Paid off mortgage today

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WorkToLive
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Paid off mortgage today

Post by WorkToLive »

I wired the payoff amount to the mortgage company today. The balance started in 2008 at $300,000 at 5.25% and we re-fi'd to 3.25% in July 2011. Our gross income varied from ~$90,000-200,000 during that time. We never touched our 6 month emergency fund and continued sending ~20% to retirement and funding college towards the end. We are 39/38. I still can't quite believe it. I just logged onto the servicing website and it says "Paid in Full." Unreal!
Last edited by WorkToLive on Fri Jun 07, 2013 10:53 am, edited 1 time in total.
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zebrafish
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Re: Paid off mortgage today

Post by zebrafish »

:beer

Congratulations!
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Toons
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Re: Paid off mortgage today

Post by Toons »

WorkToLive wrote:I wired the payoff amount to the mortgage company today. The balance started in 2008 at $300,000 at 5.25% and we re-fi'd to 3.25% in July 2011. Our gross income varied from ~$90,000-200,000 during that time. We never touched our 6 month emergency fund and continued sending ~20% to retirement and funding college at $7,000/year the entire time. We are 39/38. I still can't quite believe it. I just logged onto the servicing website and it says "Paid in Full." Unreal!
Fantastic!Now take that hypothetical mortgage payment every month and invest in and index fund,It works :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
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bottlecap
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Re: Paid off mortgage today

Post by bottlecap »

Congrats! Great news!

JT
msj16
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Re: Paid off mortgage today

Post by msj16 »

Congrats! Make sure to celebrate this important milestone.
slsnr
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Re: Paid off mortgage today

Post by slsnr »

Well done! Go celebrate. :sharebeer
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TomatoTomahto
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Re: Paid off mortgage today

Post by TomatoTomahto »

I know it feels great today, but we paid off our mortgage around a decade ago, and it still feels great. Congratulations and enjoy the buzz :beer
I get the FI part but not the RE part of FIRE.
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6miths
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Re: Paid off mortgage today

Post by 6miths »

Congratulations and TT is right - it never stops feeling good.
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Blues
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Re: Paid off mortgage today

Post by Blues »

Congrats on an important milestone...it's a great feeling. :sharebeer
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WorkToLive
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Re: Paid off mortgage today

Post by WorkToLive »

Thanks! We are planning a steak dinner once the dust settles from the end of the school year. We will invite my parents who are the only folks in real life that know about this accomplishment. My husband bought a bottle of champagne to surprise me with tonight and we had a glass each. :happy

Early retirement, here we come!
scouter
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Re: Paid off mortgage today

Post by scouter »

Congrats!! Yea, my parents were the only ones we told many years ago, as well. They loved it!
bluelight
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Re: Paid off mortgage today

Post by bluelight »

CONGRATS! I paid mine off early just about a year ago. I still have to remind myself that I don't need to make a 1st of the month payment.
German Expat
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Re: Paid off mortgage today

Post by German Expat »

Congratulations, unfortunately still have a couple years to go on our mortgage but I paid our condo completely down last year. Felt great and all the money goes into savings.
Wannaretireearly
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Re: Paid off mortgage today

Post by Wannaretireearly »

Congrat worktolive! Great job b4 40.
We got 9 more years to go on the mortgage, counting down...just having it now in single digits seems a relief....then its kids done, FIRE, and sleeping in on Mon mornings 8-)
:sharebeer
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Cucumbers
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Re: Paid off mortgage today

Post by Cucumbers »

As someone new to mortgages-- why pay off a loan at 3.25%? Couldn't you get a better investment return with that money elsewhere? Other than the satisfaction of not having debt, which obviously is huge...
Default User BR
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Re: Paid off mortgage today

Post by Default User BR »

I did the same last year . . . then turned around and took out a PenFed home-equity loan to invest.


Brian
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Christine_NM
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Re: Paid off mortgage today

Post by Christine_NM »

Yippee!

It's nice to own a little piece of the planet.
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Raymond
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Re: Paid off mortgage today

Post by Raymond »

Congratulations! :sharebeer
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RIDL
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Re: Paid off mortgage today

Post by RIDL »

I just want to say *Congrats* and I hope to get to that stage in my life some time. :D
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TomatoTomahto
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Re: Paid off mortgage today

Post by TomatoTomahto »

Cucumbers wrote:As someone new to mortgages-- why pay off a loan at 3.25%? Couldn't you get a better investment return with that money elsewhere? Other than the satisfaction of not having debt, which obviously is huge...
You cannot get a risk free 3.25% return. You have to compare paying off the mortgage with a risk free investment to make it apples to apples. Additionally, for many of us, there's the great feeling that comes with it, which is priceless.
I get the FI part but not the RE part of FIRE.
The Wizard
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Re: Paid off mortgage today

Post by The Wizard »

Should be in similar situation before too long.
Re-fied to low rate HELOC a few years back and making payments roughly three times the minimum.
Will be nice retirement "pay raise" once this happens...
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frugaltype
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Re: Paid off mortgage today

Post by frugaltype »

Cucumbers wrote:As someone new to mortgages-- why pay off a loan at 3.25%? Couldn't you get a better investment return with that money elsewhere? Other than the satisfaction of not having debt, which obviously is huge...
There's nothing quite like the felling of owning your own home, free and clear. To me, a home has never been a financial investment.
The Wizard
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Re: Paid off mortgage today

Post by The Wizard »

Cucumbers wrote:As someone new to mortgages-- why pay off a loan at 3.25%? Couldn't you get a better investment return with that money elsewhere? Other than the satisfaction of not having debt, which obviously is huge...
Balance in your cashflow is a good thing.
Yes, a 3% loan is low enough that maxing out certain investment options makes sense.
Also good if cash permits accelerating repayment of your mortgage loan...
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IlliniDave
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Re: Paid off mortgage today

Post by IlliniDave »

Congrats to the OP! Even though our minds often remember the past and wonder about/plan for the future, really, we live in the present moment, and this is a great one for you. Plus, going forward, you'll never have to worry about getting that big check to the bank, freeing your future moments from a bit of worry.

To the "new to mortgages" poster:

Seems we quickly forget the lessons of 5 years ago. Home values plummet (underwater, can't sell the house to retire the mortgage), investments plummet (can't make up the difference, still can't sell the house to retire mortgage), economy tanks (income curbed/disrupted, can't make the mortgage payments). There's risk of big problems (relatively low probability though) when indirectly or directly leveraging investments via a home mortgage/equity loan, irrespective of rate differentials, for an "average" person (income and net worth).

It's a calculated risk that often has decent outcomes, and most of us essentially do it indirectly by saving for retirement in parallel with buying a house. If you're already pretty wealthy excluding your home equity and retirement accounts and can keep yourself afloat even with a 50% or higher loss in investment value it's not a big risk to your lifestyle--and you can possibly build some more wealth. If a substantial portion of your non-retirement net worth is your home equity, it's something to think more carefully about when retiring the mortgage is in sight.

It's hard to put a dollar value on knowing that your home is yours (as long as you can scrape up the taxes). From someone who had some sleepless nights in 2008/9 and again in 2011 (and I wasn't even a pull money out of the house investor), there's more to the consider than interest rates and possible future wealth.
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FabLab
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Re: Paid off mortgage today

Post by FabLab »

Excellent! Many congrats.
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nepats
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Re: Paid off mortgage today

Post by nepats »

Congrats! Stay Thirsty my friend :)
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Toons
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Re: Paid off mortgage today

Post by Toons »

TomatoTomahto wrote:
Cucumbers wrote:As someone new to mortgages-- why pay off a loan at 3.25%? Couldn't you get a better investment return with that money elsewhere? Other than the satisfaction of not having debt, which obviously is huge...
You cannot get a risk free 3.25% return. You have to compare paying off the mortgage with a risk free investment to make it apples to apples. Additionally, for
many of us, there's the great feeling that comes with it, which is priceless.
I second that :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
Dadarkar
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Re: Paid off mortgage today

Post by Dadarkar »

Paid off mortgage in early 2010. We continued same monthly amount to already existing three fund portfolio in taxable account. We have Intermediate tax free fund instead of total bond in taxable. Has worked very well so far as 2010-2011 was good buying opportunity :happy
ALinLI
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Re: Paid off mortgage today

Post by ALinLI »

Congrats. It must feel great. I commend you for your discipline to achieve this financial accomplishment. Big Win!!
camiboxer
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Re: Paid off mortgage today

Post by camiboxer »

Congrats on the achievement!
reggiesimpson
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Re: Paid off mortgage today

Post by reggiesimpson »

You have just eliminated one of lifes greatest debts. Enjoy it for the remainder of your life.
bowest
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Re: Paid off mortgage today

Post by bowest »

Congrats Worktolive!

This is inspiring. I'm curious about whether you set yourself an ~5-year timeframe for payoff (consistently paying about $7k month) or you just threw all available funds toward the mortgage over this period.
Default User BR
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Re: Paid off mortgage today

Post by Default User BR »

TomatoTomahto wrote:You cannot get a risk free 3.25% return. You have to compare paying off the mortgage with a risk free investment to make it apples to apples.
You do? You can NEVER guarantee a riskier investment will beat the risk-free return. With that thinking, no one would ever invest in anything but risk-free assets, as you can not guarantee a better return for the risk.

Emotion aside, I would definitely have kept a long-term low-rate mortgage. That's a good hedge against future inflation and increases in interest rates. It's also very cheap leverage into a diversified portfolio that's pretty likely to do much better over time. But not, of course, guaranteed.


Brian
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momar
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Re: Paid off mortgage today

Post by momar »

Default User BR wrote:
TomatoTomahto wrote:You cannot get a risk free 3.25% return. You have to compare paying off the mortgage with a risk free investment to make it apples to apples.
You do? You can NEVER guarantee a riskier investment will beat the risk-free return. With that thinking, no one would ever invest in anything but risk-free assets, as you can not guarantee a better return for the risk.

Emotion aside, I would definitely have kept a long-term low-rate mortgage. That's a good hedge against future inflation and increases in interest rates. It's also very cheap leverage into a diversified portfolio that's pretty likely to do much better over time. But not, of course, guaranteed.


Brian
I agree. I never get it when people post that you can only compare to a risk free return.

That and 30 year Treasuries are yielding right around 3.25%.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
Grt2bOutdoors
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Re: Paid off mortgage today

Post by Grt2bOutdoors »

bowest wrote:Congrats Worktolive!

This is inspiring. I'm curious about whether you set yourself an ~5-year timeframe for payoff (consistently paying about $7k month) or you just threw all available funds toward the mortgage over this period.
An interesting question - but the math doesn't work when you're grossing between 90K - 200K putting away 20% in retirement funds there is no mathematical way to have $7K in excess cash available per month to throw at the mortgage. I believe there was a thread posted a few weeks or months ago where the OP talked about having been given substantial outside assistance (hundreds of thousands in cash) from their parents.
And quite a bit of discussion around achieving goals as a result.
Last edited by Grt2bOutdoors on Fri Jun 07, 2013 10:36 am, edited 1 time in total.
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letsgobobby
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Re: Paid off mortgage today

Post by letsgobobby »

Congrats!

I paid off my mortgage today, too!

(except I am paying it off by refinancing... :beer )
Harold
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Re: Paid off mortgage today

Post by Harold »

Default User BR wrote:
TomatoTomahto wrote:You cannot get a risk free 3.25% return. You have to compare paying off the mortgage with a risk free investment to make it apples to apples.
You do? You can NEVER guarantee a riskier investment will beat the risk-free return. With that thinking, no one would ever invest in anything but risk-free assets, as you can not guarantee a better return for the risk.

Emotion aside, I would definitely have kept a long-term low-rate mortgage. That's a good hedge against future inflation and increases in interest rates. It's also very cheap leverage into a diversified portfolio that's pretty likely to do much better over time. But not, of course, guaranteed.


Brian
This makes sense only if one has chosen to always maintain the highest level of risk he can, in hopes of the highest returns.

Rational investors will choose appropriate levels of risk and invest accordingly. In the case of paying off a mortgage, if one hasn't chosen to take on more risk by borrowing to invest -- one needs to evaluate based on investments of equivalent risk.

If one has an investing plan in place, the payoff question answers itself. Most of the time, that means paying off the mortgage is appropriate (otherwise the plan would generally involve constant refinancing as the loan is paid down etc.)

Good for the original poster for making the right financial decision, and not just taking on more risk because he can.
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Phineas J. Whoopee
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Re: Paid off mortgage today

Post by Phineas J. Whoopee »

momar wrote:...
I agree. I never get it when people post that you can only compare to a risk free return.

That and 30 year Treasuries are yielding right around 3.25%.
Hi momar,

The comparison is the value of the mortgage interest you end up not paying. For what would have been the duration of the loan you are in effect earning the interest rate the old mortgage had, and tax free because no cash is changing hands.

There's no counterparty and no actual cash flows, so there's zero risk. Therefore, the proper comparison is Treasuries.

If you want to take more risk, fine, but there's no use saying, for example, that small caps are a better investment than Treasuries because the expected return is higher. Sure it is. The risk is also higher.

Ownership of the house is a risk you already took when you bought it, regardless of the financing.

Does that help? I don't necessarily expect you to agree it is the right comparison, but now at least maybe you understand why people say it.

PJW
rixer
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Re: Paid off mortgage today

Post by rixer »

Congratulations! Take a great vacation now, you deserve it after such commitment.

When I paid my first house off, I was just as happy. 2 months later I was too good to live there. lol
NorCalDad
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Re: Paid off mortgage today

Post by NorCalDad »

First, congrats to the OP.

Each of us has to make his own decision about risk and the mental reward of paying off a mortgage. Because my risk tolerance is relatively high and I have 25-30 years of employment ahead, I personally don't think paying off a 3% mortgage early makes more financial sense than putting the prepayment money in index funds. And I certainly don't think it makes sense if one has not maximized tax-advantaged accounts first. But for others the mental relief of being mortgage free is priceless, and I can understand that.
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Re: Paid off mortgage today

Post by slippingsloth »

believe the phrase is
:beer cheers mate
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WorkToLive
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Re: Paid off mortgage today

Post by WorkToLive »

Thanks, everyone! I'll be happy to cheer anyone else on.

Not sure where the $7,000/month figure came from. I paid $351,746 including interest over the course of the loan. It took 66 months (5 1/2 years) to pay it off. That averages to ~$5,330 per month.

We did not have a clear plan. We had a goal and we stayed focused.
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momar
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Re: Paid off mortgage today

Post by momar »

Phineas J. Whoopee wrote:
momar wrote:...
I agree. I never get it when people post that you can only compare to a risk free return.

That and 30 year Treasuries are yielding right around 3.25%.
Hi momar,

The comparison is the value of the mortgage interest you end up not paying. For what would have been the duration of the loan you are in effect earning the interest rate the old mortgage had, and tax free because no cash is changing hands.

There's no counterparty and no actual cash flows, so there's zero risk. Therefore, the proper comparison is Treasuries.

If you want to take more risk, fine, but there's no use saying, for example, that small caps are a better investment than Treasuries because the expected return is higher. Sure it is. The risk is also higher.

Ownership of the house is a risk you already took when you bought it, regardless of the financing.

Does that help? I don't necessarily expect you to agree it is the right comparison, but now at least maybe you understand why people say it.

PJW
I understand why people write it, but I disagree with it. It is only appropriate if you are unwilling to take any risk and will invest only in risk free instruments. It is fine to say if that is the case, but it is more generally used as a bromide with the implication that it applies to everyone.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
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momar
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Re: Paid off mortgage today

Post by momar »

I would also add that everyone typically recognizes the value of liquidity except in these situations.
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Sam I Am
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Re: Paid off mortgage today

Post by Sam I Am »

Message deleted.
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Phineas J. Whoopee
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Re: Paid off mortgage today

Post by Phineas J. Whoopee »

momar wrote: ...
I understand why people write it, but I disagree with it. It is only appropriate if you are unwilling to take any risk and will invest only in risk free instruments. It is fine to say if that is the case, but it is more generally used as a bromide with the implication that it applies to everyone.
I see. Does that mean you favor interest-only loans which are always refinanced into new interest-only loans with no principal ever paid? That would be an extreme position, which I'm not attributing to you, but it would seem to me to be the logical consequence of what you've said.

I disagree with your subsequent statement that:
momar wrote: ... everyone typically recognizes the value of liquidity except in these situations.
Aren't you committing the sin you've just now accused others of, saying something "... with the implication that it applies to everyone."?

As I said in a PM just now, but have recognized I should have just said it publicly, I appear to have misinterpreted your words "I never get it ..." and for that I apologize.

PJW
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momar
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Re: Paid off mortgage today

Post by momar »

Phineas J. Whoopee wrote:
momar wrote: ...
I understand why people write it, but I disagree with it. It is only appropriate if you are unwilling to take any risk and will invest only in risk free instruments. It is fine to say if that is the case, but it is more generally used as a bromide with the implication that it applies to everyone.
I see. Does that mean you favor interest-only loans which are always refinanced into new interest-only loans with no principal ever paid? That would be an extreme position, which I'm not attributing to you, but it would seem to me to be the logical consequence of what you've said.
No. I don't absolutely favor paying down debt or investing. It all depends on the term length and interest rate.
Phineas J. Whoopee wrote: I disagree with your subsequent statement that:
momar wrote: ... everyone typically recognizes the value of liquidity except in these situations.
Aren't you committing the sin you've just now accused others of, saying something "... with the implication that it applies to everyone."?

As I said in a PM just now, but have recognized I should have just said it publicly, I appear to have misinterpreted your words "I never get it ..." and for that I apologize.
Yes, perhaps I shouldn't have said everyone.

No worries.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
inbox788
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Re: Paid off mortgage today

Post by inbox788 »

TomatoTomahto wrote:
Cucumbers wrote:As someone new to mortgages-- why pay off a loan at 3.25%? Couldn't you get a better investment return with that money elsewhere? Other than the satisfaction of not having debt, which obviously is huge...
You cannot get a risk free 3.25% return. You have to compare paying off the mortgage with a risk free investment to make it apples to apples. Additionally, for many of us, there's the great feeling that comes with it, which is priceless.
Congrats! Btw, I just paid down $10k mortgage principal today as well. Have another $10k that might go for another lump payment. This is from overfunded emergency fund and ??? (over/under) funded new car fund. Looking at cars as low as 30k to over double. If I don't buy the car for another 3 years, what do I do with the extra $10k today? Getting less than 2% on a cd just isn't satisfying and market feels too risky. Especially long term bonds and overpriced dividend paying stocks. Short term bonds are also low return now. So paying down mortgage and saving the car fund back up over the next few years seems like a reasonable course despite the low rate, it's higher than CDs and short term bonds.
ALinLI
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Re: Paid off mortgage today

Post by ALinLI »

Getting less than 2% on a cd just isn't satisfying and market feels too risky
This sounds like market timing. If your IPS spells out your asset allocation and that new funds should just be invested into your portfolio in correct ratios then that should "feel" right for all markets. How do you know market will not go much higher from here soon?
ALinLI
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Re: Paid off mortgage today

Post by ALinLI »

Btw, i am facing the same dilemna on how to deploy new cash in taxable - to direct to extra principal payments in the mortgage or into my portfolio, a middle of the road approach might be do say you have a 50/50 equity to FI split - might be to invest 50% in equities and the other 50% into mortgage paydown instead of bonds. Problem this presents is how to account for mortgage paydown in total portfolio and your new asset allocation and lack of having bond funds to rebalance in case equities take a dive. You can't rebalance money paid towards a mortgage.
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