Money in the bank vs paying down/off the mortgage (pension, conversation)
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I paid off my house when I retired. I just felt that Id sleep better at night knowing I had a paid roof over my head, no matter what happened. I saved thousands in interest, and my monthly bills are so much lower. That being said, I had it to pay off with, and it didnt hurt my retirement savings that much.
That’s the key. You have to have the cash, without hurting your retirement savings. It’s not the wisest move financially (no matter how people try to justify it) but that doesn’t mean the option is not without value.
Bought a house, mortgage was 3%. Ford stock was paying a steady 6%. After taxes, better to sit on the mortgage forever.
Ford dividend is now 0%. Hanging in until the battery cars, backup plan is T at 7.15%, unless they drown in debt.
A dividend is not a return nor is it comparable to interest .
over the last 3 years , including dividends T returned 2.25% , over the last 5 it returned minus 1% , the last 10 years 4.79% .
So with all its dividends you would have done pretty crappy. Unless the stock appreciates as much as it paid out you got a return that will always be less then it paid out
Not the point of the thread. The Thread is about whether it every worth paying off a mortgage versus investing the excess cash. The answer stands. Unless your mortgage interest is greater than 10%. It never makes sense, financially, to pay off a mortgage.
That is an absolute wrong statement to espouse. "NEVER" is an awful long time and to say that it is never a good idea to pay off a mortgage is silly. If you have the money to pay off the mortgage then there is no reason to not pay it off.
When my wife and I built this house 17 years ago we took out a 15 year mortgage. We retired the mortgage and retired together. We didn't need to tap savings. We just paid it off. Now that it is over we can consider renting places where we would like to spend time at to explore far away places. With a mortgage we would not even consider doing that. As it stands we are looking at rental units in Incheon South Korea to stay while we travel Asia. With rental units there running at 2k a month it certainly would have been difficult to do that with a mortgage.
To the OP good thread. You got a lot of people speaking up. Those that are good at investing in stocks and bonds talk about keeping the lower cost mortgage. Then there are those who at the end of earned income years that walk into that time with less to worry about. Two schools of thought, no wrong answer.
That is an absolute wrong statement to espouse. "NEVER" is an awful long time and to say that it is never a good idea to pay off a mortgage is silly. If you have the money to pay off the mortgage then there is no reason to not pay it off.
When my wife and I built this house 17 years ago we took out a 15 year mortgage. We retired the mortgage and retired together. We didn't need to tap savings. We just paid it off. Now that it is over we can consider renting places where we would like to spend time at to explore far away places. With a mortgage we would not even consider doing that. As it stands we are looking at rental units in Incheon South Korea to stay while we travel Asia. With rental units there running at 2k a month it certainly would have been difficult to do that with a mortgage.
To the OP good thread. You got a lot of people speaking up. Those that are good at investing in stocks and bonds talk about keeping the lower cost mortgage. Then there are those who at the end of earned income years that walk into that time with less to worry about. Two schools of thought, no wrong answer.
I absolutely agree , there is never a one size fits all answer ….simple answers to complex questions are usually the wrong answers
Bought a house, mortgage was 3%. Ford stock was paying a steady 6%. After taxes, better to sit on the mortgage forever.
Ford dividend is now 0%. Hanging in until the battery cars, backup plan is T at 7.15%, unless they drown in debt.
You better find a new backup plan. You may not be aware that T announced last month that they would be cutting their dividend roughly in half after the Warner Media/Discovery spinoff.
I have never had a mortgage. I rented and saved. Since I struggled financially for a long time (in connection with the fact that I am an immigrant from a failed country, ie, I started out from nothing financially, and legal immigration in the US is a loooooong and expensive hurdle), so it took me a long time to save enough cash to buy a small condo. Though, I have to say, this was in the 1980s and 1990s, when bank interest was high compared to practically nothing now - in those years, I could almost live just off of the interest. Anyway, I bought my home condo (which is still my primary home) just before my 40th birthday. I repeated that a few more times, and all the other small condos, in three different cities were cash purchases. All in all, I had bought 5 condos - 3 were rentals, but after a few years, I would run into a bad tenant in each one of them, so I sold 2 of them (for a nice profit, because they appreciated a lot), and the 3rd one am using for myself, as a secondary home/ change of scenery (it is not in the same city where I mostly live).
Since I don't really like thinking much about money and financial obligations, this worked well for me. I cannot imagine a mortgage for several hundred thousand $ hanging over my head for decades. About money in the bank, I found an intermediate solution: laddered fixed annuities. They have substantially better interest rates than bank CDs, they are guaranteed by large reputable 100+ year old insurance companies, they pay a fixed amount so I can't blow more money all at once than I can afford, and nobody can steal them through some senior-extortion scam or ID theft. Yes, they lose purchasing power with inflation, but that is why I laddered them (ie, there are new annuities added every 5-10 years), and when there is some real inflation (like right now), properties appreciate astronomically, which more than buffers the loss of value of fixed money eventually. If I had a massive financial emergency, I could get a HELOC, but that has not happened so far.
I'm trying to figure out what the best course of action is for us on this topic right now. We have a primary home where we have about 50% equity and we have some land that we bought that we were planning on building a weekend getaway home on, where we have about 70% equity in.
This last year, my finances took a huge hit, to the point that we can't afford a mortgage on both the house and land. So now we're thinking about selling the land and using the proceeds to pay off the house. On the one hand I think it could be better to invest those funds, but on the other hand, I tell myself we already made a killing on our investment in the land itself, so paying off the mortgage is the prudent thing to do, especially in light of my reduced income.
Either way, we have to wait until next year to sell, as selling this year would put us in the highest tax bracket, and with a gain of several hundred thousand, 5% is a good chunk of extra change that I don't want to pay to the government.
......This last year, my finances took a huge hit, to the point that we can't afford a mortgage on both the house and land. So now we're thinking about selling the land and using the proceeds to pay off the house. ........
I would be very concerned about investing the proceeds from that land. It seems you are very overextended and need that money to continue to make your mortgage payments. If so I would not put any substantial amount in the stock market or other investments that could drop.
As I have explained previously, keeping a mortgage and investing instead of paying it off can allow for large returns over time. That is not a short term strategy especially if you need returns on a regular basis to pay the mortgage.
It's funny; I was planning on dumping some funds into the mortgage but I like seeing it in the bank.
There's no upside to retaining a mortgage for most people, these days. If you're paying 3% or 4% on your mortgage and only receiving 0.10% or less on your savings you're way better off just paying off the mortgage.
Since the 2017 tax reform the Form 1040 Standard Deduction is so high that unless you have a large, brand new mortgage, most people don't have to deduct the interest separately anymore.
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