Money in the bank vs paying down/off the mortgage (supplement, depression)
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It's funny; I was planning on dumping some funds into the mortgage but I like seeing it in the bank.
While having a large balance in the bank does offer a certain sense of "comfort" it's at the cost of still having that stupid monthly payment for your domicile.
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Anyone feel equity rich (home paid off) but cash poor?
Actually, you'll feel a huge sense of accomplishment when you finally get that gorilla off your back.
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Do you wish you had kept some aside?
Once pay that turkey off, you begin to amass wealth at a MUCH faster rate. This would be your "resource recovery" part. It grows very quickly, without that gorilla payment.
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It's kind of like when you have a car payment; somehow, you always make it. But, when you do not have that payment, do you save it? Generally, no.
This where "dollar discipline" comes into play. Some people find ways to get rid of money, as if it were poison. Some people like to save for the next virus...
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If you did pay it off, did you tap into the equity later?
No, but again, it's always there if I need it for medical/care or whatever.
So, my advice would be to pay off that mortgage. Then, down the road, if you need some serious cash, you can sell or reverse mortgage (if you qualify, that is.)
Paying off your mortgage gives you options, that you wouldn't otherwise have.
While having a large balance in the bank does offer a certain sense of "comfort" it's at the cost of still having that stupid monthly payment for your domicile. Actually, you'll feel a huge sense of accomplishment when you finally get that gorilla off your back. Once pay that turkey off, you begin to amass wealth at a MUCH faster rate. This would be your "resource recovery" part. It grows very quickly, without that gorilla payment. This where "dollar discipline" comes into play. Some people find ways to get rid of money, as if it were poison. Some people like to save for the next virus...No, but again, it's always there if I need it for medical/care or whatever.
So, my advice would be to pay off that mortgage. Then, down the road, if you need some serious cash, you can sell or reverse mortgage (if you qualify, that is.)
Paying off your mortgage gives you options, that you wouldn't otherwise have.
I currently have the option of paying off our mortgage completely from our investment account and still having $58k left over to use on whatever I would want. Wouldn't have that option without having had a mortgage to fund the investment account.
On my previous midwestern house, I paid it off early and used the home equity (LOC) for my daughter's college costs, then paid that off. I sold it and used about 2/3 as down payment for my current home in NM. I banked the rest. I have a low interest rate and low mortgage payment, about half of the national average payment. I could easily cash in some investments to pay it all off but why set myself back when I'm gaining significantly on my investments? At the same time, my home's value is increasing. The home values are increasing in my area and there is a housing shortage. I get an inquiry from agents once or twice a month.
I currently have the option of paying off our mortgage completely from our investment account and still having $58k left over to use on whatever I would want. Wouldn't have that option without having had a mortgage to fund the investment account.
Always keep investments apart from your domicile. ALWAYS.
I'm pretty good at looking at other situations for clients and giving options but when it comes to my own, I guess I'm just too close to it.
As far as taxes go, we itemize so no problem there.
We are both self employed but take W2 income. Wish I had know the little trick 21 years ago and I'd be much better off for SSA but I do now.
We own 2 properties free and clear and one always had a mortgage so I can't say huge relief from getting that paid. I think I was more disciplined when I had the mortgage.
Like MQ said, some lives didn't turn out like we planned. We've had surprises in our life and I've known some couples who have lost children at young ages - what could be worse?
Still playing catch up and still not where I want to be, however, I started life behind everyone else and it's always been catch up. However, I'm glad my parents fought to keep me alive.
While having a large balance in the bank does offer a certain sense of "comfort" it's at the cost of still having that stupid monthly payment for your domicile. Actually, you'll feel a huge sense of accomplishment when you finally get that gorilla off your back. Once pay that turkey off, you begin to amass wealth at a MUCH faster rate. This would be your "resource recovery" part. It grows very quickly, without that gorilla payment. This where "dollar discipline" comes into play. Some people find ways to get rid of money, as if it were poison. Some people like to save for the next virus...No, but again, it's always there if I need it for medical/care or whatever.
So, my advice would be to pay off that mortgage. Then, down the road, if you need some serious cash, you can sell or reverse mortgage (if you qualify, that is.)
Paying off your mortgage gives you options, that you wouldn't otherwise have.
Meh ,, just about every statement can easily be countered with reasons for not paying it off or having a mortgage .
Not having so much tied up trapped in a house offers options you won’t have by choosing to use your own money and losing its use.
Especially the loss of time as you need shorter time frames to be good ones to compensate for the fact you are investing more later …that turns what is almost risk free investing over decades into a speculation over a much shorter time.
So that element of time is lost with no mortgage when investing ..
There is something so comforting to having lots of liquidity at your finger tips via a mortgage …remember we are talking where you have a choice so you can pay off that mortgage anytime if need be but in the mean time you have all your cash available to you for better opportunities.
Remember here though that at retirement it can be a different issue because we have different factors , usually we are not as aggressive plus we are introducing a whole other level of risk via sequence risk. So borrowing so you can invest should get a risk premium over just investing ….that can be hard to do with 40-60% equities and near zero on bonds and cash.
The mortgage will give you far more leverage to grow wealth then trying to use only your own money will if you are a more aggressive investor at least 80-100% diversified funds regardless of having more to invest much later on after a mortgage is paid or even paying cash you are going to have far less invested being compounded forever .
But not everyone has the temperament to invest , the desire or the knowledge so one size fits all answers are going to be wrong answers …
But like I said every reason you listed for not having a mortgage can be argued for taking a mortgage
Last edited by mathjak107; 06-17-2021 at 04:54 AM..
The problem here is your biggest friend in investing is time ….the longer the time frame you give that money the less pressure there is on a shorter time frame having to be a good one …imagine waiting until right before the lost decade to first start throwing more substantial amounts in .
So I would never cut my time frame shorter .. as it becomes riskier and riskier the shorter you give it. I want maximum amounts to grow over as long as possible reducing the pressure on my time frame
It's not an either or situation. One can still make 401k contributions and use dividends to purchase more shares while making extra payments (even small ones) on the mortgage. Time is your friend for an accelerated payoff as well. An extra payment made one month may not seem like much but it can substantially reduce the term as time moves on no matter what. Before you know it you are 5 years down the road and the extra payment you made each month substantially reduced (or eliminated) your balance.
Everyone has their own investment strategy. Mine is one that includes equites and bonds (tax deferred and taxable), short-term savings instruments, cash, and real estate. At this stage of my life I do not carry any debt. This plan has worked well for my spouse and me and has allowed us to take advantage of many opportunities that would not have been possible if we had mortgage payment obligations on our real estate holdings.
These are not get rich quick methods of investing. They are all decades in the making with the greatest benefits occurring in ones 50s and early 60s, a perfect time to retire.
It's not an either or situation. One can still make 401k contributions and use dividends to purchase more shares while making extra payments (even small ones) on the mortgage. Time is your friend for an accelerated payoff as well. An extra payment made one month may not seem like much but it can substantially reduce the term as time moves on no matter what. Before you know it you are 5 years down the road and the extra payment you made each month substantially reduced (or eliminated) your balance.
Everyone has their own investment strategy. Mine is one that includes equites and bonds (tax deferred and taxable), short-term savings instruments, cash, and real estate. At this stage of my life I do not carry any debt. This plan has worked well for my spouse and me and has allowed us to take advantage of many opportunities that would not have been possible if we had mortgage payment obligations on our real estate holdings.
These are not get rich quick methods of investing. They are all decades in the making with the greatest benefits occurring in ones 50s and early 60s, a perfect time to retire.
Reinvesting and adding little bits isn’t the same thing as leverage via a mortgage ..not even close.
There are two situations here …one is making extra payments when you have a mortgage ….that is very different then paying cash and no mortage over what could be decades working for you .
An extra payment a year is not going to effect wealth growth like using cash and no mortgage will.
Extra payments still involve using leverage to invest , paying cash does not.
As far as accelerating the payments to quickly , remember all your future appreciation is already baked in to that house , mortgage or not .so missing growth is not a factor like it is investing elsewhere ..
You can miss the greatest run up in history elsewhere , so it is a very different story than the appreciation being locked in whether you have a mortgage or not
So at best by paying it off sooner you can save some interest ..but typically over time that interest is tiny compared to what that money can grow elsewhere.
Short term we have seen very nice appreciation in housing in many areas very untypical of the housing markets ….so you did not give up much by not investing elsewhere over the last few years .
But had you done both buying that house and taking the mortgage and investing elsewhere you would have had both going for you .
typically over time market investments have surpassed housing appreciation by 2 to 4x
Using leverage over decades as a mortgage is utilized will build far greater wealth more often than not , then just trying to use your own money …
Last edited by mathjak107; 06-17-2021 at 05:57 AM..
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Thanks for all the good replies and experiences
