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^^ TIAA and most major investment houses have funds which are socially oriented and do not invest in oil, chemicals or anything that is at all questionable.
It sounds like that would not be acceptable for some people. Getting on the flying saucer and going to another planet may be the only option.
Stephen Hawkins agrees ([url=http://www.space.com/8924-stephen-hawking-humanity-won-survive-leaving-earth.html]Stephen Hawking Says Humanity Won't Survive Without Leaving Earth[/url]) and he's a pretty smart dude.
That's something my little Earthling great-great-great-great-great-great-great-great grand children might need to take seriously, but not a feasible option for the next immediate generations coming in... trying to keep it real, you know what I mean...
I ran my numbers earlier tonight on this same topic. I'm going to pay off my house in 7.5 years. I'll put a huge payment down to start in order to drop that interest. Then I'll slowly pay it off. My calculation was based on taxes, rent (if I did not buy), how much money I want to put into the property, etc.
I max out my 401k every year and add additional savings to my other investment account. I already have a lot of money in retirement already (calculated to be more than what I need when I retire due to multiple sources of income that won't stop at time of retirement). I have a year of emergency fund, mainly because my expenses are low so it makes sense to keep a year.
My goal with this house is to keep it. I don't ever seem selling since I can rent it out after I retire and move overseas for a couple of years (current plan) or keep the place and simply live in it. Long as it remains a nice place to live, I can stay here.
Paying off a property can be a wise financial decision or putting money in the market can be the same. If my retirement numbers were not hitting where they are, I might put more in the market and less into the house. Only bad choice is being "house poor". That is stupid.
There is some flawed logic here. If you sell your house in 5 years, you receive your equity. Why would you then need to also cash out of your investments, regardless of whether the market is up or down?
To put you in the same financial position as the person who paid off their house and then sold it and have the full value in cash (minus RE commissions etc.).
Either the person with the paid off home should buy stock when they sell the house, or the person with the mortgaged home should sell stock when selling their house. Otherwise your comparison doesn't work because they are not in comparable situations.
Quote:
Originally Posted by jrkliny
Sure markets can be down over a 5 year period. By that logic you would be better off putting your money in the mattress and forgetting about it.
No, money under mattress earns 0%. Doesn't make sense unless your mortgage has a negative interest rate.
For those that are more conservative and want to pay off their mortgages as soon as possible, I'm curious as to how how much that debt-free peace of mind is worth.
For instance, say you take out a 3.5% 30-year, fixed-rate mortgage, and make extra payments to try to pay it off in 20 years. At around 10 years into the mortgage, CD/bond/savings account rates are at 5%. Do you still make extra payments on the mortgage or do you start diverting those extra payments? What if those rates were 6% or 7%?
Is there a certain "risk-free" rate where you would pass up the early payoff in order to take advantage of the arbitrage opportunity? I don't think there's anything wrong with any particular answer, I'm just curious as to how much people value having a paid-off house.
For those that are more conservative and want to pay off their mortgages as soon as possible, I'm curious as to how how much that debt-free peace of mind is worth.
For instance, say you take out a 3.5% 30-year, fixed-rate mortgage, and make extra payments to try to pay it off in 20 years. At around 10 years into the mortgage, CD/bond/savings account rates are at 5%. Do you still make extra payments on the mortgage or do you start diverting those extra payments? What if those rates were 6% or 7%?
Is there a certain "risk-free" rate where you would pass up the early payoff in order to take advantage of the arbitrage opportunity? I don't think there's anything wrong with any particular answer, I'm just curious as to how much people value having a paid-off house.
I'd do it if the after-tax rate difference was more than 0.1%-0.2% or so. That is what I'd want to compensate for the fact that home equity is a protected asset which has favorable legal treatment when it comes to issues such as entitlements with asset limits (if heaven forbid I ever really need them at some point), college funding for kids, etc. If I had kids going to college in the near future, I'd probably raise the premium to 0.3% (or, in the case of a modest income, even higher, to 0.5% or 1%).
For those that are more conservative and want to pay off their mortgages as soon as possible, I'm curious as to how how much that debt-free peace of mind is worth.
For instance, say you take out a 3.5% 30-year, fixed-rate mortgage, and make extra payments to try to pay it off in 20 years. At around 10 years into the mortgage, CD/bond/savings account rates are at 5%. Do you still make extra payments on the mortgage or do you start diverting those extra payments? What if those rates were 6% or 7%?
Is there a certain "risk-free" rate where you would pass up the early payoff in order to take advantage of the arbitrage opportunity? I don't think there's anything wrong with any particular answer, I'm just curious as to how much people value having a paid-off house.
If there is a negligible financial advantage then I will always choose the house. Let's say the difference was only $50 per year or so based on the rates. If it was indeed 5% versus 3.5% then of course I would put my money into those bonds first.
For those that are more conservative and want to pay off their mortgages as soon as possible, I'm curious as to how how much that debt-free peace of mind is worth.
For instance, say you take out a 3.5% 30-year, fixed-rate mortgage, and make extra payments to try to pay it off in 20 years. At around 10 years into the mortgage, CD/bond/savings account rates are at 5%. Do you still make extra payments on the mortgage or do you start diverting those extra payments? What if those rates were 6% or 7%?
Is there a certain "risk-free" rate where you would pass up the early payoff in order to take advantage of the arbitrage opportunity? I don't think there's anything wrong with any particular answer, I'm just curious as to how much people value having a paid-off house.
Well every dollar you would have paid down saved you 3.5% every year within the 10 years and into the future so your question isn't that simple. You'd have to comprehensively run savings vs investment terms
Considering the median networth and average savings rate for most Americans, this whole conversation is a moot point. Sounds like there are people here who are "winning" by all credible standards either way. It always amazes me the energy people put into these threads - as though there is one absolute correct answer. As one who has stood on both sides of the fence, I can say that depending on which side I was standing (at the time), I could probably make a convincing argument either way.
For those that are more conservative and want to pay off their mortgages as soon as possible, I'm curious as to how how much that debt-free peace of mind is worth.
For instance, say you take out a 3.5% 30-year, fixed-rate mortgage, and make extra payments to try to pay it off in 20 years. At around 10 years into the mortgage, CD/bond/savings account rates are at 5%. Do you still make extra payments on the mortgage or do you start diverting those extra payments? What if those rates were 6% or 7%?
Is there a certain "risk-free" rate where you would pass up the early payoff in order to take advantage of the arbitrage opportunity? I don't think there's anything wrong with any particular answer, I'm just curious as to how much people value having a paid-off house.
Where did you find CD/bond/savings accounts at 5%? The best I could find was a CD at Discover giving 2.3% over 10 years.
Considering the median networth and average savings rate for most Americans, this whole conversation is a moot point. Sounds like there are people here who are "winning" by all credible standards either way. It always amazes me the energy people put into these threads - as though there is one absolute correct answer. As one who has stood on both sides of the fence, I can say that depending on which side I was standing (at the time), I could probably make a convincing argument either way.
That's true, but the people on this forum (hopefully) want to get the best bang for their buck on investing and saving. We are on here because we are passionate about the subject at hand. I would argue that paying off a mortgage early or investing are all good, as long as people don't let the money just sit in bank accounts losing value. Not everything that is good is equal, some good ideas are just good, and some are great ideas. But, in the end, most of the people in this thread are better off then the average person.
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