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Old 01-23-2015, 06:58 PM
 
Location: The beautiful Rogue Valley, Oregon
7,642 posts, read 15,846,989 times
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Quote:
Originally Posted by mathjak107 View Post
many can invest the money at 2x mortgages today. in fact given some time you will see cd's earning 1 to 2x the mortgage rates.
My mortgage rate (as a non-standard buyer) was 5% - I doubt, very much, that CD rates will be 5-10% any time soon. Plus you need an additional 3-4% (minimum) to keep from having inflation eat that nest egg.

Doing the math made paying off the mortgage a far better idea than trying to invest it and then pay back.
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Old 01-23-2015, 07:04 PM
 
75,964 posts, read 75,388,252 times
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i didn't say anytime soon. mortgages can run 30 years and the historical average for interest rates is 6-7%.


a diversified portfolio conservatively invested can easily beat todays mortgage rates. my own is only 37% equities and it can do that easily . my son just got 3.25% last week as a mortgage rate . those are insane rates.
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Old 01-23-2015, 07:34 PM
 
Location: Idaho
4,910 posts, read 4,844,466 times
Reputation: 9915
Quote:
Originally Posted by PhxBarb View Post
I understand tying up alot of cash in your house isn't what you want to do...
Quote:
Originally Posted by MrRational View Post
This new home shouldn't be more than 25% of your net worth...
Can you "guys" help me understand this? When I retire in 1.5 or 2 years from now, I fully expected to sell my current house and use the equity to purchase a new home, and since the equity will be a little bit short; make up the difference from my 403b funds. Not having a mortgage would mean that my monthly income need not be large, and I might even be able to 'survive' just fine on social security alone. After paying off the mortgage of the new house, it's value would be somewhere around 33% or 40% of my net worth. (Medical insurance will be covered in retirement, so I need not set funds aside for unforeseen medical emergencies.)

Why is this "bad" to be sans mortgage? No mortgage, less monthly income needed. 'That' usually is a family's largest monthly expense. What's wrong with this thinking?

- - -

p.s. Reading the stories here, it sounds like I should purchase my retirement home while I'm still working and have a pretty decent income. With some minor shuffling, I can afford a second mortgage. Since the new home will be in a different state, I'm sure I can find some property management firm to look after the place and perform needed lawn mowing, maintenance, etc.
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Old 01-23-2015, 08:15 PM
 
7,220 posts, read 3,391,251 times
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Quote:
Originally Posted by volosong View Post
Can you "guys" help me understand this? When I retire in 1.5 or 2 years from now, I fully expected to sell my current house and use the equity to purchase a new home, and since the equity will be a little bit short; make up the difference from my 403b funds. Not having a mortgage would mean that my monthly income need not be large, and I might even be able to 'survive' just fine on social security alone. After paying off the mortgage of the new house, it's value would be somewhere around 33% or 40% of my net worth. (Medical insurance will be covered in retirement, so I need not set funds aside for unforeseen medical emergencies.)

Why is this "bad" to be sans mortgage? No mortgage, less monthly income needed. 'That' usually is a family's largest monthly expense. What's wrong with this thinking?

- - -

p.s. Reading the stories here, it sounds like I should purchase my retirement home while I'm still working and have a pretty decent income. With some minor shuffling, I can afford a second mortgage. Since the new home will be in a different state, I'm sure I can find some property management firm to look after the place and perform needed lawn mowing, maintenance, etc.
Its not necessarily bad to pay off your mortgage. I have a pension and am not dependent on my savings for day to day expenses. To me it makes sense to have a mortgage at under 4% when I am currently earning much more on that money by investing it.

In your case, it might make sense to pay off your house if it means not taking money out of 403b funds before you are required to. That's just more money to pay taxes on and depending on your situation could make your social security taxable or more of it taxable.

Everyone's situation is different and you really have to run the numbers for your own scenario.

In general, I think a paid off house is one part of a successful retirement for many people. Especially, if you don't have the padding of substantial savings or cannot/will not be able to ride out dips in the market. The main thing is not to put yourself in a situation where you have a mortgage and cant pay it next month.
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Old 01-23-2015, 09:25 PM
 
Location: WA
5,450 posts, read 21,791,112 times
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Quote:
Originally Posted by Blondy View Post
I am assuming though that you have to set up payments to meet their debt to income ratios whether you need that amount or not. Not just the amount needed for monthly payments on the mortgage correct?
Exactly. Make the numbers look like they want.

New loan at 2.5% is cheap money so I have no regret carrying it.
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Old 01-23-2015, 09:42 PM
 
Location: Florida
5,766 posts, read 3,387,739 times
Reputation: 10532
OP doesn't say what state/city he is presently living in. There is a huge difference in the cost of real estate from one place to another. Go to realtor.com and compare prices for comparable properties.

Retirement is the threshold of ageing, a large house that was a "have to have" up nawth can be just more maintenance/work down in the sunshine.

To me having a mortgage in retirement is unthinkable. Pay interest to get a meager tax break?
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Old 01-23-2015, 10:32 PM
 
Location: Myrtle Creek, Oregon
13,170 posts, read 13,221,563 times
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Quote:
Originally Posted by PhxBarb View Post
The mortgage interest tax deduction is a plus for me and if I don't have it, I fear I will have to pay alot more to IRS. So, I need a mortgage forever probably.
You could get the same deduction by just giving $20,000 or $30,000 (however much you have been paying in interest) a year to charity and taking a charitable contribution deduction. You would even get to choose where your money goes.
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Old 01-23-2015, 10:56 PM
 
7,220 posts, read 3,391,251 times
Reputation: 6431
Quote:
Originally Posted by engineman View Post
OP doesn't say what state/city he is presently living in. There is a huge difference in the cost of real estate from one place to another. Go to realtor.com and compare prices for comparable properties.

Retirement is the threshold of ageing, a large house that was a "have to have" up nawth can be just more maintenance/work down in the sunshine.

To me having a mortgage in retirement is unthinkable. Pay interest to get a meager tax break?
Most people who are doing this are not doing it solely to get a tax break. They are investing the money they would have used to pay off the mortgage at a higher rate of return than what they are paying on the mortgage, thereby making money.

Anyone who is doing it solely for the tax break is probably misguided although there could be some cases where it changes your tax bracket I guess.
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Old 01-23-2015, 11:15 PM
 
Location: Northern Wisconsin
9,437 posts, read 8,197,634 times
Reputation: 16452
We're planning to retire homeless, in a way. We couldn't find any place we wanted to move to, so we're moving into an RV full time and we're going to travel and follow the sun. The RV will be half the cost of a house, so its cost is no problem. We're finding this downsizing is coming at the right time in our life. Its time to downsize. We have accumulated way to much stuff that just sits there. We don't want to end up old and infirm and leave the job of cleaning out to the kids, so we're doing it now, before we retire. But what a job!!!!!
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Old 01-23-2015, 11:36 PM
 
Location: The Triad (NC)
29,733 posts, read 64,865,181 times
Reputation: 34656
Quote:
Originally Posted by volosong View Post
When I retire in 1.5 or 2 years from now, I fully expected to sell my current house
and use the equity (pile 1) to purchase a new home, and since the equity will be a little bit short;
make up the difference from my 403b funds (pile 2).
And if those two piles still leave you with SUBSTANTIALLY more invested... go for it.
If not... be very very careful; find a more modest home that is easily affordable.

If your net worth is $1M ...then by all means own that nice $200,000 home.
If your net worth is $600K ... then a $100K 2BR condo is the safer bet.

Quote:
Why is this "bad" to be sans mortgage (in retirement)?
It's about the steady source of cash needed to pay the debt.

If that cash is from investment ROI... a mortgage might be justifiable as a cash management tool.
But if the cash is from SSI or a pension income... no.
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