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  #21  
Old 07-12-2018, 03:32 PM
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what do you owe on the mortgage? what is the house worth?

i don't personally know anyone who regrets paying off their house early, even if the math said otherwise.

actuaries fall in love with the numbers. money and debt is about way more than the numbers.

how much extra per month could you throw at mort debt reduction? maybe do half that and invest the other half

sleeping well at night is worth a lot

i'm nearing retirement (3 yrs?). i owe ~$62k on primary residence and expect that to be paid off in ~9 months
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  #22  
Old 07-12-2018, 03:38 PM
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\i'm nearing retirement (3 yrs?). i owe ~$62k on primary residence and expect that to be paid off in ~9 months
Wouldn't you be better off with $62k in cash (invested risk-free) and a $62k mortgage, assuming that the rates were comparable (and ignoring tax effects)?

You are long the pre-pay option (a call), and early exercise of an American-style call option on a non-dividend paying (assuming rates are comparable) security is never optimal.
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  #23  
Old 07-12-2018, 03:53 PM
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I don't have any kids and bought my house only 5 years ago, but I have similar questions to myself everyday.

Although I have a 30 year mortgage, I am making accelerated payment to have the mortgage paid off in 15-18 years. My mortgage rate is 3.75%.

After some serious thought, I have decided to pay off my mortgage early. Here are my thoughts:

1) Peace of Mind and freedom from needing a high paying job to meet monthly expenses.
2) As you get older, employers are getting pickier on older applicants. I think age discrimination is still very much an issue although no one admits or talks about it. Therefore, you may not have the same job opportunities in the future if you lose your current job.
3) Changes in technology and politics may make your current jobs obsolete. If we do get to single payer health care system one day, many insurance jobs may be eliminated.
4) Reduce temptation of frivolous spending with less disposable income.

I think once you have fully funded your retirement and emergency funds, it is a good idea to pay off mortgage early due to uncertainty in life.
Your item (4) is a big one for me, if I'm being honest with myself. Money that isn't spent on normal expenses, or used to pay down debt, just seems to disappear down a hole. Arguably, we could just invest the very money that we were planning to use for debt reduction, but I'm afraid we would "lose momentum" with that plan. Whereas, with a short-term goal to pay off the house, I think we could keep up motivation to see that happen, by controlling our spending here, there and everywhere.

Plus, having the house paid off would make it a lot easier to move one day.

Last edited by Egghead; 07-12-2018 at 04:16 PM..
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  #24  
Old 07-12-2018, 03:54 PM
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what do you owe on the mortgage? what is the house worth?
I owe $160k on a house worth $300k.
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  #25  
Old 07-12-2018, 04:30 PM
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I have an $8k car loan I could easily pay off but it's at 0.9% and I prefer having the cash. Plus I barely notice the $270 coming out every month (3yr loan, don't get snarky).

It's the psychological ability to look at my dragon pile.

Then again, I don't budget. I have inflows and outflows. I'd probably be more apt to spend without a rent payment TBH.
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  #26  
Old 07-12-2018, 04:44 PM
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I have an $8k car loan I could easily pay off but it's at 0.9% and I prefer having the cash. Plus I barely notice the $270 coming out every month (3yr loan, don't get snarky).

It's the psychological ability to look at my dragon pile.

Then again, I don't budget. I have inflows and outflows. I'd probably be more apt to spend without a rent payment TBH.
Right. Some people get comfort from wealth. Others get comfort from lack of debt.

My retirement savings almost doesn't feel real to me. It's just a number on a page. But that stupid mortgage is very real, because I absolutely have to pay it every month.

Granted, that's not applying logic. All the numbers are real. But so is my stress level.
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  #27  
Old 07-12-2018, 05:04 PM
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This is a very personal decision and depends a lot on your own feelings about debt and risk aversion.

I'm gonna be the weird one here. When my husband and I downsized 3 years ago I was 62 and he was 77. Both of us were retired. We took out a mortgage- in fact, I would have borrowed $50K more than we did except that the stupid mortgage company pretty much ignored our assets (which were about 10 X the value of the house we were buying) and fixated on what my husband was getting in SS plus my $900/month pension. We did take out a 15-year loan instead of 30-year.

My reasoning: the rate was 3% fixed and I'm doing FAR better than that on the investments. It's also manageable: we borrowed $100K. Because I'm now widowed, the increase in the standard deduction doesn't have the impact for me that it does for couples and I can still itemize, so there's some tax advantage.

I wasn't clear whether the OP would have any tax consequences if he/she liquidated investments to pay off the mortgage but that's a consideration.
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  #28  
Old 07-12-2018, 05:07 PM
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Right. Some people get comfort from wealth. Others get comfort from lack of debt.
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  #29  
Old 07-12-2018, 05:15 PM
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This is a very personal decision and depends a lot on your own feelings about debt and risk aversion.

I'm gonna be the weird one here. When my husband and I downsized 3 years ago I was 62 and he was 77. Both of us were retired. We took out a mortgage- in fact, I would have borrowed $50K more than we did except that the stupid mortgage company pretty much ignored our assets (which were about 10 X the value of the house we were buying) and fixated on what my husband was getting in SS plus my $900/month pension. We did take out a 15-year loan instead of 30-year.

My reasoning: the rate was 3% fixed and I'm doing FAR better than that on the investments. It's also manageable: we borrowed $100K. Because I'm now widowed, the increase in the standard deduction doesn't have the impact for me that it does for couples and I can still itemize, so there's some tax advantage.

I wasn't clear whether the OP would have any tax consequences if he/she liquidated investments to pay off the mortgage but that's a consideration.
On a risk adjusted basis, this is the wrong move. It could easily work out, but only because you took risk that you weren't fully compensated for.

Unless of course over the long term equity risk is actually low, and we shouldn't be equating volatility with risk, which is a reasonable argument.
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  #30  
Old 07-12-2018, 05:46 PM
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I wasn't clear whether the OP would have any tax consequences if he/she liquidated investments to pay off the mortgage but that's a consideration.
No, I wouldn't be liquidating investments. Basically, I would use bonuses and other earnings to wipe out the mortgage over the next few years. But the opportunity cost is that those same earnings could have gone toward investments.
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