Anyone regret paying off mortgage early?

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acegolfer
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Anyone regret paying off mortgage early?

Post by acegolfer » Sat Jun 02, 2012 6:38 pm

If you have paid off mortgage early, have you ever regretted your decision and why? From another thread, it seems ppl are mostly happy with their decision to pay off the loan. Let's hear your experience, if you have paid off.

This is NOT another thread on whether to pay off mortgage or not. If you want to discuss that, please go to other threads.

To be clear, this should not be a justification on why one should or should not make extra principal payments. Each case is different and there will be a survivor bias to this discussion because if one paid off early, it means he afforded it.
Last edited by acegolfer on Sun Jun 03, 2012 1:06 pm, edited 3 times in total.

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Toons
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Re: Anyone regret paying off mortgage early?

Post by Toons » Sat Jun 02, 2012 6:46 pm

We "afforded " paying off the mortgage years ago by focusing on other areas of our spending and reduced that by simplyfying our "wants".We applied that found
money monthly ,quarterly whenever to paying our mortgage down,then eventually OFF.
One of if not the best financial decisions we ever made ,not one regret not one iota. :happy
I guess if one felt bad about paying off the mortgage once done,they could always take out a home equity loan :shock:
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Jake46
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Re: Anyone regret paying off mortgage early?

Post by Jake46 » Sat Jun 02, 2012 6:49 pm

No regrets at all. Between the financial security & the peace of mind, priceless!

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NAVigator
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Re: Anyone regret paying off mortgage early?

Post by NAVigator » Sat Jun 02, 2012 6:58 pm

My only regret about paying off my mortgage early was that I didn't do it earlier. :)

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Re: Anyone regret paying off mortgage early?

Post by reggiesimpson » Sat Jun 02, 2012 7:04 pm

Paid cash for each of my homes. First one was the toughest. No regrets whatsoever!

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shmidds
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Re: Anyone regret paying off mortgage early?

Post by shmidds » Sat Jun 02, 2012 7:11 pm

Paid the house off in early 2007. One of the best financial decisions I've ever made.

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Re: Anyone regret paying off mortgage early?

Post by nisiprius » Sat Jun 02, 2012 7:18 pm

No regrets, and the end of the stream of monthly mortgage payments was the real beginning of our ability to save for retirement. To say nothing of the security of knowing that in a financial pinch, one of the basic human needs, shelter, can now be met for a very small sum of money. Within the last few years we had to hack it for some months on my unemployment compensation and my wife's part-time salary, and not having to pay monthly rent or mortgage payments made that an inconvenience rather than a crisis.
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coachz
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Re: Anyone regret paying off mortgage early?

Post by coachz » Sat Jun 02, 2012 7:20 pm

Best feeling ever !

acegolfer
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Re: Anyone regret paying off mortgage early?

Post by acegolfer » Sat Jun 02, 2012 7:24 pm

Interesting.

I was hoping someone would say they regret paying off early because they should have invested in apple stock or gold. :)

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Re: Anyone regret paying off mortgage early?

Post by VictoriaF » Sat Jun 02, 2012 7:32 pm

I am not a home owner, and so treat what follows accordingly. I can think of two circumstances in which one may regret paying off mortgage early:

1. A home owner is making larger payments, still has a long way to go, and does not have a sufficient emergency fund. He loses his job and needs money to live while still making mortgage payments.

2. The area is devastated by a major disaster (hurricane, tornado, nuclear accident, or something like that) and all houses are destroyed. The event is not covered by insurance and homeowners with paid off houses lose everything. Those with mortgages can probably walk away (similarly to those who are figuratively under water).

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Re: Anyone regret paying off mortgage early?

Post by anncatchingup » Sat Jun 02, 2012 7:36 pm

I've heard/read suggestions from some "financial experts" that one should not be concerned about paying off a mortgage unless one plans to stay in that house in retirement (or forever?).

My husband and I are nearing retirement (next 2 years or so), but we don't know that we will necessarily stay in the house we're living in now. We may move to a totally different state. Who knows?

How does paying off a mortgage apply to us? We have a good size emergency fund. We are putting the max in 403B, 457, ROTH at this time. We could pay more toward our mortgage if it were the prudent thing to do, but...

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Re: Anyone regret paying off mortgage early?

Post by acegolfer » Sat Jun 02, 2012 8:00 pm

ann and Victoria,

Thanks for your posts. But I'm the OP and this is not another discussion on whether or not to pay off mortgage early. There are plenty of those already.

I was looking for 1st hand experience from those who paid off.

pobox2001
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Re: Anyone regret paying off mortgage early?

Post by pobox2001 » Sat Jun 02, 2012 8:04 pm

No regrets at all.

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mhc
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Re: Anyone regret paying off mortgage early?

Post by mhc » Sat Jun 02, 2012 8:33 pm

No regret. I love the freedom of having no debt.

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6miths
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Re: Anyone regret paying off mortgage early?

Post by 6miths » Sat Jun 02, 2012 9:19 pm

Paid it off in 2004 at age 42. Felt fabulous and no regrets at all.
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xerty24
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Re: Anyone regret paying off mortgage early?

Post by xerty24 » Sat Jun 02, 2012 9:23 pm

How much more than your mortgage rate would a balanced stock/bond portfolio have made over that 20-30 year period? I'm betting people like "feeling debt free", but they might like an extra $100k+ even more.
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6miths
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Re: Anyone regret paying off mortgage early?

Post by 6miths » Sat Jun 02, 2012 9:32 pm

xerty24 wrote:How much more than your mortgage rate would a balanced stock/bond portfolio have made over that 20-30 year period? I'm betting people like "feeling debt free", but they might like an extra $100k+ even more.
It's a good argument of course but the return on the mortgage pay down is guaranteed. I would have been looking at a mortgage rate of between 5 and 8% for several more years vs the lost decade in equities. And things are even easier in Canada since mortgage interest is not a tax deduction. Bottom line is that there is a great feeling of security knowing that the roof over your head is paid for. To each there own of course.
'It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so!' Mark Twain

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Re: Anyone regret paying off mortgage early?

Post by scouter » Sat Jun 02, 2012 9:54 pm

We paid off two of them. Absolutely no regrets.

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mhc
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Re: Anyone regret paying off mortgage early?

Post by mhc » Sat Jun 02, 2012 10:38 pm

xerty24 wrote:How much more than your mortgage rate would a balanced stock/bond portfolio have made over that 20-30 year period? I'm betting people like "feeling debt free", but they might like an extra $100k+ even more.
In general I think you a correct that most people would like an extra $100k. Who would have made sure I got that money if I hadn't paid off my mortgage?

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Re: Anyone regret paying off mortgage early?

Post by 555 » Sat Jun 02, 2012 10:39 pm

No regrets at all.

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Re: Anyone regret paying off mortgage early?

Post by Userdc » Sat Jun 02, 2012 10:49 pm

I think the people who would regret it wouldn't do it in the first place. I sleep fine with a mortgage worth of index funds in my taxable account, so I won't ever be in a situation to regret it.

Plus it's a pretty easy "mistake" to undo by taking out another mortgage (although you might miss your old rate if rates have jumped).

I guess the other potential regret scenario is where you no longer have income to qualify for a new mortgage, and you end up needing that liquidity.

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Re: Anyone regret paying off mortgage early?

Post by RTR2006 » Sat Jun 02, 2012 11:46 pm

We paid off our home in December 2005. Best decision ever.

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Re: Anyone regret paying off mortgage early?

Post by SGM » Sun Jun 03, 2012 4:25 am

No regrets. I have thought in the past that I could have invested the money instead, but the lure of having no payments and interest rates being as high as they were in the past I decided to pay off a mortgage early on the personal residence.

When housing was going up so much over so many years in certain markets a mortgage was a means for leveraging the gains. Of course when the housing bubble collapsed mortgaging single or multiple properties was a way to ruin for some. Some with mortgages actually made money by abandoning their homes, after taking the equity out first.

On a slightly different note rental properties might call for second thoughts about not keeping a mortgage. A consideration is liability and putting rental property in separate LLCs. Landlords do get sued and I wonder if it is wise not to have a mortgage on rental property. Also the interest on a rental property can be deducted against the rent collected.
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Re: Anyone regret paying off mortgage early?

Post by ks289 » Sun Jun 03, 2012 5:15 am

From other similar topics on this board, I think this topic will generate near 100% satisfaction rate among those paying off mortgage early, but we'll see.
Perhaps should start a topic looking for those who regret NOT paying off mortgage early also.

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Re: Anyone regret paying off mortgage early?

Post by itypefast » Sun Jun 03, 2012 5:33 am

I regret not paying my mortgage off sooner. I left a ton of money sitting in cash equivalents waiting for interest rates to rise.

I guess I could have allocated 100% of my money to riskier assets but then I'm not an idiot so I didn't do that.

I think anyone advocating investing in lieu of paying off your mortgage is probably very young and is only conducting a thought experiment. In theory, borrowing at 3.5% and making 10% sounds great. But you never know if that's how it's going to pan out. Paying off the mortgage is a risk free rate and those advocating not doing that should look up the definition of Sharpe ratio and calculate it for their hypothetical portfolio.

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Re: Anyone regret paying off mortgage early?

Post by OAG » Sun Jun 03, 2012 5:59 am

We paid off our last mortgage in 1986 when we sold the last home with a mortgage (one we assumed from the previous owner). We have purchased five homes since that time (one at a time never owned more than one at a time with the exception of a second home we owned for a parent who since is deceased). We do currently maintain a "no cost to open and maintain" HELOC that we use from time to time to pay cash for other large ticket items. Usually the balance on the HELOC is at $0 and the interest rate while variable has stayed at a pretty low rate (FFR -.5%) and has provided an "all cash position" on negotiating to purchase large ticket items. We never regretted paying off the final mortgage in 1986 (which was at 9%).
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SnapShots
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Re: Anyone regret paying off mortgage early?

Post by SnapShots » Sun Jun 03, 2012 7:12 am

Love! not having a mortgage payment. Should have done it sooner. No regrets. We own four houses. One was inherited: a garden home. Besides our home the other two are paid off: a rental and a 2nd vacation home. We now are going to sell our larger home and move into a garden home.
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Re: Anyone regret paying off mortgage early?

Post by peppers » Sun Jun 03, 2012 7:15 am

Nope.
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SnapShots
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Re: Anyone regret paying off mortgage early?

Post by SnapShots » Sun Jun 03, 2012 7:20 am

OAG wrote:We paid off our last mortgage in 1986 when we sold the last home with a mortgage (one we assumed from the previous owner). We have purchased five homes since that time (one at a time never owned more than one at a time with the exception of a second home we owned for a parent who since is deceased). We do currently maintain a "no cost to open and maintain" HELOC that we use from time to time to pay cash for other large ticket items. Usually the balance on the HELOC is at $0 and the interest rate while variable has stayed at a pretty low rate (FFR -.5%) and has provided an "all cash position" on negotiating to purchase large ticket items. We never regretted paying off the final mortgage in 1986 (which was at 9%).
Could you explain the HELOC and how your obtained this? And the FFR? I'm new on this site and don't understand this acronym. Thanks!
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Re: Anyone regret paying off mortgage early?

Post by ks289 » Sun Jun 03, 2012 7:57 am

itypefast wrote:I regret not paying my mortgage off sooner. I left a ton of money sitting in cash equivalents waiting for interest rates to rise.

I guess I could have allocated 100% of my money to riskier assets but then I'm not an idiot so I didn't do that.

I think anyone advocating investing in lieu of paying off your mortgage is probably very young and is only conducting a thought experiment. In theory, borrowing at 3.5% and making 10% sounds great. But you never know if that's how it's going to pan out. Paying off the mortgage is a risk free rate and those advocating not doing that should look up the definition of Sharpe ratio and calculate it for their hypothetical portfolio.
Thanks for the expert and kind advice. I see from your prior postings on this and other subjects that you did your homework and had a solid plan but regret the results and decision.

Since I am not very young (not sure what your cutoff is) then I must be an idiot for not using funds to pay off my entire mortgage balance.
The sharpe ratio is dismal (0.4) for investing vs pay down (assuming 100% invested in s&p for simplicity with 10% return, SD 16% vs 3.5%) . Maybe I will rethink my strategy.

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Re: Anyone regret paying off mortgage early?

Post by desertbandit442 » Sun Jun 03, 2012 8:16 am

No regrets here, but this is my final home as far as I plan.

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Re: Anyone regret paying off mortgage early?

Post by nisiprius » Sun Jun 03, 2012 10:30 am

anncatchingup wrote:I've heard/read suggestions from some "financial experts" that one should not be concerned about paying off a mortgage unless one plans to stay in that house in retirement (or forever?).
Do these financial experts sell investments, and make money when you buy investments, but not when you pay down a mortgage?

Do these financial experts sell both mortgages and investments and make money when you buy investments and lose money when you pay off a mortgage early?

Could you share with us the names of these financial experts?
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Re: Anyone regret paying off mortgage early?

Post by LynnC » Sun Jun 03, 2012 10:34 am

Being debt free is the best feeling ever!

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Re: Anyone regret paying off mortgage early?

Post by ruralavalon » Sun Jun 03, 2012 10:39 am

No regrets at all.

I didn't know how bad the "having a mortgage" feeling was until it was gone. "Free at last, . . . ."

Paying off the mortgage frees up a lot of cash flow, for anything else you desire.
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Re: Anyone regret paying off mortgage early?

Post by segfault » Sun Jun 03, 2012 10:41 am

I love not having a mortgage or car payment, and I know I'm in the minority here, but if I had it to do over again I might not pay them off early (or at least not as quickly). A little leverage can be a powerful thing especially if it helps you max out your retirement accounts or even if it allows you to save more in taxable accounts.

Given current low interest rates, I wouldn't sweat paying off a 4% mortgage or a 3% car loan.

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Re: Anyone regret paying off mortgage early?

Post by ks289 » Sun Jun 03, 2012 10:57 am

nisiprius wrote:
anncatchingup wrote:I've heard/read suggestions from some "financial experts" that one should not be concerned about paying off a mortgage unless one plans to stay in that house in retirement (or forever?).
Do these financial experts sell investments, and make money when you buy investments, but not when you pay down a mortgage?

Do these financial experts sell both mortgages and investments and make money when you buy investments and lose money when you pay off a mortgage early?

Could you share with us the names of these financial experts?
According to the link on this recent Forbes article

http://www.forbes.com/sites/financialfi ... age-early/

Some "experts" (more accurately personal finance advice commentators) that support not NECESSARiLY paying down mortgage aggressivlely include Liz Pulliam Weston, Walter Updegrave, Laura Rowley, Kiplingers magazine.

I have heard great (usually respectful) high level analysis on this board advocating the opposite (siding with the Dave Ramsey and Suze Orman set).

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Re: Anyone regret paying off mortgage early?

Post by runner9 » Sun Jun 03, 2012 11:07 am

We're on track to payoff 10 years after 1st buying. I'm all for buy and hold and maxing our Roths, but I'm glad to be able to see an ammorization schedule and no for sure that's what my balance will be in X months/years.

Especially with the volitility of stocks and low interest rates on savings, we're happy to put "extra" money after savings towards the mortgage principal.

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Re: Anyone regret paying off mortgage early?

Post by supersharpie » Sun Jun 03, 2012 11:13 am

Psychologically paying off the mortgage is beneficial. Financially it doesn't make sense unless you are an ultra-conservative investor.

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Re: Anyone regret paying off mortgage early?

Post by Sam I Am » Sun Jun 03, 2012 11:29 am

Message deleted.
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Re: Anyone regret paying off mortgage early?

Post by scrabbler1 » Sun Jun 03, 2012 11:30 am

I paid off my mortgage in 1998 just after I turned 35. I had done a refi in 1992, lowering my interest rate from 10+% on a 5-year ARM to 6% on a 1-year ARM. The rate had crept back up to 8% but I used a lot of the money I saved by NOT paying all of that extra interest for 6 years to pay it off.

This was a key step towards my switching to part-time work in 2001 and retiring in 2008.

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Re: Anyone regret paying off mortgage early?

Post by steve r » Sun Jun 03, 2012 11:35 am

supersharpie wrote:Psychologically paying off the mortgage is beneficial. Financially it doesn't make sense unless you are an ultra-conservative investor.
The similarties between this debate and the bond debate are striking. The reality is people are willing to lend money at very low rates because smart investors DO NOT think you can get a better return elsewhere on a risk adjusted basis. They could just as easly buy emerging market stocks, gold, US stocks, or whatever but they buy mortgage backed securites and (worse?) government bonds at record low rates.

The bond debate basically boils down to a debate between future inflation or deflation.

When rates hit record low levels in Japan over twenty ++ years ago ... the correct move "financially" was to pay off debt and not leverage up. They experienced deflation despite massive government debt and quantitative easings. Japan was the worlds second largest economy.

If the U.S. experiences deflation, ... paying off debt is a great idea. If we experience inflation, it may not be the right move. Who knows, stocks did not do well in the inflationary 1970s. Who knows?

What we do know is that the TIPS market and the bond market is signaling deflation, not inflation. The much less liquid gold market is signalling the opposite.

One last thought, a balanced portfolio means buying a chunk of bonds. You would be borrowing to turn around and lend.

It stikes me that a hedge strategy may be best. If you pay off the house, be more aggressive with your equity portfolio. I you use mortage money to invest, be conservative and have bonds.
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Re: Anyone regret paying off mortgage early?

Post by Watty » Sun Jun 03, 2012 12:00 pm

Watch out for recency bias.

My parents kept their mortgage for the full 30 years and they were very happy they did. They had a rate of less than 4% during the double digit inflation years of the late 1970's and early 1980's.


Paying the mortgage off or not does not have to be an "either/or" decision where you have to do one or the other.

You can also see if the lender will let you pay off a significant percentage of the mortgage (like 50% or whatever) and then "recast your mortgage" (Google this) where they will recalculate the required mortgage payment so that if you had a $1000 a month mortgage it would drop to $500 but the interest rate and length of the mortgage would stay the same. This has a lot of advantages compared to the normal partial pre-payment of principal where the length of the loan is decreased but the month payment remains the same.

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Re: Anyone regret paying off mortgage early?

Post by Tom_T » Sun Jun 03, 2012 12:28 pm

supersharpie wrote:Psychologically paying off the mortgage is beneficial. Financially it doesn't make sense unless you are an ultra-conservative investor.
One size does not fit all. What if someone cannot afford to retire until the monthly mortgage payment is off the books? Or the cash flow is needed for something else?

There is no one right answer to the question. What works for some doesn't work for others.

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Re: Anyone regret paying off mortgage early?

Post by twinsdad » Sun Jun 03, 2012 12:58 pm

Finished paying off mortgage this year, age 48. Here is one negative I have found, although I am not sure it is a "regret," in fact I consider it a "relative" negative. I no longer have the desire to work harder, extra hours, and keep trying to make more money and increase my income like I did when I had debt and a goal. Having a large debt is good motivation to work hard and increase your income. However, when I do get home from work now, the beer in my backyard does taste just a little bit better since I own it not the bank.

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Re: Anyone regret paying off mortgage early?

Post by acegolfer » Sun Jun 03, 2012 1:10 pm

twinsdad wrote:Finished paying off mortgage this year, age 48. Here is one negative I have found, although I am not sure it is a "regret," in fact I consider it a "relative" negative. I no longer have the desire to work harder, extra hours, and keep trying to make more money and increase my income like I did when I had debt and a goal. Having a large debt is good motivation to work hard and increase your income. However, when I do get home from work now, the beer in my backyard does taste just a little bit better since I own it not the bank.
liked. So paying off early motivated you to work harder in your early years. Have you asked whether you would have worked harder, if you had not intended to pay off early?

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Re: Anyone regret paying off mortgage early?

Post by Harold » Sun Jun 03, 2012 1:15 pm

twinsdad wrote:the beer in my backyard does taste just a little bit better since I own it not the bank.
You mean all the rest room graffiti I've read is wrong? You really do own beer instead of renting it?

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Re: Anyone regret paying off mortgage early?

Post by stan1 » Sun Jun 03, 2012 1:19 pm

Who is in a better situation:

A) $1M in assets including house, $300K in mortgage debt, $700K net worth
B) $700K in assets including house, $0K in debt, $700K net worth

Some will say they are the same (net worth is the same), others will say A) (more flexibility, potential for higher returns if investments make a higher rate of return than the rate on the borrowed money), and still others will say B) (less risk).

I'm not sure borrowing money to invest in stocks and bonds will make a significant difference over the long run. As others have pointed out the assumptions you make today will certainly not hold over 30 years so there really is no way to predict whether the outcome will be positive or negative. Too much depends on current vs future tax rates and current vs future investment returns which you have no control over. If rates of return are relatively stagnant for 15 years then skyrocket for the next 15 years after that you are of course better off with the 15 year loan and then investing the money you would have used for your mortgage starting in 2027.

Borrowing money to invest in a business you have a large degree of control over and which produces income is a different situation.

You can fool yourself into thinking its a fact-based decision by trusting your assumptions, but in the end I think its a decision based off gut instincts as well as analysis.

I don't have my mortgage paid off yet, but I do make extra principal payments on my 15 year loan. No regrets.

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Re: Anyone regret paying off mortgage early?

Post by twinsdad » Sun Jun 03, 2012 1:22 pm

twinsdad wrote:
the beer in my backyard does taste just a little bit better since I own it not the bank.

You mean all the rest room graffiti I've read is wrong? You really do own beer instead of renting it?


The beer I rent, the backyard I own.

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Re: Anyone regret paying off mortgage early?

Post by twinsdad » Sun Jun 03, 2012 1:33 pm

acegolfer wrote:
twinsdad wrote:Finished paying off mortgage this year, age 48. Here is one negative I have found, although I am not sure it is a "regret," in fact I consider it a "relative" negative. I no longer have the desire to work harder, extra hours, and keep trying to make more money and increase my income like I did when I had debt and a goal. Having a large debt is good motivation to work hard and increase your income. However, when I do get home from work now, the beer in my backyard does taste just a little bit better since I own it not the bank.
liked. So paying off early motivated you to work harder in your early years. Have you asked whether you would have worked harder, if you had not intended to pay off early?
That's is an interesting question. Seems like until recently, I've always had debt, student loan, mortgage etc. Debt has been a strong work motivator my entire career. If I were a trust fund kid with no student loans, house bought by parents and my goal was to increase my assets from 5 million to 10 million I don't think I would have worked as hard at my job, but probably have taken more risks with my investments. If I had no plans to pay the mortgage off early as your question asks, I believe my nature to still to work hard and succeed but the extra $$ would likely have gone to nicer cars, more expensive vacations and things like that. I believe if you choose not to pay off your mortgage and invest every extra dollar, it takes just as much discipline to stay the course and do it right as it does to pay off mortgage early. Good luck.

jojay
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Joined: Sun Apr 29, 2012 11:09 am

Re: Anyone regret paying off mortgage early?

Post by jojay » Sun Jun 03, 2012 1:56 pm

I don't believe you'll find anyone who regrets paying off the mortgage early. Who could regret getting rid of a financial obligation. I'd never regret pating off any debt early.

Is it wise is the question. From several financial perspectives, paying off a mortgage early may not be the wisest move. If your interset rate is 3.25% and you are in a 30% tax bracket, paying off your mortgage early is the equivalent of getting a 2.25% return. If you can do better with your money elsewhere ( tough these days ) you should not pay off the loan early as you are giving up opportunity.

What it costs you to pay off the mortgage also has to be accounted for. If you pay it off by wiping out your emergency fund and then an emergency arises, you'll incur some grief - it will be less because the nmortgage is paid off but you get the point.

If the interest on the mortgage qualifies other items that make you eligblie for Iteming Deductions on your 1040, you may want to keep the mortgage. It seems counter intuitive but do the math and see if it makes sense.

Once paid, any principal stays paid. Paying off the mortgage early ensures that your principal is eliminated whereas investment returns can fluctuate.

Psychologically ( if that is the right term ) speaking, paying off your mortgage early frees your income up for lots of other opportunities - just don't waste that money. Think about it:
1. No monthly payments
2. No requirement to commit to earn income to come up with those payments. Having had different mortgages over the years, I've arrived at the sense that the concept of mortgages is really kind of enslaving. Yes, it makes the American home ownership dream come true but it is an albatross. For years, decisions about work and lifestyle are always made with the element of "needing to cover the mortgage" shadowing many decisions.
3. You have complete equity.
4. If you are the financial manager in your life, if you incur injury or death, your family members don''t have to worry about covering a mortgage.

Looking at some of these other posts, clearly people that have paid off their mortgages seem thrilled. I can understand that. What a great feeling. Just make sure that feeling is also smart fiancially.

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