At what mortgage rate would you pay it off early?

[anonymoususer]

At what mortgage rate would you pay it off early?
Would you stop contributing to retirement accounts? What about selling investments? What about withdrawing from Roth contribution? At what federal/state income tax bracket?
What is your reasoning?

[pizzy]

There’s a priority list in the wiki. Which I believe in.

As far as the initial question re: what rate.

I think 5% is my over/under.

[runner3081]

Up to you. We paid ours off 3-years ago at 2.75%. Bad choice, given where we are now, but it is done and over with. Was also <$200K.

[barnaclebob]

Ive got 180k left on a 1.875% mortgage. Several months ago I diverted my extra principle payments into a money market fund. When said fund becomes big enough to make the rest of the payments I'll start pulling money from there to do so. If rates fall to probably 2.5% or less, ill lump sum it back into the mortgage.

[KlangFool]

OP,

1) I only pay down the mortgage if I am financially independent.

2) Since I only buy a house if and when the mortgage payment is significantly cheaper than renting, the mortgage interest rate does not matter to me. I make money from imputed rent by paying the mortgage.

3) Usually, the folks that feel burden by the mortgage are folks that are "House Poor".

4) And, usually it is a bad idea for "House Poor" folks to pay down their mortgage. It just increase their liquidity risk and make them more likely to lose their houses in the coming recession.

"Would you stop contributing to retirement accounts? What about selling investments? What about withdrawing from Roth contribution? At what federal/state income tax bracket?"

5) The second lowest marginal tax rate is 10%. And, the mortgage interest rate is not 10% or above yet. So, how does it makes any sense for someone to pay 10% or more taxes in order to save less than 10% mortgage interest?

6) 401K/IRA are not retirement accounts. They are tax advantaged account. You can get money out tax free and penalty free before 59 1/2 years old.

KlangFool

[Spring garden]

Up to you. We paid ours off 3-years ago at 2.75%. Bad choice, given where we are now, but it is done and over with. Was also <$200K.

Was it actually a bad choice? What would your rate of return post tax on your alternative investment have been? For example, vanguard 2040 retirement shows a 3 year return as of 10/31 of 4.55. Assuming a 40% hit from taxes total gets you 2.73%. Seems about even for taking a fair bit more risk. What about the 3 fund advocate's darling bond fund, total bond.... -5.52. Yes that is minus 5.52% before taxes.

Seems to me one could conclude paying off that mortgage was a smart choice . Nice work!

[anonymoususer]

There’s a priority list in the wiki. Which I believe in.

As far as the initial question re: what rate.

I think 5% is my over/under.

I have seen that wiki page. It says pay down higher interest rate loan after emergency funds and employer match. What is higher interest for someone reading this? Also what if you already have money in hsa and Roth. Would you withdraw it for the amount that is penalty free?

[pizzy]

There’s a priority list in the wiki. Which I believe in.

As far as the initial question re: what rate.

I think 5% is my over/under.

I have seen that wiki page. It says pay down higher interest rate loan after emergency funds and employer match. What is higher interest for someone reading this? Also what if you already have money in hsa and Roth. Would you withdraw it for the amount that is penalty free?

Re: what rate. As I said, my over/under is 5%.

And no, I wouldn’t withdraw from retirement accounts during the accumulation phase unless things were dire.

[KlangFool]

There’s a priority list in the wiki. Which I believe in.

As far as the initial question re: what rate.

I think 5% is my over/under.

I have seen that wiki page. It says pay down higher interest rate loan after emergency funds and employer match. What is higher interest for someone reading this? Also what if you already have money in hsa and Roth. Would you withdraw it for the amount that is penalty free?

If you are unemployed in the coming recession, more money in the house will not save you. You still lose your house if you do not pay the mortgage and/or property taxes.

"Also what if you already have money in hsa and Roth. Would you withdraw it for the amount that is penalty free?"

No.

How long can you last if you are unemployed in the coming recession?

KlangFool

[anonymoususer]

There’s a priority list in the wiki. Which I believe in.

As far as the initial question re: what rate.

I think 5% is my over/under.

I have seen that wiki page. It says pay down higher interest rate loan after emergency funds and employer match. What is higher interest for someone reading this? Also what if you already have money in hsa and Roth. Would you withdraw it for the amount that is penalty free?

Re: what rate. As I said, my over/under is 5%.

And no, I wouldn’t withdraw from retirement accounts during the accumulation phase unless things were dire.

In that case, if you won’t add new money to Roth, why won’t you withdraw previous qualified Roth contributions?

[Jack FFR1846]

DW and I essentially did a Dave Ramsey pay down back when Dave was broke and hopeless.

We did avalanche before that word was attached to what we were doing. Pay the highest interest debt first with any extra money. We did pay off credit cards every month in full. But we had a personal loan from our wedding and car loans and student loans. Eventually we got to where only the mortgage was left and we continued to put all extra money towards it until it was gone. What was it's rate? I didn't care. It was a debt. Along the way, we did refinance the mortgage with zero cost mortgages maybe 3 times to first reduce the rate, then to reduce both the term and the rate. So those reduced our rate. This was 20 years ago so I think our final rate was 9 or 10%.

Back then, DW and I put something like 6% into 401k's. I bought savings bonds now and then. We were never in the market beyond the 401k and we didn't have a taxable account until about 5 years ago. Our first Roth was about 8 years ago. With that said, you might have the picture that we'll never have enough to retire. Well, we are both retired as of July 1st with a paid off house, 4 paid off cars, and about $4M in savings. We are spending about $75k a year in retirement which is a 50% increase over our working spending of about $50k a year.

[pizzy]

There’s a priority list in the wiki. Which I believe in.

As far as the initial question re: what rate.

I think 5% is my over/under.

I have seen that wiki page. It says pay down higher interest rate loan after emergency funds and employer match. What is higher interest for someone reading this? Also what if you already have money in hsa and Roth. Would you withdraw it for the amount that is penalty free?

Re: what rate. As I said, my over/under is 5%.

And no, I wouldn’t withdraw from retirement accounts during the accumulation phase unless things were dire.

In that case, if you won’t add new money to Roth, why won’t you withdraw previous qualified Roth contributions?

Because you can’t get the space back.

[WestCoastPhan]

5-ish percent mortgage rate would lead me to paying it down. Currently at 2.25% until Jan 2027.

[DVMResident]

About +1% net taxes over 10yr T-notes. I’m willing to pay a small interest for additional liquidity.

[anonymoususer]

5-ish percent mortgage rate would lead me to paying it down. Currently at 2.25% until Jan 2027.

If you don’t have enough money in non retirement account to payoff the mortgage after Jan 2027, have you stopped contributing to retirement account beyond the match? If not, what’s the thought process?

[anonymoususer]

About +1% net taxes over 10yr T-notes. I’m willing to pay a small interest for additional liquidity.

What type of bonds do you hold? What’s the mix? How about maturity?

[beardsicles]

Up to you. We paid ours off 3-years ago at 2.75%. Bad choice, given where we are now, but it is done and over with. Was also <$200K.

Was it actually a bad choice? What would your rate of return post tax on your alternative investment have been? For example, vanguard 2040 retirement shows a 3 year return as of 10/31 of 4.55. Assuming a 40% hit from taxes total gets you 2.73%. Seems about even for taking a fair bit more risk. What about the 3 fund advocate's darling bond fund, total bond.... -5.52. Yes that is minus 5.52% before taxes.

Seems to me one could conclude paying off that mortgage was a smart choice . Nice work!

This is an extremely charitable and extremely selective read.

To answer the question, given current interest rates, probably 5-6%.

[WestCoastPhan]

5-ish percent mortgage rate would lead me to paying it down. Currently at 2.25% until Jan 2027.

If you don’t have enough money in non retirement account to payoff the mortgage after Jan 2027, have you stopped contributing to retirement account beyond the match? If not, what’s the thought process?

I have enough in a taxable account to pay it off.

[cbs2002]

It's not purely about the rate, but a "sleep at night" decision.

At 2.375% I am not paying it off anytime soon, but:

If the mortgage balance was a small percentage of my NW, let's say less than 5%, I would be tempted to just shovel the money over there and be done with it for the mental satisfaction. We will probably be in that position in about 5 years. Optimal for investment return? No. But I would sleep even better at night.

[tesuzuki2002]

What is your reasoning?

It was at a cost when rates were so low.... However, I haven't had a mortgage for 4 almost 5 years now... so that's nice.. Money just get invested or spend on fun stuff.. depends on how I feel. LOL.

[queenofthemadhouse]

We are aggressively paying down a 6 percent loan instead of taxable investing.

We are still maxing 1 401k, 2 IRAs and an HSA. We are not paying medical expenses out of pocket. We are mostly skipping the 529 during this time.

Our marginal tax rate would be high right now with even a modest addition to income, so we are sacrificing some liquidity to avoid hitting an AGI cliff.

[Spring garden]

Up to you. We paid ours off 3-years ago at 2.75%. Bad choice, given where we are now, but it is done and over with. Was also <$200K.

Was it actually a bad choice? What would your rate of return post tax on your alternative investment have been? For example, vanguard 2040 retirement shows a 3 year return as of 10/31 of 4.55. Assuming a 40% hit from taxes total gets you 2.73%. Seems about even for taking a fair bit more risk. What about the 3 fund advocate's darling bond fund, total bond.... -5.52. Yes that is minus 5.52% before taxes.

Seems to me one could conclude paying off that mortgage was a smart choice . Nice work!

This is an extremely charitable and extremely selective read.

To answer the question, given current interest rates, probably 5-6%.

beardsicles, I was quite disappointed when I looked at our portfolio performance over the past 3 years.

I know it seems far fetched given how close the two returns were, but I didn't cherry pick. Vanguard 2040 is my personal "index to beat" and total bond is what I think of as a default bond choice.

I agree with you and think 5ish% is a reasonable threshold in current rate environment, i'm just pointing out to runner3081 when asset prices were bloated 2-3 years ago with interest rates near zero, paying down a lower rate mortgage actually worked out well. I wouldn't pay that rate down with current rates. Considerations for threshold for payoff rate are tax status, current rate environment, and liquidity concerns.

[Chv396]

We paid off ours at 3.5%. We had some cash in a Money Market fund earning 1%, so we paid off the mortgage with it.

[8foot7]

If you're asking about the conditions right now, I don't think it makes sense to pay off any debt at or under 5%, mostly since you can reliably earn that return in an insured (read: risk-free) account. But it's also because, in the case of a 4.25% or lower mortgage, I think there is a decent chance you may not be able to take out a mortgage at that low of a rate in the future.

Between losing a mortgage you can't predictably get again and being able to meet or beat the rate with liquid savings, at this current point in time there is no logical argument for paying off a low-rate mortgage early. (You'll of course hear the peace of mind crowd weigh in, and certainly personal finance is personal, but math is also math.)

In these situations I think it makes entirely too much sense to put the amounts you'd pay down ahead of schedule into a high-rate risk-free savings account. If and when rates on that account lower to the point where paying off the debt becomes reasonable, you can do so in a few clicks, no big deal. In the meantime, you've remained liquid and your funds were more productive in terms of earning power than being used to retire a low-rate debt.

[holycow007]

5% sounds like a good enough number
I was paying extra for 2.875% and 3.25% mortgage (rental) a yr or so as well as routing a portion of lump sum
However I read some posts here and changed my approach

I don't pay anything extra now
I created a separate account in fidelity and divert rental income, what I previously paid extra into the fidelity account - right now it is all treasuries well above 5% - even with federal taxes I am at above 4% return. Plan to do that until treasuries drop below 5 and then go to a conservative allocation 60/40 or something. So far I have accumulated a yrs worth of payments there

[runner3081]

Up to you. We paid ours off 3-years ago at 2.75%. Bad choice, given where we are now, but it is done and over with. Was also <$200K.

Was it actually a bad choice? What would your rate of return post tax on your alternative investment have been? For example, vanguard 2040 retirement shows a 3 year return as of 10/31 of 4.55. Assuming a 40% hit from taxes total gets you 2.73%. Seems about even for taking a fair bit more risk. What about the 3 fund advocate's darling bond fund, total bond.... -5.52. Yes that is minus 5.52% before taxes.

Seems to me one could conclude paying off that mortgage was a smart choice . Nice work!

I firmly believe it was the right thing to do, and would do it again, but doubt creeps in as there is a very strong "don't ever pay it off" group here and in other financial circles.

However your points are all valid!

[random_boglehead]

vanguard 2040 retirement shows a 3 year return as of 10/31 of 4.55. Assuming a 40% hit from taxes total gets you 2.73%. Seems about even for taking a fair bit more risk. What about the 3 fund advocate's darling bond fund, total bond.... -5.52. Yes that is minus 5.52% before taxes.

Not sure about the bond fund as I'm not a fan of bonds, but cherry picking short term results from a long term investment vehicle to support a conclusion seems a bit disingenuous to me.

Between losing a mortgage you can't predictably get again and being able to meet or beat the rate with liquid savings, at this current point in time there is no logical argument for paying off a low-rate mortgage early. (You'll of course hear the peace of mind crowd weigh in, and certainly personal finance is personal, but math is also math.)

I have trouble reconciling the fact Bogleheads are supposed to remain rational minded and remove strong emotions from investing decisions, yet allow for exceptions when it comes to financial decisions like debt. It seems a bit hypocritical for a group that seems to favor decision making based on data/logic/reason.

Anyway, I don't get too worked up about this stuff as I don't really care what people do as long as it doesn't harm others. It's just interesting to see some of the contradictions and biases in even a supposedly rational group. I guess humans will be humans lol.

[invest4]

During accumulation phase...generally not paying it off early. I prefer to direct monies toward long term tax advantaged investments for financial independence.

* Tax advantaged investments are typically use it or lose it each year

* Difference between mortgage and HYSA is ~2%. I would also prefer this approach to maintain liquidity and options vs sticking into the house.

* Don't fight the Fed. Eventually, interest rates will come down. I am focused on the longer term.

* If there is a recession / other and it's bad enough, you may also find it difficult to pull your money out of the house via HELOC as banks may protect themselves. (has happened before).

In 2000, my mortgage was 8.25%, but i could get 6% from the bank. I kept investing for financial independence per plan. Rates floated generally downward over the years...eventually landing with current mortgage of 2.62% which I currently plan to simply pay as agreed.

YMMV.

[MrJedi]

If mortgage rates are high, presumably the risk free rate is also high. I expect my investments to beat the risk free rate over time. So there isn't really a mortgage rate I would pay off early. I would only really pay off early to simplify my finances once mortgage balance becomes small compared to the overall portfolio.

If the risk free rate plummets while I hold a high rate mortgage, that likely means I can simply refinance to a lower rate.

[CletusCaddy]

I have never understood the "sleep well at night" camp on this question.

If I paid off my mortgage I would still owe:
1. Annual property tax of $22k+
2. Maintenance of the property, repairs/replacement of things that break. I just had to buy a new dishwasher after five years of using the old one. Another $1k out the window.
3. Annual insurance of $1-2k
4. Utilities of $4-5k

So getting rid of $18k in mortgage interest per year is supposed to land me in some kind of nirvana state of contentment?

[runswithscissors]

Anything above 5.5% I'd be paying down.

[anonymoususer]

If mortgage rates are high, presumably the risk free rate is also high. I expect my investments to beat the risk free rate over time. So there isn't really a mortgage rate I would pay off early. I would only really pay off early to simplify my finances once mortgage balance becomes small compared to the overall portfolio.

If the risk free rate plummets while I hold a high rate mortgage, that likely means I can simply refinance to a lower rate.

So if you are taking mortgage today at 8%, you won’t pay it off early?

[RedJunglefowl]

At what mortgage rate would you pay it off early?
Would you stop contributing to retirement accounts? What about selling investments? What about withdrawing from Roth contribution? At what federal/state income tax bracket?
What is your reasoning?

Assuming my asset allocation calls for at least some fixed income (so not 100% equities), which it does, I'd compare the (after tax) mortgage interest rate to the after-tax yield for a bond fund with close to no credit risk (so heavy on treasuries) and similar duration to my mortgage. If the mortgage interest rate is higher, sell bonds and pay down the mortgage and direct new money that would have bought bonds to paying down the mortgage.

However, in practice, my asset allocation doesn't always call for holding bonds of similar duration to my mortgage. Furthermore, maintaining the mortgage balance preserves refinancing optionality if interest rates go down a lot. So in practice I would end up comparing the yields on the bonds I would actually be holding and, if they are very close to the mortgage interest, slightly preferring to keep the mortgage around.

The decision gets more complicated if I've already sold all the bonds my asset allocation suggests I hold and I still have a very large mortgage balance. Then I have to compare risky equities to a risk-free return from paying down debt. Even in this case I would try to get a sense from bond yields how attractive paying down the mortgage is relative to prevailing yields.

[doobiedoo]

I would pay off any mortgage early, regardless of interest rate.

[Tom_T]

I would pay off any mortgage early, regardless of interest rate.

That's an emotional decision, not a financial one.

[MrJedi]

If mortgage rates are high, presumably the risk free rate is also high. I expect my investments to beat the risk free rate over time. So there isn't really a mortgage rate I would pay off early. I would only really pay off early to simplify my finances once mortgage balance becomes small compared to the overall portfolio.

If the risk free rate plummets while I hold a high rate mortgage, that likely means I can simply refinance to a lower rate.

So if you are taking mortgage today at 8%, you won’t pay it off early?

No, definitely not.

[CletusCaddy]

If mortgage rates are high, presumably the risk free rate is also high. I expect my investments to beat the risk free rate over time. So there isn't really a mortgage rate I would pay off early. I would only really pay off early to simplify my finances once mortgage balance becomes small compared to the overall portfolio.

If the risk free rate plummets while I hold a high rate mortgage, that likely means I can simply refinance to a lower rate.

So if you are taking mortgage today at 8%, you won’t pay it off early?

No, definitely not.

You seem to be wise to the equity risk premium but totally ignorant of the mortgage risk premium

[stoptothink]

Up to you. We paid ours off 3-years ago at 2.75%. Bad choice, given where we are now, but it is done and over with. Was also <$200K.

We paid off our 3.125% mortgage in 4yrs early '20 We did max out all tax-deferred investment vehicles before putting anything more to the mortgage, but still a poor decision in hindsight.

[MrJedi]

If mortgage rates are high, presumably the risk free rate is also high. I expect my investments to beat the risk free rate over time. So there isn't really a mortgage rate I would pay off early. I would only really pay off early to simplify my finances once mortgage balance becomes small compared to the overall portfolio.

If the risk free rate plummets while I hold a high rate mortgage, that likely means I can simply refinance to a lower rate.

So if you are taking mortgage today at 8%, you won’t pay it off early?

No, definitely not.

You seem to be wise to the equity risk premium but totally ignorant of the mortgage risk premium

Sure. I typically assume the market to be efficient and I can only accept what the market gives to me. If I'm taking out a mortgage that must mean I need liquidity, doesn't really matter what the interest rate is. With the open market, I know it will generally be fair/competitive.

I do not really see a difference when treasuries were paying close to 0% and mortgage rates around 3% vs. now with treasuries paying about 5% and mortgage rates around 8%.

You might even argue you can hold the higher mortgage and there's a chance for rates to go down and you can refinance vs. when rates were rock bottom and there was thought they wouldn't go negative.

[Spring garden]

vanguard 2040 retirement shows a 3 year return as of 10/31 of 4.55. Assuming a 40% hit from taxes total gets you 2.73%. Seems about even for taking a fair bit more risk. What about the 3 fund advocate's darling bond fund, total bond.... -5.52. Yes that is minus 5.52% before taxes.

Not sure about the bond fund as I'm not a fan of bonds, but cherry picking short term results from a long term investment vehicle to support a conclusion seems a bit disingenuous to me.

It's a fair point that its a short term result. Only time will tell what the "correct" decision was. The timeline isn't cherry picked, it's the time the decision was made to current. As to the appropriate time frame for judging, I suppose it would be whenever the mortgage would have been paid off absent prepayment. Would be interesting to review at that time and see how the decision fared. Total bond may have caught up, but using the 2x duration and size of the prepayment, I think its far from certain. As to a diversified portfolio, probably a better chance, but only time will tell.

[snackdog]

10% or a bit higher for me.

[8foot7]

Between losing a mortgage you can't predictably get again and being able to meet or beat the rate with liquid savings, at this current point in time there is no logical argument for paying off a low-rate mortgage early. (You'll of course hear the peace of mind crowd weigh in, and certainly personal finance is personal, but math is also math.)

I have trouble reconciling the fact Bogleheads are supposed to remain rational minded and remove strong emotions from investing decisions, yet allow for exceptions when it comes to financial decisions like debt. It seems a bit hypocritical for a group that seems to favor decision making based on data/logic/reason.

Anyway, I don't get too worked up about this stuff as I don't really care what people do as long as it doesn't harm others. It's just interesting to see some of the contradictions and biases in even a supposedly rational group. I guess humans will be humans lol.

I agree. And while I can at least appreciate the "sleep at night" argument, the one that really bothers me is the, "it's too much of a hassle to make the payments every month," as if things like autopay don't exist. And one owes property taxes either way, and I suspect most would carry insurance as well, so those payments need to be made. Same with electric, water/sewer, heat/natural gas, etc. It's not as if monthly bill paying disappears. It's simply a justification for doing something emotional. And that's fine, but it should be regarded as such, and not treated as some objective rationale for an optimal decision.

[260chrisb]

At what mortgage rate would you pay it off early?
Would you stop contributing to retirement accounts? What about selling investments? What about withdrawing from Roth contribution? At what federal/state income tax bracket?
What is your reasoning?

For me; 3%! If I were working would I stop contributions to retirement accounts or withdraw from a Roth? No way nor would I be concerned with whatever tax bracket one is in. I know, I know.....you can make more in the market, you lose liquidity, etc, etc, etc.......blah, blah, blah....nothing in life pisses me off more than paying interest even if it's mortgage interest at 3%. My home, while it is a lot more valuable than it was 8 years ago when I bought it, is not and will never be my largest asset and even as I live off of my IRAs and am now retired nothing feels better than the feeling of transferring principal only payments 3-4 times a year as I begin to see the end of my mortgage. It's not a cost or an expense to me but instead a transfer from one savings account to another that has bedrooms and bathrooms.

[Tom_T]

Between losing a mortgage you can't predictably get again and being able to meet or beat the rate with liquid savings, at this current point in time there is no logical argument for paying off a low-rate mortgage early. (You'll of course hear the peace of mind crowd weigh in, and certainly personal finance is personal, but math is also math.)

I have trouble reconciling the fact Bogleheads are supposed to remain rational minded and remove strong emotions from investing decisions, yet allow for exceptions when it comes to financial decisions like debt. It seems a bit hypocritical for a group that seems to favor decision making based on data/logic/reason.

Anyway, I don't get too worked up about this stuff as I don't really care what people do as long as it doesn't harm others. It's just interesting to see some of the contradictions and biases in even a supposedly rational group. I guess humans will be humans lol.

I agree. And while I can at least appreciate the "sleep at night" argument, the one that really bothers me is the, "it's too much of a hassle to make the payments every month," as if things like autopay don't exist. And one owes property taxes either way, and I suspect most would carry insurance as well, so those payments need to be made. Same with electric, water/sewer, heat/natural gas, etc. It's not as if monthly bill paying disappears. It's simply a justification for doing something emotional. And that's fine, but it should be regarded as such, and not treated as some objective rationale for an optimal decision.

+1

My taxes+insurance make up 47% of my monthly payment. Paying off the mortgage is not going to make-or-break my monthly budget. Besides, I have a 2.1% rate. Paying that off early is illogical. I'd sleep worse at night knowing that I took $90K out of my savings to pay off a ridiculously cheap loan.

[MrBobcat]

I have never understood the "sleep well at night" camp on this question.

If I paid off my mortgage I would still owe:
1. Annual property tax of $22k+
2. Maintenance of the property, repairs/replacement of things that break. I just had to buy a new dishwasher after five years of using the old one. Another $1k out the window.
3. Annual insurance of $1-2k
4. Utilities of $4-5k

So getting rid of $18k in mortgage interest per year is supposed to land me in some kind of nirvana state of contentment?

With $22k+ of annual property tax, you might never land in some kind of nirvana state of contentment.

[Tom_T]

I have never understood the "sleep well at night" camp on this question.

If I paid off my mortgage I would still owe:
1. Annual property tax of $22k+
2. Maintenance of the property, repairs/replacement of things that break. I just had to buy a new dishwasher after five years of using the old one. Another $1k out the window.
3. Annual insurance of $1-2k
4. Utilities of $4-5k

So getting rid of $18k in mortgage interest per year is supposed to land me in some kind of nirvana state of contentment?

With $22k+ of annual property tax, you might never land in some kind of nirvana state of contentment.

Yes, but you own your home! Unless you don't pay your property taxes, that is.

[Gennaro Dillinger]

You can debate what % is advisable and always get a counter opinion. I paid off my mortgage 23 years ago - I do not care what the % rate was, I honestly am not sure what it was now. It was paid and then I took that payment I made every month and immediately began to invest it. I retired at 53 and love it. Not having the debt has always been a source of satisfaction for my wife and I. It also allowed me to leverage some other opportunities as the years went by.

Obviously, paying off a mortgage is a guaranteed return - which no equity will ever do.

I saw a study (might have been by Ramsey) where they polled like 10,000 millionaires. Something like >85% of them owned their primary residence. There is no clear causal correlation but obviously there is some correlation - probably people who are financially astute, conscious and conscientious all contribute to owning your home and being financially independent.

[Gennaro Dillinger]

vanguard 2040 retirement shows a 3 year return as of 10/31 of 4.55. Assuming a 40% hit from taxes total gets you 2.73%. Seems about even for taking a fair bit more risk. What about the 3 fund advocate's darling bond fund, total bond.... -5.52. Yes that is minus 5.52% before taxes.

Not sure about the bond fund as I'm not a fan of bonds, but cherry picking short term results from a long term investment vehicle to support a conclusion seems a bit disingenuous to me.

Between losing a mortgage you can't predictably get again and being able to meet or beat the rate with liquid savings, at this current point in time there is no logical argument for paying off a low-rate mortgage early. (You'll of course hear the peace of mind crowd weigh in, and certainly personal finance is personal, but math is also math.)

I have trouble reconciling the fact Bogleheads are supposed to remain rational minded and remove strong emotions from investing decisions, yet allow for exceptions when it comes to financial decisions like debt. It seems a bit hypocritical for a group that seems to favor decision making based on data/logic/reason.

Anyway, I don't get too worked up about this stuff as I don't really care what people do as long as it doesn't harm others. It's just interesting to see some of the contradictions and biases in even a supposedly rational group. I guess humans will be humans lol.

Interesting. Is it emotional or logical to be conservative in the face of a financial decision(s) that is impacted by so many variables and unknowns? I have avoided debt many times in life when other choices and the relative risk was unclear (or I couldn't be bothered to research it in any great detail). I never saw it as an emotional choice, more logical and conservative.

[Nowizard]

First: What assets would be used to pay off a mortgage, so that differs from being able to do so without making other changes to what assets are sold to do so. In our case, we have been able to payoff a mortgage at any point for a number of years but have not done so. We have believed that net return on the increased amount available for investing justifies the mortgage. It has worked well for us. The issue that creeps toward the front is our age and gradual moves toward increasing simplicity. Overall comfort level, investor psychology rather than analytics, will likely be the reason we will payoff a mortgage of about 100k in the next couple of years after have one for fifty years or more.

Tim

[SevenBridgesRoad]

vanguard 2040 retirement shows a 3 year return as of 10/31 of 4.55. Assuming a 40% hit from taxes total gets you 2.73%. Seems about even for taking a fair bit more risk. What about the 3 fund advocate's darling bond fund, total bond.... -5.52. Yes that is minus 5.52% before taxes.

Not sure about the bond fund as I'm not a fan of bonds, but cherry picking short term results from a long term investment vehicle to support a conclusion seems a bit disingenuous to me.

Between losing a mortgage you can't predictably get again and being able to meet or beat the rate with liquid savings, at this current point in time there is no logical argument for paying off a low-rate mortgage early. (You'll of course hear the peace of mind crowd weigh in, and certainly personal finance is personal, but math is also math.)

I have trouble reconciling the fact Bogleheads are supposed to remain rational minded and remove strong emotions from investing decisions, yet allow for exceptions when it comes to financial decisions like debt. It seems a bit hypocritical for a group that seems to favor decision making based on data/logic/reason.

Anyway, I don't get too worked up about this stuff as I don't really care what people do as long as it doesn't harm others. It's just interesting to see some of the contradictions and biases in even a supposedly rational group. I guess humans will be humans lol.

This got me thinking about what a totally rational life would look like. It would sure cut down the number of posts at BH. And no rational reason for this forum since everyone is behaving rationally.