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Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: The compound interest trap ()
Date: September 01, 2018 07:07PM

Pay it off early. It's one of the best things you'll ever do.




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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: Someone doesn't understand... ()
Date: September 01, 2018 07:40PM

...present value of money.

I bought a house in 1986. If I'd put $10K less down on that house and put it into Microsoft stock instead, I would have retired years ago.

Even beyond that, inflation eats away at principal like nothing else.

It's not as simple an equation as you make it sound.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: Opportunity cost is lost....... ()
Date: September 01, 2018 08:11PM

Did it ever occur to you that all the money you have tied up in a paid off house could be earning on average 10% a year? Mortgage money is cheap 3-5%, and interest is tax-deductible (at least it used to be). Your math does not add up.

You don't ever want to pay off your house. Does not make sense. While you are smiling at no mortgage payment the mortgage company is making a fortune off of your money.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: Chapter 1... ()
Date: September 01, 2018 09:08PM

Dave Ramsey = Not good.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: Carmelized Onion ()
Date: September 01, 2018 09:26PM

Op is a buttfucker.

If you have REVOLVING DEBT higher than your mortgage rate, your monkey ass needs to pay off that shit first.

Then, pay off your car loan IRREGARDLESS of it being a “0% loan.” You get killed on depreciation.

Next, take what you were paying on your credit cards and cut that amount towards your mortgage.
Take what you were normally paying for your car note and pay towards your mortgage.
*you can also switch your car insurance to just liability. Apply the monthly cost savings vs comprehensive insurance towards your mortgage.

That biweekly shit is bs if you are carrying revolving debt AND a car note!

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: Aisha ()
Date: September 01, 2018 09:33PM

I did the same thing. If I bought B.E.T. in 1990 instead of buying a car I would be a rich diva today for real.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: Bill.N. ()
Date: September 01, 2018 09:52PM

Always consider the opportunity costs.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: easy money vs smart money ()
Date: September 01, 2018 10:22PM

Bill.N. Wrote:
-------------------------------------------------------
> Always consider the opportunity costs.


Not that I'd disagree with that in general but there's another side to that equation. I have friends who have been playing the keep rolling it 'opportunity cost' game with their mortgage and now are waking up suddenly 65 and looking at having a mortgage or rent payment that's going to eat a big chunk of their retirement income until they die. But they had fun spending the money along the way.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: Depends on the situation ()
Date: September 02, 2018 12:55AM

It all really depends on your mortgage rate and how much of your interest payment is deductible. If you have a sub 5% rate (and I know folks who have under 4%), it usually makes sense to pay off other higher interest rate debts and if you don't have those, invest the money elsewhere. It isn't hard to beat 5%; The S&P 500 average annual return is about 10%.

The home interest deduction itself isn't what it used to be, primarily because of the much higher standard deduction and the cap on SALT at $10,000. If you max out your SALT deduction and no others are in play, the first $14k of your annual mortgage interest isn't deductible, at least when assessed against the married standard deduction. This doesn't financially screw existing home owners too much, it just means many of them are captured by a still fairly generous standard deduction. That said, the tax law change does mean the home interest deduction doesn't lower the effective interest rate of a loan by as much as it used to.

My take; during rocky financial times, if you have money and want a decent predictable return, paying down the mortgage can be an OK thing to do. But to miss out on a 20%+ stock market year like 2017 because you throw that money to help pay off a 5% mortgage. Insanity.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: OP is a dave ramsey retard ()
Date: September 02, 2018 05:46AM

My effective mortgage rate after deductions is about 3%, my investments have returned an average of 12% over the last 30 years. Ummm yea I'll keep the mortgage.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: Bill.N. ()
Date: September 02, 2018 06:22AM

easy money vs smart money Wrote:
-------------------------------------------------------
> Bill.N. Wrote:
> --------------------------------------------------
> -----
> > Always consider the opportunity costs.
>
>
> Not that I'd disagree with that in general but
> there's another side to that equation. I have
> friends who have been playing the keep rolling it
> 'opportunity cost' game with their mortgage and
> now are waking up suddenly 65 and looking at
> having a mortgage or rent payment that's going to
> eat a big chunk of their retirement income until
> they die. But they had fun spending the money
> along the way.


Technically fun would be an opportunity cost. However I was thinking in terms of more financially responsible alternatives such as using the money to pay down higher interest rate debt, using it to max out the matching options in retirement, using it to make certain you had enough safety cash or using it for investments. There are large numbers of people today with mortgages under 4%. It is not that hard to get at least that kind of return by investing the money. Then there are also tax implications to consider.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: LetsRock ()
Date: September 02, 2018 09:28AM

I am paying my 4.125% mortgage BI-WEEKLY. By making that extra full payment each year, I am shaving about $60K off of my 30-year loan.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: The big boy way... ()
Date: September 02, 2018 09:37AM

easy money vs smart money Wrote:
-------------------------------------------------------
> I have friends who have been playing the keep rolling
> it 'opportunity cost' game with their mortgage and
> now are waking up suddenly 65 and looking at having
> a mortgage or rent payment that's going to eat a big
> chunk of their retirement income until they die.
> But they had fun spending the money along the way.

Things could be changing, but we have just been through a 30-year period of declining mortgage interest rates. Doing a series of refi's in such an environment is a matter of accepting free money when it's being offered to you. It's pretty much just fools that pass that sort of thing by at any age.

If you can only afford to live in the sticks with no mortgage on whatever retirement income you will have, the problem is that you screwed up and never managed to bake in enough retirement income.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: Bank One Two Three ()
Date: September 02, 2018 10:34AM

The compound interest trap Wrote:
-------------------------------------------------------
> Pay it off early. It's one of the best things you'll ever do.

More likely one of the stupidest. For most people, a mortgage is the cheapest debt they have. You would rather pay off all the other stuff first. And keep in mind that $1000 thirty years from now is the same as just over $300 today if interest rates are 4%.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: four five ()
Date: September 02, 2018 03:55PM

Having any debt other than your home is stupid. Live within your means. Pay credit cards in full every month and save up the money to buy your vehicles with cash.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: That's what they said ()
Date: September 02, 2018 04:28PM

The big boy way... Wrote:
-------------------------------------------------------
> easy money vs smart money Wrote:
> --------------------------------------------------
> -----
> > I have friends who have been playing the keep
> rolling
> > it 'opportunity cost' game with their mortgage
> and
> > now are waking up suddenly 65 and looking at
> having
> > a mortgage or rent payment that's going to eat a
> big
> > chunk of their retirement income until they die.
>
> > But they had fun spending the money along the
> way.
>
> Things could be changing, but we have just been
> through a 30-year period of declining mortgage
> interest rates. Doing a series of refi's in such
> an environment is a matter of accepting free money
> when it's being offered to you. It's pretty much
> just fools that pass that sort of thing by at any
> age.
>
> If you can only afford to live in the sticks with
> no mortgage on whatever retirement income you will
> have, the problem is that you screwed up and never
> managed to bake in enough retirement income.


As they were sucking most all of their equity out over the years. Now they have a +$2,000/month housing cost in perpetuity unless they move to the sticks. Likely at a net real dollar loss once you count commission on the sale not even considering money put into it for maintenance and improvements. Once you're at a low rate further declines don't buy you much.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: Inquisitive One ()
Date: September 03, 2018 03:38AM

Every situation is different. Interest rates on mortgages in 1988 were 10 percent on a 30 year loan and then played the refinancing game every couple of years as interest rates decreased which ate up additional principle. At those rates I would have wanted to shed myself of that type of debt. Now, interest rates are comparatively low and having a mortgage is not as much of a burden. Another thought. It is much easier planning for retirement when you do not plan to carry a mortgage into your retirement years.

The key is to have a plan and execute it. There are numerous ways of doing it. Invest excess funds when stocks are inexpensive and during times such as now when their cost is excessive "invest" that money into buying down the principle on your mortgage. It still pushes you down the amortization schedule where more of your mortgage payment is used to pay down the principle.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: 60k here, 200k there ()
Date: September 03, 2018 06:13AM

LetsRock Wrote:
-------------------------------------------------------
> I am paying my 4.125% mortgage BI-WEEKLY. By
> making that extra full payment each year, I am
> shaving about $60K off of my 30-year loan.


While that's not a bad move, you would still be better off investing that second payment into an index fund or balanced fund.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: timing the market = fools game ()
Date: September 03, 2018 06:14AM

Inquisitive One Wrote:
-------------------------------------------------------

> The key is to have a plan and execute it. There
> are numerous ways of doing it. Invest excess funds
> when stocks are inexpensive and during times such
> as now when their cost is excessive "invest" that
> money into buying down the principle on your
> mortgage. It still pushes you down the
> amortization schedule where more of your mortgage
> payment is used to pay down the principle.

I've been hearing stock are expensive since 2013. You could have invested the day before every market crash and still come way ahead of any current mortgage rate.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: LetsRock ()
Date: September 03, 2018 08:04AM

60k here, 200k there Wrote:
-------------------------------------------------------
> LetsRock Wrote:
> --------------------------------------------------
> -----
> > I am paying my 4.125% mortgage BI-WEEKLY. By
> > making that extra full payment each year, I am
> > shaving about $60K off of my 30-year loan.
>
>
> While that's not a bad move, you would still be
> better off investing that second payment into an
> index fund or balanced fund.

I already have $62K in Vanguard index funds.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: Makes no sense ()
Date: September 03, 2018 08:34AM

LetsRock Wrote:
-------------------------------------------------------
> I already have $62K in Vanguard index funds.

You will need more than a million of today's dollars in order to afford a comfy retirement and even that would be just $50K per year for 20 years.

Accelerating payments on a low-interest mortgage is taking the slow boat to China. You could be putting the funds to any one of many much better purposes.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: LetsRock ()
Date: September 03, 2018 02:37PM

Makes no sense Wrote:
-------------------------------------------------------
> LetsRock Wrote:
> --------------------------------------------------
> -----
> > I already have $62K in Vanguard index funds.
>
> You will need more than a million of today's
> dollars in order to afford a comfy retirement and
> even that would be just $50K per year for 20
> years.
>
> Accelerating payments on a low-interest mortgage
> is taking the slow boat to China. You could be
> putting the funds to any one of many much better
> purposes.


True. That is just one account since you mentioned "index funds". I got a small pension coming from EDS and my 401K with my current employer.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: Keep at it ()
Date: September 03, 2018 02:43PM

...and remember not to short yourself. There may come a time when things are overtaken by events for a while, so stay as far out front as you can.

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: uppity white ()
Date: September 03, 2018 04:25PM

Just use the money from your trust fund to buy a modest house in a nice neighborhood and pay cash, duh!

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Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Posted by: makes no sense ()
Date: September 03, 2018 05:41PM

LetsRock Wrote:
-------------------------------------------------------
> Makes no sense Wrote:
> --------------------------------------------------
> -----
> > LetsRock Wrote:
> >
> --------------------------------------------------
>
> > -----
> > > I already have $62K in Vanguard index funds.
> >
> > You will need more than a million of today's
> > dollars in order to afford a comfy retirement
> and
> > even that would be just $50K per year for 20
> > years.
> >
> > Accelerating payments on a low-interest
> mortgage
> > is taking the slow boat to China. You could be
> > putting the funds to any one of many much
> better
> > purposes.
>
>
> True. That is just one account since you
> mentioned "index funds". I got a small pension
> coming from EDS and my 401K with my current
> employer.


My Vanguard account has a special little flag on it and yet I still keep my mortgage.

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