One more mortgage payoff thread...

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Traveller
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One more mortgage payoff thread...

Post by Traveller »

I did it.

After reading so many of the omnipresent "should I payoff my mortgage" threads, I decided that I prefer to be debt free. I walked into my bank yesterday afternoon and had the teller transfer enough money to buy a really nice European car to my mortgage as the final payoff.

This is our 4th home in about 20 years. First mortgage was a 30 year fixed with an 8% rate. We've refinanced whenever there was a meaningful dip in rates over the years, and each time we moved to a new house we rolled all equity into the new home. I'm other words, we never reduced the amount of equity we had in our home. We bought the current home 3 years ago with about 60% down and took out a 15 year 2.75% fixed mortgage for the balance. We've been very fortunate to be able to fully fund all available retirement accounts, plus save a substantial amount of after tax money each year, so I started making significant additional payments on the mortgage. Now it's gone! :D

And it feels great! Except there is really nobody but my wife that I can share this with, except for you, my esteemed bogleheads. So, in my best Dave Ramsey voice: "I'M DEBT FREE!!!"

(would you look at that - I managed to bring up 2 of the most contentious topics on this forum in a single post 8-))
grettman
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Re: One more mortgage payoff thread...

Post by grettman »

Congratulations. As Dave would say, if you decide you don't like the paid off house, you can always mortgage it again. I am so torn on the subject. I don't know personally what I will do when I have the option to pay it off. I frankly don't think there is a right or wrong answer.
TravelforFun
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Re: One more mortgage payoff thread...

Post by TravelforFun »

Congratulations! We did the same a few years ago and became completely debt-free. You should have a mini celebration.
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tainted-meat
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Re: One more mortgage payoff thread...

Post by tainted-meat »

grettman wrote:Congratulations. As Dave would say, if you decide you don't like the paid off house, you can always mortgage it again. I am so torn on the subject. I don't know personally what I will do when I have the option to pay it off. I frankly don't think there is a right or wrong answer.

Yeah it's a tough decision. Personally, I have decided to keep a mortgage as long as possible at these interest rates.

However, one could pay off the mortgage and count that as a 50% bond allocation.

Say a person has a $100,000 mortgage and owns $75,000 in bonds.

If you pay the mortgage off you could cut your bond holdings in half to $37,500 as a compromise of sorts. Just something to think about.
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jimb_fromATL
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Re: One more mortgage payoff thread...

Post by jimb_fromATL »

Congratulations. I can state from experience that regardless of whether you might be able to earn a little more in an investment, there's no way to put a numeric value on the feeling of security and well-being of knowing that the home is all yours.

Besides, when you have that much cash to spare after you're contributiing plenty to retirement and have an adequate emergency fund, there's virtually nowhere else you can put after-tax money that can give you anywhere near the same net return on the investment, absolutely guaranteed with no risk. ( In fact the equivalent rate of return compared to other non-retirement investments is a bit better than the mortgage rate itself -- because you would be paying tax on earnings in an investment, but there is --at least so far-- no tax on money that you choose to keep for yourself instead of paying it out to somebody else as interest.)

Now you can invest the freed-up payments if you wish. And you can afford to invest it more aggressively. It's a lot easier to ride out the market's ups and downs when you know you don't need the money to make the mortgage payment. And you'll be hedging your bets by dollar-cost averaging into the market.

It also makes it a lot easier to tolerate the stress of a job when you don't have to depend on it as much to make the mortgage payment. Or you might be able to work at a job you like more where there's less stress even if it pays less.

Or you might be able to do what I did 20+ years ago ... and drop out of the rat race a lot earlier than most folks. That's a lot easier to do when you don't have a mortgage payment to worry about. No more red-eye flights and 80-90 hour work weeks because somebody else's bad planning becomes your emergency. No more hours-long traffic jams because all the other drivers are idiots. And no more hours-long staff meetings accomplishing nothing with managers who were the role models for the Dilbert comic strip.

jimb
ThankYouJack
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Re: One more mortgage payoff thread...

Post by ThankYouJack »

Traveller wrote: Now it's gone! :D

And it feels great! Except there is really nobody but my wife that I can share this with, except for you, my esteemed bogleheads. So, in my best Dave Ramsey voice: "I'M DEBT FREE!!!"
Congrats!! I did something similar a couple months ago. The feeling was lot better than expected (and still is). I used to be much more concerned about hitting my target number, investing as much as possible, checking on my investments, etc. Being debt free and having "enough" is an amazing feeling. Sure, I'd love to be financially independent, but I'm not in as big of a rush to get there.
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Watty
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Re: One more mortgage payoff thread...

Post by Watty »

Congratulations! :beer

Now maybe my thread will finally die out. I was surprised that it got so many responses.

A few things to remember to do;

One side benefit that people often don't mention is that if you have an emergency fund of six months expenses then you don't need as much money in that now.

If you had your mortgage scheduled for auto-payment then remember to turn that off.

Your home owner's insurance likely has your lender listed on the policy, they should be notified to take them off the policy by the lender but check to see if it happened. The problem is that if you ever have a claim then any check may be made out to you and the lender(I have had that happen). You may be able to increase your home insurance deductible if you want to.

One thing that I will do in a few months is to check with my county to make sure that the mortgage lien was actually removed from their records. You may be able to check online. Even if you get the paperwork saying it was it doesn't hurt to double check. There was a post a few years ago from someone that was settling his parents estate and selling the house but there was a mortgage lien recorded for a mortgage that had been paid off decades before. The lender had since gone through multiple mergers and their records could not longer be found. They had to get lawyers involved to get it removed and it delayed selling the house. Mistakes like that are no doubt rare but it doesn't hurt to check.
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Re: One more mortgage payoff thread...

Post by smitty1515 »

Congrats, we are getting ready to start putting an extra $450/mo to the principle of our home. We purchased our home in February of 2015 and I calculate the ability to knock off 10 yrs and 90k interest by doing this.

Reading this forum and seeing how many are paying off their homes keeps me motivated to keep investing, saving, and paying down our house debt. Nice work :).
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Re: One more mortgage payoff thread...

Post by Jack FFR1846 »

Congratulations!

Years ago, I paid off my mortgage after talking with many people. I had been burned in Black Monday. Several people told me "no, invest the money". I always asked "what can I invest in that guaranteed to return more than my mortgage rate?". Nobody ever had an answer. I am very risk averse and even today have a year in spending in a high yield savings plus a 5 year CD dispite having 7 years spending in savings bonds.
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NMJack
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Re: One more mortgage payoff thread...

Post by NMJack »

jimb_fromATL wrote: Or you might be able to do what I did 20+ years ago ... and drop out of the rat race a lot earlier than most folks. That's a lot easier to do when you don't have a mortgage payment to worry about. No more red-eye flights and 80-90 hour work weeks because somebody else's bad planning becomes your emergency. No more hours-long traffic jams because all the other drivers are idiots. And no more hours-long staff meetings accomplishing nothing with managers who were the role models for the Dilbert comic strip.

jimb
Amen brother!! :sharebeer
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Phineas J. Whoopee
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Re: One more mortgage payoff thread...

Post by Phineas J. Whoopee »

Watty wrote:Congratulations! :beer
I concur.
Watty wrote:...
One thing that I will do in a few months is to check with my county to make sure that the mortgage lien was actually removed from their records. ....
My lender messed it up. Twice. Finally I got it resolved by agreeing with the county records office manager it was my mistake in the first place. In fairness, she worded and inflected (over the phone) her question in such a way that I was meant to understand saying yes would clear up the problem immediately.

Now the proper lien release document is online for all to see.

Good thing for me I had visualized what success meant in that situation, which did not include proving I was more correct than the county official or the lender.

I also took care to preserve the original note marked paid in full in my safe deposit box, within a heavy duty Ziploc-branded bag, just in case.

PJW
SuzBanyan
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Re: One more mortgage payoff thread...

Post by SuzBanyan »

Congratulations!

We paid ours off today. With no pension coming in retirement, it felt like the right thing for us to do.
Capsu78
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Re: One more mortgage payoff thread...

Post by Capsu78 »

Thank you Watty!

I found a couple of "to do's" in your post that I want to move to "To dones". We paid off in April and while the thrill ain't gone, it is fading a little... still no remorse however- first time in our live we have "owned" our house!
PedXing
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Re: One more mortgage payoff thread...

Post by PedXing »

Paid mine off yesterday with no regrets. Count me amongst those very happy to not carry a mortgage, though I recognize some valid and rationale reasons to keep a mortgage that you could otherwise afford to pay off.
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Traveller
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Re: One more mortgage payoff thread...

Post by Traveller »

Thank you all for the congrats and kind words!

And thank you for the tips as well (especially Watty). I'll definately follow up with the county and make sure the lien release gets recorded.

...and I swear the grass looks greener today! :beer
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Traveller
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Re: One more mortgage payoff thread...

Post by Traveller »

TravelforFun wrote:You should have a mini celebration.
I'm on it. Thai food and cheap wine!
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Re: One more mortgage payoff thread...

Post by Traveller »

jimb_fromATL wrote:Besides, when you have that much cash to spare after you're contributiing plenty to retirement and have an adequate emergency fund, there's virtually nowhere else you can put after-tax money that can give you anywhere near the same net return on the investment, absolutely guaranteed with no risk.
That was my feeling as well. We are saving plenty - this felt like a no brainer.
jimb_fromATL wrote:Or you might be able to do what I did 20+ years ago ... and drop out of the rat race a lot earlier than most folks. That's a lot easier to do when you don't have a mortgage payment to worry about. No more red-eye flights and 80-90 hour work weeks because somebody else's bad planning becomes your emergency. No more hours-long traffic jams because all the other drivers are idiots. And no more hours-long staff meetings accomplishing nothing with managers who were the role models for the Dilbert comic strip.
I own the company, so I guess I am the model for the comic strip...
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Re: One more mortgage payoff thread...

Post by Traveller »

smitty1515 wrote:Reading this forum and seeing how many are paying off their homes keeps me motivated to keep investing, saving, and paying down our house debt. Nice work :).
This forum was a huge motivator for me as well - keep it up!
printer86
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Re: One more mortgage payoff thread...

Post by printer86 »

Traveller,

Your story is similar to ours. We bought our first house in June of 1996. We moved a number of times since then, but kept pouring the equity back into the next house. This spring, I finally did what you just did and sent my lender a certified check for the balance. I feel great on so many levels.

Congrats
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Traveller
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Re: One more mortgage payoff thread...

Post by Traveller »

I remember when I was a kid watching the TV show "Eight is Enough". I recall an episode in the mid/late 70s when they had a mortgage burning party to celebrate the payoff of the mortgage. Maybe after I receive the mortgage note in the next few weeks, I'll have a little burning party (with a photocopy, of course).
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StevieG72
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Re: One more mortgage payoff thread...

Post by StevieG72 »

Congrats!

I agree that there is and should be some satisfaction in having that mortgage paid off!

You now own your own home! I don't own mine, the bank does.... they just let me stay as long as I make timely payments.

I am slowly paying mine off by making additional principal payments towards a 15 yr loan.
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Toons
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Re: One more mortgage payoff thread...

Post by Toons »

Bravo,Bravo,,and
Bravo!!
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magazinewriter
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Re: One more mortgage payoff thread...

Post by magazinewriter »

Congratulations!

I credit my ability to retire at 55 with my mortgage payoff at age 50. I've never been sorry. When I paid off my mortgage my rate was 6.88% (which I thought was low at the time) so I know that today's low rates make it a tougher decision for some people. I know two people getting ready to retire who still have mortgages and they've both been high earners. I am glad that I'm not in that position.
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Re: One more mortgage payoff thread...

Post by jimb_fromATL »

StevieG72 wrote:
You now own your own home! I don't own mine, the bank does.... they just let me stay as long as I make timely payments.
Not singling you out, because that is a popular saying. But just for the record, you actually DO own the home. It's just that you borrowed money from the bank and used your home as collateral to secure the debt -- meaning you agreed that they can eventually take possession of the home (foreclose) to get their money if you don't pay them back what you promised.
I am slowly paying mine off by making additional principal payments towards a 15 yr loan
Congratulations. You can't really go wrong that way. As I have said many times before, there is no way to put a mere numeric value on the feeling of security and well-being of having your home paid-for and no pesky mortgage payment.

However, here's something else most folks need to consider:

Especially at today's low mortgage rates (and even more when you're already saving a lot of time and interest by having a 15 year mortgage instead of the more common 30 year loan) just be aware that for the best use of your spare money for the long run you should usually be contributing the max allowed to all available tax-deferred and tax-advantaged retirement accounts such as 401(k)s and IRAs before you pay any extra on a mortgage. Because of the exponential factor of time in compound interest, you can usually earn a lot more on your investments over your lifetime than the after tax money will save on the relatively short-term mortgage.

Once you are taking all the tax advantages possible, AND have plenty of liquid cash reserved to cover emergencies, and have paid off virtually all other debts except perhaps some student loans, then you cannot beat the absolutely guaranteed rate of return with no risk that you get for paying down the mortgage faster.



jimb
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Re: One more mortgage payoff thread...

Post by lostdog »

Congratulations! :sharebeer
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acunn
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Re: One more mortgage payoff thread...

Post by acunn »

Such a wonderful weight lifted - Congratulations!! :sharebeer :sharebeer
printer86
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Re: One more mortgage payoff thread...

Post by printer86 »

jimb_fromATL wrote:
Once you are taking all the tax advantages possible, AND have plenty of liquid cash reserved to cover emergencies, and have paid off virtually all other debts except perhaps some student loans, then you cannot beat the absolutely guaranteed rate of return with no risk that you get for paying down the mortgage faster.



jimb
Jimb, Your comment should automatically appear when someone starts a "Should I pay off my mortgage" thread. Having the liquid cash locked up was the last thing I needed before I pulled the trigger.

For better or worse, I've always been somewhat of a worrier. Having a paid off house is a massive relief in my life. I can now focus my worry on other matters, like my favorite baseball team.
frugalecon
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Re: One more mortgage payoff thread...

Post by frugalecon »

StevieG72 wrote:Congrats!

I agree that there is and should be some satisfaction in having that mortgage paid off!

You now own your own home! I don't own mine, the bank does.... they just let me stay as long as I make timely payments.

I am slowly paying mine off by making additional principal payments towards a 15 yr loan.
I have adopted the same strategy, and I expect at some point I will pay it off in one fell swoop, probably when I have about a year's worth of payments left. The idea of not having that burden hanging over me/us is appealing. But the balance does fall very quickly with the 15 year loan.
joebh
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Re: One more mortgage payoff thread...

Post by joebh »

Traveller wrote:After reading so many of the omnipresent "should I payoff my mortgage" threads, I decided that I prefer to be debt free. I walked into my bank yesterday afternoon and had the teller transfer enough money to buy a really nice European car to my mortgage as the final payoff.
Congratulations on achieving your goal. Sounds like you are now in a position to never be in any debt again.

When I paid off the mortgage on my primary residence a long time ago, it felt really good too. For me at least, the feeling wore off quickly, so when I purchased a vacation/weekend second home I decided not to pay cash, and to get a 30 year mortgage. That feels like a wiser choice for me now. YMMV.

I think you indicated in a follow-up comment that you are a business owner. Does your business operate debt-free as well? Or just your personal finances?
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Earl Lemongrab
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Re: One more mortgage payoff thread...

Post by Earl Lemongrab »

jimb_fromATL wrote:Once you are taking all the tax advantages possible, AND have plenty of liquid cash reserved to cover emergencies, and have paid off virtually all other debts except perhaps some student loans, then you cannot beat the absolutely guaranteed rate of return with no risk that you get for paying down the mortgage faster.
I guess I don't follow. Why would the guaranteed rate be important? Under that philosophy we'd never invest in stocks because there is no guaranteed return for that, so we'd all have Treasuries and FDIC insured investments.

This, like most investing, is a risk/reward situation. Using the mortgage as leverage is riskier, but potentially much more rewarding.

Earl
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Traveller
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Re: One more mortgage payoff thread...

Post by Traveller »

joebh wrote: I think you indicated in a follow-up comment that you are a business owner. Does your business operate debt-free as well? Or just your personal finances?
We do have a credit facility available to us, but we are very well capitalized and have no long-term debt.

Why do you ask?
joebh
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Re: One more mortgage payoff thread...

Post by joebh »

Traveller wrote:
joebh wrote: I think you indicated in a follow-up comment that you are a business owner. Does your business operate debt-free as well? Or just your personal finances?
We do have a credit facility available to us, but we are very well capitalized and have no long-term debt.

Why do you ask?
I like to find out how far "debt is bad" proponents go with the thought. Just trying to learn...
MIretired
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Re: One more mortgage payoff thread...

Post by MIretired »

Earl Lemongrab wrote:
jimb_fromATL wrote:Once you are taking all the tax advantages possible, AND have plenty of liquid cash reserved to cover emergencies, and have paid off virtually all other debts except perhaps some student loans, then you cannot beat the absolutely guaranteed rate of return with no risk that you get for paying down the mortgage faster.
I guess I don't follow. Why would the guaranteed rate be important? Under that philosophy we'd never invest in stocks because there is no guaranteed return for that, so we'd all have Treasuries and FDIC insured investments.

This, like most investing, is a risk/reward situation. Using the mortgage as leverage is riskier, but potentially much more rewarding.

Earl
I guess they're implying an apples to apples, or oranges, comparison. --such as a CD or high grade bond has a guaranteed return and a term.
I compare 5 yrs. left on mortgage after doing a prepay, to a 5 yr CD.
But this has to consider when and how to get the prepay principle amount back, too. As in imputed rent, or selling home, or accepting it as net worth on paper.
Yea, but what to compare to a mortgage with 15 years left on it?? If not a CD/treasury issue, then apples to oranges. But I might take my chance with stock index fund for that duration comparison.
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MIretired
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Re: One more mortgage payoff thread...

Post by MIretired »

joebh wrote:
Traveller wrote:
joebh wrote: I think you indicated in a follow-up comment that you are a business owner. Does your business operate debt-free as well? Or just your personal finances?
We do have a credit facility available to us, but we are very well capitalized and have no long-term debt.

Why do you ask?
I like to find out how far "debt is bad" proponents go with the thought. Just trying to learn...
I wonder if a business loan interest rates have any relation to the business's expected return on that loan? LOL
I know it isn't always so, as in the SBA loans.
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Traveller
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Re: One more mortgage payoff thread...

Post by Traveller »

joebh wrote:
Traveller wrote:
joebh wrote: I think you indicated in a follow-up comment that you are a business owner. Does your business operate debt-free as well? Or just your personal finances?
We do have a credit facility available to us, but we are very well capitalized and have no long-term debt.

Why do you ask?
I like to find out how far "debt is bad" proponents go with the thought. Just trying to learn...
FYI - I don't think debt is inherently good or bad. It's just debt.
supernova72
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Re: One more mortgage payoff thread...

Post by supernova72 »

Been debating this for a long time and now it seems more urgent than prior. I was recently downsized (link below) so potentially "retiring" and having a mortgage does not seem like a great plan cash flow wise. Decisions, decisions!

viewtopic.php?f=2&t=192769
GoldenFinch
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Re: One more mortgage payoff thread...

Post by GoldenFinch »

:happy

Yay! Good for you! And cheers!

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FelixTheCat
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Re: One more mortgage payoff thread...

Post by FelixTheCat »

Congratulations! I suggest taking your wife on a nice vacation to celebrate this milestone. :happy
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joebh
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Re: One more mortgage payoff thread...

Post by joebh »

Traveller wrote:
joebh wrote:
Traveller wrote:
joebh wrote: I think you indicated in a follow-up comment that you are a business owner. Does your business operate debt-free as well? Or just your personal finances?
We do have a credit facility available to us, but we are very well capitalized and have no long-term debt.

Why do you ask?
I like to find out how far "debt is bad" proponents go with the thought. Just trying to learn...
FYI - I don't think debt is inherently good or bad. It's just debt.
We are in agreement.
Impromptu
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Re: One more mortgage payoff thread...

Post by Impromptu »

I sent in the payoff check last week and today saw online that my mortgage account was "closed". I now await the lien release documents and will try and make sure we are titled as tenants by the entirety. Bogleheads is one of the only places I can celebrate. I won't start my own thread, but I will pretend that all the previous congratulations were also directed at me.

We are 37 and 32 and this is a smaller house, so it is possible that we'll someday again have a mortgage when our family grows in size. My wife and I are going to continue to pay a monthly "mortgage" into a "down-payment" savings account. We don't need that extra cash flow, so why grow into it now?

In addition, for the last 3 years we had been paying all of our extra money (after retirement savings) toward the student loans and then the house. With no more debts to throw the extra money at, we'll have a real monthly cash flow increase (even keeping the down payment savings account). We plan on increasing our emergency savings from 3 months to 6-12 months. The first 6 months will be safe in an online savings account. Months 7-12 will be in an index fund. I plan on using the interest and dividends from those to pay the home insurance and property taxes.

The slight increase in lifestyle will be the purchase of a virtual reality system. I have wanted an Oculus Rift since I heard of it. Half the fun has been the anticipation and research. We watch all sorts of youtube videos on it. Plus I'll be able to build another computer. It has been 4 years since the last one, which is mostly a media center. Gaming computers seem like a lot of fun.
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whodidntante
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Re: One more mortgage payoff thread...

Post by whodidntante »

tainted-meat wrote:
grettman wrote:Congratulations. As Dave would say, if you decide you don't like the paid off house, you can always mortgage it again. I am so torn on the subject. I don't know personally what I will do when I have the option to pay it off. I frankly don't think there is a right or wrong answer.

Yeah it's a tough decision. Personally, I have decided to keep a mortgage as long as possible at these interest rates.

However, one could pay off the mortgage and count that as a 50% bond allocation.

Say a person has a $100,000 mortgage and owns $75,000 in bonds.

If you pay the mortgage off you could cut your bond holdings in half to $37,500 as a compromise of sorts. Just something to think about.
I'm not sure what you mean. Home equity is not a bond.
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whodidntante
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Re: One more mortgage payoff thread...

Post by whodidntante »

grettman wrote:Congratulations. As Dave would say, if you decide you don't like the paid off house, you can always mortgage it again. I am so torn on the subject. I don't know personally what I will do when I have the option to pay it off. I frankly don't think there is a right or wrong answer.
Exactly. You are torn because the numbers are close enough that it's more about what you prefer to do.

Being debt free is no comfort without liquidity. I pay my mortgage down, but keep plenty of liquid assets around.
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Re: One more mortgage payoff thread...

Post by michaeljc70 »

grettman wrote:Congratulations. As Dave would say, if you decide you don't like the paid off house, you can always mortgage it again. I am so torn on the subject. I don't know personally what I will do when I have the option to pay it off. I frankly don't think there is a right or wrong answer.
Maybe. If you aren't working (or have significant other income), you won't be able to get a mortgage. And also, will the rate be 2.75% then?

Congratulations to the OP though.
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Re: One more mortgage payoff thread...

Post by Horsefly »

michaeljc70 wrote:
grettman wrote:Congratulations. As Dave would say, if you decide you don't like the paid off house, you can always mortgage it again. I am so torn on the subject. I don't know personally what I will do when I have the option to pay it off. I frankly don't think there is a right or wrong answer.
Maybe. If you aren't working (or have significant other income), you won't be able to get a mortgage. And also, will the rate be 2.75% then?

Congratulations to the OP though.
I don't think I agree that you can't get a mortgage without income. I know a couple of friends that bought a new house (with a mortgage) after they retired. For them, the key was helping the bank to understand all of what they had invested.

I'm actually counting on being able to get a mortgage, as we wil probably be buying a second home in the next year or two, and my only income right now is a small pension that won't even cover the mortgage payment.

Steve
joebh
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Re: One more mortgage payoff thread...

Post by joebh »

BusySnevl wrote:I don't think I agree that you can't get a mortgage without income. I know a couple of friends that bought a new house (with a mortgage) after they retired. For them, the key was helping the bank to understand all of what they had invested.

I'm actually counting on being able to get a mortgage, as we wil probably be buying a second home in the next year or two, and my only income right now is a small pension that won't even cover the mortgage payment.
Ideally, if you can show a combination of enough Social Security, pension, dividend, and other sources of income, you may be able to qualify for a mortgage. Barring that, you might be able to demonstrate enough liquid assets that can be systematically depleted to pay for the mortgage.

Hopefully, you'll have a great credit score, and little to no other debt.
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jimb_fromATL
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Re: One more mortgage payoff thread...

Post by jimb_fromATL »

BusySnevl wrote: I don't think I agree that you can't get a mortgage without income. I know a couple of friends that bought a new house (with a mortgage) after they retired. For them, the key was helping the bank to understand all of what they had invested.

I'm actually counting on being able to get a mortgage, as we wil probably be buying a second home in the next year or two, and my only income right now is a small pension that won't even cover the mortgage payment.
It has been possible --though not easy-- for retirees to get mortgages from smaller institutions like local banks or credit unions or others that carry the mortgages themselves and/or do manual underwriting based on individual cases. But most lenders and brokers have had to go by the guidelines that allow them to sell the mortgages to big institutions like Fannie Mae and Freddie Mac and others -- who want to be absolutely sure that they'll get paid.

Social Security and pensions count as qualifying income, but those are are often not enough to qualify for much of a mortgage. I've also heard of cases where a SPIA annuity counts as income for qualifying because it is essentially guaranteed income. But having a lot of investments has not often counted in the past. I guess that stands to reason, because if you lose your investment nest egg in a market crash you may not have enough left to be able to withdraw enough to pay the mortgage regularly and have groceries too. There's also nothing to keep you from withdrawing it all and wasting it.

However, possibly because there are so many boomers retiring who do have a lot of retirement funds, it appears that Fannie Mae and Freddie Mac are now counting some of your retirement investment plans like 401(k)s and IRAs.

HERE is an article that came up in a search about it a while back.

And HERE is a Fannie Mae document about it, including this:
  • "... If retirement income is paid in the form of a distribution from a 401(k), IRA, or Keogh retirement account, determine whether the income is expected to continue for at least three years after the date of the mortgage application. In addition
    • •the borrower must have unrestricted access without penalty to the accounts; and

      •if the assets are in the form of stocks, bonds, or mutual funds, 70% of the value (remaining after any applicable costs for the subject transaction) must be used to determine the number of distributions remaining to account for the volatile nature of these assets..."
jimb
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Traveller
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Re: One more mortgage payoff thread...

Post by Traveller »

Impromptu wrote:I sent in the payoff check last week and today saw online that my mortgage account was "closed". I now await the lien release documents and will try and make sure we are titled as tenants by the entirety. Bogleheads is one of the only places I can celebrate. I won't start my own thread, but I will pretend that all the previous congratulations were also directed at me.
Congratulations! :beer
michaeljc70
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Re: One more mortgage payoff thread...

Post by michaeljc70 »

BusySnevl wrote:
michaeljc70 wrote:
grettman wrote:Congratulations. As Dave would say, if you decide you don't like the paid off house, you can always mortgage it again. I am so torn on the subject. I don't know personally what I will do when I have the option to pay it off. I frankly don't think there is a right or wrong answer.
Maybe. If you aren't working (or have significant other income), you won't be able to get a mortgage. And also, will the rate be 2.75% then?

Congratulations to the OP though.
I don't think I agree that you can't get a mortgage without income. I know a couple of friends that bought a new house (with a mortgage) after they retired. For them, the key was helping the bank to understand all of what they had invested.

I'm actually counting on being able to get a mortgage, as we wil probably be buying a second home in the next year or two, and my only income right now is a small pension that won't even cover the mortgage payment.

Steve
I paid cash for my home and wanted to mortgage it to do some remodeling. I was newly self-employed. By self-employed, I worked as a contractor for a publicly traded company on a contract on an hourly basis paid on a 1099. It is not like I was working on commission or some start-up. I was told by multiple lenders that I needed to be self-employed 2 years to qualify for a conforming mortgage. Maybe if I had one full years tax return self employed I would qualify. I said I obviously have the money as I own the house outright, plus have other investments. He said it doesn't matter if I have $10 million in the bank (this was for a $200k loan), that wouldn't change anything.

They do not really count assets in a conforming mortgage. If they generate significant and consistent income, then they can count that. Conforming mortgages are meant for the masses which means income from steady job on a w-2 and credit score are the main factors.

Of course, if you can find a local independent bank (not many left) and have a relationship with them, maybe you can get a non-conforming loan. It will most likely be more expensive.

I have another story of a friend that wanted a line of credit. To make the story very short, he owns over 60 rentals and 3 personal homes. He wanted a $200k LOC and did business with Chase where he tried to get the LOC. They wanted a copy of every lease and a thousand other documents. This is someone worth $10 million+.
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