Pay off mortgage

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Topic Author
Flynow7
Posts: 71
Joined: Thu Mar 25, 2021 11:06 am

Re: Pay off mortgage

Post by Flynow7 »

go2run wrote: Wed Aug 17, 2022 11:06 am
Flynow7 wrote: Wed Aug 17, 2022 8:17 am thank you for all the input, looks like I should just save my free cashflow per month and keep my mortgage payment and not pre pay and just invest the money. Refinance the mortgage when rates drop. I took out the mortgage about two months ago.
OP, you have been given good suggestion in the threads here. You either already had your mind made up what you should do, or are just flat out missing the point.

Your question of taking existing cash flow to either pay down principal or invest comes down to a pure numbers game. lakpr put together a good analysis of what returns you would need in your investments to be better than what you are paying in your mortgage. Others have suggested at looking to refinance and to me that is one of the quickest ways you can improve your situation. Going to a 15 yr mortgage will likely yield a better rate and will allow you pay down your debt quicker. You can have best of both worlds..yield a better rate and continue to invest extra cash flow in your taxable account. Why would you not consider that?

My logic of paying off the mortgage early is because why should I pay the bank 5.85% in interest just for them to have their shiny building when I have my own money to pay down the mortgage ? In 30 years that 350k of interest making the bank richer and robbing me of that money.
LittleMaggieMae
Posts: 2054
Joined: Mon Aug 12, 2019 9:06 pm

Re: Pay off mortgage

Post by LittleMaggieMae »

Flynow7 wrote: Tue Aug 16, 2022 8:00 pm
mortfree wrote: Tue Aug 16, 2022 7:27 pm You aren’t paying off your mortgage.

You are paying it down.

That’s a huge difference.

The balance is too high for my liking to think about paying it down.
So
What would you do? Pay it down or just invest ?
I'm not who this was directed to but he's right.

If you need the "warm fuzzy" of saving on the interest you pay on the mortgage - round up your PI portion of your mortgage payment and pay that every month. You get the bragging rights and warm fuzzy of paying down your mortgage. Invest the rest of your money.

In theory, the reason you bought a house was to have more or less "fixed" monthly expenses - you need a place to live. In theory, you chose a house with a mortgage payment (PITI) that you could easily afford on your current income - which translates to "I will have more "disposable" income as I progress forward with my income to spend on savings/retirement/something I want to do".
You don't want to pay off your house (which is generally the cheapest money you will ever buy) and then turn around and take a loan at a higher interest rate in the future on something else (a car, credit cards, a personal loan, something I can't think of right now).

The above three things are the "power" of taking a mortgage.

Also, you can't "sell" parts of your paid off house if you need money. You CAN take out a new loan to use the money you paid for your house (and maybe pay more in interest than your current mortgage.).
LittleMaggieMae
Posts: 2054
Joined: Mon Aug 12, 2019 9:06 pm

Re: Pay off mortgage

Post by LittleMaggieMae »

Flynow7 wrote: Mon Jan 23, 2023 1:16 pm My logic of paying off the mortgage early is because why should I pay the bank 5.85% in interest just for them to have their shiny building when I have my own money to pay down the mortgage ? In 30 years that 350k of interest making the bank richer and robbing me of that money.
Are you truly planning to stay in this house for the next 30 years?
If you knew this was your forever home - why didn't you take a 15 year mortgage when you purchased it? You seem to have been aware that your income would go up dramatically (and the bigger payment commitment would be easier over time).

Why not make monthly payments as if it was a 15 year mortgage and invest the rest of your disposable income? That's an easy solution.

You bought "money" - I'm not sure why you feel you are being robbed. Did you not shop around and get the best deal?
harikaried
Posts: 2280
Joined: Fri Mar 09, 2012 3:47 pm

Re: Pay off mortgage

Post by harikaried »

Flynow7 wrote: Mon Jan 23, 2023 1:16 pmIn 30 years that 350k of interest making the bank richer and robbing me of that money
Approximating a $300k loan with 6% interest repaid over 30 years indeed results in $350k total interest paid with monthly payments of $1.8k. You can shift some of that "bank richer / robbing me" interest payments to yourself by paying down the mortgage faster thus resulting in less principal for the bank to charge interest on.

For example, paying it back over 20 years would have total interest of $220k with $2.1k monthly payments. This saves you $130k in interest at the "cost" of $300 more per month, but then you also have 10 years of extra of no more mortgage payments. Similarly paying it off in 15 years would have $155k total interest for a savings of $190k and 15 years but requires $2.5k/mo payments during that time.
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