Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Your husband sounds crazy.

Show him the actual dollars and cents on paper. I assume the $4k is for the state tax benefits? Show him that. Show him traditional growth of a home vs. growth of investment accounts over time.

The mortgage rates are SO LOW and housing can never be thought of as a sound investment. I can't imagine the logic behind that kind of strategy.

OP here. I have ran the numbers for him.

I've shown him my return on my Vanguard account and that we should budget a 7% increase, but he just talks about paying off the mortgage. He keeps saying nothing will get us 4% interest every year (even though I show him we can do better). If anything, it's better to invest and then when we have a lump sum to pay off the mortgage, do that. We get nothing for paying on our mortgage early right now.

Yes we're in VA and the 4k was for the state tax benefit. We paid off 80k of his student loans and he thinks it was easy and no big deal and that our kids should do the same.

He is selfish and ignorant.

I would have a major issue with this. Major. On a HHI of $180K at this (early) point in your parenting, there is NO reason not to be saving aggressively for college. None.

And your kids are going to be spoiled and entitled. Ever heard of the GI Bill? Didn't think so. The biggest losers I know had their parents pay for their college.

It sucks your parents didn't pay for you but you are so wrong. My parents paid for my and my sister's education and we both appreciated it. My husband didn't have college as an option and went military. Life was very hard for him and he didn't get his degree until close to retirement. Its no easy getting a degree and being active duty, especially now with deployments. Why on earth wouldn't you help your kids as much as you can? If they are spoiled and entitled that is partly on you for your parenting and has nothing to do with paying for education. An education is the best gift you can give your child.

Anonymous wrote:

Anonymous wrote:OP, I think it's ridiculous that you want to buy a rental property. That shouldn't even be an option right now, given your inexperience as a landlord (I presume) and the fact that you guys are neither maxing out retirement or 529.

OP here. I have been a landlord previously. While DH isn't maxing his 401k, combined we put 28k in last year. What is maxing out a 529? I put 4k in yearly. We're very good at major home repairs and construction, so renovating a townhouse and renting it out would actually be a good fit for us.

What happens if you have a vacancy that spans more than a month?

How long did it take to save the 150k? Depending on the answer it might make sense to just pay off the mortgage and get it over with. Or put 50k lump sum in the 529 to benefit from interest and use the rest for the mortgage.

depends on how old you are and how old your kids are. When I'm in my late forties that's what my kids will be off to college. So I feel like we can be a little more risky because we will have quite a few more earning years in us once the kids are out of the house. If I was an older parent when I'd first given birth I probably would look at things a little bit differently.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Your husband sounds crazy.

Show him the actual dollars and cents on paper. I assume the $4k is for the state tax benefits? Show him that. Show him traditional growth of a home vs. growth of investment accounts over time.

The mortgage rates are SO LOW and housing can never be thought of as a sound investment. I can't imagine the logic behind that kind of strategy.

OP here. I have ran the numbers for him.

I've shown him my return on my Vanguard account and that we should budget a 7% increase, but he just talks about paying off the mortgage. He keeps saying nothing will get us 4% interest every year (even though I show him we can do better). If anything, it's better to invest and then when we have a lump sum to pay off the mortgage, do that. We get nothing for paying on our mortgage early right now.

Yes we're in VA and the 4k was for the state tax benefit. We paid off 80k of his student loans and he thinks it was easy and no big deal and that our kids should do the same.

He is selfish and ignorant.

I would have a major issue with this. Major. On a HHI of $180K at this (early) point in your parenting, there is NO reason not to be saving aggressively for college. None.

And your kids are going to be spoiled and entitled. Ever heard of the GI Bill? Didn't think so. The biggest losers I know had their parents pay for their college.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Pay off the house! You never know what it coming. Your child may get scholarship, decide to go a different route than college. Once the house is paid off you will be amazed at how much easier it is to enjoy life. Plus, stock market investing is a bad idea right now. Market is overinflated and bound to correct.

+1. We're in our 30s and paid it off in our 20s. No regrets. We're still saving for college, but our retirement is essentially covered by a paid off house.

...what kind of house do you live in that your retirement is covered by a paid off house and you're in your 30's?

I mean that if necessary, we could pay our property taxes,utilities, and food via social security if we didn't have any savings or income beyond our house. It wouldn't be the fanciest retirement, but if necessary, it would work. The only house it takes to make this work is one that's a.) paid off and b.) has manageable property taxes. This is essentially the main retirement strategy around the globe (owning your home), along with being cared for by family.

This is a strategy?

For the majority of people around the world, yeah. What do you think people do in countries without social security when they can't work anymore?

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Pay off the house! You never know what it coming. Your child may get scholarship, decide to go a different route than college. Once the house is paid off you will be amazed at how much easier it is to enjoy life. Plus, stock market investing is a bad idea right now. Market is overinflated and bound to correct.

+1. We're in our 30s and paid it off in our 20s. No regrets. We're still saving for college, but our retirement is essentially covered by a paid off house.

...what kind of house do you live in that your retirement is covered by a paid off house and you're in your 30's?

I mean that if necessary, we could pay our property taxes,utilities, and food via social security if we didn't have any savings or income beyond our house. It wouldn't be the fanciest retirement, but if necessary, it would work. The only house it takes to make this work is one that's a.) paid off and b.) has manageable property taxes. This is essentially the main retirement strategy around the globe (owning your home), along with being cared for by family.

This is a strategy?

NP here. We have a seven figure income and have a similar mindset as pp. If anything were to happen to our incomes, we'd have a home to live in and no mortgage to pay. Our strategy is to pay off house first and then invest every penny we make.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I hope your husband can consider the possibility that his strategy might not be the best one for wealth accumulation.

Perhaps print this article below and see if he'll read it? I find Ric Edelman to be very sensible.

http://www.edelmanfinancial.com/education-center/articles/1/11-great-reasons-to-carry-a-big-long-mortgage

OP here. I just read through that and it was very interesting.

A point my dh keeps coming back to is that over the course of a 30 year mortgage he will pay 300k in interest. That number is what bothers him the most. He doesn't think that he can get 300k in investment over 30 years (I think we can).

Most of these PPs are lunatics. Do you all like just giving your money away to the government when you don't have to? The tax benefits of the mortgage interest deduction and 529 plans aren't nothing. Paying off your mortgage for "peace of mind" when you're perfectly able to otherwise pay it monthly is just stupid. Why don't you point out to your husband how many 100s of thousands of dollars he'll be LOSING in interest if he doesn't stick some money in the 529s. Someone pointed out that your husband doesn't like carrying a lot of debt. I think it's pretty sh*tty that he'd prefer to just saddle your kids with it instead.

We are in our 30s and want to pay off our house too. We threw all our extra money at our student loans until they were paid off. Will probably pay off our mortgage next year when we are 38. We max out of 401ks. Do not have college funds for our kids but we should be able to easily pay their college tuitions.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Pay off the house! You never know what it coming. Your child may get scholarship, decide to go a different route than college. Once the house is paid off you will be amazed at how much easier it is to enjoy life. Plus, stock market investing is a bad idea right now. Market is overinflated and bound to correct.

+1. We're in our 30s and paid it off in our 20s. No regrets. We're still saving for college, but our retirement is essentially covered by a paid off house.

...what kind of house do you live in that your retirement is covered by a paid off house and you're in your 30's?

I mean that if necessary, we could pay our property taxes,utilities, and food via social security if we didn't have any savings or income beyond our house. It wouldn't be the fanciest retirement, but if necessary, it would work. The only house it takes to make this work is one that's a.) paid off and b.) has manageable property taxes. This is essentially the main retirement strategy around the globe (owning your home), along with being cared for by family.

This is a strategy?

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can you split 1/2? I can see logic in both approaches. We paid off mortgage first and it worked out fine for us. Knowing your home is completely paid for gives you tremendous peace of mind.

OP here. But is this financially the best strategy? I'd rather have a rental property before paying off the mortgage.

Historically and mathematically speaking, no. Paying off mortgage gives you two upsides - 1) you are always moving forward (market - stock or real estate investments) can go down; and 2) peace of mind (important to some, not so for others).

Female here, and I'm Team Husband.

There's 1 more upside with paying off mortgage. Mortgage equity is counted differently than money in 529. Every single cent in 529 is counted as $ available for college, whereas mortgage equity is not.

With a HHI of $180k at 30 years old, they will not qualify for need based aid when the time comes, so this issue is moot.

I'm a CPA and I am with your husband on this one. By paying off your mortgage, you are basically locking in a 3.5% - 4% guaranteed rate of return which isn't huge, but you can't get that anywhere else with 100% certainty. Secondly, most people overestimate the benefits of the mortgage interest deduction and itemizing in general - you already get a standard deduction without doing anything so the benefit is only the difference between the two. Thirdly, the vast majority of people in the U.S. do not have a college education. What will you do with the 529 if your kids don't go? Fourth, evaluate your savings rate and the pace at which your net worth is growing. We have similar incomes and increase our net worth about $100K each year so could easily pay off your mortgage in 3-5 years. If I were you, I would max out your 401K/Roth IRA, make sure you have an adequate emergency fund, and then allocate remaining funds to the mortgage. With the mortgage out of the way, you should be able to cash flow your kids education.

Anonymous wrote:

Anonymous wrote:Pay off the house! You never know what it coming. Your child may get scholarship, decide to go a different route than college. Once the house is paid off you will be amazed at how much easier it is to enjoy life. Plus, stock market investing is a bad idea right now. Market is overinflated and bound to correct.

+1. We're in our 30s and paid it off in our 20s. No regrets. We're still saving for college, but our retirement is essentially covered by a paid off house.

Agreed Do your child a favor and pay off your house.
Your 30 your kid is likely not even 5 now. You can still save just flip the percentages for now. You can go college crazy once she hits elementary.

Anonymous wrote:I consider paying off mortgage vs. investing as a question of asset allocation. Your ideal asset allocation should consist of a percentage of equities and bonds. Why not put what you would normally invest in bonds into the mortgage instead? Here you are getting a guaranteed long term rate of return of 4% less the mortgage deduction. This is probably better than any return you could get in the bond market and is not subject to interest rate risk.

This is a really interesting way to look at it! -OP

I consider paying off mortgage vs. investing as a question of asset allocation. Your ideal asset allocation should consist of a percentage of equities and bonds. Why not put what you would normally invest in bonds into the mortgage instead? Here you are getting a guaranteed long term rate of return of 4% less the mortgage deduction. This is probably better than any return you could get in the bond market and is not subject to interest rate risk.

PPs who paid off in 3 years here--the mortgage deduction was meaningless to us, as it didn't offset the additional interest faced by keeping the mortgage.