Spouse Insistent on Paying Mortgage Off Early

[Anonymous]

You didn't say what the mortgage balance is, but it sounds like you could pay it all (most?) off with your NW if you had to. So what you have is a low risk margin loan for real estate. If you pay it off early you're making your portfolio over indexed on real estate, you already have a rental too. If you max your 401k you're diversifying your portfolio instead. Stick your extra money in your 401k and ride out the historic 5% loan.

[Anonymous]

Agree with earlier posters to split the difference - you max out the 401k, he maxes toward paying extra toward the mortgage.

We would both be making the 401k, but in marriage, you have to compromise

[Anonymous]

At a 5% mortgage interest rate this is a closer call in purely financial terms than you are making it to be, OP. In your situation I would prioritize accumulating retirement and other savings rather than paying off the mortgage but the latter is not a ridiculous option.

[Anonymous]

Anonymous wrote:Interest based banking is based on exploitation of poor people.

If you want to use other people's money to buy a house or start a business, you need to pay them for the privilege.

[Anonymous]

We did payoff our mortgage when my wife was very adamant on paying it off. But - it was much later and we had a significant retirement account already built. It was a something I agreed to for her peace of mind. It is definitely one less to worry about now the house is fully paid. But wouldn't have done it if not for situation with our retirement account.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Wow, you have a lot of debt for that income. We paid ours off. It as freeing. You should be doing both.

Our mortgage is only 3k a month and the rental with a mortgage provides positive cash flow. I would disagree that it’s a lot or debt.

I would suggest maxing out your 401ks for the tax deduction, and tell him that any money from the rental (above the reserves you should keep on hand) can be thrown at your primary mortgage at the end of each year. He will see it going down in chunks and your retirement savings will benefit. Every dollar has a job; everybody wins.

[Anonymous]

Paying mortgage off early is not a problem. You can put at least some money towards that without negatively impacting your retirement savings. Heck, you can even fully fund your TSPs or whatever and still pay your mortgage down already.

Why do you, OP, think that you are the boss of the marriage? Compromise. Jeez.

[Anonymous]

Is the paid-off rental something you would not mind living in yourself? If not, i agree with your spouse. It makes good sense pay off your current home while you can. You never know what the future holds, job loss or illness.

[Anonymous]

Each of you invest in your own 401K up to the match amount (not the max). Put the extra you are paying now in 401K towards the mortgage

If you had a 2.7% mortgage, your viewpoint would be a stronger argument. Paying down a 5% loan isn't the worst idea.

Make sure you have savings outside your 401K for unexpected situations. If an emergency happens and you need 50K or 100K, you don't want to be pulling it out of your 401K and paying the penalty.

And you sure don't want to take a home equity loan when you have been paying down the mortgage.

[Anonymous]

Not having a mortgage can me psychologically comforting.

Work out the expected cost of his decision and consider that his "fun" money.

[Anonymous]

Anonymous wrote:Is the paid-off rental something you would not mind living in yourself? If not, i agree with your spouse. It makes good sense pay off your current home while you can. You never know what the future holds, job loss or illness.

???
Better to default on your mortgage than be forced to sell to buy food!

[Anonymous]

Anonymous wrote:My husband is obsessed with paying our mortgage off early and I have been unable to convince him that this is a sub-optimal financial decision. He hates the idea of paying interest and is allergic to debt. Our mortgage rate on our home is only 5% but he would rather contribute to paying our mortgage off early instead of investing more in our retirement accounts. Just for context here is a summary of our financial situation. We are in our early 30s and our total NW is around 1.1M. We have 240k in retirement accounts and we are contributing a combined amount of around 36k a year to our retirement accounts. We own 2 rentals, one is paid off and the other rental has a sub 3% mortgage on it. Our total income is around 250k per year. Basically the disagreement is that he would prefer to pay off our mortgage by 2035 and I would prefer to max out our 401k's. What should I do, just give in and pay off the mortgage early or double down on 401k contributions?

Here's what you do.
You put your money in a mega backdoor Roth.
You create a real estate investment trust (REIT) for the Roth invest in.

The REIT buys your house and pays down the mortgage.

[Anonymous]

Anonymous wrote:Is the paid-off rental something you would not mind living in yourself? If not, i agree with your spouse. It makes good sense pay off your current home while you can. You never know what the future holds, job loss or illness.

If you’re concerned with job loss, you want money OUT of the house.

[Anonymous]

OP, it’s not a numbers only decision. Debt represents risk. What happens if you have a few kids and he gets cancer and at age 38 is unable to work? All of that $ in retirement is unavailable or only available with stiff penalties. People make different decisions without a mortgage weighing them down - you are more confident and have more freedom to prioritize what you want.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Do NOT pay off mortgage early. If he wanted a shorter mortgage, he should have requested a shorter term. We just paid off a 15 year old mortgage, which comes with far less interest than a 30 year. If you pay off a 30 mortgage early, you're still paying more interest. It negates all the benefits of having that longer term.

Invest the money in the stock market instead. Apple, Nvidia, Microsoft, Alphabet (Google), Netflix, Meta. Maybe not Tesla.

Awful advice. First, if they pay it down faster, all amounts over the regular monthly amount come straight off principal, so it's wise to do so.

Second, investing in a handful of stocks is highly risky because it's not diversifying. Most of those stocks have really high P/E ratios too = potentially overvalued.

PP you replied to. I stand by what I said. You don't seem to understand that "the regular monthly amount" is made up of more interest than if you'd chosen a shorter-term mortgage! So they're making you pay the interest first anyway.

Picking a shorter term mortgage and not paying it in advance has worked well for me. I'm 100% in stocks I hand-picked myself and that has led to a rapid wealth accumulation. But beyond anecdotal data, the math is sound. We can talk about a stock market bubble if you want, but personally, I think stock market investment is still the way to wealth.