Anonymous wrote:Can someone ELI5 why it would be bad to pay off your mortgage, in this scenario at least? We are self-employed with irregular income and not having a mortgage sounds like a dream.

And maybe also teach me how to turn money into more money, because we are looking at a similar windfall at some point in the future…

We used to be self employed (contractors) and always have at least a year's worth of expenses, including the mortgage payment. I also lived through two recessions, and the mortgage meltdown. So I've learned to be very conservative with my savings.

If your income is irregular, you want to have a huge cushion to pay your monthly bills. If you use that $150K to pay off your low interest mortgage, and you lose your contract, you might not have a mortgage to worry about, but you also have $150K less to pay your other expenses.

I would put that cushion into a safe, low risk investment account like a money market.

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Anonymous wrote:Yes, we didn't inherit and paid off our mortgage. Its freeing.

Exactly.

If put the amount left on the mortgage in a HYSA that makes 1.25% more than my mortgage, set it on autopay, and forget about it (unless I need he cash), how is that any less freeing?

Because if your mortgage is switched to a different servicer and you don't get the memo, it could go into default while your autopay is merrily humming along.

If you are so incompetent that you can't manage to change an autopay, I agree, you should just pay it off. For those of us who can manage in modern society, we'll take our changes.

Obviously we can manage it. But when it's sold multiple times in a year, it's a pain to have to do all of that. My time is worth something, and having to spend time managing that is not worth it, all to save $400-500/year.

That you have to assume that your mortgage will be sold multiple times per year, every year, to try buttress your point demonstrates that it's really not much of a point at all. And even if that were true, if it takes you 10-20 hours to set up accounts and switch autopay each year, you really shouldn't be permitted to walk around unattended.

The extra time is from when the mortgage company f's it up and you have to deal with idiots getting stuff corrected. And yes back when I had a mortgage, in the last 3 years it was sold 6+ times and there were issues I had to stay on top of.so yeah if you only have $300k in "cash" don't pay off the mortgage.
But I own houses totally $6m in cash and it's only 10-12% of net worth. So yeah not worth the stress

But don't worry, I think the fact I can make 7 figures from interest/dividends from my "cash equivalent funds" ( not even mentioning what's in the market) means I can manage finances just fine

I would pay it off so fast and then celebrate. I’d pay off my car too and figure out how little I could work by conservatively investing the rest.

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Anonymous wrote:Yes, we didn't inherit and paid off our mortgage. Its freeing.

Exactly.

If put the amount left on the mortgage in a HYSA that makes 1.25% more than my mortgage, set it on autopay, and forget about it (unless I need he cash), how is that any less freeing?

Because if your mortgage is switched to a different servicer and you don't get the memo, it could go into default while your autopay is merrily humming along.

If you are so incompetent that you can't manage to change an autopay, I agree, you should just pay it off. For those of us who can manage in modern society, we'll take our changes.

Obviously we can manage it. But when it's sold multiple times in a year, it's a pain to have to do all of that. My time is worth something, and having to spend time managing that is not worth it, all to save $400-500/year.

That you have to assume that your mortgage will be sold multiple times per year, every year, to try buttress your point demonstrates that it's really not much of a point at all. And even if that were true, if it takes you 10-20 hours to set up accounts and switch autopay each year, you really shouldn't be permitted to walk around unattended.

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Anonymous wrote:This is kind of an interesting question from the perspective of economic class. Like most people, I will never be worth $2 million and don't have any living relatives worth that much (our parents are dead anyway). I owe over $100k on my low interest mortgage and probably WOULD pay it off if I magically came into a huge windfall.

My reasoning is this: In my tiny experience, life has a way of chewing away at any money that might accumulate. An unexpected layoff, child's medical emergency, parental dementia, broken cars. At some point down the road, I know that the money will be all gone and the best move I can make for my mood is to remove that mortgage debt hanging over my head.

It's not rational but I know I'm not as clever as most of the folks on DCUM.

it is indeed a very very class based response. yours is a mentality of someone who will never create wealth and never teach your children how to create wealth. This is because you come from a scarcity mindset and have an emotional bond with money. Money sis. tool to create more resources not a resource ti spend down. you never spend more money than you are creating after you get to a certain point.

Whatever helps you sleep at night, bro. DP. MANY, MANY rich people carry no mortgage—at least on their primary residence, if not on all of their properties. I know a guy who is a C-level exec at one of the biggest Fortune 500 companies in the DC area, and he has previously held the same position with other Fortune 100 companies. He has no mortgage. Each of his stints lasts 3-4 years, and he is never sure if he will get another one (though he has been lucky to date). He makes a ton but is never sure if it will last. Plus, anyone can get MeToo'ed or DEI'ed out of a job with almost no notice.

The same mindset applies to other high-earners like business owners. Businesses don't last forever, and good times do not always abound. These owners are more than happy to take the safe return of a paid-off house to balance out the inherent risk of being self-employed and having an irregular income—and it's not like they don't also have sizable investments in the market as well.

This is why we paid it off - DH is always wary of layoffs. I heard that Dell laid off a dozen people in the Austin office last November and the common denominators were: white, male and 50+

again a scarcity mindset. I’ve offset this by investing my entire life. I’m at the point where my investments passively make me more money annually than my w2 wage income. Doesn’t matter if i lose my job.

Anonymous wrote:A 2 million windfall? I'd pay my mortgage in a heartbeat. I'll never forget this piece of advice,

"There is a reason so many people lose their homes. They think they are too smart to pay it off".

This makes no sense, actually. There's no benefit to paying it off.

Can someone ELI5 why it would be bad to pay off your mortgage, in this scenario at least? We are self-employed with irregular income and not having a mortgage sounds like a dream.

And maybe also teach me how to turn money into more money, because we are looking at a similar windfall at some point in the future…

Anonymous wrote:Assuming no other debt, fully funded 529s, etc.? In other words, what's the peace of mind value of no longer having a mortgage?

Yes. A lower inheritance would probably change my answer, but at that level, yes, I would get rid of the mortgage.

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Anonymous wrote:No, I would not pay off my low interest mortgage.

Our “very low” mortgage is at 2.25%. It doesn’t make any sense to pay that off when I can get 3% in a regular savings account.

+1 We have the money in cash to pay off our mortgage right now, but why? The rate is 2.75%, and our money is sitting in a MMA earning closer to 4%.

There are these things called taxes. Assuming you're at least in the 32% bracket (24% federal and 8% MD) and are among the 90%+ of Americans who don't itemize deductions, you'd actually be earning a higher return by paying off your mortgage than keeping it in a MM at 4%.

Also, you've got it in cash for now, but paying off your mortgage is also a protection against making a bad move in the stock market (e.g., you pile into NVDA because of the hype and it drops 70% during the next correction). Why play games with the roof over your head for *at most* a few basis points in return??[b]

I agree with you but reality is majority of people in this area Don’t have a 2.75 mortgage rate.

Yeah, they probably do unless they just bought their house in the lasr few years. Interest rates were low for a very long time. We refinanced from 3.5 to 2.750 about 10 + years ago. Of course most homeowners are not current buyers.

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Anonymous wrote:I would. I value simplicity and peace of mind more than gaming interest rates on a $150,000 loan and/or taxes (though I doubt a $150k mortgage does much for your taxes). It's so tiny relative to what it sounds like you have that it's not worth the mental load of carrying the mortgage anymore.

This is my mindset too. I agree that paying off the mortgage for the peace of mind when someone already has enough for investments isn’t a bad idea.

And an unintended consequence is one less bill for your heirs to deal with down the road. As someone who has had to manage several estates the simpler the better!

OP has $2mil. Why would a $150K mortgage at 2.75% be a burden on their mind? If OP passes away, the heir would inherit the $2mil, I assume. And there's autopay for the mortgage. Or maybe their heirs will sell the house.

Anonymous wrote:A 2 million windfall? I'd pay my mortgage in a heartbeat. I'll never forget this piece of advice,

"There is a reason so many people lose their homes. They think they are too smart to pay it off".

I think if you have $2mil set aside and at least $150K invested in a low risk investment to pay the mortgage of *if you need to* is pretty safe.

A 2 million windfall? I'd pay my mortgage in a heartbeat. I'll never forget this piece of advice,

"There is a reason so many people lose their homes. They think they are too smart to pay it off".

Hell no. $2 mil cash isn't enough peace of mind? We have a low rate too and I wish we could just never pay our mortgage off. Save some to travel with family and invest the rest.

Yes, I probably would pay off the mortgage but the better financial strategy is probably to hold on to it due to the low rate. If I did that, I'd still want to hold on to enough cash to cover the mortgage if things went bad. Like keep $150,000 in a savings or CD account.

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Anonymous wrote:I would. I value simplicity and peace of mind more than gaming interest rates on a $150,000 loan and/or taxes (though I doubt a $150k mortgage does much for your taxes). It's so tiny relative to what it sounds like you have that it's not worth the mental load of carrying the mortgage anymore.

This is my mindset too. I agree that paying off the mortgage for the peace of mind when someone already has enough for investments isn’t a bad idea.

And an unintended consequence is one less bill for your heirs to deal with down the road. As someone who has had to manage several estates the simpler the better!

Life is much easier when you don't have to deal with a mortgage. I pay my insurance once a year and same with my property taxes. No dealing with mortgage being sold, mortgage company failing to pay the property taxes despite having collected your money thru the year. Yes---I've seen that personally and with friends. Just because they are supposed to do it, doesn't mean they do it properly or pay in full. And it's on you the homeowner for being in default. back when I had a mortgage, I once had them not collect enough and refuse to fully pay the taxes until they got more from me. Then they increased the next year to over collecting by $2K, then they adjust it the next year and so it. I had a late fee because of the stupid mortgage company. So no thanks, I'd prefer to just manage everything myself, a once your mortgage is a small portion of your net worth, it's simpler and a guaranteed return to not have a mortgage.

And yes, our kids will inherit our homes (or the estate will) free and clear, no mortgage to pay off