Paid off our Mortgage this evening!

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runner9
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Paid off our Mortgage this evening!

Post by runner9 »

Today my wife and I are paying off our mortgage! We couldn’t be happier, especially me:)

Here’s a graph of our monthly mortgage balance:
Image

Feel free to stop reading there, otherwise some background for those interested:

We bought our home in May, 2007. It’s our first home and our forever home. We paid $180K and put down $40K. The $140K mortgage was 30 years fixed at 6.0%.

We paid a 15 year payoff amount from the start ($1451 and soon after rounded to $1500)

In spring 2010 we got serious about our whole financial picture. We had 50K in cash, and were funding Roth IRAs about half the max. We increased IRAs to the max, started a 529 for our child and made a 1 time $10K extra payment on the mortgage. We upped the monthly payment to $1800 which would project to payoff in 2017 instead of 2021.

In spring 2011 we closed on a refi to 4.25%. During the refi process we had been making monthly payments but the new mortgage was the amount when we started the process, so we paid the difference when the check was sent to us. (shows as a slight increase on the chart, as does the second refi)

In summer 2012 we purchased a new car, our last big purchase on the horizon, both then and now. We also refinanced to PenFed at 3.0% 5/5ARM and PenFed paid closing costs. We decided to cap our emergency fund at $37.5K which was 9 months of expenses and pay everything over that to the mortgage.

By capping our EF at 37.5K each month I figure out the current balance of our accounts combined, then subtract the credit card statement balances that will be auto deducted. (I have a little spreadsheet I just copy/paste for each new month, it takes about 3 minutes). This has allowed us to make two $10K payments and mostly 2K to 4K payments.

In early 2013 we started a 457 for my wife and nearly fully funded it in 2013, it’s fully funded for 2014 and going forward. We continue to max to Roth IRAs and contribute to our child’s 529 plan.

After our Nov 1 payment we were left with 3.5K and made the decision to pay it off today instead of waiting until Dec. 1. We were actually planning to payoff tomorrow but you can’t submit a payment to PenFed online for more than the mortgage balance so after moving the money from Ally to PenFed Money Market Shares they said they would move the money on their end and it would be done this evening, so today it is! I just checked and it shows $0 and status of closed.

The plan has been to go to a nice dinner, just the 2 of us. These few weeks are crazy busy so we’ll do that, but it probably won’t be until December or January.

We’ll let the emergency fund increase for a few months, and then consider a few home improvements we’ve been putting off and also start a taxable account. (We’re keeping in the 15% tax bracket and I don’t want to have a ton that’s tax deferred at retirement.)

I’ll also check the county recorder site in 2 months and make sure the mortgage is released. I’ll also take PenFed off our home insurance as claimant, or whatever the term is. There’s been no escrow, so we’re all set there.

I know there are different debt vs. invest arguments and we probably would/could be ahead a bit if we went another path. We’re debt adverse, we picked a goal and made it happen. I hope most of the replies are positive congrats:)

Anyway, just wanted to share our good news!
epictetus
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Re: Paid off our Mortgage this evening!

Post by epictetus »

congratulations!
sounds like with your planning and hard work you are well ahead of the curve on all fronts.
Focus on what you can control
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LowER
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Re: Paid off our Mortgage this evening!

Post by LowER »

Awesome!!!!
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GerryL
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Re: Paid off our Mortgage this evening!

Post by GerryL »

Congrats. I became un-mortgaged last year in December. Great way to start the new year. (You may see your credit score dip a teeny bit in the next year, but you'll know the reason: fewer kinds of debt.)
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jfn111
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Re: Paid off our Mortgage this evening!

Post by jfn111 »

Congratulations, that was one of the best days of my life when I paid off mine.
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coachz
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Re: Paid off our Mortgage this evening!

Post by coachz »

Awesome! You will never regret it. I don't!!!
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Tyrobi
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Re: Paid off our Mortgage this evening!

Post by Tyrobi »

Very nice!
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sallys
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Re: Paid off our Mortgage this evening!

Post by sallys »

Congratulations! Enjoy.
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Tycoon
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Re: Paid off our Mortgage this evening!

Post by Tycoon »

Congratulations!!! Now pay yourself that mortgage every month and watch your net worth grow.
Emotionless, prognostication free investing. Ignoring the noise and economists since 1979. Getting rich off of "smart people's" behavioral mistakes.
LateStarter1975
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Re: Paid off our Mortgage this evening!

Post by LateStarter1975 »

Awesome....you guys are rock stars
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C319
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Re: Paid off our Mortgage this evening!

Post by C319 »

CONGRATULATIONS!!!
Feels good, doesn't it?
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BostonBoy
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Re: Paid off our Mortgage this evening!

Post by BostonBoy »

Just fantastic! Congratulations.
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Will do good
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Re: Paid off our Mortgage this evening!

Post by Will do good »

It feels great, congrats. :sharebeer
bhsince87
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Re: Paid off our Mortgage this evening!

Post by bhsince87 »

Congratulations! That's an accomplishment worthy of celebration.
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Gilberto
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Re: Paid off our Mortgage this evening!

Post by Gilberto »

Yowzah! Hearing your success story (and all the boglehead congrats too) is additional encouragement for my own payoff plans!
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obgyn65
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Re: Paid off our Mortgage this evening!

Post by obgyn65 »

Well done.
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Beth*
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Re: Paid off our Mortgage this evening!

Post by Beth* »

Congratulations!
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matjen
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Re: Paid off our Mortgage this evening!

Post by matjen »

Congratulations!!! :sharebeer
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rob
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Re: Paid off our Mortgage this evening!

Post by rob »

That's great - you want to start paying mine now? :D Fee up some cashflow to add to the savings :D
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Pony Ears
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Re: Paid off our Mortgage this evening!

Post by Pony Ears »

Congratulations! We are maxing out our Roths and contributing to 529 as well. We are still years away from paying off our mortgage, but enjoyed reading about your success. Cheers :sharebeer
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dbCooperAir
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Re: Paid off our Mortgage this evening!

Post by dbCooperAir »

Congratulations, its a great feeling not owing the man!
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Ignatious P. Daily
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Re: Paid off our Mortgage this evening!

Post by Ignatious P. Daily »

Congrats! Welcome to freedom from the evil banks!
poker27
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Re: Paid off our Mortgage this evening!

Post by poker27 »

love reading this. I'm only 2 years into my mortgage, so the amount remaining seems daunting. Then again, this isnt our forever home, so I'm not in a huge rush to pay it down. I can only imagine how yall must feel without the $x payment due every month
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BolderBoy
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Re: Paid off our Mortgage this evening!

Post by BolderBoy »

runner9 wrote:I’ll also check the county recorder site in 2 months and make sure the mortgage is released.
You are to be highly congratulated. Having no mortgage is very freeing. In my experience, the county recorder will mail you the document showing the mortgage has been released - store it safely.
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kenyan
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Re: Paid off our Mortgage this evening!

Post by kenyan »

Congratulations! Just another 29 years for us to say the same...

Ok, I do anticipate paying it off well before then, but we shall see.
Retirement investing is a marathon.
TSR
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Re: Paid off our Mortgage this evening!

Post by TSR »

Way to go! I'm more than a little envious, but still very happy for you. :beer
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Traveller
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Re: Paid off our Mortgage this evening!

Post by Traveller »

Outstanding!!

I hope to join your club in about 5 years. Does the air smell fresher and the food taste better in the house now?

Congratulations!
nepats
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Re: Paid off our Mortgage this evening!

Post by nepats »

Congrats! Great job executing your plan :sharebeer
whomever
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Re: Paid off our Mortgage this evening!

Post by whomever »

I'm only 2 years into my mortgage, so the amount remaining seems daunting.
Do you have the amortization schedule? When we got our mortgage, we printed off the schedule. It looks something like
(this is for 30 yr fixed 250K 5.5% - which happened to be the defaults on the online calculator I found):

Code: Select all

Month     Interest    Principal    Balance
1              $1146         $274     $249726
2                1145          275       249451
3                1143          276       249175
4                1142          277       248897
...
and so on
So when we were ready to write the $1420 check for month 2, we'd look at the checkbook and the 'Principal' column. If we could scratch up an extra $276, we would add that on. That took care of payment #3, and we never had to pay the $1143 in interest for month 3. When you look at it that way, it gets pretty easy to find ways to scrape up a few hundred extra bucks from time to time ("OK, I'll spend Saturday changing the water pump on the clunker and keep it going a few more months"). When we got a lump sum - a bonus, or a tax refund, we'd happily cross off multiple months. It was a great way to keep motivated. We still have the dog eared piece of paper with each month's worth of payments delineated.

When you get down to the end, of course, it gets harder - the ratio of principal to interest reverses - but by then you're smelling the barn :-).
basspond
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Re: Paid off our Mortgage this evening!

Post by basspond »

Congratulations! Welcome to the real home owner's club. It has helped us to save and use it to pay cash for large purchases including college.
CW47
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Re: Paid off our Mortgage this evening!

Post by CW47 »

Tycoon wrote:Congratulations!!! Now pay yourself that mortgage every month and watch your net worth grow.
+1

Congrats! :sharebeer
mchop
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Re: Paid off our Mortgage this evening!

Post by mchop »

Traveller wrote:Does the air smell fresher and the food taste better in the house now?
I would be interested to hear the OP's response (and any others). We paid our mortgage off last month after selling our former home that we had been renting (renter purchased).

I was not a good landlord and was itching to sell the house, so that was a huge relief - and i feel a weight off my shoulders. After having the cash in my bank account for a day, i paid the mortgage off but it hasnt really changed much for me. It was nice not having a mortgage payment come out the bank on the first of November...and i am sure i will enjoy that each month...however...other than that it feels like a bit of an anti climax. Onto the next goal i guess.

Thanks
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NateH
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Re: Paid off our Mortgage this evening!

Post by NateH »

Bravo! :moneybag :moneybag :moneybag :moneybag :moneybag :moneybag :moneybag
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runner9
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Re: Paid off our Mortgage this evening!

Post by runner9 »

OP here. Thank you for all the kind messages :D

Only breathing better because I had the day off, cleaned the house and replaced the furnace filter :wink:

The last payment was a bit under $3,300 and included a $35.75 "release fee." The money was in savings at Ally, then transferred to PenFed Money Market and then to the mortgage, all yesterday afternoon. As of today it still hasn't posted to Ally and is sitting there, as well as credited to the mortgage with shows $0. I think it will feel more real when we get some official paperwork, but for sure more real when it's out of our savings, which I guess will be overnight tonight.

We refi'd twice so those 2 mortgages are listed with the county as closed (whatever the term is). The county sent us nothing but the old mortgage carrier did each time, so I expect something from PenFed.

Interestingly, I know when we refi'd to this 5/5ARM PenFed paid closing but said if you closed it within 2 years you owed closing costs prorated back. I called to make sure it was 2 years as I've seen 3 years on promotions since, and we paid off in just over 2 years. They had to check and called me back but found no stipulation in our paperwork, I had already looked through the closing paperwork myself and found none either.

For those discussing payoff schedules, I absolutely love this calculator: http://www.mtgprofessor.com/calculators ... tor2a.html
It can quickly produce a schedule for questions like:
What's the current amortization schedule?
How payment do I need to make to payoff by X date? (I just kept adjusting additional principal to get to the date)
If I pay X per month extra when will it be paid off? How much interest saved?
If I pay X for a certain month(s) in the future when will it be paid off? How much interest saved?

We feel very lucky. We rented an apartment for a couple of years after getting married and saved up. We bought our "forever" home and don't worry that we bought in May, 2007 right before the bubble popped. (couldn't do anything about it anyway)

We're in our middle 30s and hope to have many, many decades living here.

I will certainly continue following any responses and will update when we get any official paperwork.
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IlikeJackB
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Re: Paid off our Mortgage this evening!

Post by IlikeJackB »

Congrats on coming one step closer to financial freedom!

We paid off our mortgage about 13 years ago and haven't regretted it for one minute.

Since then my wife and I have had a running joke whenever we see anything regarding a mortgage ….. we'll look at each other and say, "Mmm, mm, m ….. mortgage? What's that?". Or, "We don't pay interest, we earn interest".
"Do what you will, the capital is at hazard." Justice Samuel Putnam, Harvard College vs Amory, 1830. The "Prudent Man Rule."
whomever
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Re: Paid off our Mortgage this evening!

Post by whomever »

however...other than that it feels like a bit of an anti climax.
Both my parents and my wife's parents were children during the Great Depression. Of the four parents, three were booted out of their homes (one couldn't keep up the payments on the farm, one were sharecroppers who couldn't make the rent, and one was a city dweller who couldn't make the rent. The 4th's family never lost their job, so they were OK).

So when we paid ours off, it was a pretty good feeling - come what may, more or less, we'd have a roof over our head. Heck, if times got tough, we could take in boarders or something. Plus, now we could put that income stream into savings, and that felt pretty good as well.
poker27
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Re: Paid off our Mortgage this evening!

Post by poker27 »

whomever wrote:
I'm only 2 years into my mortgage, so the amount remaining seems daunting.
Do you have the amortization schedule? When we got our mortgage, we printed off the schedule. It looks something like
(this is for 30 yr fixed 250K 5.5% - which happened to be the defaults on the online calculator I found):

Code: Select all

Month     Interest    Principal    Balance
1              $1146         $274     $249726
2                1145          275       249451
3                1143          276       249175
4                1142          277       248897
...
and so on
So when we were ready to write the $1420 check for month 2, we'd look at the checkbook and the 'Principal' column. If we could scratch up an extra $276, we would add that on. That took care of payment #3, and we never had to pay the $1143 in interest for month 3. When you look at it that way, it gets pretty easy to find ways to scrape up a few hundred extra bucks from time to time ("OK, I'll spend Saturday changing the water pump on the clunker and keep it going a few more months"). When we got a lump sum - a bonus, or a tax refund, we'd happily cross off multiple months. It was a great way to keep motivated. We still have the dog eared piece of paper with each month's worth of payments delineated.

When you get down to the end, of course, it gets harder - the ratio of principal to interest reverses - but by then you're smelling the barn :-).
I do have it, and I agree that is a good way to make you scrape up a few 100 bucks every month to get it down. Honestly, as amazing as it sounds, its just not a priority for me right now. We will most likely move in 5ish years, to a hopefully forever ish home, and I would like that one paid off ASAP.
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stickman731
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Re: Paid off our Mortgage this evening!

Post by stickman731 »

Congratulations - One thing to remember is your tax bill if it was being paid by the mortgage company. Make sure you get the tax bill due date ASAP so they do not send it to the mortgage holder and you get a late fee. I paid mind off two years ago (Thank you Bogleheads) at the end of the 3Q and mortgage was registered correctly about 6 weeks later, but tax bill for 4Q tax bill was already sent to mortgage company unknowingly. Hit with a ~$50 late fee.
lolbatross
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Re: Paid off our Mortgage this evening!

Post by lolbatross »

Congrats & well done.

I am firmly in the invest > pay down camp - if the #s make sense (mort rate, tax, AA) . However, if one does not like that option then aggressively paying down the mortgage makes sense. The key as others have stated is to use the new cash flow to invest now. This behavioral element is by far the most important part.

Again congrats.
flyingaway
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Re: Paid off our Mortgage this evening!

Post by flyingaway »

We bought our house in June 2006 and paid off the mortgage in September 2010. Although it would have been better for us financially to invest the money in 401(k) accounts, we never regretted to pay off the mortgage as soon as we could. Being debt-free makes us feel much better.
chuppi
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Re: Paid off our Mortgage this evening!

Post by chuppi »

Congratulations! The debt free feeling is priceless.

A lot of people will argue that investing the money instead would have fetched 7% annual returns on an average. Mortgage interest rate is only 3.5% and you are not taking advantage of the difference. 7% is not guaranteed and in the near future it may be less and we will never know until after the fact. We surely know that we keep the returns of 3.5% that we would give someone else.

I am not sure if there are other advantages to paying off mortgage. For example if you are living next to a stream that barely has any water but you lender will force you to get a flood insurance. I don't have experience but I am guessing there are advantages to not having mortgage.
placeholder
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Re: Paid off our Mortgage this evening!

Post by placeholder »

I paid off mine and celebrated by taking out a home equity loan.
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grabiner
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Re: Paid off our Mortgage this evening!

Post by grabiner »

chuppi wrote:I am not sure if there are other advantages to paying off mortgage. For example if you are living next to a stream that barely has any water but you lender will force you to get a flood insurance. I don't have experience but I am guessing there are advantages to not having mortgage.
My lender requires me to get homeowner's insurance with a deductible less than a fixed percentage of my condo's value; this is a lower deductible than I wanted.

This is a more common issue with auto insurance; the lender will require collision and comprehensive, often with a low deductible such as $500, to protect its own interest. When the car loan is paid off, you can drop collision and comprehensive, or keep them with a $1000 or $2000 deductible to reduce your costs significantly.
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madbrain
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Re: Paid off our Mortgage this evening!

Post by madbrain »

grabiner wrote: This is a more common issue with auto insurance; the lender will require collision and comprehensive, often with a low deductible such as $500, to protect its own interest. When the car loan is paid off, you can drop collision and comprehensive, or keep them with a $1000 or $2000 deductible to reduce your costs significantly.
Which auto insurer allows a $2000 deductible ?
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ofcmetz
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Re: Paid off our Mortgage this evening!

Post by ofcmetz »

I bought my house in April of 2007 and am not nearly paid off yet. I admit to feeling a bit jealous. Congrats OP, and thanks for sharing. I've leaned towards filling the retirement accounts with extra money, but am on a 15 year mortgage so I'll have my paid off post one day. :sharebeer
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TradingPlaces
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Re: Paid off our Mortgage this evening!

Post by TradingPlaces »

This is a nice achievement, congrats!

I do have a contrarian view here. Let me elaborate. Let's say that your tax situation is such that you benefit more by taking itemized deductions (as opposed to standard). Let's also suppose that you are in the 15% Federal Income Bracket.

Why not get a 5/1 ARM at 3.00%, and then by getting 15% deduction on the mortgage interest, the effective rate of interest is 2.55%. And then use the loan out of the house as capital to invest in a manner that is tax efficient.

I am not saying that you can make a risk-free 3% or even 2.55%, but with risk, and time, surely you can make 5-6%. In this low interest rate environment, you could possibly make higher returns on equities.

At the same time, if there is inflation, by taking a mortgage, even if it is a 5/1 ARM, you would have sold a bond high, effectively.

Put it this way: is it better to invest what would be your 5/1 ARM mortgage payments, at 80% LTV, or the 80% of the appraised value of the house. I think the second.
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White Coat Investor
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Re: Paid off our Mortgage this evening!

Post by White Coat Investor »

There's nothing wrong with your math, TradingPlaces. It ignores the behavioral aspect (most people who carry mortgages based on this math argument, including me, buy a boat instead of paying off the mortgage rather than invest instead of paying off the mortgage.) However, I've been giving this thing a lot of thought lately. The point to me is for the equity in my home to be such a tiny percentage of my net worth that it doesn't matter much what I do with it. So if it feels good to have the home paid off, great! It's not going to affect the overall growth much.

Dave Ramsey likes to call the paid off home mortgage the new status symbol of choice. Since the math doesn't always make sense doing that, it is, in some ways, a status symbol. About half of my partners (and it isn't an age thing) have their house paid off. Those are the docs who seem happiest too.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Pacific
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Re: Paid off our Mortgage this evening!

Post by Pacific »

Congratulations!

The comments on here have convinced me to do the same next month.

1. I probably will not be itemizing next year.

2. I have a PenFed 7/1 ARM at 3.128% interest and will owe $62,000 (of original $260,000 purchase price) next month.

3. The payoff of the remaining balance will come from myAlly Bank savings account (0.8% interest??)

4. I have been paying an additional $2,400 each month principal.

5. I will take the $3,000 monthly payments and invest.

I do have one question -- what are those two blips on your chart which show an increase in your mortgage balance??
Viking65
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Re: Paid off our Mortgage this evening!

Post by Viking65 »

Hearty Congratulations Runner9!!! Enjoy the milestone.
I am in the home stretch now, with 10 months left to go on my mortgage, and I can smell the finish line. I will be in your (mortgageless) shoes soon.
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runner9
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Re: Paid off our Mortgage this evening!

Post by runner9 »

Thanks, all. Yesterday we got a form letter from PenFed that it's paid off, as long as funds clear. Feeling a bit more real!

PenFed did not make us escrow, so we've been paying our own homeowner's insurance and property tax.
Pacific wrote: I do have one question -- what are those two blips on your chart which show an increase in your mortgage balance??
Those are the 2 times we refinanced. Both times the new mortgage was the amount we had outstanding the day we started the process. However, by the time we actually closed we'd made a couple more months payments so our balance was lower. The new refi would have the higher balance, then we'd get a check for the difference in a few weeks and we'd make a larger payment to the new refi the first month. Hope that makes sense.
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