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We have a 30 year fixed rate mortgage at 3.625% interested started in July 2015, and put 30% down. We have an emergency fund, contribute to retirement accounts every month, and pay into the kids college 529 every month, $400 each month for each of the 2 kids. (They are 3 years old and 6 months old).
We "try" to also save on the other big expenses like for a future car and future house expenses or break-downs.
So far, I have paid 4 extra payments consisting of principal to the mortgage since 2015. What is a reasonable goal or time period to pay this down? Or in other words, how quickly should I pay down this 30 year mortgage? Is it reasonable to throw extra money at this mortgage each year?
Adding 1 extra principal payment per year only cuts out 4 years out of a 30 year mortgage I think.
It would be great to pay off this mortgage before the kids get to college to have more money left over each month for other expenses.
I think it's an excellent plan to have one's mortgage paid off at least before retirement if not earlier. I don't see the point in having a mortgage in perpetuity. My spouse and I mortgaged our first home as newlyweds. After a few years, we sold that house and rolled the profits into our next home. And then we did it again. And again. Seventeen years later, we sold our fourth house and bought our current home for cash. All the while, we continued saving for retirement and for our kids to attend college. At this time, we are in our late forties, completely debt-free, and holding seven figures in investments, not including our house, with our kids college paid in full and more than fifteen years until retirement. We never shorted our savings in order pay down our mortgage, and I would never recommend that, but it sounds as if you're right on track with saving for retirement and college expenses. Well done.
Retirees have been paying 3% interest and making more than 9 % a year for a long time now ...what is there to not see their point about ?
Whether I agree or disagree I certainly understand their point
I like my financial life simple. My real estate purchases funded future real estate purchases. Household income funded retirement and college savings. Some people want to die with the most toys (or the ability to purchase the most toys). My goal has always been to have a sufficiency for a modestly comfortable life, and I'm way ahead of schedule, so I don't feel the need to liberate and invest the money in my house to buy stuff I don't need to impress people who don't matter. YMMV.
I like my financial life simple. My real estate purchases funded future real estate purchases. Household income funded retirement and college savings. Some people want to die with the most toys (or the ability to purchase the most toys). My goal is simply to have a sufficiency for a modestly comfortable life, and I'm way ahead of schedule, so I don't feel the need to liberate the money in my house to buy stuff I don't need to impress people who don't matter. YMMV.
That is you ...my point is you said you don't see the point of wanting that mortgage .... they have no problem with a mortgage and are profiting off it nicely at least up to now.
There is a difference between not wanting to do something vs not seeing the point of why something is done
Quote:
Originally Posted by abbottkd71
I think it's an excellent plan to have one's mortgage paid off at least before retirement if not earlier. I don't see the point in having a mortgage in perpetuity..
That is you ...my point is you said you don't see the point of wanting that mortgage .... they have no problem with a mortgage and are profiting off it nicely at least up to now.
There is a difference between not wanting to do something vs not seeing the point of why something is done
Fair enough. It might very well be wise for somebody to take a mortgage in retirement in order to maximize investment income if they find themselves coming up short in meeting their expenses or even if they do just want to die with the most toys. I made a value judgement and that was inappropriate. I could and should have expressed my preference for a simple financial life and modest retirement lifestyle without additional commentary. Consider me chastened.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Quote:
Originally Posted by Electrician4you
Completely moot point as most people simply don’t have 320,000 to invest all in one lump sum.
That’s what’s funny about all these posts where the advice to “buy on loan and invest at a higher rate and you are making money “suggestions. It REQUIRES you to ACTUALLY HAVE that amount of money to buy or invest. And the truth of the matter is most people do not have that kind of money so they buy on loan.
And a lot of people forget that the market can crash. So can housing but I can tell you that you have more c9ntrol over your housing than you do over the market.
A person that has that kind of money doesn’t need to pay their house off early. They most likely have the money to weather a bad economy. For example there is literally no reason for me to pay off early. Although I do round off my payments and make a additional payment a year. My rate is 3.25. After deductions and when I borrowed and my payment I’m actually borrowing money very cheaply. Not to mention my house went up in value about $160,000.
Now I had a house long time ago where my rate was about 9%. I refinanced that down to 4.25. There was a good reason to pay that faster. Now it’s a rental. No reason to pay faster on it as it’s almost paid for.
You of all people should know better. How many people in California had that much or more to put down on a house? My numbers were just illustrative of paying off a home versus using the money to invest.
In my case I had the money to pay all cash for a house but invested it instead. No issues about not sleeping not having a paid off house.
Fair enough. It might very well be wise for somebody to take a mortgage in retirement in order to maximize investment income if they find themselves coming up short in meeting their expenses or even if they do just want to die with the most toys. I made a value judgement and that was inappropriate. I could and should have expressed my preference for a simple financial life and modest retirement lifestyle without additional commentary. Consider me chastened.
actually you likely have it backwards ....
the people who are underfunded are likely the ones not to borrow money to invest and want the house paid off in retirement ..
the reason is they likely don't have much discretionary spending in the budget and that means they likely have little slack in the plan to cut back if need be .
they tend to be those who will not want a mortgage in retirement .
those who have a choice between mortgage or cash tend to want to still grow assets and don't mind taking on risk .
Last edited by mathjak107; 12-30-2019 at 02:51 AM..
there is this emperors new clothes vision that many have that somehow having your money tied up in a house inaccessible with out loans is somehow safer then having a horde of accessible money invested in liquid assets ......
while the saying you can't live in a stock is true , the saying you can't spend the living room on groceries is also true .
2008 saw heloc closed or cancelled ...today you need the same criteria as a mortgage to get a heloc as well ...
so counting on expensive loans to eat , if you find yourself cash shy can be an issue as well ...
retirees who invest also are not likely to be 100% equities and a 50/50 has more then a decade of spending money in a downturn . so there just may be more safety and comfort in having those liquid assets available then trying to borrow money back out of a house ...
the reality is both can be double edged swords
Last edited by mathjak107; 12-30-2019 at 02:52 AM..
Not even sure what your point is here. This post is about whether or not to pay off a mortgage, not about renting. I said there are taxes and insurance WHETHER OR NOT you carry a mortgage! I never said anything about freebies, just talking about shelling out monthly for the mortgage payment. And it certainly is different for all circumstances. There is a lot of wealth that can be built by leveraging with a mortgage. In fact, that is how we got started. We put nothing down on a house over 20 years ago. Interest rates got lower and lower, so we kept refinancing and had no incentive to pay it off, all the while investing in other things, and taking the full deductions for the mortgage interest and taxes. By the time the salt incentives were removed, our investments had grown to more than we will ever need for the rest of our lives. It made sense for us at that point to not carry mortgages any longer. It makes our life much simpler by having no monthly obligations, and our cost of living is quite low now so we can skim less off those investments if we choose. We pay property taxes when they are due at the end of the year but we ALWAYS had to do that.
of course everyone's results are going to be different geographically .
the homes we bought in long island in the 1970's were 30-35k ... well those mortgages are likely long gone but taxes are 12-15k a year ...that paid off mortgage does not even cover the utility bill today .
so affordability wise , things are really no different as not having that relatively tiny mortgage today , which back then was a crushing amount to us, represents so little of that monthly carrying cost today as to not even be that helpful as far as affordability goes .
the problem is time and inflation can be good and it can be bad .... it accelerated all the other expenses making that mortgage so tiny of an amount 30-40 years later as to be inconsequential. our cable and phone bill is actually larger today then our mortgage was ,.
of course everyone's results are going to be different geographically .
the homes we bought in long island in the 1970's were 30-35k ... well those mortgages are likely long gone but taxes are 12-15k a year ...that paid off mortgage does not even cover the utility bill today .
so affordability wise , things are really no different as not having that relatively tiny mortgage today , which back then was a crushing amount to us, represents so little of that monthly carrying cost today as to not even be that helpful as far as affordability goes .
the problem is time and inflation can be good and it can be bad .... it accelerated all the other expenses making that mortgage so tiny of an amount 30-40 years later as to be inconsequential. our cable and phone bill is actually larger today then our mortgage was ,.
This is true, but whether or not one pays off a small mortgage or a large mortgage, there is still something to be said about living “rent free.” We moved to an area with fairly low property taxes compared to where we came from. This move meant buying a new house so a 30-40 year old mortgage was not a factor. However the “inflation” in the old house created the wealth to pay cash for the new ones. Paying cash was a personal choice, I don’t think anyone can say it is right or wrong. We also “cut” the cable bill, and the utilities are considerably less than where we came from so overall carrying costs are quite low. That being said, things always change and I’m sure the craziness that made the col in old place skyrocket will inevitably creep its way here.
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