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Old 03-25-2013, 06:50 PM
 
244 posts, read 481,320 times
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Rationally, we should be trying to get the lowest rate and longest terms possible in this low interest environment. It's expected for interest rates eventually to rise.

Also, the general expectation is for there to be inflation, in which the debt will be paid off using devalued money.

This is sort of what we've been doing in the past few years, converting all cash into assets and debts.
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Old 03-25-2013, 08:18 PM
 
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The financial experts will tell you you're an idiot to pay off your mortgage early.

But, you gotta remember...they have stuff to sell you.
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Old 03-25-2013, 08:55 PM
 
1,209 posts, read 3,497,091 times
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I think the most important thing in managing finances is cash flow.

So, I would suggest paying off mortgages at a faster pace as your risk appetite sees fit, but opening a HELOC to be able to tap into it for emergencies (but not use it for frivolous things like it was done in the heydays).

Not sure how HELOCs are done these days, but I did it way back before the bust, and it worked out meaningfully for me.
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Old 03-26-2013, 02:48 AM
 
Location: Northern VA
508 posts, read 625,135 times
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Yes, I pay extra towards the principal. I have a 30 year mortgage but I plan to pay it off in 1/2 the time. If I don't pay it off early I'll have to keep working into my 70s. I have a military pension but it's not enough to cover the mortgage and the rest of my monthly expenses. Once the mortgage is paid off I can live comfortably (even in NOVA) on just the pension.
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Old 03-26-2013, 03:41 AM
 
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We pay bi-weekly. We did this so our house will be near paid off when our kids are starting college and we are getting ready to retire. I've seen a range of years bi-weekly payments save you, anywhere from 4-7 years. I guess it depends on your interest rate. We have a good interest rate, but would rather not have a house payment in retirement. No house payment means roughly $30k each month in our pocket. We could use this for college expenses (although we have 529s) or to buy a retirement home. I see it as part of our balance portfolio.
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Old 03-26-2013, 04:41 AM
 
Location: Northern VA
508 posts, read 625,135 times
Reputation: 616
Quote:
Originally Posted by PolandSprings View Post
We pay bi-weekly. We did this so our house will be near paid off when our kids are starting college and we are getting ready to retire. I've seen a range of years bi-weekly payments save you, anywhere from 4-7 years. I guess it depends on your interest rate. We have a good interest rate, but would rather not have a house payment in retirement. No house payment means roughly $30k each month in our pocket. We could use this for college expenses (although we have 529s) or to buy a retirement home. I see it as part of our balance portfolio.
If this isn't a typo I want to know what a $30k mortgage payment gets you
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Old 03-26-2013, 07:35 AM
 
244 posts, read 481,320 times
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I guess it all depends on what you are looking to do with your money.

If you have no other investments, and are just content living the normal life:

- Work a career
- Raise a family
- Support a family home, paying mortgage, upgrading perhaps every 7 years
- Retire with a comfortable middle class life style

Then your goal is probably to pay off your home ASAP regardless of what the interest rate is. But if you invest your money in other means and understand the potential risks and rewards of leverage, then the current low interest rate environment is perfect for maximizing your debt with a fixed rate and prolonged term. If I could get a 30-year fixed interest-only loan at a reasonable rate, I'd do it in a heart beat.
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Old 03-26-2013, 09:43 AM
 
162 posts, read 304,812 times
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Quote:
Originally Posted by djplourd View Post
If this isn't a typo I want to know what a $30k mortgage payment gets you
Sorry, should be a year, not month!
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Old 03-26-2013, 03:24 PM
 
Location: Chester County, PA
1,077 posts, read 1,427,128 times
Reputation: 1033
I would much rather increase my retirement contributions (401k, IRA, etc.) than make any extra principal payments on my mortgage. Same goes for my remaining student loans which have a fixed interest rate of 2.25%. Probably makes a difference that I am only 31 years old and still have almost 30 years remaining on my mortgage, but with interest rates so low, I just don't see any benefit to paying off this debt any sooner than necessary. Another consideration is that, depending on your tax situation, the effective interest rate on your mortgage (and possibly student loan interest) is less than your stated rate because of the tax deduction you get for the interest paid. In my situation, the government, federal and state, is essentially paying for almost 1/3 of my mortgage interest as well as 1/3 of the real estate taxes. I don't get any deduction for my student loan interest, but the rate is so low to begin with, I just don't see myself ever paying anything other than the minimum payment required. If I have extra money, it is either going to liquid savings (up to a certain point) or into retirement funds.
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