Paying off your mortgage early

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TSPking
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Re: Paying off your mortgage early

Post by TSPking »

aev wrote:just pay extra and get out of debt as soon as you can.
I'm in this camp. Especially after the recent tax change bumping standard deduction which for many people wipes out the advantage of having a mortgage.
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Aitrus
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Re: Paying off your mortgage early

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Ditto. We're about 12 months away from paying off a mortgage we first signed on four years ago. No massive down payment, just really aggressive about payments and living on about half of what we bring in. After the house is done, either of us could lose our job and we're still good to put the kids through college and still have a nice retirement. If need be, we can live at our current standard of living on about $35k a year if the house is paid off, so no worries about going bankrupt.

It's a great peace of mind.
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dougellen1
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Re: Paying off your mortgage early

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dearsmiths usually has a reasonable response to these conundrums we all face. Kudos to dearsmiths!

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IRQVET
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Re: Paying off your mortgage early

Post by IRQVET »

I forgot to update this thread, but this is what ended up transpiring.

I did move forward with a refinance, went from a 30 year down to a 20 year, and got my interest rate reduced from 3.385% down to 2.375%. In addition to the refinance, I’m paying an extra $300 per month on the loan, so the house will be paid off in 14 years, (I retire in 19 years) so I can really throw monies at my retirement for that last 5 years or so.

Not bad considering its a newer house. Hopefully I’ll have this thing paid off just before my roof needs to be replaced.

Home Details:
  • 1,900 Sq. Feet
    Built in 2019
    4 Bed
    2 Bath
    1.3 acres
    2 Car garage
I could have afforded a bigger and fancier house. But being a student of Dave Ramsey, I went with a modest house that would fore fill the basics that I could also pay off quickly. Its going to be tight for a family of 5, but as the kids grow up and move out, it will “feel” bigger and bigger as time goes on.
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Last edited by IRQVET on Sat Jun 18, 2022 5:52 pm, edited 5 times in total.
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Re: Paying off your mortgage early

Post by Scarfinger »

That's great news. My house will be paid of in 4 years, 7 years before I retire but like you... I will probably need a new roof.

Congrats on getting that major expense in a more manageable position.
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alpe9942
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Re: Paying off your mortgage early

Post by alpe9942 »

My wife and I decided to pay off our mortgage early as well. It was hard to determine if it was the right choice at the time, but we’re glad we did. This was 6 years ago and now the property is almost twice the value we paid for it. The weight removed from paying off a mortgage was a big motivator.

We don’t have big plans for the property now, but we are renting it out now and letting it continue to increase in value. It’s also helping us with some tax write offs due to depreciation and the rent we collect will mostly go back into fixing it up. We hope to sell it later to have funds for our retirement home. Also, with all the inflation going on right now, it’s allowing us to keep our money out of banks and still fairly safe.

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jimcasada
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Re: Paying off your mortgage early

Post by jimcasada »

If you are are locked into a low fixed rate, with much higher rates & inflation on the horizon, why pay something now with today's more expensive dollars when you can put it off to pay it with much cheaper future dollars???

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Re: Paying off your mortgage early

Post by bloobs »

jimcasada wrote: Fri Apr 29, 2022 8:40 am If you are are locked into a low fixed rate, with much higher rates & inflation on the horizon, why pay something now with today's more expensive dollars when you can put it off to pay it with much cheaper future dollars???
Exactly.

To me (and I can be wrong on this), the one factor that everyone seems to agree on is that within the next 10 years, INTEREST RATES will be markedly higher than that last few years, so....

Likely Scenario 1: Inflation goes to double digits; but economy/GDP blasts off as well. Housing prices skyrocket per demand, so you win on account of paying literal pennies on the dollar on a mortgage compared to the poor schmuck who has to pay up the arse to cover his 10% mortgage interest payments ON TOP of double/triple the sale price on the same home you bought a decade ago.

Likely Scenario 2: Inflation goes to double digits; but economy flatten/crashes (stagflation). Housing prices crater due to demand destruction caused by crashing wages/low employment and of course very high home interest rates.
So the home you just eagerly paid off is now worth less than when you bought it a decade ago. Return on investment on all those forward mortgage payments = negative/loss. You could have socked those extra mortgage payments to buy foreclosures with cash or depressed equity prices instead.

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Aitrus
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Re: Paying off your mortgage early

Post by Aitrus »

bloobs wrote: Fri Apr 29, 2022 10:06 am Exactly.

To me (and I can be wrong on this), the one factor that everyone seems to agree on is that within the next 10 years, INTEREST RATES will be markedly higher than that last few years, so....

Likely Scenario 1: Inflation goes to double digits; but economy/GDP blasts off as well. Housing prices skyrocket per demand, so you win on account of paying literal pennies on the dollar on a mortgage compared to the poor schmuck who has to pay up the arse to cover his 10% mortgage interest payments ON TOP of double/triple the sale price on the same home you bought a decade ago.

Likely Scenario 2: Inflation goes to double digits; but economy flatten/crashes (stagflation). Housing prices crater due to demand destruction caused by crashing wages/low employment and of course very high home interest rates.
So the home you just eagerly paid off is now worth less than when you bought it a decade ago. Return on investment on all those forward mortgage payments = negative/loss. You could have socked those extra mortgage payments to buy foreclosures with cash or depressed equity prices instead.
I'm in the process of selling our house right now (pending inspection and such), and for over double what we paid for it in 2016. We had it paid off by late 2019, and sweat equity did a lot to make it an attractive buy. The interest rate we had was around 2.75%, but we wanted the debt off our backs. Now for our move from Washington State to Georgia, we have a ton of cash to pay for a new place outright, so increasing mortgage interest rates won't affect our ability to buy. We're even thinking of renting for a while to see if the market tanks and take advantage of a drop in housing prices. Where we're moving to is much cheaper than what we left, so either way we'll be paying less for more house. Our goal is to not go back into debt again.
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IRQVET
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Re: Paying off your mortgage early

Post by IRQVET »

We did the same, sold in Oregon and moved out to Florida. Getting off the left coast was the best move for me and my family. Both quality of life and financially speaking. The south east has alot of people moving here from liberal cities and states, escaping the high crime and even higher tax rates. It was a good move! Equity wise, we are already up $100K in 18 months! Like I said, this place is exploding.
Aitrus wrote: Sun May 01, 2022 9:46 am
bloobs wrote: Fri Apr 29, 2022 10:06 am Exactly.

Now for our move from Washington State to Georgia, we have a ton of cash to pay for a new place outright, so increasing mortgage interest rates won't affect our ability to buy.
Last edited by IRQVET on Sat Jun 18, 2022 5:51 pm, edited 1 time in total.
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jimcasada
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Re: Paying off your mortgage early

Post by jimcasada »

Aitrus wrote: Sun May 01, 2022 9:46 am
bloobs wrote: Fri Apr 29, 2022 10:06 am Exactly.

To me (and I can be wrong on this), the one factor that everyone seems to agree on is that within the next 10 years, INTEREST RATES will be markedly higher than that last few years, so....

Likely Scenario 1: Inflation goes to double digits; but economy/GDP blasts off as well. Housing prices skyrocket per demand, so you win on account of paying literal pennies on the dollar on a mortgage compared to the poor schmuck who has to pay up the arse to cover his 10% mortgage interest payments ON TOP of double/triple the sale price on the same home you bought a decade ago.

Likely Scenario 2: Inflation goes to double digits; but economy flatten/crashes (stagflation). Housing prices crater due to demand destruction caused by crashing wages/low employment and of course very high home interest rates.
So the home you just eagerly paid off is now worth less than when you bought it a decade ago. Return on investment on all those forward mortgage payments = negative/loss. You could have socked those extra mortgage payments to buy foreclosures with cash or depressed equity prices instead.
I'm in the process of selling our house right now (pending inspection and such), and for over double what we paid for it in 2016. We had it paid off by late 2019, and sweat equity did a lot to make it an attractive buy. The interest rate we had was around 2.75%, but we wanted the debt off our backs. Now for our move from Washington State to Georgia, we have a ton of cash to pay for a new place outright, so increasing mortgage interest rates won't affect our ability to buy. We're even thinking of renting for a while to see if the market tanks and take advantage of a drop in housing prices. Where we're moving to is much cheaper than what we left, so either way we'll be paying less for more house. Our goal is to not go back into debt again.
I think you would need to deduct about 20% from your home value to get a more accurate picture of were you stand. Still, not bad.
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