Paying off primary mortgage

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Suzyq1952
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Paying off primary mortgage

Post by Suzyq1952 » Wed Sep 20, 2017 11:14 am

Retired, monthly income 8K. No other outstanding debt. Have primary mortgage left of 250K @ 3.75apr. Would have to cash out 100K in stock and add to reserve to pay off mortgage. Costs 3% to buy into stock again. Don't need the write off of mortgage interest for taxes. Should we pay off the mortgage?

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Kevin M
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Re: Paying off primary mortgage

Post by Kevin M » Wed Sep 20, 2017 11:33 am

Suzyq1952 wrote:
Wed Sep 20, 2017 11:14 am
Costs 3% to buy into stock again.
What does this mean?
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chevca
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Re: Paying off primary mortgage

Post by chevca » Wed Sep 20, 2017 11:48 am

With a monthly income of $8k, it would seem you can easily make the mortgage payment. I assume anyway that it's a manageable payment.

We need more info about your situation to give you good advice... how many years left on it, what's the monthly payment, what's your overall situation like, why do you want to pay it off, etc. But, it sort of sound like it wouldn't matter much for you to pay it off or leave it be.

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Toons
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Re: Paying off primary mortgage

Post by Toons » Wed Sep 20, 2017 11:50 am

One Step at a time.
Pay off mortgage as you described.
Tackle the 3% cost of stock purchase next.
You might reconsider(indexing :happy )
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

avalpert
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Re: Paying off primary mortgage

Post by avalpert » Wed Sep 20, 2017 12:03 pm

What is you asset allocation? When you say you don't "need" the write off for taxes what does that mean - does that mean you take the standard deduction? What would the tax costs be in taking the money out of your investments?

The comparison you should be making is between the cost of debt and the return on capital of the invested money.

Suzyq1952
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Re: Paying off primary mortgage

Post by Suzyq1952 » Wed Sep 20, 2017 12:07 pm

Short explanation of indexing?

Suzyq1952
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Re: Paying off primary mortgage

Post by Suzyq1952 » Wed Sep 20, 2017 12:08 pm

No tax consequences. In 15%...long term gains on all stocks that would have to be liquidated.

Jack FFR1846
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Re: Paying off primary mortgage

Post by Jack FFR1846 » Wed Sep 20, 2017 12:09 pm

Indexing: Buy Index funds. They're low cost, high volume, passive funds.
Bogle: Smart Beta is stupid

ResearchMed
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Re: Paying off primary mortgage

Post by ResearchMed » Wed Sep 20, 2017 12:11 pm

Suzyq1952 wrote:
Wed Sep 20, 2017 12:08 pm
No tax consequences. In 15%...long term gains on all stocks that would have to be liquidated.
If you are liquidating $100k and that includes a substantial amount of long term gains, there might be tax consequences, and that would also depend upon your regular/other taxable income.

But tell us more about that "3%" to repurchase... what is that all about?
It shouldn't be necessary.

RM
This signature is a placebo. You are in the control group.

Suzyq1952
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Re: Paying off primary mortgage

Post by Suzyq1952 » Wed Sep 20, 2017 12:21 pm

Franklin Templeton has a sales charge of 3.5% when investing 100K-249K addition money. 100K is about the chunk of change at a time that we can invest...so we have to figure we've lost 3.5%initially before we see the investment profit...hopefully...

ResearchMed
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Re: Paying off primary mortgage

Post by ResearchMed » Wed Sep 20, 2017 12:25 pm

Suzyq1952 wrote:
Wed Sep 20, 2017 12:21 pm
Franklin Templeton has a sales charge of 3.5% when investing 100K-249K addition money. 100K is about the chunk of change at a time that we can invest...so we have to figure we've lost 3.5%initially before we see the investment profit...hopefully...
Wow.

Why not use a vendor like Vanguard or Fidelity or Schwab, without those really high fees.
That's 3.5% that you've lost forever, plus the accumulated returns of that money over many years.

Have you read some of the background on Bogleheads about some of this?
It can make a *huge* difference in a case like this, something that can snowball of time.

And there may be ongoing annual fees in addition (?) that could be avoided.

RM
This signature is a placebo. You are in the control group.

J G Bankerton
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Re: Paying off primary mortgage

Post by J G Bankerton » Wed Sep 20, 2017 12:32 pm

Suzyq1952 wrote:
Wed Sep 20, 2017 12:21 pm
Franklin Templeton has a sales charge of 3.5% when investing 100K-249K addition money.
:shock: You are in the right place and just in time.

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Kevin M
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Re: Paying off primary mortgage

Post by Kevin M » Wed Sep 20, 2017 12:35 pm

Suzyq1952 wrote:
Wed Sep 20, 2017 12:21 pm
Franklin Templeton has a sales charge of 3.5% when investing 100K-249K addition money. 100K is about the chunk of change at a time that we can invest...so we have to figure we've lost 3.5%initially before we see the investment profit...hopefully...
Yikes! I would place a much higher priority on leaving this provider and moving assets to a low-cost provider like Vanguard than on worrying about the mortgage. There are no fees to buy most Vanguard funds, and the annual expenses probably will be much lower than what you're paying now (look at the "expense ratio" of the fund--that's the annual cost to you, although you don't see it directly on a statement).

Kevin
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Admiral
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Re: Paying off primary mortgage

Post by Admiral » Wed Sep 20, 2017 12:36 pm

Ah... Franklin Templeton! I remember back in the day when my Morgan Stanley adviser sold me on their "outperforming" fund families. :oops:

I think they had both front and rear loads, plus the advertising fees.

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CAsage
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Re: Paying off primary mortgage

Post by CAsage » Wed Sep 20, 2017 3:02 pm

If the tax break isn't helping you much, it might worthwhile to sell stock (after a really long bull market) to pay off the mortgage. First, you need to see what the capital gains would be on selling that stock and what it would cost you tax-wise. You need to know your tax bracket and be able to predict what the impact would be. Then, separately, look into what sort of investments you would do with your income. The choice really comes down to - can you earn more than the mortgage rate? Maybe.
There is NEVER a good reason to pay a load or an expensive advisory fee. Front loads are just plain rip-offs. Suggest you look into a book on basic investing theory to understand mutual fund expenses and how they are paid, and how you can invest at the lowest cost to yourself. If it's a bit much to tackle, Vanguard does have a modestly priced advisory service (.3%?) and you would be invested in low cost index funds.
The Wiki on this website has a lot of good reference material and book references. Good luck.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

mptfan
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Re: Paying off primary mortgage

Post by mptfan » Wed Sep 20, 2017 3:07 pm

Suzyq1952 wrote:
Wed Sep 20, 2017 12:21 pm
Franklin Templeton has a sales charge of 3.5% when investing 100K-249K addition money.
:oops:
Stop. Do not invest one more dollar with Franklin Templeton. Open an account with Vanguard or Schwab or Fidelity and invest in low cost index funds with no front end loads or loads of any kind or extra junk fees. You're welcome.
:beer
I eat risk for breakfast. :)

goingup
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Re: Paying off primary mortgage

Post by goingup » Wed Sep 20, 2017 3:50 pm

Suzyq1952 wrote:
Wed Sep 20, 2017 12:21 pm
Franklin Templeton has a sales charge of 3.5% when investing 100K-249K addition money. 100K is about the chunk of change at a time that we can invest...so we have to figure we've lost 3.5%initially before we see the investment profit...hopefully...
Why not just use the $100K replacement money for the mortgage payoff, and leave the Franklin-Templeton fund where it is? I'd hate to pay cap gains if $100K was going to appear shortly anyways. Am I missing something?

delamer
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Re: Paying off primary mortgage

Post by delamer » Wed Sep 20, 2017 3:59 pm

One key factor in making the mortgage decision is how much you'd spend down your savings in order to do so. If paying off your mortgage will leave with you with just $100,000 in liquid assets, then it isn't a good idea. If it would leave you with $1 million, then it is a matter of preference and what makes you sleep better.

One of the core premises of the Boglehead philosophy is to invest in low-cost mutual funds and ETFs. There are many excellent options for investment that don't require you to pay a sales charge at all. Vanguard, which was founded by John Bogle, offers funds/ETFs that have no sales charge and very low ongoing expense ratios.

Try one of these books: it will save you money if you get away from Franklin Templeton -

https://www.bogleheads.org/RecommendedReading.php

turner2
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Re: Paying off primary mortgage

Post by turner2 » Wed Sep 20, 2017 10:54 pm

Suzyq1952 wrote:
Wed Sep 20, 2017 12:21 pm
Franklin Templeton has a sales charge of 3.5% when investing 100K-249K addition money. 100K is about the chunk of change at a time that we can invest...so we have to figure we've lost 3.5%initially before we see the investment profit...hopefully...

You are losing a lot more than that, that is just one of the fees.

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LiveSimple
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Re: Paying off primary mortgage

Post by LiveSimple » Thu Sep 21, 2017 1:15 am

Please walk into Fidelity or Charles schwab office, open an account and talk to them about index funds. You can open online within five minutes, but I assumed you do need some human interaction.

Also refer the following.
https://www.bogleheads.org/wiki/Fidelity
https://www.bogleheads.org/wiki/Charles_Schwab

There is a day and night difference,from your templetin funds to index funds.

Please ask, for more help here until you understand the fees.

Good luck, you are in the right place.

None of us gain a dime, ( but we gain satisfaction) when you switch or invest with these companies, so it is for your own best interests.

CantPassAgain
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Re: Paying off primary mortgage

Post by CantPassAgain » Thu Sep 21, 2017 9:57 am

goingup wrote:
Wed Sep 20, 2017 3:50 pm
Suzyq1952 wrote:
Wed Sep 20, 2017 12:21 pm
Franklin Templeton has a sales charge of 3.5% when investing 100K-249K addition money. 100K is about the chunk of change at a time that we can invest...so we have to figure we've lost 3.5%initially before we see the investment profit...hopefully...
Why not just use the $100K replacement money for the mortgage payoff, and leave the Franklin-Templeton fund where it is? I'd hate to pay cap gains if $100K was going to appear shortly anyways. Am I missing something?
She mentioned she was in the 15% tax bracket so depending on the amount of capital gains she might not have to pay any taxes at all.

I would echo what others say and move everything to Vanguard or Fidelity or Schwaab or any other place I could buy low cost index funds commission free. And I would do it in a way to minimize the capital gains taxes so if the realized gains should be spread over a few years that's what should be done.

pjtallman
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Re: Paying off primary mortgage

Post by pjtallman » Thu Sep 21, 2017 3:19 pm

How much of the 100K is capital gain? Aren't capital gains taken into account when determining tax bracket? Isn't it possible, given that it is long term gain, that it may push you into higher tax bracket when included with your ordinary income at tax time? If so, then you may have to pay some taxes on it. Just want to make sure:)

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BolderBoy
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Re: Paying off primary mortgage

Post by BolderBoy » Thu Sep 21, 2017 3:33 pm

Suzyq1952 wrote:
Wed Sep 20, 2017 12:21 pm
Franklin Templeton has a sales charge of 3.5% when investing 100K-249K addition money.
Yikes. Stop! Forget the mortgage for now. You need to get away from doing this. Find a no load fund provider you like (I like Vanguard), plan to invest there and read more info here on the forum.

If you post your financial situation in this format, you'll get a lot of GREAT advice: viewtopic.php?f=1&t=6212
“Where you stand, depends on where you sit” - Rufus Miles | "Never underestimate one's capacity to overestimate one's abilities"

CantPassAgain
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Re: Paying off primary mortgage

Post by CantPassAgain » Thu Sep 21, 2017 5:39 pm

pjtallman wrote:
Thu Sep 21, 2017 3:19 pm
How much of the 100K is capital gain? Aren't capital gains taken into account when determining tax bracket? Isn't it possible, given that it is long term gain, that it may push you into higher tax bracket when included with your ordinary income at tax time? If so, then you may have to pay some taxes on it. Just want to make sure:)
Yes, so if OP is in 15% tax bracket now, she will have to be careful to only realize enough gains to keep her there.

SleepCity
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Re: Paying off primary mortgage

Post by SleepCity » Thu Sep 21, 2017 5:45 pm

Suzyq1952 wrote:
Wed Sep 20, 2017 12:21 pm
Franklin Templeton has a sales charge of 3.5% when investing 100K-249K addition money. 100K is about the chunk of change at a time that we can invest...so we have to figure we've lost 3.5%initially before we see the investment profit...hopefully...


Why not invest 99k instead? Or just switch to vanguard....

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