25%- Bonds 10%- REIT 10%. These papers are often called a mortgage release or mortgage satisfaction. Great food for thought! In most cases, it makes sense to pay off student debt. I wouldn’t wait for the current administration to make reforms. This is the second mortgage I’ve paid off, and it feels pretty much the same as it did the first time… liberating, yet anti-climatic. Yes, I sleep well at night. However, I’m sure it must be a huge psychological burden lifted to not have that huge debt hanging over your head. We'll finally pay it off when we're 80 and 88, LOL. No doubt the “math” says lever the hell out of it, but the goal for me isn’t to eek out every last dollar of return. Also, if you own any bonds, why carry a mortgage? That’s the age I’m hoping for. In that scenario the only viable option for regular folks is to have a fixed long term mortgage and have the value of the interest and payments decimated by inflation. Don’t worry about the house. I've been in the "but the math shows" debate many times. An employee who transfers from full-time to part-time during the year is entitled to pay related to time worked (i.e. Early Retirement and The Likelihood of Regret | Passive Income M.D. We just refinanced for 2.75% – 7/1 ARM – so for the next 6.5ish years I don’t see us paying down the mortgage any faster – focusing on wealth creation, trusting the math side with long term stock market returns. https://www.thebillfold.com › 2017 › 07 › mortgage-free-by-45 If you can afford to have a few million in mortgages, you’re in mighty good shape. If you’re trying to pay off your mortgage early, the worst thing you can do is give the bank extra. We received the 5 percent cash back incentive for shopping at Lowe’s and another 5 percent cash back just for using the card. Instead I used anger as motivation. Eventually, though, we realized we were holding on to the past which was making life in the present more difficult and potentially jeopardizing our future as we were basically hemorrhaging money. That is the LAST thing I would ever do. From a psychological standpoint, being debt-free is a state of being that has significant value that’s much more difficult to quantify. If your answer would be no, then why are you ok with your mortgage now? Remaining home mortgage is 360 of 380k at 4.5 percent. My 2018 financial theme…”The Year of the Mortgage”. On the upside we have access to a geo arbitrage option for retirement. So your 3% (with interest deduction) mortgage example requires a 4% safe investment return to break even. You shouldn’t empty out your savings to pay off your mortgage. Great article and awesome dialogue in the comments, PoF! I am 53 and love my job as a food consultant for a high street retailer where I earn £55,000. It’s not always about the math. 1-2% more for repairs and upkeep is $135 – $270. Track your investments for free with Personal Capital. . We paid off our house last year and we didn't really tell anyone except when it came up in conversation. Discussing the term length of a mortgage means discussing how long it will take to pay the loan off. While chipping away at my student loan debt, I added a half-million dollar construction loan. Incomes going up steadily but should plateau at around 700 to 800 per year soon, depending on bonus. We paid off our mortgage when I turned 40 as well. Love your thought process. By paying off the mortgage, you guaranteed a rate of return of 5% since you are not paying it to the bank. We’re debt averse (just the mortgage), but right now we aren’t working on paying it down (investing in real estate instead). Certainly. The Chase Ink Business Unlimited offers a flat 1.5% cash back on all purchases. I have no reason to fear volatility in the markets. I have an honest question – why buy a house at all? Arbitraging the difference between the mortgage interest rate (small after phase out of deduction) and market return gave me some happiness in the far future, but also would possibly give me unhappiness if the market declined for a bit. The fact that you continually wrestle with the idea, combined with the fact that you can almost feel the weight being lifted off your shoulders tells me you should slay that beast of a mortgage. I love being debt-free. That would make me debt free by 41 (so not too bad). And once that loan was paid off, it freed up a lot more money that I then used to aggressively save in my taxable account (after maxing out the tax deferred accounts). Granted it’s close to work, beautiful, etc… but mathematically it has been lousy. GREAT post PoF!!! I am only planning to work 7 more years, but that could change if I could modify the work environment, drop call, etc.. Their mortgage costs $1,800 a month—a whopping 45% of their take-home pay. I hear you, PIMD. As a bonus, you won’t qualify for quite as much house, which will help keep you from over-reaching. one-time-only contribution through PayPal. But when you think of what “Your Money ratios” and William Bernstein both say- if the rent is less than 150 times the price, it’s wiser to rent. I even went into more advanced pros/cons by considering the money I put into it today is worth more than the money I would have put into it at end of loan (a dollar today would have more purchasing power than a dollar I would use to pay it at year 30 of the loan). good post and great comments from others. That’s why I consider those montecarlo 3-4% withdrawal schemes completely useless because over 30 years they don’t work. The math doesn’t lie. 5. With each monthly payment, you pay some interest, and you repay part of the loan balance. Our house expenses went from around $4500 a month to just over $1000 a month. Is It Best to Pay Off Debt Before Buying a House? Our interest rate is low and like ERN we are in AMT territory, so we’re aren’t going to try to pay off our mortgage post-haste. And these things are not isolated but interrelated. First, I decided that every time we get our bi-weekly paychecks, $100 would go towards the mortgage. Having a good retirement account on top of having your house paid off by the time you retire can be a good combination. States and counties levy real estate taxes differently, with some regions requiring payment only once annually, while others require them each quarter. It’s about—well, you know that old saying “it’s not how much money you make, but how much you keep”? Replies to my comments If you added to your contributions the extra $900 from your paid-off mortgage, your interest earnings would be $173,599 after 15 years. I know I wouldn’t be comfortable being 100% retired with the mortgage hanging over my head. With my mortgage I paid about 10K of interest per year in hopes of getting 3K back. I am in no rush to pay that off as long as I am working and do not have a cash flow issue. Most of the time, math will favor the mortgage holder, and it certainly does in the scenario described. We also became free. So even though you refinanced recently, talk to a loan officer about whether refinancing again could lower your payment. Every goal needs a good plan, and mine evolved as our situation changed. Assuming you have a 20% down payment ($9,000), your total mortgage on a $45,000 home would be $36,000.For a 30-year fixed mortgage with a 3.5% interest rate, you would be looking at a $162 monthly payment. It aired on March 4th, 2016, along with the rest of season 4. Every state is different when it comes to what is protected, so if you want to take the next step, be sure to do so with a lawyer in your own state. When do I want this paid off? It's how I track my portfolio. Wife is retiring (at 37) in June! The investment side only works if you actually invest (and keep) that money in the market. At any given time, I usually owe at least a couple thousand dollars to a credit card company, but I always pay the full balance on time. Rates have been so low for the last 15 years or so that it’s easy to forget that rates under 5% are abnormal. In total, we scored $100 on that transaction alone. Desire to be debt free check. Being debt free gave me guaranteed immediate happiness. Related Posts. We plan to live in the same house for a few decades, so it makes sense to have it paid off early. Looking at the prevailing rates, I didn’t see the sense of borrowing dear and lending out cheap. I view our mortgage as a bond. I found this recent podcast at Doctor Money Matters interesting, and the guest has a website with dozens of posts on the subject. I like the idea of keeping all the rent money each month, rather then sending most of it on to the mortgage company. Are they high-interest loans? I could have done better of course but, to paraphrase Buffett, why risk what I have and need for what what I don’t need? Once you consider yourself financially independent, you can more easily stomach some debt, particularly if you’ve got the funds to pay it off and still be considered FI. Emotional well-being. To beat this, you need to find an equally safe investment that returns more…..good luck with that. Image of architecture, bank, property - 139061695 Finally, it didn’t hurt that several of my coworkers were being sued at the time and paying off debt is pretty darn good asset protection. I wouldn’t be too concerned with the mortgage interest deduction. I started by rounding up to the next full simple amount. 1-2% more for repairs and upkeep is $135 – $270. Now the yield to maturity on those bonds looked pretty good, higher than the mortgage rate. Money and house. They do provide a living for “financial advisers” however. I’m going on 15 years of never having a debt and paying cash for each purchase, best decision for my overall happiness and net worth I ever made. By my calculations, we’ll be able to pay off … Um, yeah, I know how you paid off your mortgage. The deduction is phased out at an adjusted gross income of $70,000 to $85,000 for individuals in 2019 (double that if married, filing jointly), an income most physicians will exceed. I’m on board with paying off the mortgage. I had a 30 yr mortgage at a 5.625% interest rate (initially for 500k) and also had about 100k in student loans at a higher interest rates (approx 6-8%). History shows that people do a poor job of putting that money to work, so you end up paying the mortgage without getting any investment gains…A lose-lose situation. However, one issue that hasn’t been discussed much is risk of malpractice. Loan Information. Join now & receive a $10 bonus!. I set a target date of 5–6 years from now, meaning we’ll have our mortgage paid off when I’m 45. Thanks for the comment,Peter, and congratulations on decimating that mortgage! Now that no lender is submitting property taxes on your behalf, you'll need to pay them directly, pursuant to the property tax laws of your state or municipality. Next year when we get our tax return, I will divide it into three equal parts: savings, spending, and mortgage prepayment. The interest rates on second mortgages are higher than the mortgages even though they are tax deductible. I chose the option to be debt-free and haven’t regretted it one bit. Once your mortgage is paid off, you'll receive a number of documents from your lender that show your loan has been paid in full and that the bank no longer has a lien on your house. Have made extra payments all along. I’m working hard at the same goal, but am excluding the mortgage (that will have to wait until I’m 50). I can go part time (if I choose – fortunately, I LOVE what I do) whenever since we have managed ‘lifestyle’ creep and spend well below our income. It is always nice to hear people who also make poor math decisions in search of happier lives. Will $50 or $200 a month even make a dent? This nation could use some serious tort reform, but it’s tough to get when so many lawmakers are also lawyers. On a $200,000 home, that comes to $40,000. A prepayment penalty is a fee that can be charged if your mortgage is paid down or paid off early. The payoff calculations are similar, but not identical for the high-income professional. I have a 2.625% interest rate on my house through a 5/1 ARM. Sure, we’ll get some of that money back when we sell, but definitely not all. Article 45.01 (E) - Employees with Less than One Year’s Service by July 1st Cut-Off 1. the calculations are complex with assumptions about the future. It probably made money to keep the mortgage. It makes so much more sense now. I would love the freedom and sense of accomplishment that would come being mortgage free at a young age on a modest income, and I can’t wait to see how much closer I can get to this reality by the end of this year. Congrats! How We Paid Off $25,000 in Student Loans in 10 Months! By making consistent regular payments toward debt service you will eventually pay off your loan. Now I get that the majority of people, have way bigger mortgage balances than I do. Most people never assume inflation will come back, but surely when a bankrupt country faces reality the currency takes the biggest hit. 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