,100 today. Triple.

Doesn't change the success of course. Many congrats!

Actually started building the house on 09/10/10, S&P was at 1109..and it's not like I had all of the money at the time to invest, but point taken. Might be an interesting study, to see what the true opportunity cost was...I'll probably do that at some point.

 

[Tiger Fan]

Random cut my quote out plz. Kind feel like it's not the spirit of the thread.

it's a fair challenge...not offended by any means. But to answer, I didn't stop investing. Maxed out both Roth's and was able to fund additional into 401k as well.

 

[Tiger Fan]

Yeah I don't know. Not to piss in your Cheerios but 2009 wasn't the time to stop investing.

I'd seriously like to know if he cares. Its about as bad of a time frame as it gets but I'd bet he still doesn't care.

Not one bit.

 

[tri-man 47]

Welcome to the party, pal.

I'd bumped up my payment a year ago to accelerate and be done (which I was in December), so it really feels nice not having that hit on the checkbook every month.

 

[kutta]

<p>

Relevant details:

• 30 y/o...married, no kids (but trying)
• Will be building a house this year and I'm about 95% confident that I can have it paid off in 4 years
• I will have at least 6 mos of expenses in liquid cash for emergencies
• Doing this would likely move all free cash towards the house (i.e. no savings for years)
• The route I would be taking is a 30year mtg and just paying extra towards the principal as much as possible...this way, if anything unexpected pops up, we're still fine....just delays payoff accordingly
• I currently max out both myself and wifes Roth IRA while maxing out my company's ESSP
• Small chance I can pull it off in 5 years while still maxing out our Roth IRA's each year
• Both of our cars will last throughout these 5 years (knock on wood)
• Only other debt I have is about ~$37k in student loans @ 1.9% (currently have this covered in a high yield checking earning 5.25%)Traditionally, I am always in the camp of "If you think the mkt will earn more than your real int rate, then keep it in the mkt"....however the thought of being debt free at 35 intrigues the hell out of me. I would have the house I plan on living in for the rest of my life and just the general freedom is probably very tough to put a value on....especially since I'm sure there will be another economic cycle before I retire.
  
  Talk me in/out of this. I want to hear all sides!
  

Your case makes for an interesting case study for sure.. great feeling paying it off of course. Your OP is timed 3/2/09 which was just about the bottom. S&P closed at 700 that day and 2,100 today. Triple.

Doesn't change the success of course. Many congrats!

Actually started building the house on 09/10/10, S&P was at 1109..and it's not like I had all of the money at the time to invest, but point taken. Might be an interesting study, to see what the true opportunity cost was...I'll probably do that at some point.

Don't forget to factor in the true opportunity cost of a good, peaceful night's sleep.

 

[NewlyRetired]

Congrats TF!

 

[tommyboy]

Im of the mindset i want the tax writeoff. Ive been looking for a second home, but finally decided to drop $200k into an addition. Serves the same purpose for tax reasons and gives my family needed room. We have zero debt outside the home.

 

[Todd Andrews]

Yeah I don't know. Not to piss in your Cheerios but 2009 wasn't the time to stop investing.

I'd seriously like to know if he cares. Its about as bad of a time frame as it gets but I'd bet he still doesn't care.

Not one bit.

Mr. Roboto is rude.

 

[pantherclub]

Yeah I don't know. Not to piss in your Cheerios but 2009 wasn't the time to stop investing.

I'd seriously like to know if he cares. Its about as bad of a time frame as it gets but I'd bet he still doesn't care.

Not one bit.

what do you do for work?

 

[James Daulton]

Well done TF!

I'll be happy to get mine paid off in my early 50's. Your situation is polar opposite of mine (and lots of others I'd bet):

2 kids in my mid-20's

wife stayed home so 1 income

no sweet real estate deal

Bottom line, kids are freaking expensive!

 

[Tiger Fan]

Yeah I don't know. Not to piss in your Cheerios but 2009 wasn't the time to stop investing.

I'd seriously like to know if he cares. Its about as bad of a time frame as it gets but I'd bet he still doesn't care.

Not one bit.

Mr. Roboto is rude.

No, it's fine. If you read my original post, I welcomed all challenges...and his is a great one. This has been a good debate in the FFA for a long time...and there is no right or wrong answer...so it's only beneficial to everyone to see both sides.

 

[Tiger Fan]

Yeah I don't know. Not to piss in your Cheerios but 2009 wasn't the time to stop investing.

I'd seriously like to know if he cares. Its about as bad of a time frame as it gets but I'd bet he still doesn't care.

Not one bit.

what do you do for work?

Playing devil's advocate...why does it matter? It's all about spending way below your mean, setting a goal and working towards it.

 

[Tiger Fan]

Im of the mindset i want the tax writeoff. Ive been looking for a second home, but finally decided to drop $200k into an addition. Serves the same purpose for tax reasons and gives my family needed room. We have zero debt outside the home.

Just challenging you here...but why do you want a tax writeoff? That still means you're paying someone interest.

 

[Random]

Im of the mindset i want the tax writeoff. Ive been looking for a second home, but finally decided to drop $200k into an addition. Serves the same purpose for tax reasons and gives my family needed room. We have zero debt outside the home.

Just challenging you here...but why do you want a tax writeoff? That still means you're paying someone interest.

 

[Grahamburn]

So, knocked it out at 37? Did you ever end up having a child?