Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
A write off is like spending 2 or 3 dollars to win a one dollar prize ..never use a write off as criteria...ditch the mortgage and you are a head if you are not going to do anything more worthwhile with the money assuming you have a safety buffer of cash or liquid assets .
Never count on any kind of helocs or personal loans to see you through ..2008 had so many helocs closed or denied as well as when times get tough you may not meet the criteria for them
One other thing I want to reiterate...I know I have said this over and over but so many just don’t get it .
When we invest our money , anything over what we get in cash instruments can be worth it ...it can be 1 percent over and be worth it .
But when we have a mortgage and are investing our money we are in effect borrowing that mortgage money to invest ...we don’t look at it that way because most of us retirees would not buy stocks with borrowed money .
Yet by borrowing money via the mortgage so we can keep our money invested that is exactly what we are doing .
In down years ,spending thousands in mortgage payments plus the effect of being down can increase sequence risk ...
So in the opinion of researchers like kitces you really want a decent size risk premium to invest with what amounts to borrowed money .
Would you ever borrow money to invest in stocks for a 3% return over the mortgage cost taking on risk with borrowed money when govt bonds pay 2-1/2 %? I wouldn’t ....I would want a pretty substantial risk premium over A govt bond if I was borrowing money .
So that can really alter the equation for retirees ..hey if was 100% equities in my accumulation stage , no problem . I would borrow through the mortgage and let it ride .
But today , my balanced portfolio at 30-40% equities is not going to give me the risk premium I want to take on debt and invest with borrowed money .
For many , they have never looked at the mortgage as borrowing to invest and if they did they never considered a risk premium for using borrowed money ....
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,705 posts, read 58,031,425 times
Reputation: 46172
$5114.28 / yr is pocket change for many retirees, probably even less than some spend on food.
20% what they might spend on a throwaway car?
Not a huge risk obligation.
Do what best suits your cash flows and sleeping quotient.
I could buy 146 cars for $5114.28, but it is still not considered a risk for me to carry a mortgage. My car will easily last me another 35 yrs in retirement.
Four years ago we moved from a very low cost of living area to an area where you would pay twice as much for the same house/condo. We did it in case I retire and we would be close to family and grandkids.
We sold our southern home and bought what we wanted here but to get what we wanted a mortgage was necessary. Either a mortgage or take money from our retirement accounts which wouldn't be a smart tax move.
Our mortgage payment is $426.19/month.
While I am working we can now easily pay $3,000.00/month up from the $2,000/month we paid last year. The idea was to get away from the mortgage but would it be smarter to keep the money in cash?
We owe $65,000 and the interest rate is 2.50% so the interest is only about $135.00/month and I am wondering if I would feel better with an extra $60,000 cash in savings or get away from the $426.19?
The $426.19/month mortgage isn't going to kill us it represents just 8% of our total retirement income once I stop working. We could actually pay it off in six months without having to dip into our retirement accounts but it would wipe out our cash savings and I don't like that.
I just like the idea of the extra cash. If I want $50,000 in cash I like the idea I can just go to the bank and get it.
Oh, and the love of my life is taken care of, if something happens to me there is enough life insurance where she would be able to knock out the mortgage and live comfortably.
I hate to put it this way, but I suspect if someone gave you perfect advice for todays economy, and the troubled waters we have ahead, you likely would not heed the sound advice.
Not because you are unintelligent, but your generation tends to think in static terms, but what is ahead of us is not like anything you can imagine.
I should know, as my Dad cannot fathom what is going to happen, despite being more intelligent than I am in history, and some important aspects of life.
However I will say you are on the right track, not wanting to pay off your mortgage. For starters, your interest rate is very low, and when inflationary rates occur, your will be well situated having a less than 3% loan.
Yet, if you are thinking about keeping cash in the bank, understand that investing it is the only thing that makes sense.
The days of retirees being able to live off interest the banks pay is long gone. Even if inflationary pressures cause the banks to pay more interest, it is a pittance compared to what your ever diminishing dollars value could yield.
So staying liquid rather than paying off a low interest loan is correct, you must find ways to invest where your dollars diminishing value makes more money for you.
Thus an older school way is to be come a dividend investor, making passive income with safer blue chip stocks, that still pay a decent dividend, regardless of how they are doing in the stock market.
Frankly you should likely be in a reputable fund such as Vanguard or the like. Having some of your money invested into precious metals such as gold/silver also makes sense.
Diversification is the key to not only have a hedge against inflation, but with the coming crisis, the dollar is in serious trouble.
I wont even bother to mention certain other strategies, as they could well turn you off, but rest assured a good investment consultant/financial planner could be the best money you'll ever spend.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,348 posts, read 8,564,711 times
Reputation: 16689
Quote:
Originally Posted by Igor Blevin
Being free and clear is a good feeling. I hope I can have that feeling someday. I have never been free and clear on a house, only on cars. That is a good feeling when you get a car title. I can't imagine how good it feels to have a house free and clear.
The OP has been on both sides of the coin, so he can judge those from experience.
I was free and clear a few years ago including my 20 plus rentals. I’ve pulled cash out and now carry mortgages. 7 now. Used the money to get a few more rentals, down payment on my personal home, and now buying an expensive sports car.
It felt good before, but honestly with the debt I don’t have any more stress.
Who knows how I will feel a few years down the road, but for me debt free wasn’t that big of a deal.
I was free and clear a few years ago including my 20 plus rentals. I’ve pulled cash out and now carry mortgages. 7 now. Used the money to get a few more rentals, down payment on my personal home, and now buying an expensive sports car.
It felt good before, but honestly with the debt I don’t have any more stress.
Who knows how I will feel a few years down the road, but for me debt free wasn’t that big of a deal.
No offense but haven't we seen this movie about leverage before?
I didn't have a choice, since I was unable to buy a home of my own until I was nearly 53. I took out a 30-year, 3.5% down mortgage, and I figured I'd be dead before it ever got paid off. It was still better than paying the same amount toward rent and never having any tax deductions.
But my circumstances changed, and I not only refi'd to a 15-year last year (after ten years), I'll have it paid off in 5 or 6. The idea of being truly debt-free for the first time ever in my adult life is thrilling to me. Plus, of course, the chance that I might outlive my mortgage!
I haven't been back to my gym in over a year (COVID). But I do remember this guy that regularly wore a tee shirt that read: "Old age is not for Sissies."
I didn't have a choice, since I was unable to buy a home of my own until I was nearly 53.
Same here. We had a 15 year mortgage and was going to have it paid off when I reached 65. But an opportunity came up to transfer back to SoCal to be close to my aging parents was a no brainer. Unfortunately the housing prices was 2-3X higher here so we had to take out a new mortgage.
I have a different philosophy on having a mortgage. We had about $250K savings but instead of paying down the mortgage I decided to keep it as rainy day fund and keep it in an investment account instead. I figured in case I loss my job we could afford to live for 5 yrs on that savings alone. Longer if I can duplicate the S&P 500 returns.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
The older I get, the better I was!
