City-Data Forum Paying Off Mortgages
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01-11-2018, 03:53 PM
 29 posts, read 22,640 times Reputation: 40

Quote:
 Originally Posted by mathjak107 why do they want you to pay off the mortgage ? it may not make sense if the rate is low enough and the money you would use is invested and doing well
It depends on where you are on loan repayment. Loans are amortized for monthly payments. Most of interest is collected upfront as the balance is much more in the beginning. At about 2/3 time period, interest repayments are minuscule.

It does makes sense only if differential income is worth the headache.

01-11-2018, 03:54 PM
 71,643 posts, read 71,777,271 times Reputation: 49240
that is a myth and false .MORTGAGES ARE NOT FRONT END LOADED . do the math . the interest is applied to the balance each year -period . that a mortgage is front end loaded is a myth that just will not die .

"When you make a mortgage payment on a 30 year loan (or any loan term for that matter) the bank is simply charging you the interest that is due on the principal amount owed. For example, on the first payment for a loan amount of \$100,000 with an interest rate of 5%, the interest owed is calculated by multiplying the interest rate (5% or .05) by the loan amount (\$100,000) and dividing it by 12 months. The interest owed for that month would be \$416.67.

Now whether you have a 30 year, 40, 25, 20, 15, or 10 year mortgage loan, the amount of interest due on a balance of \$100,000 at 5% will always be \$416.67. The difference between those mortgage types (i.e. 10, 15, 30 year terms) is the amount that you are forced to pay to principal so that the loan is paid in full in the time allotted in the contract. Naturally on a 15 year mortgage you will see a lot more go to the principal with each payment."

Last edited by mathjak107; 01-11-2018 at 04:13 PM..

01-11-2018, 06:25 PM
 Status: "Loving life, wife and job!" (set 11 days ago) Location: USA 999 posts, read 387,453 times Reputation: 2715
We paid our home off in 2008 just as everything went south. When my wife’s job moved to Chicago and she was left jobless, it was sure nice being debt-free. She used that time to finish her masters and prepare herself for the next job. Since losing that job, she has almost doubled her salary so it worked our well for us.

01-12-2018, 07:42 AM
 6,261 posts, read 4,737,090 times Reputation: 12856
In mid 2013, we bought a house and took out a \$300K mortgage. We could have paid cash but instead invested the money. At the 4 1/2 year mark, we have made about \$100K over what we have paid into the mortgage. That does not count any mortgage income tax savings.

Clearly we have done well during a time when investment returns have been good. Even so the odds were very much with us. The loan is under 4% with annual costs of interest and principle of about 5%. With a moderately allocated portfolio, we can expect returns that average in the range of 7-8%. Do the math. With compounding that extra couple of percent translates into serious money after a few years. I did not try to estimate the savings in income taxes but they have been substantial. The interest deduction with medical and other deductions have kept our income taxes very low.

01-12-2018, 09:44 AM
 Location: Ypsilanti, MI 2,446 posts, read 3,666,532 times Reputation: 4819
Quote:
 Originally Posted by volosong I submit for consideration a minor correction . . . Simple answer is to get a mortgage before informing your employer you are going to quit. .

Also depends on the size of the company you work for. Both I and a former Supervisor decided independently in late 2012 to retire effective April 1, 2013. Because of low-low interest rates at that time, we both refinanced our respective homes' mortgages to gain a lower payment while in retirement. My loan closed in late January while his closed in early February of 2013, neither with any hiccups by Chase Bank - another unusual commonality.

Our Managers knew we were leaving and the outside company serving as Retirement Specialists at Mega-Corp had been notified . Because of the length of time necessary to process a Retirement our employer's internal HR Department clearly did not know.

I guess we are sort of saying the same thing, but a large company's internal bureaucracy and time delays may work to your advantage.
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