If paying off your mortgage is dumb, why do so many rich people do it?
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Anonymous
| I’ve never met anyone with a paid off house that regretted doing it. |
Anonymous
I have met someone who purchased a house with cash and regretted doing it. |
Anonymous
I regret prepaying my mortgage… |
Anonymous
Then go out and get another mortgage - very simple. |
Anonymous
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My early retirement plan includes not having a mortgage. The mortgage will be paid in about a year!
I can’t imagine regretting not having that expense, which is the biggest monthly expense we have. We will save more for retirement and spend some on home repairs and travel. |
Anonymous
| The only debt I have is my mortgage which is $1800/mth and has a balance of less than $150K. Might as well pay it off. |
Anonymous
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There are liquid risk free (or nearly so) bonds that pay more than legacy mortgages (which statistically most mortgage borrowers have).
When people talk about “investments can tank” or “I don’t want all my money in the stock market”, it kills me because it’s as if muni’s, CD’s, I-bonds, treasuries, IG corporates, CLO AAA, etc don’t exist. Go forth and lend, collect tasty coupons from the borrowers of America! Liquidity has value. If you’re so rich and liquid, say house asset value = <20% of NW, it probably doesn’t matter but if you’re a typical mass affluent with a couple milsky’s and thinking about paying off that sexy long legged 2 3/4% 28 year amortizing inflation hedging borrower friendly almost free mortgage, don’t do it! |
Anonymous
| *credit risk free, mind your duration risk (though being short a mortgage is a wonderful non mark to market duration hedge) |
Anonymous
Same here. We are about three years away from early retirement and paying off the mortgage is in our near-term goal. We continue to max 401ks and fund 529s (above $150k each). The house and another piece of paid-off real estate make up about 20% of our NW. |
Anonymous
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It makes sense to pay off the mortgage before retirement if you know you won't be able to afford the mortgage payments in retirement.
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Anonymous
Or --if you have a low interest mortgage-- you can take all the money that would go to pre-paying retirement and put it in an investment that is dedicated to paying off the mortgage in retirement. |
Anonymous
Exactly. Open a heloc. |
Anonymous
Yeah, tap your equity at 6-7% APR just so you have the comfort of knowing your house is still owned by the bank. Brilliant financial planning. |
Anonymous
Obviously getting a mortgage involves transaction costs and HELOCs are often at a higher rate than the prevailing mortgage/refinance so you'd have to assess the numbers (as always in personal finance). I think the point people were making is that if you have a mortgage of below 3% (which most homeowners these days do), prepaying doesn't make sense in the current interest rate environment where you can earn 4.5% in savings accounts, 5% in CDs etc. |
Anonymous
| Paying a mortgage means paying interest. Why pay interest if you don't have to? Pretty simple. |