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It's always a question: do you invest the extra for retirement or pay off the home? I figure it this way: if steady amounts are paid into retirement, then sure, go ahead and pay extra towards the house. I'd rather have a housing cost {taxes only} that is low {less than half, as we are high tax state} and less in over all retirement, than to struggle to make the mortgage payment in retirement. My income{s} will be finite in retirement, they are varied higher and have room to grow now during working years...
It is up to the individual: if they feel more secure paying it off, then do so.
If they feel they'd want to invest more now, then do so.
Stating the obvious, it is ALWAYS a desirable retirement goal to have your house paid off in full before you retire. In fact I would advise anybody who hasn't paid off their house to continue working until it is paid off and THEN retire.
Quote:
Originally Posted by jbgusa
My only quibble is that the HARP program really should not have been to benefit me, an attorney who is not struggling financially.
There's our government for you, always handing out money whether people need it or not. It seems to me that there are a huge number of government programs designed to make people dependent on the government for hand-outs.
We leveled up and moved to a more expensive house in a better neighborhood. Higher mortgage payments came along with it. No regrets, though, not at all.
My first mortgage, in 1992, was a 30 year. I refinanced to another 30 year in January 1994 because of a major rate drop in the market, to the original mortgage balance. In August 2003 I refinanced again to a 15 year, again due to a major rate drop, this time at the balance then due on the mortgage. In November 2012 I took advantage of the HARP program and refinanced to a 10 year, again this time at the balance then due on the mortgage, which by now was quite low. I made payments of about $1800 rather than the coupon of just over $1000 until I lost my job at the end of 2014, then dropped back to the coupon. This has served me well since I will finish about two and a half years after the 15 year mortgage in 2003 would have finished, and saved a lot of money in the process.
My only quibble is that the HARP program really should not have been to benefit me, an attorney who is not struggling financially.
Wasn't HARP for people with low equity? How did you still have such low equity if you had the same house and had been paying since 1992?
I originally bought my house in 2003 at 25 with a 30 year loan. We were young, and had only been married a couple of years, so the safety net was important. Turned out to be a very smart idea, because when the market crashed, my husband lost his job and was out of work for a year. Had we gone the 15 year route, we very possibly might have lost our home, and certainly would have trashed our credit.
As it was, we rode it out, and within 6 months of him going back to work, we were debt free, other than the mortgage.
3 years ago (so about 17 years in), we did a no cost refi down to a 12 year loan, dropping 2% off our interest in the process. So in effect, we cut about 7 years off the loan. Our monthly payment actually stayed the same, but doesn't escrow, so in effect, it really went up about $120 a month.
But as a result, it will be paid off by the time I am in my late 40s. We never intend to have a mortgage again. I'm looking forward to paying it off.
I originally bought my house in 2003 at 25 with a 30 year loan. We were young, and had only been married a couple of years, so the safety net was important. Turned out to be a very smart idea, because when the market crashed, my husband lost his job and was out of work for a year. Had we gone the 15 year route, we very possibly might have lost our home, and certainly would have trashed our credit.
As it was, we rode it out, and within 6 months of him going back to work, we were debt free, other than the mortgage.
3 years ago (so about 17 years in), we did a no cost refi down to a 12 year loan, dropping 2% off our interest in the process. So in effect, we cut about 7 years off the loan. Our monthly payment actually stayed the same, but doesn't escrow, so in effect, it really went up about $120 a month.
But as a result, it will be paid off by the time I am in my late 40s. We never intend to have a mortgage again. I'm looking forward to paying it off.
I just love your story! I was several years older than you when I realized that owning my own home was my destiny.
I had a Corvette Stingray and a Triumph Bonneville 750cc MC at the time. I sold them both and bought a Honda Civic, and banked my profit towards my down payment. (I had bought both 'Vette and "Trumpet" brand new after working about a year at my first job out of college, paid cash.) Selling the 'Vette and MC and buying a house was one of the best financial decisions I ever made. I was growing up then, in my early 30s, when I realized that living in an apartment and having a hot car and hot motorcycle was not all that life had to offer. (Okay I admit to my youthful indiscretions aided by the hot car and hot bike!)
As I said I got rid of the toys in my early '30s, and by the time I was in my late 40s I owned my house free and clear. I had also upgraded my wheels by then, paying cash for a Toyota Celica, a rather nice sporty car.
There are two kinds of people and you have to decide which kind you are. People like you and I play the "long game." People like us end up owning our homes free and clear, and have plenty of extra money to buy new cars for cash whenever we want, but we also don't buy new cars every 2-3 years just because we can. My current car is 10 years old and I'm shopping for a new car (which I will pay cash for) but I may wait a year or two.
One thing that is the motto of my life: I don't pay interest. I pay my credit cards off in full every month. I own my primary residence free and clear.
My only exception is business assets, SFR rental houses, which makes no sense to pay cash for: it's a business. Anyway the tenants pay the interest for me.
Stating the obvious, it is ALWAYS a desirable retirement goal to have your house paid off in full before you retire. In fact I would advise anybody who hasn't paid off their house to continue working until it is paid off and THEN retire.
There's our government for you, always handing out money whether people need it or not. It seems to me that there are a huge number of government programs designed to make people dependent on the government for hand-outs.
No, I think you misunderstood.
My statement was in regards to those who think or say it is better to invest the "extra" into retirement rather than to pay off the house, whether or not the house is/going to be paid off before going into retirement. Their idea is to grow the retirement accounts and keep the mortgage payment.
That means they MAY still have a mortgage, but will also have a higher retirement account when they reach retirement. It can also mean their retirement accounts MAY be able to pay off the house when they retire.
Sure, everyone should be mortgage free by retirement, but some still think it better to carry a mortgage.
I want the house paid off by then, and NOT pay a huge amount of interest, that is MY preference. When you calculate the HUGE amount of interest you will pay on a mortgage, THAT amount must also be "made up" in growth of the retirement fund, not just fund growth due to compounding.
It's up to the individual/couple over which makes them feel more secure. I feel more secure paying off the house NOW than later, and saving the interest I'd pay out for retirement instead. AS I noted too many people are in danger of/have lost their homes in retirement because they didn't pay it off. I don't want to be one.
We purchased our first house at the age of 24. This was 12 years ago, and we put 5% down, got a 15% mortgage for 15 years at a higher interest rate, and then the other 80% was over 30 years. We paid extra and had the 15 year part paid off in 5 years. We then paif the same amount we had been paying on the 30-year note.
We bought our current home 6 years ago when we were 30. Our old home hadnt sold, so we put 3% down and got an FHA loan for 30 years. They required us to pay PM I for 5 years even if we were below 80%. So when our old house sold a month later, we refinanced and put 20% down. We got a 15 year note and because it comes out every two weeks instead of 2x a month, we will pay it off in 12 years total. We've talked about paying extra, but our interest rate is so low and we only have 6 years left, so there isn't much reason to do so. Our payments only and up about 100 a month switching from the 30year with PM I to the 15 year. It was a no brainer. Our house will be paid off just in time for our daughter to need a car and head off to college.
FWIW, we don't make tons of money each year, but we lived pretty frugally for several years. We hustled to pay off my student loans and our cars while paying down our mortgsge. We tend to drive our cars for 10 years or longer and live within our means. We've never felt stretched making our mortgage payment, and we still have plenty of money for things we enjoy. Yeah, I would like to have a new car and take expensive vacations, but I like not having car payments and debt even more!
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