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Pay it off.
We're just paying an extra $1000 a month (our monthly bill is $2117 - so we send $3117) and that knocks off 15 years and over $220,000 off our INTEREST.
Do the math yourself on a mortgage calculator if you need convincing. It's sick.
How much interest you aren't paying is irrelevant. In the end it is the overall difference in net future value that counts.
I just did do the math myself and it is better to not pay it off. My assumptions: 4% loan, 8% investment return in taxable accounts, $2000 mortgage payment, $1000 extra to either pay down (like in the quote above) or invest at 8%.
no gambling involved like on the stock markets where you sometimes gain a lot and then loose more.
American companies are in the business of making money. We as investors stand to benefit by investing with those companies. If we look at the past ten years (a small period in the overall scheme of things) we'll see a pretty flat performance. We need to look at a longer time line and the whole philosophy of why we invest. Our American financial system is based and geared on American business working with investors. Those businesses have a lot of PhDs and MBAs working to make money for your benefit.
How much interest you aren't paying is irrelevant. In the end it is the overall difference in net future value that counts.
I just did do the math myself and it is better to not pay it off. My assumptions: 4% loan, 8% investment return in taxable accounts, $2000 mortgage payment, $1000 extra to either pay down (like in the quote above) or invest at 8%.
Pay it off.
We're just paying an extra $1000 a month (our monthly bill is $2117 - so we send $3117) and that knocks off 15 years and over $220,000 off our INTEREST.
Do the math yourself on a mortgage calculator if you need convincing. It's sick.
You might look at doing a refi - your interest rate must be through the roof! I send in an extra $200 a month, and that will knock 8 years off our loan. An extra $1000 should do a lot more than 15 years.
How much interest you aren't paying is irrelevant. In the end it is the overall difference in net future value that counts.
I just did do the math myself and it is better to not pay it off. My assumptions: 4% loan, 8% investment return in taxable accounts, $2000 mortgage payment, $1000 extra to either pay down (like in the quote above) or invest at 8%.
Where you live is part of the equation too. In a state like California, we get to deduct the interest against our state income taxes, and if you are in a high bracket (easy to do in CA), that is an added benefit.
My previous state, Ohio, didn't allow the mortgage interest deduction against state taxes, so not as beneficial.
How much interest you aren't paying is irrelevant. In the end it is the overall difference in net future value that counts.
I just did do the math myself and it is better to not pay it off. My assumptions: 4% loan, 8% investment return in taxable accounts, $2000 mortgage payment, $1000 extra to either pay down (like in the quote above) or invest at 8%.
Good points. Realistically the decision spans a couple financial topics and isn't just about returns.
1) Liquidity. Make sure you have enough before paying down mortgage.
2) Portfolio balance, how much do you already have in stocks, bonds etc.
3) Rates of Return
In my situation my mortgage is 5.5% and paying it down is risk free...or a Beta of 0. It's not a fair comparison to stock market returns. My remaining balance is low enough that refinancing is not economically feasible so I have been dumping extra cash onto my mortgage since I have enough of a slush fund to cover liquidity if I'm laid off and have a heavy stock exposure already.
I will have my mortgage retired in 3 more years and at that time will convert the 1500/mo I pay into stock investments. It's hard to pass up 5.5% risk free right now. It will also allow me to carry less of a liquidity fund since I won't have that 1500/mo. payment so I will re-allocate some of that to higher risk/yield investments at that time.
Good discussion all, no one right answer but at least people are thinking about options and saving some money instead of trying to suck all the equity out like they were.
How much interest you aren't paying is irrelevant. In the end it is the overall difference in net future value that counts.
I just did do the math myself and it is better to not pay it off. My assumptions: 4% loan, 8% investment return in taxable accounts, $2000 mortgage payment, $1000 extra to either pay down (like in the quote above) or invest at 8%.
You have to compare apples to apples. Paying off the mortgage is a risk free return. Right now, I don't think you can get a risk free 8% return anywhere.
Good luck getting 8% conservatively going forward.
That's what I've been trying to say to you, looks like you finally got it .
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