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Anonymous wrote:I have about $1 million in my retirement account, plus another $500,000 in Vanguard mutual funds, plus enough in 529s to pay for my kids' college.

My monthly principal and interest payment on my mortgage is $1,750, and I have a $428,000 balance.

And with those number, I feel a lot more secure and free with $500,000 of liquid funds and a monthly mortgage bill of $1,750 than I would if I paid off my mortgage and had no monthly payment but only $80,000 of liquid investments

What if your 500k dropped to 250k in a deep recession amid layoffs and you still owed 400k?

If this happens I will deal with the situation. As long as I owe the $400k at an interest rate lower than what I can make with my $250k on the market, I’m fine because I know it’s the better position from a pure financial angle. I’m able to put emotions aside.

Can you care to elaborate how to the non-savvy folks who are paying off their mortgages ? IMHO this is the missing piece why folks pay off the mortgages as they dont how how to handle such scenarios

DP: Um, with a bank account and ibonds earning more interest than my mortgage. How are the folks paying off their mortgage going to handle a financial emergency if say you lose your job and need to move to get a new job but the housing market is currently terrible? Liquid safe cash is safer than a paid-off mortgage. The more the better.

Once the mortgage is paid off, you have more cash, (The PI from the PITI), that you are automatically saving. It adds up quick and also please note that the monthly expenses are lower owing to the paid off house. In the event that you have to move, you can always rent out the house that is paid in full.

Once the mortgage is paid off and then you accumulate more cash--that's a longer period of relative insecurity compared to just building the cash and then slowing paying off the mortgage with the accumulated cash (esp. while the cash is accumulating more interest than the mortgage). Also, while you might be able to rent out the house, it doesn't give you a strong asset base to move from--just a steady income at whatever the market rental rate in your particular area is.

People are saying this like it's normal, but it's just a temporary aberration. Of course, if you have a 3% mortgage and can get 5% from risk-free investments, it makes sense to do that. But that's not normal. Normal is that safe investments pay something like 3% less than your mortgage (i.e. 3% risk-free interest rate and a 6% mortgage), so to get a higher return than paying off your mortgage, you have to take risk.

So you’re giving advice for some past situation you’re calling normal that is not the case today? Today, I have a 3% mortgage and can easily get 4+% return from safe cash investments. Paying off my mortgage early would only be for some peace of mind that having debt is bad. It is not the right financial move, I am in a much stronger financial position keeping my safe liquid investments and slowly paying off the mortgage over time while my investments continue to earn a better rate.

+1
Make your financial decisions for the actual conditions you are making the decisions in-- not some generic idea that "debt is bad" or "leverage is good." That's what smart people do.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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Anonymous wrote:

Anonymous wrote:I have about $1 million in my retirement account, plus another $500,000 in Vanguard mutual funds, plus enough in 529s to pay for my kids' college.

My monthly principal and interest payment on my mortgage is $1,750, and I have a $428,000 balance.

And with those number, I feel a lot more secure and free with $500,000 of liquid funds and a monthly mortgage bill of $1,750 than I would if I paid off my mortgage and had no monthly payment but only $80,000 of liquid investments

What if your 500k dropped to 250k in a deep recession amid layoffs and you still owed 400k?

If this happens I will deal with the situation. As long as I owe the $400k at an interest rate lower than what I can make with my $250k on the market, I’m fine because I know it’s the better position from a pure financial angle. I’m able to put emotions aside.

Can you care to elaborate how to the non-savvy folks who are paying off their mortgages ? IMHO this is the missing piece why folks pay off the mortgages as they dont how how to handle such scenarios

DP: Um, with a bank account and ibonds earning more interest than my mortgage. How are the folks paying off their mortgage going to handle a financial emergency if say you lose your job and need to move to get a new job but the housing market is currently terrible? Liquid safe cash is safer than a paid-off mortgage. The more the better.

Once the mortgage is paid off, you have more cash, (The PI from the PITI), that you are automatically saving. It adds up quick and also please note that the monthly expenses are lower owing to the paid off house. In the event that you have to move, you can always rent out the house that is paid in full.

No, once the mortgage is paid off you can slowly save more cash than you did before. You’re forgetting the large amount of cash you put towards paying off your mortgage. That cash is now tied up in your house and not available for spending in the event you have a job loss. Job loss is really the fear everyone is hinting at since your income will drop significantly but you still have bills to pay. Wouldn’t you rather have a large amount of cash to pay your bills than a small amount of cash but a paid off house?

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Anonymous wrote:

Anonymous wrote:I have about $1 million in my retirement account, plus another $500,000 in Vanguard mutual funds, plus enough in 529s to pay for my kids' college.

My monthly principal and interest payment on my mortgage is $1,750, and I have a $428,000 balance.

And with those number, I feel a lot more secure and free with $500,000 of liquid funds and a monthly mortgage bill of $1,750 than I would if I paid off my mortgage and had no monthly payment but only $80,000 of liquid investments

What if your 500k dropped to 250k in a deep recession amid layoffs and you still owed 400k?

If this happens I will deal with the situation. As long as I owe the $400k at an interest rate lower than what I can make with my $250k on the market, I’m fine because I know it’s the better position from a pure financial angle. I’m able to put emotions aside.

Can you care to elaborate how to the non-savvy folks who are paying off their mortgages ? IMHO this is the missing piece why folks pay off the mortgages as they dont how how to handle such scenarios

DP: Um, with a bank account and ibonds earning more interest than my mortgage. How are the folks paying off their mortgage going to handle a financial emergency if say you lose your job and need to move to get a new job but the housing market is currently terrible? Liquid safe cash is safer than a paid-off mortgage. The more the better.

Once the mortgage is paid off, you have more cash, (The PI from the PITI), that you are automatically saving. It adds up quick and also please note that the monthly expenses are lower owing to the paid off house. In the event that you have to move, you can always rent out the house that is paid in full.

Once the mortgage is paid off and then you accumulate more cash--that's a longer period of relative insecurity compared to just building the cash and then slowing paying off the mortgage with the accumulated cash (esp. while the cash is accumulating more interest than the mortgage). Also, while you might be able to rent out the house, it doesn't give you a strong asset base to move from--just a steady income at whatever the market rental rate in your particular area is.

People are saying this like it's normal, but it's just a temporary aberration. Of course, if you have a 3% mortgage and can get 5% from risk-free investments, it makes sense to do that. But that's not normal. Normal is that safe investments pay something like 3% less than your mortgage (i.e. 3% risk-free interest rate and a 6% mortgage), so to get a higher return than paying off your mortgage, you have to take risk.

So you’re giving advice for some past situation you’re calling normal that is not the case today? Today, I have a 3% mortgage and can easily get 4+% return from safe cash investments. Paying off my mortgage early would only be for some peace of mind that having debt is bad. It is not the right financial move, I am in a much stronger financial position keeping my safe liquid investments and slowly paying off the mortgage over time while my investments continue to earn a better rate.

Anonymous wrote:I'm paying off my mortgage extremely quickly. It makes absolutely no sense to do. The interest rate is 2.5% and even my savings account earns 3.3%. I have a phd in finance. But it just doesn't matter me - I want that mortgage gone. It's like asking why do I spot clean 20 areas of my house every single day when I know the maid will clean it - clearly a waste of time and effort from a rational perspective. Don't care. Need to make sure it is clean constantly

You describe paying off your mortgage like it is a mental illness!

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Anonymous wrote:I have about $1 million in my retirement account, plus another $500,000 in Vanguard mutual funds, plus enough in 529s to pay for my kids' college.

My monthly principal and interest payment on my mortgage is $1,750, and I have a $428,000 balance.

And with those number, I feel a lot more secure and free with $500,000 of liquid funds and a monthly mortgage bill of $1,750 than I would if I paid off my mortgage and had no monthly payment but only $80,000 of liquid investments

What if your 500k dropped to 250k in a deep recession amid layoffs and you still owed 400k?

If this happens I will deal with the situation. As long as I owe the $400k at an interest rate lower than what I can make with my $250k on the market, I’m fine because I know it’s the better position from a pure financial angle. I’m able to put emotions aside.

Can you care to elaborate how to the non-savvy folks who are paying off their mortgages ? IMHO this is the missing piece why folks pay off the mortgages as they dont how how to handle such scenarios

DP: Um, with a bank account and ibonds earning more interest than my mortgage. How are the folks paying off their mortgage going to handle a financial emergency if say you lose your job and need to move to get a new job but the housing market is currently terrible? Liquid safe cash is safer than a paid-off mortgage. The more the better.

Once the mortgage is paid off, you have more cash, (The PI from the PITI), that you are automatically saving. It adds up quick and also please note that the monthly expenses are lower owing to the paid off house. In the event that you have to move, you can always rent out the house that is paid in full.

Once the mortgage is paid off and then you accumulate more cash--that's a longer period of relative insecurity compared to just building the cash and then slowing paying off the mortgage with the accumulated cash (esp. while the cash is accumulating more interest than the mortgage). Also, while you might be able to rent out the house, it doesn't give you a strong asset base to move from--just a steady income at whatever the market rental rate in your particular area is.

People are saying this like it's normal, but it's just a temporary aberration. Of course, if you have a 3% mortgage and can get 5% from risk-free investments, it makes sense to do that. But that's not normal. Normal is that safe investments pay something like 3% less than your mortgage (i.e. 3% risk-free interest rate and a 6% mortgage), so to get a higher return than paying off your mortgage, you have to take risk.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have about $1 million in my retirement account, plus another $500,000 in Vanguard mutual funds, plus enough in 529s to pay for my kids' college.

My monthly principal and interest payment on my mortgage is $1,750, and I have a $428,000 balance.

And with those number, I feel a lot more secure and free with $500,000 of liquid funds and a monthly mortgage bill of $1,750 than I would if I paid off my mortgage and had no monthly payment but only $80,000 of liquid investments

What if your 500k dropped to 250k in a deep recession amid layoffs and you still owed 400k?

If this happens I will deal with the situation. As long as I owe the $400k at an interest rate lower than what I can make with my $250k on the market, I’m fine because I know it’s the better position from a pure financial angle. I’m able to put emotions aside.

Can you care to elaborate how to the non-savvy folks who are paying off their mortgages ? IMHO this is the missing piece why folks pay off the mortgages as they dont how how to handle such scenarios

DP: Um, with a bank account and ibonds earning more interest than my mortgage. How are the folks paying off their mortgage going to handle a financial emergency if say you lose your job and need to move to get a new job but the housing market is currently terrible? Liquid safe cash is safer than a paid-off mortgage. The more the better.

Once the mortgage is paid off, you have more cash, (The PI from the PITI), that you are automatically saving. It adds up quick and also please note that the monthly expenses are lower owing to the paid off house. In the event that you have to move, you can always rent out the house that is paid in full.

Once the mortgage is paid off and then you accumulate more cash--that's a longer period of relative insecurity compared to just building the cash and then slowing paying off the mortgage with the accumulated cash (esp. while the cash is accumulating more interest than the mortgage). Also, while you might be able to rent out the house, it doesn't give you a strong asset base to move from--just a steady income at whatever the market rental rate in your particular area is.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have about $1 million in my retirement account, plus another $500,000 in Vanguard mutual funds, plus enough in 529s to pay for my kids' college.

My monthly principal and interest payment on my mortgage is $1,750, and I have a $428,000 balance.

And with those number, I feel a lot more secure and free with $500,000 of liquid funds and a monthly mortgage bill of $1,750 than I would if I paid off my mortgage and had no monthly payment but only $80,000 of liquid investments

What if your 500k dropped to 250k in a deep recession amid layoffs and you still owed 400k?

If this happens I will deal with the situation. As long as I owe the $400k at an interest rate lower than what I can make with my $250k on the market, I’m fine because I know it’s the better position from a pure financial angle. I’m able to put emotions aside.

Can you care to elaborate how to the non-savvy folks who are paying off their mortgages ? IMHO this is the missing piece why folks pay off the mortgages as they dont how how to handle such scenarios

DP: Um, with a bank account and ibonds earning more interest than my mortgage. How are the folks paying off their mortgage going to handle a financial emergency if say you lose your job and need to move to get a new job but the housing market is currently terrible? Liquid safe cash is safer than a paid-off mortgage. The more the better.

Once the mortgage is paid off, you have more cash, (The PI from the PITI), that you are automatically saving. It adds up quick and also please note that the monthly expenses are lower owing to the paid off house. In the event that you have to move, you can always rent out the house that is paid in full.

While you are paying off the mortgage, you have less cash. What if something happens at that time.
After the mortgage is paid off, you have moor cash but a lot less cash compared to someone in the same situation who didn’t pay off the mortgage.

You can also always rent a house that is not paid in full. What’s your point here?

If you can’t pay your mortgage because your income dropped, you could always sell your house and downsize to a more affordable house.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have about $1 million in my retirement account, plus another $500,000 in Vanguard mutual funds, plus enough in 529s to pay for my kids' college.

My monthly principal and interest payment on my mortgage is $1,750, and I have a $428,000 balance.

And with those number, I feel a lot more secure and free with $500,000 of liquid funds and a monthly mortgage bill of $1,750 than I would if I paid off my mortgage and had no monthly payment but only $80,000 of liquid investments

What if your 500k dropped to 250k in a deep recession amid layoffs and you still owed 400k?

If this happens I will deal with the situation. As long as I owe the $400k at an interest rate lower than what I can make with my $250k on the market, I’m fine because I know it’s the better position from a pure financial angle. I’m able to put emotions aside.

Can you care to elaborate how to the non-savvy folks who are paying off their mortgages ? IMHO this is the missing piece why folks pay off the mortgages as they dont how how to handle such scenarios

I dealt with this during the 2008 recession. The value of my investments dropped. I lost my job and I had a mortgage. My emergency fund allowed me to pay my bills until I found another job 3 months later. In the worst case scenario I would have sold some stocks to pay my bills. It’s that simple.

Fear, panic and overreaction are your worst enemies when it comes to financial and investment decisions. Be greedy when others are fearful. This is one of Warren Buffett’s recipes for success.
It’s hard to do for most people and even harder for risk averse people because they can’t deal with fear.

Folks who pay off their mortgages don’t want or don’t know how to deal with fear of potentially losing their home if something bad happens. This is ok. That’s who they are and they are comfortable with it. Everyone can’t be a warrior.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have about $1 million in my retirement account, plus another $500,000 in Vanguard mutual funds, plus enough in 529s to pay for my kids' college.

My monthly principal and interest payment on my mortgage is $1,750, and I have a $428,000 balance.

And with those number, I feel a lot more secure and free with $500,000 of liquid funds and a monthly mortgage bill of $1,750 than I would if I paid off my mortgage and had no monthly payment but only $80,000 of liquid investments

What if your 500k dropped to 250k in a deep recession amid layoffs and you still owed 400k?

If this happens I will deal with the situation. As long as I owe the $400k at an interest rate lower than what I can make with my $250k on the market, I’m fine because I know it’s the better position from a pure financial angle. I’m able to put emotions aside.

Can you care to elaborate how to the non-savvy folks who are paying off their mortgages ? IMHO this is the missing piece why folks pay off the mortgages as they dont how how to handle such scenarios

DP: Um, with a bank account and ibonds earning more interest than my mortgage. How are the folks paying off their mortgage going to handle a financial emergency if say you lose your job and need to move to get a new job but the housing market is currently terrible? Liquid safe cash is safer than a paid-off mortgage. The more the better.

Once the mortgage is paid off, you have more cash, (The PI from the PITI), that you are automatically saving. It adds up quick and also please note that the monthly expenses are lower owing to the paid off house. In the event that you have to move, you can always rent out the house that is paid in full.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have about $1 million in my retirement account, plus another $500,000 in Vanguard mutual funds, plus enough in 529s to pay for my kids' college.

My monthly principal and interest payment on my mortgage is $1,750, and I have a $428,000 balance.

And with those number, I feel a lot more secure and free with $500,000 of liquid funds and a monthly mortgage bill of $1,750 than I would if I paid off my mortgage and had no monthly payment but only $80,000 of liquid investments

What if your 500k dropped to 250k in a deep recession amid layoffs and you still owed 400k?

If this happens I will deal with the situation. As long as I owe the $400k at an interest rate lower than what I can make with my $250k on the market, I’m fine because I know it’s the better position from a pure financial angle. I’m able to put emotions aside.

Can you care to elaborate how to the non-savvy folks who are paying off their mortgages ? IMHO this is the missing piece why folks pay off the mortgages as they dont how how to handle such scenarios

DP: Um, with a bank account and ibonds earning more interest than my mortgage. How are the folks paying off their mortgage going to handle a financial emergency if say you lose your job and need to move to get a new job but the housing market is currently terrible? Liquid safe cash is safer than a paid-off mortgage. The more the better.

Anonymous wrote:I'm paying off my mortgage extremely quickly. It makes absolutely no sense to do. The interest rate is 2.5% and even my savings account earns 3.3%. I have a phd in finance. But it just doesn't matter me - I want that mortgage gone. It's like asking why do I spot clean 20 areas of my house every single day when I know the maid will clean it - clearly a waste of time and effort from a rational perspective. Don't care. Need to make sure it is clean constantly

I have the same urge to pay off my mortgage, but I don't because I know it's dumb. But I appreciate that you're honest about it--recognizing there is less genuine security in paying off your mortgage and is not cost-effective--it's just an itch you need to scratch. That's fine in my book since you're not pretending to give 'good financial advice' to others.

I'm paying off my mortgage extremely quickly. It makes absolutely no sense to do. The interest rate is 2.5% and even my savings account earns 3.3%. I have a phd in finance. But it just doesn't matter me - I want that mortgage gone. It's like asking why do I spot clean 20 areas of my house every single day when I know the maid will clean it - clearly a waste of time and effort from a rational perspective. Don't care. Need to make sure it is clean constantly

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have about $1 million in my retirement account, plus another $500,000 in Vanguard mutual funds, plus enough in 529s to pay for my kids' college.

My monthly principal and interest payment on my mortgage is $1,750, and I have a $428,000 balance.

And with those number, I feel a lot more secure and free with $500,000 of liquid funds and a monthly mortgage bill of $1,750 than I would if I paid off my mortgage and had no monthly payment but only $80,000 of liquid investments

What if your 500k dropped to 250k in a deep recession amid layoffs and you still owed 400k?

If this happens I will deal with the situation. As long as I owe the $400k at an interest rate lower than what I can make with my $250k on the market, I’m fine because I know it’s the better position from a pure financial angle. I’m able to put emotions aside.

Can you care to elaborate how to the non-savvy folks who are paying off their mortgages ? IMHO this is the missing piece why folks pay off the mortgages as they dont how how to handle such scenarios

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Not paying off a mortgage is financially the right decision. However, the emotional aspect to finances is real and for some folks putting the mortgage in the rear view mirror brings a lot of relief. No judgement here.

In hot real estate markets, the only way to buy a house is to have a cash offer. And if you don't get the mortgage when you buy, you cannot just go get a mortgage on a home later.

+1000

Haven't had a mortgage in over a decade and haven't had a car loan in over 2 decades. It's nice to jump off the American way of financing everything.

You are #goals.

Thanks!

I was wrong—we did get one car loan, because only way to get the $1500 cash back was to “finance” at 0.9%. So I got the loan and paid it off the first month. Seemed silly to not get the $1500 rebate otherwise

Once you jump off the financing trail it’s liberating. And east to not take car loans—keep them 7-10 years, save for next one and sell the used car for $10-20k (we buy luxury cars now).

I had a car loan when it was 0% and there were rebates. I just put the cash for the car in an account earning more than that and set it on autopay. I do the same thing with my 2.49% mortgage I have more than that in 100% safe investments earning more than that and have set it at autopay. I'll walk away with 30k+ more that way.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can we stop this false narrative now. Most wealthy people do not have mortgages. Full stop. Some do and the reasons why are on this thread. But most do not. Most use money from outsized market gains like before last year’s meltdown and pay off any debt. Why? The really wealthy 25 million plus do not want to deal with debt and are uninterested in the arbitrage. The wealthy 10- 25 million know how quickly the world turns on you and that debt should disappear in good times. Below 10 you are doing great but you are not wealthy.

You have to stop this false narrative that wealthy people do not take mortgages. Maybe that's true for the small UMC DCUM rich. But the true wealthy people do take mortgages.
I used to work in real estate in New York and I can tell you that 90% of people buying expensive properties had a mortgage. No rich person in their right mind would buy a $10M property and pay cash when they know they can borrow that money at 3% and instead invest the cash in a hedge fund for a much higher return.

Explain to me why Zuckerberg, Buffett, Elon, etc... take mortgages. Do you think they are stupid?
https://www.fool.com/the-ascent/mortgages/articles/why-did-mark-zuckerberg-get-a-mortgage-on-his-home/

People take 10 mortgages on 10 million dollar properties because they do not have the free coin at that time. Once they do they close the mortgage. Warren buffet does not have a mortgage. It's all about timing.

Do you really think they are unable to find the cash at the time they purchase the house? Do you really think that it would take these billionaires months or years to get 10m or 20m in liquidity to purchase a house without taking a mortgage? If they need 10m or 20m in liquidity, they can get it in their account in a day.
No it’s not about timing for them. It’s because they can keep their money earning a lot more than the mortgage rate.
They aren’t afraid of losing their home because they have a mortgage.
Billionaire Zuckerberg took a mortgage to purchase his home. Years later he refinanced it at a lower rate.
Do you think this is because he couldn’t pay it off?

Buffett himself recommends taking a mortgage rather than buying cash. Most rich people would tell you the same thing. They aren’t stupid.