Going “all in” on paying mortgage

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6bquick
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Re: Going “all in” on paying mortgage

Post by 6bquick »

JBTX wrote: Sun Oct 25, 2020 11:22 pm
6bquick wrote: Sun Oct 25, 2020 9:36 pm
JBTX wrote: Sat Oct 24, 2020 10:38 pm The distinction between paying down and paying off a mortgage made in this thread makes no sense to me. They are the same thing, just a matter of degree.
In theory, you're right. it's a matter of degree. In reality, they are not at all the same thing. the difference is cashflow.
hypothetical numbers.
I have a $125k mortgage (PITI is $1k/mo) and $100k in taxable. therefore, I have 100 months worth of mortgage payments in taxable. Eight and one third YEARS of mortgage payments I have in my possession. If I get fired tomorrow, I'll have at least 8.5 years before I risk losing the roof over my head. If I take that entire 100k and pay DOWN my mortgage, I now have a balance owed of 25k (@1k/mo) and if I lose my job tomorrow, even though the mortgage is 20% of its previous value, I have 2 months instead of 102 months until I risk losing the roof over my head.

switch those initial numbers around, 100k mortgage and 125k taxable, I choose to pay OFF the mortgage, the wolves at the door are satiated much longer should I lose my job tomorrow because there is no mortgage anymore.

as with any hypothetical, there are confounding variables ad astra, but I hope you can see that from a monthly cashflow perspective, paying down a debt and paying off a debt are not even remotely the same thing in practice.
The problem with your example is if you are unemployed, you may need some of that $100k to pay other expenses until you are back on your feet. That is the purpose of additional liquidity.

I can't count how many times people have posted variants of this. Somehow if you get rid of a large sum of money that makes you more financially secure, because the comparatively small payment has gone away.

The reason to pay off or down a mortgage is you don't need the liquidity, and pay down/off gives you the best risk adjusted return vs the alternatives.
I know the numbers are simplified to make the point. I tried to illustrate that with my caveat at the end. I'll do better next time.

I think we're saying the same thing. I completely agree with you that it is ridiculous to think that "Somehow if you get rid of a large sum of money that makes you more financially secure, because the comparatively small payment has gone away."

The problem with paying off/down a mortgage based upon your liquidity needs is that you can't be certain what tomorrow holds re: liquidity needs.

I think we agree on this issue, I was merely trying to explain how there is a very real difference, in practice, between paying OFF something and paying DOWN something.
investnoob
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Re: Going “all in” on paying mortgage

Post by investnoob »

I have been prepaying my mortgage because I kind of understand what it means to do so. I will save money on interest.

If I was inclined to understand taxable investing, in Canada, I may have gone another route. I did do some research but got lost when I saw that US dividends are taxable in certain accounts but not in others and Canadian dividends have some sort of tax treatment and and and and...

So I just said screw it and decided to use any money that would have gone into a taxable account to prepay the mortgage. I did also keep some funds aside for an emergency (about 6 months of pared back spending).
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JupiterJones
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Re: Going “all in” on paying mortgage

Post by JupiterJones »

The sinking fund strategy certain has some liquidity advantage. But is it really any better than paying extra on the mortgage instead?

If my thinking is correct, every dollar that you don't use to pay down the mortgage has a cost equal to your mortgage's interest rate. If you instead put that dollar in a sinking fund, you'll have to get a return equal to (or greater) than your interest rate in order to not lose money.

While current interest rates are low, they're still not lower then the best risk-free investment vehicle, are they? Which means that the sinking fund approach either A) costs money, B) adds risk.

Is the choice between paying down the mortgage and using a sinking fund really just a choice between whether you take liquidity risk or investment risk?

In which case I suppose the time horizon becomes an important factor, since liquidity risk increases over time--greater chance of at least one "emergency" over 30 years than 5--whereas investment risk lowers over time.

(Full disclosure: I'm currently a "payer downer" myself. Not at the expense of a fat emergency fund and sinking funds for other known upcoming expenses though.)
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Hyperchicken
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Re: Going “all in” on paying mortgage

Post by Hyperchicken »

That's exactly why the subject of paying down/off mortgage vs. investing comes up regularly - it is not a clear-cut decision, and there are multiple variables that determine the answer. You get better returns with more risk but worse returns with the same risk if you invest. Then liquidity comes into picture, and the worth of liquidity is very subjective. Then "feels good" aspect comes into picture, etc.
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hornet96
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Re: Going “all in” on paying mortgage

Post by hornet96 »

6bquick wrote: Mon Oct 26, 2020 8:22 am

The problem with paying off/down a mortgage based upon your liquidity needs is that you can't be certain what tomorrow holds re: liquidity needs.

I think we agree on this issue, I was merely trying to explain how there is a very real difference, in practice, between paying OFF something and paying DOWN something.
One word: Optionality. Most BH's seem to have a very hard time grasping the value of optionality in these discussions.
KlangFool
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Re: Going “all in” on paying mortgage

Post by KlangFool »

JupiterJones wrote: Mon Oct 26, 2020 9:57 am
The sinking fund strategy certain has some liquidity advantage. But is it really any better than paying extra on the mortgage instead?

If my thinking is correct, every dollar that you don't use to pay down the mortgage has a cost equal to your mortgage's interest rate. If you instead put that dollar in a sinking fund, you'll have to get a return equal to (or greater) than your interest rate in order to not lose money.

JupiterJones,

You are borrowing money at X% via your mortgage. You could use that borrowed money to


A) Invest in the safe FI


Or


B) Invest in your portfolio


The choice is yours. Yes, the risk in (B) is higher. But, it is up to YOU to decide whether it is acceptable.


My mortgage interest rate is 3.49%. My AA is 60/40. I believe that my portfolio should at least return on an average of 5%. Hence, it is a good bet for me.


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anon_investor
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Re: Going “all in” on paying mortgage

Post by anon_investor »

rockstar wrote: Sun Oct 25, 2020 11:31 pm It doesn't make sense to prepay a mortgage and not have an emergency fund available for your job loss scenario.
+1!
EnjoyIt
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Re: Going “all in” on paying mortgage

Post by EnjoyIt »

JupiterJones wrote: Mon Oct 26, 2020 9:57 am The sinking fund strategy certain has some liquidity advantage. But is it really any better than paying extra on the mortgage instead?

If my thinking is correct, every dollar that you don't use to pay down the mortgage has a cost equal to your mortgage's interest rate. If you instead put that dollar in a sinking fund, you'll have to get a return equal to (or greater) than your interest rate in order to not lose money.

While current interest rates are low, they're still not lower then the best risk-free investment vehicle, are they? Which means that the sinking fund approach either A) costs money, B) adds risk.

Is the choice between paying down the mortgage and using a sinking fund really just a choice between whether you take liquidity risk or investment risk?

In which case I suppose the time horizon becomes an important factor, since liquidity risk increases over time--greater chance of at least one "emergency" over 30 years than 5--whereas investment risk lowers over time.

(Full disclosure: I'm currently a "payer downer" myself. Not at the expense of a fat emergency fund and sinking funds for other known upcoming expenses though.)
If you are taking the sinking fund and putting it under your mattress, then yeah, you are paying for that liquidity. On the other hand just invest the sinking fund as a part of your desired asset allocation. The average return for a 60/40 portfolio is 8.7%. Even if returns will be muted for the next 10 years, they are still very likely better than most low interest mortgages today. Depending on the mortgage, the rate, and returns, this can be worth well over 6 figures and bring financial independence a year or two sooner.

We followed this strategy. Just invest as much as possible and then one day we found ourselves financially independent, we used cash and dividends from our portfolio to pay off our mortgage over a relatively short period of time. This strategy has the highest expected return while still keeping liquidity.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
loukycpa
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Re: Going “all in” on paying mortgage

Post by loukycpa »

We aggressively prepaid our mortgage with what was left after maxing out retirement plans, and had home paid off in our late 30s. Moved up to a nicer home last year but did not need a mortgage to do it. At 47 home equity is about 30% of our net worth. We have a $250k HELOC at prime rate we will likely never use but I pay the $50 fee each year to have it because I like knowing it is there.

In hindsight of course I can see I would have been better off buying VTSAX in a taxable account over the years instead of prepaying the mortgage. Hindsight is always 20/20.
DemoEngr
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Re: Going “all in” on paying mortgage

Post by DemoEngr »

But given the next couple of years of monetary policy, would it not be better & safer to use some of the bond funds to pay down the next couple of years mortgage while bonds will be a likely minimum return.
KlangFool
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Re: Going “all in” on paying mortgage

Post by KlangFool »

DemoEngr wrote: Mon Oct 26, 2020 12:04 pm But given the next couple of years of monetary policy, would it not be better & safer to use some of the bond funds to pay down the next couple of years mortgage while bonds will be a likely minimum return.

DemoEngr,


Why would you pay down and/or pay off the fixe-rate mortgage?


The logical conclusion would be we will have high inflation and/or high-interest rate. The 30 years fixed-rate mortgage would be great inflation and high-interest rate hedge.

You cannot have it both ways. If you believe that we will have high inflation, you would not pay down or pay off your fixed-rate mortgage. Be consistent.

<<would it not be better & safer to use some of the bond funds >>

Why would you borrow money to invest in the bond fund? Invest in your portfolio instead.

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JupiterJones
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Re: Going “all in” on paying mortgage

Post by JupiterJones »

KlangFool wrote: Mon Oct 26, 2020 10:41 am Hence, it is a good bet for me.
No doubt. But it's still a bet.

And I guess my point is that it's a bet either way:

The person paying extra on the mortgage is "betting" that they'll have the mortgage paid off before they experience any sort of job loss or other emergency that would require liquidity beyond their standard EF.

The person investing the money instead is betting that their investments will earn more, over the "sinking period", than they're paying in interest on that same amount. It's a leveraged investment, essentially.

Both are probably pretty good bets, in the grand scheme of things. Although obviously neither is slam-dunk, sure-fire winner either.
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JupiterJones
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Re: Going “all in” on paying mortgage

Post by JupiterJones »

Hyperchicken wrote: Mon Oct 26, 2020 10:05 am That's exactly why the subject of paying down/off mortgage vs. investing comes up regularly - it is not a clear-cut decision, and there are multiple variables that determine the answer. You get better returns with more risk but worse returns with the same risk if you invest. Then liquidity comes into picture, and the worth of liquidity is very subjective. Then "feels good" aspect comes into picture, etc.
Well put, Hyperchicken.
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j0nnyg1984
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Re: Going “all in” on paying mortgage

Post by j0nnyg1984 »

Without reading through 4 pages of junk...

I put 25% down on my property. I made huge lump sum payments in year 2 and 3, finally paying it off in year 4 with another big lump. During this period, my IRA, 401k, and HSA contributions were maxed and my EF was never touched.

I have zero regrets, couldn’t care less about the additional money I *could have* made by investing the money, and still have zero interest in taxable investing.

HTH
Hyperchicken
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Re: Going “all in” on paying mortgage

Post by Hyperchicken »

j0nnyg1984 wrote: Mon Oct 26, 2020 2:08 pm Without reading through 4 pages of junk...

I put 25% down on my property. I made huge lump sum payments in year 2 and 3, finally paying it off in year 4 with another big lump. During this period, my IRA, 401k, and HSA contributions were maxed and my EF was never touched.

I have zero regrets, couldn’t care less about the additional money I *could have* made by investing the money, and still have zero interest in taxable investing.

HTH
Funny that you declared everything that others said "junk", then proceeded to repeat the same "feels good" argument.
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hornet96
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Re: Going “all in” on paying mortgage

Post by hornet96 »

JupiterJones wrote: Mon Oct 26, 2020 1:43 pm The person investing the money instead is betting that their investments will earn more, over the "sinking period", than they're paying in interest on that same amount. It's a leveraged investment, essentially.
And even if the investments don't earn more, the accumulated investment fund still provides option value in the event of a job loss/loss of income to cover the mortgage payments. You now have much more time to cover the mortgage payments and keep a roof over your head, while you sort out your employment situation.

If you had prepaid the mortgage instead, but still had an outstanding balance with no liquid savings available, as KlangFool often points out, you now have no time to recover and are at much higher risk of losing your home while you remain unemployed and unable to meet your mortgage obligations.

So while there is potentially a "price" for this optionality (if return on investments < interest paid), the embedded option retains value up to and until the mortgage is completely paid off.
nick evets
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Re: Going “all in” on paying mortgage

Post by nick evets »

I just still don't see this liquidity issue as a significant threat.

If you lose your job can you really not find 'something' than can pay the mortgage in 6 months or a year, or within the range of your emergency fund?

Second, can't you take out a HELOC?

Third, what about renting your home?

Fourth, worse case, can't you sell your home and presumably realize all of the equity?
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jriding
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Re: Going “all in” on paying mortgage

Post by jriding »

pepperz wrote: Wed Oct 21, 2020 3:43 pm Has anyone prioritized their mortgage big time over taxable investing?

I’m talking about sending all investible funds straight to mortgage after maxing out tax advantaged accounts.

I realize that is *not* historically the path to maximizing long term ROI on those dollars however having zero mortgage sure does seem like an amazing way to protect your downside.

You would need less emergency fund, have less stress, be able to take more risk to catch up, etc etc.... but at what cost?

I’d love to hear from folks that have done it or regretted not doing it.

I was in a similar situation a few years ago and decided to split the difference:
50% to extra mortgage payments and 50% to taxable savings.
It worked out great: mortgage is paid off as of this past January and I have a healthy taxable savings balance.
chillwill120
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Re: Going “all in” on paying mortgage

Post by chillwill120 »

nick evets wrote: Mon Oct 26, 2020 3:24 pm I just still don't see this liquidity issue as a significant threat.

If you lose your job can you really not find 'something' than can pay the mortgage in 6 months or a year, or within the range of your emergency fund?

Second, can't you take out a HELOC?

Third, what about renting your home?

Fourth, worse case, can't you sell your home and presumably realize all of the equity?
1. If you lose your job can you really not find 'something' than can pay the mortgage in 6 months or a year, or within the range of your emergency fund? Maybe or maybe not. If you get laid off, there is a good chance that the economy is in recession or that your particular field is not doing well. It can take months or years to find a job that pays enough to cover your mortgage and other bills. You may never find that job again and may be forced into a lower paying career. Who knows what could happen?

2. Second, can't you take out a HELOC?
What bank is going to give a line of credit to an unemployed person?

3. Third, what about renting your home? Would the rent be sufficient to cover the mortgage? What if the tenant stops paying rent and you need to evict? Now you have no place to live, no rental income, no job, an expensive court case on your hands and still have a mortgage to pay. Where do you live in the meantime? Are you able to afford the rent in the area where your house is located? This is impractical and a terrible idea.

4. Fourth, worse case, can't you sell your home and presumably realize all of the equity? Again, if you are getting laid off, it may be during a time of recession. Maybe home prices have dropped and your equity has been wiped out. Even if that hasn't happened, if you do sell you'd want to have the luxury of time to find the right buyer so you're not forced to sell for pennies on the dollar. If you only have 6 months' worth of mortgage payments saved up, you do not have time on your side.
rockstar
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Re: Going “all in” on paying mortgage

Post by rockstar »

It looks like a few premises are being thrown around. First, folks think their emergencies funds wont be adequate for an emergency. The obvious answer here is to increase them. The purpose of an emergency fund is to avoid tapping your investments in a downturn. Second, folks think they can make more money investing. This should be true in the long term. However, we did have a decade of zero returns between 2000 and 2009. A decade of zero returns is possible again. Finally, prepaying doesn't reduce your monthly cash flow expenses. i have already brought up both a refi and a recast as possible ways to reduce your monthly expense via a large prepayment.

My take away from this thread is that people talking about liquidity need much larger emergency funds.
wolf359
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Re: Going “all in” on paying mortgage

Post by wolf359 »

WhiteMaxima wrote: Fri Oct 23, 2020 11:49 am Paying off mortgage doesn't mean you are debt free, Your local government owns the tax right on your property. You are always a "renter" on that piece of property. I would treat house as a leveraged roof on top of your head.
This is an excellent point, although I wouldn't conflate tax with debt. Don't forget that your mortgage payment consists of paying your taxes, insurance, principal, and interest. When you successfully pay off your mortgage, the P&I portion goes away, but the taxes and insurance do not. You still have to budget for a housing expense, and don't forget to include maintenance and big repairs (e.g. amortizing a roof replacement).

But no, a paid off house isn't leveraged. That tax would be paid whether I'm renting (and paying the tax for my landlord's property) or paying it myself. And it's much cheaper to pay just taxes, insurance, and maintenance than a full mortgage or a full rent.
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hornet96
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Re: Going “all in” on paying mortgage

Post by hornet96 »

rockstar wrote: Mon Oct 26, 2020 7:19 pm My take away from this thread is that people talking about liquidity need much larger emergency funds.
What if your liquidity needs end up being more than your prudent six month emergency fund? Or even more than your very conservative twelve month fund? The point is, you can’t know until such a situation arises. Hence, the option value embedded in NOT prepaying the mortgage isn’t entirely dependent on the size of your emergency fund, although the size of the EF does indicate some degree of delta in relation to the mortgage balance.

And I would just note that the quoted text is kind of redundant: to increase liquidity, one should increase emergency funds. If one increases emergency funds, liquidity would be increased.
nick evets
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Re: Going “all in” on paying mortgage

Post by nick evets »

chillwill120 wrote: Mon Oct 26, 2020 4:13 pm
nick evets wrote: Mon Oct 26, 2020 3:24 pm I just still don't see this liquidity issue as a significant threat.

If you lose your job can you really not find 'something' than can pay the mortgage in 6 months or a year, or within the range of your emergency fund?

Second, can't you take out a HELOC?

Third, what about renting your home?

Fourth, worse case, can't you sell your home and presumably realize all of the equity?
1. If you lose your job can you really not find 'something' than can pay the mortgage in 6 months or a year, or within the range of your emergency fund? Maybe or maybe not. If you get laid off, there is a good chance that the economy is in recession or that your particular field is not doing well. It can take months or years to find a job that pays enough to cover your mortgage and other bills. You may never find that job again and may be forced into a lower paying career. Who knows what could happen?

2. Second, can't you take out a HELOC?
What bank is going to give a line of credit to an unemployed person?

3. Third, what about renting your home? Would the rent be sufficient to cover the mortgage? What if the tenant stops paying rent and you need to evict? Now you have no place to live, no rental income, no job, an expensive court case on your hands and still have a mortgage to pay. Where do you live in the meantime? Are you able to afford the rent in the area where your house is located? This is impractical and a terrible idea.

4. Fourth, worse case, can't you sell your home and presumably realize all of the equity? Again, if you are getting laid off, it may be during a time of recession. Maybe home prices have dropped and your equity has been wiped out. Even if that hasn't happened, if you do sell you'd want to have the luxury of time to find the right buyer so you're not forced to sell for pennies on the dollar. If you only have 6 months' worth of mortgage payments saved up, you do not have time on your side.
Those are fair points, certainly.

1) If you need *years* to find a replacement job that will allow you to pay the mortgage, you may have made some unwise choices on both house...and career. :)

2) Maybe; with good credit, plenty of equity and/or a co-signer....? Dunno. I would say it's situational.

3) Again, highly situational. Someone how bought a home 20 years ago may have a relatively low mortgage relative to the current value, and rental potential. But it introduces other risks an concerns, I agree.

4) I wouldn't expect 6 months one way or the other to mean the difference between a full-price offer and 'pennies on the dollar.' In fact, if you've got the home on the market for 6 months without accepting an offer, that's a *negative*. And, since our homeowner is out of work, in this dire scenario, he or she has the time to paint and handle repairs thus saving money ultimately.

Anyway, let's be reasonable -- this entire scenario is self-selecting for success, or low-risk:

a) homeowner is currently maxing out tax-advantaged space (a rarity in the US -- not sure about world)
b) homeowner has job/income that not only allows "a)", paying every other bill and commitment, and STILL allows a monthly surplus.
c) homeowners considers myriad personal and situational factors and determines, yes, making additional payments to accelerate paying off the lien is more advantageous and less risky than adding to, or building, and taxable portfolio.

And let's face it -- we've got all these risks demanding liquidity, but why wouldn't they also hammer the taxable account? I could easily see a scenario where, for a couple of years, market returns are relatively flat, or take a huge dip, while the house value -- especially in a high-demand areas -- is stable.
TonyDAntonio
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Re: Going “all in” on paying mortgage

Post by TonyDAntonio »

Back in 2011 we received an inheritance from my mother. We were maxing out all retirement accounts and with the inheritance began our first real taxable account. A few years out of the great recession, we were just starting to see real progress again in our stock investments. In hindsight we would have been much better off plowing the $65,000 into the market and continuing to pay on our mortgage. But we chose to pay off the mortgage and have never regretted that. We were still able to put a fair amount of money into the market (weekly 401k/ira contributions) while checking off one of our pre-retirement checklist items: paying off the house. When I was laid off in 2015 it was one less thing to worry about. So in short it wasn't the best financial decision but it was the best peace of mind decision.
chillwill120
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Re: Going “all in” on paying mortgage

Post by chillwill120 »

nick evets wrote: Tue Oct 27, 2020 8:18 am
chillwill120 wrote: Mon Oct 26, 2020 4:13 pm
nick evets wrote: Mon Oct 26, 2020 3:24 pm I just still don't see this liquidity issue as a significant threat.

If you lose your job can you really not find 'something' than can pay the mortgage in 6 months or a year, or within the range of your emergency fund?

Second, can't you take out a HELOC?

Third, what about renting your home?

Fourth, worse case, can't you sell your home and presumably realize all of the equity?
1. If you lose your job can you really not find 'something' than can pay the mortgage in 6 months or a year, or within the range of your emergency fund? Maybe or maybe not. If you get laid off, there is a good chance that the economy is in recession or that your particular field is not doing well. It can take months or years to find a job that pays enough to cover your mortgage and other bills. You may never find that job again and may be forced into a lower paying career. Who knows what could happen?

2. Second, can't you take out a HELOC?
What bank is going to give a line of credit to an unemployed person?

3. Third, what about renting your home? Would the rent be sufficient to cover the mortgage? What if the tenant stops paying rent and you need to evict? Now you have no place to live, no rental income, no job, an expensive court case on your hands and still have a mortgage to pay. Where do you live in the meantime? Are you able to afford the rent in the area where your house is located? This is impractical and a terrible idea.

4. Fourth, worse case, can't you sell your home and presumably realize all of the equity? Again, if you are getting laid off, it may be during a time of recession. Maybe home prices have dropped and your equity has been wiped out. Even if that hasn't happened, if you do sell you'd want to have the luxury of time to find the right buyer so you're not forced to sell for pennies on the dollar. If you only have 6 months' worth of mortgage payments saved up, you do not have time on your side.
Those are fair points, certainly.

1) If you need *years* to find a replacement job that will allow you to pay the mortgage, you may have made some unwise choices on both house...and career. :)

2) Maybe; with good credit, plenty of equity and/or a co-signer....? Dunno. I would say it's situational.

3) Again, highly situational. Someone how bought a home 20 years ago may have a relatively low mortgage relative to the current value, and rental potential. But it introduces other risks an concerns, I agree.

4) I wouldn't expect 6 months one way or the other to mean the difference between a full-price offer and 'pennies on the dollar.' In fact, if you've got the home on the market for 6 months without accepting an offer, that's a *negative*. And, since our homeowner is out of work, in this dire scenario, he or she has the time to paint and handle repairs thus saving money ultimately.

Anyway, let's be reasonable -- this entire scenario is self-selecting for success, or low-risk:

a) homeowner is currently maxing out tax-advantaged space (a rarity in the US -- not sure about world)
b) homeowner has job/income that not only allows "a)", paying every other bill and commitment, and STILL allows a monthly surplus.
c) homeowners considers myriad personal and situational factors and determines, yes, making additional payments to accelerate paying off the lien is more advantageous and less risky than adding to, or building, and taxable portfolio.

And let's face it -- we've got all these risks demanding liquidity, but why wouldn't they also hammer the taxable account? I could easily see a scenario where, for a couple of years, market returns are relatively flat, or take a huge dip, while the house value -- especially in a high-demand areas -- is stable.
I hear what you're saying. I am not one of these people who thinks every spare penny should go into equities. On the contrary, I think that if one is maxing out retirement accounts and has a solid emergency fund, making some additional mortgage principal payments could be a reasonable decision. I'm just making the point that the lack of liquidity is indeed a valid concern. Plus, given that mortgage rates are barely above 2% with the Fed aiming for 2% inflation, the real return one gets for paying down a mortgage and foregoing liquidity is not that great.

Also, just need to disagree with your point 1 above. Look at what Covid-19 has done to jobs that depend on office buildings. In NY for example, a ton of people who had jobs relating to office buildings (cleaning, maintaining building systems like elevators, HVAC systems, plumbing, managing buildings, leasing brokers, leasing attorneys, etc.) are now out of the job b/c people just aren't going to offices anymore. If this goes on long enough, the REITs and other businesses that own these buildings may have to lay off people as well (if they haven't already started). With the genie out of the bottle with respect to working from home, will they ever get their jobs back? If these people own homes anywhere near NYC, they likely have a pretty high mortgage; even a modest home in a less hot area is not cheap. Who could've seen this coming? Are you saying all those people made terrible career and house buying decisions?
cureious
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Re: Going “all in” on paying mortgage

Post by cureious »

I struggle with this concept all the time

HHI around 500K annually
Max out all of our retirement space and place 6-figures into taxable account
Only have 1 child
Have 425K left on 15 year mortgage at 2.875% fixed (6 months into this current mortgage since we have re-financed several times over the past 2 years)
Waffle all the time on how much extra principal (not pre-payments) I should do on an annual basis for our mortgage.

Very stable job and income. Our family is relatively thrifty.
I know we have "good problems," but still struggle how to proceed.

My age is 36. More inclined to keep investing as much as possible for the longer time horizon and just take the 14.5 years to pay off our mortgage.

Of note our assessed house value is $850K and bought a little over 5 years ago.
EnjoyIt
Posts: 4996
Joined: Sun Dec 29, 2013 8:06 pm

Re: Going “all in” on paying mortgage

Post by EnjoyIt »

cureious wrote: Tue Oct 27, 2020 11:33 am I struggle with this concept all the time

HHI around 500K annually
Max out all of our retirement space and place 6-figures into taxable account
Only have 1 child
Have 425K left on 15 year mortgage at 2.875% fixed (6 months into this current mortgage since we have re-financed several times over the past 2 years)
Waffle all the time on how much extra principal (not pre-payments) I should do on an annual basis for our mortgage.

Very stable job and income. Our family is relatively thrifty.
I know we have "good problems," but still struggle how to proceed.

My age is 36. More inclined to keep investing as much as possible for the longer time horizon and just take the 14.5 years to pay off our mortgage.

Of note our assessed house value is $850K and bought a little over 5 years ago.
Absolutely without a doubt invest that money. If you are saving a nice chunk of your income, one day in the future you will find your wealth many multiples of your mortgage. At that point finish it off.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
Money_Badger
Posts: 51
Joined: Thu Jul 02, 2020 11:05 pm
Location: Raleigh NC

Re: Going “all in” on paying mortgage

Post by Money_Badger »

EnjoyIt wrote: Tue Oct 27, 2020 12:18 pm
cureious wrote: Tue Oct 27, 2020 11:33 am I struggle with this concept all the time

HHI around 500K annually
Max out all of our retirement space and place 6-figures into taxable account
Only have 1 child
Have 425K left on 15 year mortgage at 2.875% fixed (6 months into this current mortgage since we have re-financed several times over the past 2 years)
Waffle all the time on how much extra principal (not pre-payments) I should do on an annual basis for our mortgage.

Very stable job and income. Our family is relatively thrifty.
I know we have "good problems," but still struggle how to proceed.

My age is 36. More inclined to keep investing as much as possible for the longer time horizon and just take the 14.5 years to pay off our mortgage.

Of note our assessed house value is $850K and bought a little over 5 years ago.
Absolutely without a doubt invest that money. If you are saving a nice chunk of your income, one day in the future you will find your wealth many multiples of your mortgage. At that point finish it off.
I agree. The rate is super low and you are young. Keep investing.

If you want to feel like you are chipping away, throw a couple hundred bucks at the mortgage each month, but invest the rest.
mervinj7
Posts: 1573
Joined: Thu Mar 27, 2014 3:10 pm

Re: Going “all in” on paying mortgage

Post by mervinj7 »

cureious wrote: Tue Oct 27, 2020 11:33 am I struggle with this concept all the time

HHI around 500K annually
Max out all of our retirement space and place 6-figures into taxable account
Only have 1 child
Have 425K left on 15 year mortgage at 2.875% fixed (6 months into this current mortgage since we have re-financed several times over the past 2 years)
Waffle all the time on how much extra principal (not pre-payments) I should do on an annual basis for our mortgage.

Very stable job and income. Our family is relatively thrifty.
I know we have "good problems," but still struggle how to proceed.

My age is 36. More inclined to keep investing as much as possible for the longer time horizon and just take the 14.5 years to pay off our mortgage.

Of note our assessed house value is $850K and bought a little over 5 years ago.
Refinance again! You should get 2.25% for a 15 year.

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