I want to pay off my mortgage. Am I crazy?

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madbrain
Posts: 5242
Joined: Thu Jun 09, 2011 5:06 pm
Location: San Jose, California

Re: I want to pay off my mortgage. Am I crazy?

Post by madbrain » Thu Apr 19, 2018 2:12 am

Toons wrote:
Wed Apr 18, 2018 10:22 am
I would pay off Everything.
Give yourself "options"
:happy
It's the exact opposite you are doing by paying off the mortgage - taking options off the table, locking your money into home equity, which you may not be able to access later unless you sell the house. With higher interest rates, debt-to-income ratio becomes a limiting factor. There is no way I could qualify for a loan on the entire amount of home equity I have based on my income.

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randomizer
Posts: 1547
Joined: Sun Jul 06, 2014 3:46 pm

Re: I want to pay off my mortgage. Am I crazy?

Post by randomizer » Thu Apr 19, 2018 2:18 am

Seems it simply doesn’t matter.
87.5:12.5, EM tilt — HODL the course!

ByThePond
Posts: 149
Joined: Thu Dec 31, 2015 11:21 am

Re: I want to pay off my mortgage. Am I crazy?

Post by ByThePond » Thu Apr 19, 2018 10:10 am

[/quote]
Does the pleasure pass, or is there initial excitement and then just onto the next thing?
[/quote]

We paid off our remaining few years' mtg back in 2007. Guess how we felt going through the great recession?
To this day, we still feel good about being entirely debt free. Was it the best financial move? Probably not. Wast the best psychological move? I'd say yes, it was for us. YMMV.

frugalecon
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Joined: Fri Dec 05, 2014 12:39 pm

Re: I want to pay off my mortgage. Am I crazy?

Post by frugalecon » Thu Apr 19, 2018 11:23 am

I am within 8 years of paying off the mortgage, which is at a fixed rate of 3.125%. Under the new tax law, I will no longer find it optimal to itemize deductions. Given my marginal federal/state tax rate, prepaying extra on the mortgage is equivalent to a fixed income investment of about 4.7%. Maybe I would do better than prepaying by investing more in equities, but given forecasts about future returns that is hardly guaranteed. So, I am allocating about 10% of my investment contributions to mortgage prepayments, which will shave a couple of years off. (I am putting about 65% of new investment into a mix of foreign and domestic stock, 10% into mortgage, and 25% into other fixed income. Overall portfolio is around 80/20.) That seems like a non-crazy strategy to me, though I would be open to opposing views.

bradpevans
Posts: 545
Joined: Sun Apr 08, 2018 1:09 pm

Re: I want to pay off my mortgage. Am I crazy?

Post by bradpevans » Thu Apr 19, 2018 11:44 am

frugalecon wrote:
Thu Apr 19, 2018 11:23 am
I am within 8 years of paying off the mortgage, which is at a fixed rate of 3.125%. Under the new tax law, I will no longer find it optimal to itemize deductions. Given my marginal federal/state tax rate, prepaying extra on the mortgage is equivalent to a fixed income investment of about 4.7%. Maybe I would do better than prepaying by investing more in equities, but given forecasts about future returns that is hardly guaranteed. So, I am allocating about 10% of my investment contributions to mortgage prepayments, which will shave a couple of years off. (I am putting about 65% of new investment into a mix of foreign and domestic stock, 10% into mortgage, and 25% into other fixed income. Overall portfolio is around 80/20.) That seems like a non-crazy strategy to me, though I would be open to opposing views.
For me its about time horizon. For 8 years (now maybe six with extra payments), you are getting a low-ish
(but KNOWN) return on that "extra" money.
Q1: could you (would you?) do better in the market? (or stuffed into retirement)
Q2: once paid off, will you take the (payment + extra) into:
spending
low risk / low return
higher risk / equities?

From a cash flow, the extra payment does nothing ... until the (earlier) final payment.
So my view (with low interest rates) is don't pay it down until i can pay it off.

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