On the topic of paying off your mortgage early

[r32gojirra]

Chicked or egg, matters not.

The feeling of discomfort they get upon seeing the numbers does.

Well I hope that seeing the numbers put out there like that helps someone. Next time maybe use more realistic rates of return rather than trying to leave it so much in favour of ramseycels, some people might miss the nuance

[Anachron]

Well I hope that seeing the numbers put out there like that helps someone. Next time maybe use more realistic rates of return rather than trying to leave it so much in favour of ramseycels, some people might miss the nuance

I thought I was point blank in pointing out that I fudged everything to be in favour of the ramseycels as much as I could without making it stupid - and even offered to run the numbers for people.

Surprising how no one took me up on the offer...

[DuracellBunny]

As an aside, isn't mortgage interest tax deductible in the US?

[r32gojirra]

I thought I was point blank in pointing out that I fudged everything to be in favour of the ramseycels as much as I could without making it stupid - and even offered to run the numbers for people.

Surprising how no one took me up on the offer...

Yeah I know that, just would have been more compelling with a more realistic number because especially how things are at the moment, over a decade the difference could be non-ironically life changing

Meh

As an aside, isn't mortgage interest tax deductible in the US?

If that’s the case it would skew the argument further in favour of OP

But didficult to model because then you have to account for people’s individual marginal tax rate etc

For the sake of simplicity probably not worth worrying about

[nutsy54]

As an aside, isn't mortgage interest tax deductible in the US?

Yes, but...
- Only if someone has more than $13,850 (single) or $27,700 (married) in total itemizable deductions, otherwise the standard deduction (cited) makes sense
- Spending $20,000 on interest to "save" $4,800 on taxes (24% tax bracket) isn't a winning math/financial strategy

[Anachron]

Yes, but...
- Only if someone has more than $13,850 (single) or $27,700 (married) in total itemizable deductions, otherwise the standard deduction (cited) makes sense
- Spending $20,000 on interest to "save" $4,800 on taxes (24% tax bracket) isn't a winning math/financial strategy

If you go back to the first post...

"Spending" that $20K on interest is the winning financial strategy.

My offer that I presented to you earlier in the thread is still open, btw.

[nutsy54]

Not having a mortgage would be psychologically beneficial but it’s also psychologically beneficial to have a big chunk of money sitting elsewhere that you can tap into when needed/wanted

Nobody said to have no money available... Always have an emergency fund, and be investing while paying off the mortgage. But with no mortgage payment I can save & invest a LOT more.

[r32gojirra]

Yes, but...
- Only if someone has more than $13,850 (single) or $27,700 (married) in total itemizable deductions, otherwise the standard deduction (cited) makes sense
- Spending $20,000 on interest to "save" $4,800 on taxes (24% tax bracket) isn't a winning math/financial strategy

So it’s generally possible to get greater leverage AND a lower interest rate AND the interest on the loan is a tax deduction and you don’t see the advantage in holding that as debt and putting capital into higher yield investments

Jesus

[Anachron]

Nobody said to have no money available... Always have an emergency fund, and be investing while paying off the mortgage. But with no mortgage payment I can save & invest a LOT more.

And you'll never catch up, even having invested that much more.

That is proven in the OP, and that is with only a 0.5% differential.

[nutsy54]

So it’s generally possible to get greater leverage AND a lower interest rate AND the interest on the loan is a tax deduction and you don’t see the advantage in holding that as debt and putting capital into higher yield investments

Once again, your plan omits risk and just assumes/hopes you'll always get a higher yield. When in reality, the market goes up and down in the short term. So your plan needs to rely on debt for decades to hopefully make it all work out.

You're acting like the 4 1/2 years it took to pay off my mortgage (while also investing) destroyed my financial future... Yet today's I'm at a $1.5 Million net worth, after starting from nothing and broke 13 years ago.

[Anachron]

Once again, your plan omits risk and just assumes/hopes you'll always get a higher yield. When in reality, the market goes up and down in the short term. So your plan needs to rely on debt for decades to hopefully make it all work out.

You're acting like the 4 1/2 years it took to pay off my mortgage (while also investing) destroyed my financial future... Yet today's I'm at a $1.5 Million net worth, after starting from nothing and broke 13 years ago.

Let's see the numbers then.

Why are you scared of sharing the details?

We can all see how it worked out better for you than if you didn't pay it off.

[LateShow]

$350k mortgage with 7.25% interest in Texas
No PMI, but $2k per year homeowners insurance

[Anachron]

$350k mortgage with 7.25% interest in Texas
No PMI, but $2k per year homeowners insurance

7.25% is brutal, that is where it might start making sense to pay the mortgage off first - but of course, the numbers should be ran first.

[SaviorSelfJT]

Now do one for the people who put their house savings in a savings account because stocks are too risky, without accounting for the risk of home prices shooting up while their savings account didn’t even keep up with inflation

[Anachron]

Now do one for the people who put their house savings in a savings account because stocks are too risky, without accounting for the risk of home prices shooting up while their savings account didn’t even keep up with inflation

Why would I do a simulation for people who are financially retarded?

And why would home prices "shooting up" matter if you already own the house?

[SaviorSelfJT]

Why would I do a simulation for people who are financially retarded?

And why would home prices "shooting up" matter if you already own the house?

I mean for people saving up to buy their first house

People love savings accounts too much

[Destor]

7.25% is brutal, that is where it might start making sense to pay the mortgage off first - but of course, the numbers should be ran first.

Yeah but you could stick the extra cash in a money market fund or whatever and make I think 5% on it, effectively reducing that to a 2.25% interest rate

Because these things are all interconnected and yields on fixed assets will increase with mortgage rates, I’m not really sure where it ever makes that much sense.

And money markets / savings / treasuries yielding decent %s is supportive of the equity market

[SaviorSelfJT]

Yeah but you could stick the extra cash in a money market fund or whatever and make I think 5% on it, effectively reducing that to a 2.25% interest rate

Because these things are all interconnected and yields on fixed assets will increase with mortgage rates, I’m not really sure where it ever makes that much sense.

And money markets / savings / treasuries yielding decent %s is supportive of the equity market

Don’t forget you gotta pay taxes on interest. The 5 percent interest is really more like 4

[Jasonw1178]

My house is paid off. Not going to refi it, anyone who knows more about that knows it cost money off the top. I do not borrow against it. I don't care if I could make more off doing that, I make enough and I like the security. I mean, the financial geniuses on the Misc like who even if the market crashed to 0 they would double his money, but in reality, yes the market could crash, and you can lose a lot and now you have to pay your house. Nice having no house payment. I just have to pay my taxes and I'm sweet and the taxes here aren't that bad. About $3K a year.

In reality, you borrow money against the assets of a business, say a LLC, you don't do it to your personal home. Everyone having these get rich schemes and people talking about it being so easy and all, but in reality there are a lot of people who go under and sometimes it's not really due to their stupidity, but things can happen, but they don't talk about that.

[r32gojirra]

Once again, your plan omits risk and just assumes/hopes you'll always get a higher yield. When in reality, the market goes up and down in the short term. So your plan needs to rely on debt for decades to hopefully make it all work out.

You're acting like the 4 1/2 years it took to pay off my mortgage (while also investing) destroyed my financial future... Yet today's I'm at a $1.5 Million net worth, after starting from nothing and broke 13 years ago.

*sigh*

No, the risk is priced into the return that the market provides on capital

You have the opportunity to arbitrage the cost of supplying that capital

Wtf are they teaching you in those “schools” of yours?

How to name 72 different genders? That information is of little practical value

[Zackad]

sorry OP but you're wrong

if you really want to get the most value with minimal risk, make your minimum payments and dump the rest into gold or silver.

[2011change]

OP.

Lets say if Person A has enough money to buy a house for 300-500k. CASH

And have 200k leftover


Would you buy all in cash or put a heft downpayment and pay a loan on 100-150k?

[Zackad]

My house is paid off. Not going to refi it, anyone who knows more about that knows it cost money off the top. I do not borrow against it. I don't care if I could make more off doing that, I make enough and I like the security. I mean, the financial geniuses on the Misc like who even if the market crashed to 0 they would double his money, but in reality, yes the market could crash, and you can lose a lot and now you have to pay your house. Nice having no house payment. I just have to pay my taxes and I'm sweet and the taxes here aren't that bad. About $3K a year.

In reality, you borrow money against the assets of a business, say a LLC, you don't do it to your personal home. Everyone having these get rich schemes and people talking about it being so easy and all, but in reality there are a lot of people who go under and sometimes it's not really due to their stupidity, but things can happen, but they don't talk about that.

You would not believe the amount of people I deal with at my work who borrow against their principal residences for business purposes. That's actually my bread and butter at work.


Some have legitimate, feasible plans to pay them off within the term. Most do not and end up getting stuck cycling loans to pay off previous ones so they don't lose their house.

[DuracellBunny]

You would not believe the amount of people I deal with at my work who borrow against their principal residences for business purposes. That's actually my bread and butter at work.


Some have legitimate, feasible plans to pay them off within the term. Most do not and end up getting stuck cycling loans to pay off previous ones so they don't lose their house.

I sold my apartment (we don't call them condos here), rented a 400sqft studio and used the money from the sale to start the company.

I went all in.

[r32gojirra]

I sold my apartment (we don't call them condos here), rented a 400sqft studio and used the money from the sale to start the company.

I went all in.

^^^I leveraged the primary residence and other investment properties to the balls to do my first multi-unit development

Was in two minds about it but the wife just said we have to go for it

Got it all built and ready to sell, then COVID hit and prices went up 30%

The rest as they say is history

[SaviorSelfJT]

When you have an opportunity to vacuum up some of the free money the federal reserve is spewing out, you take it. By paying off your low interest rate mortgages you’re shutting the vacuum off because it makes you feel safe

[DuracellBunny]

^^^I leveraged the primary residence and other investment properties to the balls to do my first multi-unit development

Was in two minds about it but the wife just said we have to go for it

Got it all built and ready to sell, then COVID hit and prices went up 30%

The rest as they say is history

I'm in professional services (engineering consulting + some other stuff, but people understand if I say engineering) and I just had to make payroll. I hired 4 guys to WFH and used the money to cover payroll until invoices were paid.

I didn't leverage until year 2. I borrowed against some IP, bought a warehouse and converted it into labs and office space.

I don't like leveraging and I don't like the market, although I will hold my nose and do it when I need to. I generally reinvest back in to the business, but I've pulled money out multiple times to buy farmland (which is now all in my daughters name).

[Jasonw1178]

You would not believe the amount of people I deal with at my work who borrow against their principal residences for business purposes. That's actually my bread and butter at work.


Some have legitimate, feasible plans to pay them off within the term. Most do not and end up getting stuck cycling loans to pay off previous ones so they don't lose their house.

Right. If it works out, great, but if it doesn't, and a lot of businesses fail, they will be out of business and without a home. Of course, everyone here is too smart so it couldn't happen to them, right? When people have that attitude, that's exactly the kind of people that it happens to because they couldn't see how it could happen, until it did.

I sold my apartment (we don't call them condos here), rented a 400sqft studio and used the money from the sale to start the company.

I went all in.

I hope it works out for you, brah. For me, I could so do that and open my own shop, and I think I'd do okay, probably succeed, but damn I'd kick myself hard AF if I failed even if the reasons were out of my control, and I make decent money and get things paid as it is, so Im not making that move.

I have a theory, that if you can't make 6 figures in a field employed by someone else, you aren't going to succeed doing it yourself. Some people luck out, some people when faced with losing everything, they work six figures hard, but so many fail.

[DuracellBunny]

Right. If it works out, great, but if it doesn't, and a lot of businesses fail, they will be out of business and without a home. Of course, everyone here is too smart so it couldn't happen to them, right? When people have that attitude, that's exactly the kind of people that it happens to because they couldn't see how it could happen, until it did.



I hope it works out for you, brah. For me, I could so do that and open my own shop, and I think I'd do okay, probably succeed, but damn I'd kick myself hard AF if I failed even if the reasons were out of my control, and I make decent money and get things paid as it is, so Im not making that move.

I have a theory, that if you can't make 6 figures in a field employed by someone else, you aren't going to succeed doing it yourself. Some people luck out, some people when faced with losing everything, they work six figures hard, but so many fail.

I started the company ~20 years ago and things have gone fairly well.

[Destor]

Don’t forget you gotta pay taxes on interest. The 5 percent interest is really more like 4

That’s true but it’s quite the offset for the lowest risk/reward option. If you wanted to lock it up for an easy return, I think there are treasuries that have certain tax advantages — like either state or federal tax doesn’t apply — but then you don’t have the easy access.