Paying off the morgatge, good or bad idea?

[Anonymous]

Anonymous wrote:Pro-mortgage people are always citing the risk of having money tied up in an illiquid asset. What if you lose your job and need cash?

My response: At least you don't have a mortgage payment to worry about.

Love this response! That's exactly what I would say. We are paying off our mortgage with extra payments as much as we can- have about 3 years left. We are in 40s and 50s and have no other debt. We have maxed out our TSP. I work full time as a federal employee, have a stressful job. Once the mortgage is paid off, I could work part time somewhere for fun and still afford living in my $850K worth house.
Pay off the mortgage!

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm not a CFA, but I did stay at a Holiday Inn last night.

- Paying off a mortgage is not a risk-free return. I don't need to tell you that real estate can decrease (dramatically) in value, and paying extra principal can lead to losses in the event of a bankruptcy, foreclosure, or short sale. Most people probably think this wouldn't or couldn't happen to them, but as we learned in 2008, it can affect a sizable portion of the population, including the wealthy.

- The liquidity point is a valid one. Real Estate is a relatively illiquid asset. Yes, you can borrow against equity with a HELOQ, or you can sell the house, but both of those incur costs. It shouldn't be the only determining factor, but it should be a consideration.

- I didn't read every post in the thread, but the most important point should be diversification. The average American has way too much of their net worth tied up in their primary residence. Paying down a mortgage increases your concentration in real estate and your exposure to risk in that asset class. If you are sufficiently diversified elsewhere, it might be a great move. If not, it might not be advisable.

Once you buy the house with a mortgage, you are already exposed to the full risk in the real estate asset class. Paying your mortgage off or not does not change the fact that you are on the hook for the full value of the mortgage. Same with your comment about real estate decreasing in value.... you aren't protected from a decline in value just b/c you still have a mortgage... unless you plan to file bankruptcy or default on the loan. If the market value goes down and you sell, you still have to come up with the amount of the loan.

This depends on state law. Mortgages are "non-recourse" or "one action" in many states. (Hence the stories in 2008 about people putting the keys in the mailbox and walking away from underwater houses.)

I'm a pp who expressed concerns about liquidity. To me, its not so much concern about whether I'll lose $$ on the investment in real estate, or whether I can make the payments, but rather whether I want so much of my cash wrapped up in one investment that may take years to liquidate. It just limits our flexibility in ways I'm not ready for right now. If I thought I'd live in this house forever, or if I was actually living a little closer to the edge financially, I might be more willing to pay off the house. However, taking the risk that my investments might return a little less than the interest rate I'm paying on the mortgage (net of taxes) is a risk I'm willing to take right now. Being able to access my capital to change our investment strategy has value to me. YMMV

[Anonymous]

Mortgage free isn't equal payment free. You still have to pay property taxes.There is no such thing as paying off the mortgage and living free, not owing a cent to anybody.
Some people have to a sell houses they paid off because they couldn't afford paying property taxes.
We pay about $1000 in property taxes every month.

[Anonymous]

Debt has a role. See this book for how it applies to personal finance:

https://www.amazon.com/gp/product/1118758617/

[Anonymous]

Anonymous wrote:

Anonymous wrote:Pro-mortgage people are always citing the risk of having money tied up in an illiquid asset. What if you lose your job and need cash?

My response: At least you don't have a mortgage payment to worry about.

Love this response! That's exactly what I would say. We are paying off our mortgage with extra payments as much as we can- have about 3 years left. We are in 40s and 50s and have no other debt. We have maxed out our TSP. I work full time as a federal employee, have a stressful job. Once the mortgage is paid off, I could work part time somewhere for fun and still afford living in my $850K worth house.
Pay off the mortgage!

Same here. We are late 40s and I will be quitting after 25 yrs working, in 3 yrs.

[Anonymous]

the stupidity on DCUM never ceases to amaze me

stock market returns on average 7% a year

yall are really really really really dumb

[Anonymous]

Anonymous wrote:the stupidity on DCUM never ceases to amaze me

stock market returns on average 7% a year

yall are really really really really dumb

Can't you buy more of that if you don't have a mortgage?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Pro-mortgage people are always citing the risk of having money tied up in an illiquid asset. What if you lose your job and need cash?

My response: At least you don't have a mortgage payment to worry about.

Love this response! That's exactly what I would say. We are paying off our mortgage with extra payments as much as we can- have about 3 years left. We are in 40s and 50s and have no other debt. We have maxed out our TSP. I work full time as a federal employee, have a stressful job. Once the mortgage is paid off, I could work part time somewhere for fun and still afford living in my $850K worth house.
Pay off the mortgage!

The flaw with this thinking is that everyone’s mortgage becomes less expensive over time. Even just five years later, my mortgage seems a lot less through the raises I’ve received and just normal inflation. Eventually I could just babysit and pay my mortgage if I were to lose my job. One doesn’t have to pay off their entire mortgage to have a lot of freedom because of a low fixed housing expense.

[Anonymous]

We paid off ours in 7 years. Didn't care what others did, it was one step closer to retirement for my husband. We will never be homeless, have more money every month to invest, save or spend, a paid off home is real money. No worries, no struggle, one less thing to think about.

Being debt free let's us help our kids out more.

[Anonymous]

Anonymous wrote:the stupidity on DCUM never ceases to amaze me

stock market returns on average 7% a year

yall are really really really really dumb

Can you guarantee 7% return?

[Anonymous]

Anonymous wrote:We paid off ours in 7 years. Didn't care what others did, it was one step closer to retirement for my husband. We will never be homeless, have more money every month to invest, save or spend, a paid off home is real money. No worries, no struggle, one less thing to think about.

Being debt free let's us help our kids out more.

Ok but in doing so, you gave away one of the biggest gifts the US government ever gives - the ability to finance debt for a FIXED rate for 30 years. Over time the debt becomes less and less through inflation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We paid off ours in 7 years. Didn't care what others did, it was one step closer to retirement for my husband. We will never be homeless, have more money every month to invest, save or spend, a paid off home is real money. No worries, no struggle, one less thing to think about.

Being debt free let's us help our kids out more.

Ok but in doing so, you gave away one of the biggest gifts the US government ever gives - the ability to finance debt for a FIXED rate for 30 years. Over time the debt becomes less and less through inflation.

You do you I guess?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We paid off ours in 7 years. Didn't care what others did, it was one step closer to retirement for my husband. We will never be homeless, have more money every month to invest, save or spend, a paid off home is real money. No worries, no struggle, one less thing to think about.

Being debt free let's us help our kids out more.

Ok but in doing so, you gave away one of the biggest gifts the US government ever gives - the ability to finance debt for a FIXED rate for 30 years. Over time the debt becomes less and less through inflation.

You do you I guess?

Financially paying down your mortgage is a TERRIBE move. Do the math and you’ll see. Obviously you made this decision based on your emotions and not wanting to have debt. Which is fine, but in the long run you would be much, much better off having let TIME and inflation pay down your mortgage instead of your hard earned money.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We paid off ours in 7 years. Didn't care what others did, it was one step closer to retirement for my husband. We will never be homeless, have more money every month to invest, save or spend, a paid off home is real money. No worries, no struggle, one less thing to think about.

Being debt free let's us help our kids out more.

Ok but in doing so, you gave away one of the biggest gifts the US government ever gives - the ability to finance debt for a FIXED rate for 30 years. Over time the debt becomes less and less through inflation.

You do you I guess?

Financially paying down your mortgage is a TERRIBE move. Do the math and you’ll see. Obviously you made this decision based on your emotions and not wanting to have debt. Which is fine, but in the long run you would be much, much better off having let TIME and inflation pay down your mortgage instead of your hard earned money.

That's not even close to being accurate

[Anonymous]

We have same dilemma except our mortgage is almost $2m. We would save 9k in interest per month.