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i would choose renting like we did and investing elsewhere anytime . that difference ended would have ended up letting us buy multiple homes today even after subtracting out rent and taxes .
but buy or rent is a different topic .
Last edited by mathjak107; 10-03-2017 at 07:01 AM..
you can't spend the living room at the supermarket either .
so each case is going to be unique .
the mistake is , i see those who are not saving enough in retirement assets plow extra money in to mortgage's
time in investing is your greatest friend . they end up losing the time value as they try to increase savings years later after the mortgage is paid . big mistake!
to reach the same levels takes way more savings the longer you delay getting that money in .
you really need a priority list for extra money and deploy it where it does the most good . rarely is paying off the house faster going to improve things compared to investing that dough longer elsewhere unless your plan is to sell and relocate and your home ends up appreciating at a better rate . .
I think this deserves more attention. You could work to pay off your 30-year mortgage in 20 years. Afterwards, you'll have 10 years of higher contributions, but will that really be enough to offset up to 20 lost years of compounding those extra mortgage payments?
i would choose renting like we did and investing elsewhere anytime . that difference ended would have ended up letting us buy multiple homes today even after subtracting out rent and taxes .
but buy or rent is a different topic .
No it's not. You take the approach that he who acquires the biggest pile of money wins. That is not the only approach to life. I chose to spend a big chunk of my income along the way. I've skied every winter weekend my entire adult life, owned a vacation home at a ski resort since 1993, and traveled the world on ski trips. I've pretty much always owned a boat. I take vacations in Europe. I've eaten at fine restaurants around the world. I've visited the museums in the major world cities. I've owned nice houses in great locations.
I'm 59. I've had a great quality of life my entire working life. I have no interest in trying to pile up the largest possible pile of money. Money exists to be spent to give me my quality of life. When I'm 75, I'm not going to be able to ski waist-deep powder helicopter skiing. I'm unlikely to be able to hike the Grand Canyon rim to rim. I've accumulated enough wealth that I won't be poor when I stop working.
You have a big pile of money and you live in an apartment in Queens. I don't see you "buying multiple homes". You're going to continue to live your Queens rental and subway life until you can't. That's fine but that's not how I want to live my life.
Dollars on the market keep working for you. Dollars paying off a mortgage are done working and have retired. They will not make you any more money because they are locked away in a paid off home.
Yes it must be a nice feeling to not have any debt. For me though I have a few years before I will need a paid off home. I can afford to keep placing money in the market.
I think this deserves more attention. You could work to pay off your 30-year mortgage in 20 years. Afterwards, you'll have 10 years of higher contributions, but will that really be enough to offset up to 20 lost years of compounding those extra mortgage payments?
Yup.
The worst decision I ever saw was a kid who worked for me. He had bought his first house, housing values had raced up, and he decided to take all the equity out of the house to buy stocks he just knew would rocket. On margin.
I tried to talk him out of it, doing all the math with him, etc. Sure enough, within a week, bad times in the market, margin call, bye bye house and everything.
One of the good things about a fully paid off house is it's a safety net. If the markets go to hell, I'll still have the house, fully paid off, in a high cost of living area. Some people use bonds and cash accounts for downside buffers. Owning the house outright is a downside buffer. I won't go upside down, and if I lose too much in the stock market, I have the option of downsizing rather than having no options if I'm renting or get foreclosed on.
Having said all that, I've never fully been on one side or the other. Good arguments on both sides.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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A status symbol must be visible to others. No one will know whether your home is paid off or not, unless you tell them. For the BMW everyone sees it, though I wouldn't consider that a status symbol any more, they have become far too common and ordinary. Having a mortgage, with interest and property tax deductions along with the equity building (currently at 13%/year) allows for continued investing in other forms, for financial diversity in case of another recession.
I have never paid off any debt early. After college, I had 12k in debt that i could have paid over 2-3 years. Instead I paid it over 10. Why would I give up the security blanket of 10k in cash if I had borrowed at 2.3% interest. During that time I have averaged 15% return in my account.
Same thing with my car - I could pay the 12k I own tomorrow. Why would I? It costs me 2%.
Same thing with my mortgage. I might pay it off if I am loaded down the road and don't know what to do with my money, but why would I pay something off that costs me 3.375%.
If I had the money, I would probably put it all in a dividend ETF and generate enough money in dividends to pay the mortgage balance every year and have the security blanket of an easily accessible cash pile.
In the case of a job loss, nobody is going to care that you shaved off 4 years off your mortgage. Your payment will still be the same. However, if you had 4 years of house payments in liquid investments, you would probably be able to weather the storm.
The worst decision I ever saw was a kid who worked for me. He had bought his first house, housing values had raced up, and he decided to take all the equity out of the house to buy stocks he just knew would rocket. On margin.
I tried to talk him out of it, doing all the math with him, etc. Sure enough, within a week, bad times in the market, margin call, bye bye house and everything.
One of the good things about a fully paid off house is it's a safety net. If the markets go to hell, I'll still have the house, fully paid off, in a high cost of living area. Some people use bonds and cash accounts for downside buffers. Owning the house outright is a downside buffer. I won't go upside down, and if I lose too much in the stock market, I have the option of downsizing rather than having no options if I'm renting or get foreclosed on.
Having said all that, I've never fully been on one side or the other. Good arguments on both sides.
I don't think anyone here would advocate for what that kid did. There's a big difference between low interest fixed-payment, long payback period mortgage debt and high-interest, no ceiling, short-payback period margin debt.
The worst decision I ever saw was a kid who worked for me. He had bought his first house, housing values had raced up, and he decided to take all the equity out of the house to buy stocks he just knew would rocket. On margin.
I tried to talk him out of it, doing all the math with him, etc. Sure enough, within a week, bad times in the market, margin call, bye bye house and everything.
One of the good things about a fully paid off house is it's a safety net. If the markets go to hell, I'll still have the house, fully paid off, in a high cost of living area. Some people use bonds and cash accounts for downside buffers. Owning the house outright is a downside buffer. I won't go upside down, and if I lose too much in the stock market, I have the option of downsizing rather than having no options if I'm renting or get foreclosed on.
Having said all that, I've never fully been on one side or the other. Good arguments on both sides.
That's dumb and extreme. Here is another example. You plow every extra dollar you get into your house. Trying to pay it off as quickly as you can. You have shaved off 8 years off of your 15 year mortgage. Your safety fund is only 4 mos.
You lose your job due to bad economy. You have no cash. Your house payment is still the same, even though, you have shaved off 8 years. Your house sits on the market for 5 months since no one is buying. You lose your house.
I think it's one of those topics, like many on C-D, where you can go around and around in circles ad nauseam, saying I'm right, no I'm right, no I'm right.........
There is no "I'm right" argument. If the question is the best ROI financially, then there is only one answer - not paying off the mortgage early. It's just math. There is no other answer.
If you factor in other variables, like psychological and that someone just feels better with a paid off mortgage, then sure - you can argue about whether to pay off mortgage early or not.
For those who want to come out with the most money in the end, you need to stretch out the mortgage payment for as long as you can. Period.
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