Anyone regret paying off mortgage early?

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Admiral
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Re: anyone regret paying off mortgage early

Post by Admiral »

lakpr wrote: Tue Jun 08, 2021 5:38 pm
wordsmith11 wrote: Tue Jun 08, 2021 5:32 pm
Hyperchicken wrote: Tue Jun 08, 2021 2:59 pm Mortgage pay-off threads are always such a good reading for learning about cognitive biases.

My favorite is mental accounting in "I paid off my mortgage so that now I have cash flow to fund X and Y and Z".
Mine is "I now own it 'free and clear'," well actually your local taxing authority begs to differ...
It is always implicitly understood that "free and clear" meant exclusive of property taxes, and no existing lien. Try not paying property taxes when you do have the mortgage, the reaction from the local taxing authority is going to be identical. Having mortgage or not does not change that, bringing that argument up is a strawman. With the mortgage you have an existing lien on the house, without the mortgage you don't.
I would not say it's a straw-man argument.

I think the point being made is that regardless of loan or no loan, a house has tax obligations that demand payment. So when one says "I feel great, I own my home free and clear, the bank can't take it away" that may be true, but it's a cognitive bias because if you fail to pay taxes, you can also lose your home (or at least be in a position where a lien makes it impossible to sell.)

The psychological state of feeling some type of emotional "freedom" from "owing anyone anything" is, when it comes to homeownership, a mirage. You continue to owe. You just don't owe the bank. For many people their r.e. taxes can approach the cost of their mortgage. I have no doubt I will feel great when I get rid of my $25k per year mortgage. But that's because I'll have one less large expense, not because I'll have some hazy sense of being free from owing anyone anything.
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Que1999
Posts: 274
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Re: anyone regret paying off mortgage early

Post by Que1999 »

Yeah, I do regret it. It was pretty nice to reduce our expenses by around $1,000 per month... However, it is a fact our net worth would be substantially higher had we invested the mortgage pay-down money instead.

It is what it is.
drummer
Posts: 68
Joined: Tue Jun 08, 2021 5:41 pm

Re: anyone regret paying off mortgage early

Post by drummer »

I have no regrets paying off my mortgage. It's a sure thing compared to the speculation of the stock market.

I think it's regrettable that many folks just think making large monthly payments for the better part of their lives is acceptable.

You can always get in debt, especially if you have assets that are free and clear.

Whatever feels the most comfortable for you is what's right.
smitcat
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Re: anyone regret paying off mortgage early

Post by smitcat »

ensign wrote: Tue Jun 08, 2021 4:51 pm
Admiral wrote: Tue Jun 08, 2021 10:47 am
TheDogFather wrote: Tue Jun 08, 2021 10:41 am I don't have any regrets about paying off our mortgage. At the time interest rates were low and the markets were producing excellent returns, and we had experienced a great run-up in our investments.

I felt the time was right to be a little more conservative and decided to get rid of our largest debt and monthly expense. Add of course step up monthly investments of the monthly payments we had eliminated.

While my instinct is that market returns have continued to be excellent, I'm not interested in going back to see 'what if' I'd kept the mortgage and a different investment strategy.

Living debt-free has felt very good and our investments have grown more than we needed anyway.
Therefore the only thing that matters is the math: can you hold your money and make more than the mortgage costs you? That's the same decision that people make when they hold a mortgage and invest instead of paying it down.
There is no “math” to it because no one knows what the future holds. Holding debt in order to invest those funds is speculative. Markets are not risk-free, despite the “sure thing” so many here seem to espouse. Getting rid of debt is ALWAYS wise.
"Getting rid of debt is ALWAYS wise."
Not at all accurate.
smitcat
Posts: 13308
Joined: Mon Nov 07, 2016 9:51 am

Re: anyone regret paying off mortgage early

Post by smitcat »

ensign wrote: Tue Jun 08, 2021 4:42 pm
KlangFool wrote: Tue Jun 08, 2021 8:36 am
mrsgoldilocks wrote: Mon Jun 07, 2021 9:29 pm
I really hate myself always going back to revisit my decision. I just wonder if others' personal experience can help me settle the issue.
mrsgoldilocks,

A) It is common for some of my income peers to either pay down or pay off their mortgage and assuming that they will be fully-employed continuously until retirement age. Then, they were permanently unemployed or under-employed in their 40s and 50s when their kids go to college. They have to take a more expensive student loan for their kids' college education.

KlangFool
If one is underemployed or unemployed in their 40s and 50s the last thing he or she needs is a mortgage.
I agree with Klang - often its much better to have that mortgage at any age - even if you get laid off.
Afty
Posts: 2390
Joined: Sun Sep 07, 2014 5:31 pm

Re: anyone regret paying off mortgage early

Post by Afty »

I used to pay extra on my mortgage until we refinanced recently. I kind of regret it. Because of the refinance, the benefit isn’t as much as I thought it would be. It would have been better to invest that money in taxable instead.
ensign
Posts: 133
Joined: Wed Jan 06, 2016 9:18 am

Re: anyone regret paying off mortgage early

Post by ensign »

Admiral wrote: Tue Jun 08, 2021 6:26 pm
lakpr wrote: Tue Jun 08, 2021 5:38 pm
wordsmith11 wrote: Tue Jun 08, 2021 5:32 pm
Hyperchicken wrote: Tue Jun 08, 2021 2:59 pm Mortgage pay-off threads are always such a good reading for learning about cognitive biases.

My favorite is mental accounting in "I paid off my mortgage so that now I have cash flow to fund X and Y and Z".
Mine is "I now own it 'free and clear'," well actually your local taxing authority begs to differ...
It is always implicitly understood that "free and clear" meant exclusive of property taxes, and no existing lien. Try not paying property taxes when you do have the mortgage, the reaction from the local taxing authority is going to be identical. Having mortgage or not does not change that, bringing that argument up is a strawman. With the mortgage you have an existing lien on the house, without the mortgage you don't.
I would not say it's a straw-man argument.

I think the point being made is that regardless of loan or no loan, a house has tax obligations that demand payment. So when one says "I feel great, I own my home free and clear, the bank can't take it away" that may be true, but it's a cognitive bias because if you fail to pay taxes, you can also lose your home (or at least be in a position where a lien makes it impossible to sell.)

The psychological state of feeling some type of emotional "freedom" from "owing anyone anything" is, when it comes to homeownership, a mirage. You continue to owe. You just don't owe the bank. For many people their r.e. taxes can approach the cost of their mortgage. I have no doubt I will feel great when I get rid of my $25k per year mortgage. But that's because I'll have one less large expense, not because I'll have some hazy sense of being free from owing anyone anything.
There’s nothing “psychological” about having no mortgage. It’s one less debt. It’s farcical to say if you don’t pay your taxes you lose your house. You also lose your car if you don’t pay taxes, and yoy lose your job if you don’t show up for work. What’s your point?
ensign
Posts: 133
Joined: Wed Jan 06, 2016 9:18 am

Re: anyone regret paying off mortgage early

Post by ensign »

drummer wrote: Tue Jun 08, 2021 7:03 pm I have no regrets paying off my mortgage. It's a sure thing compared to the speculation of the stock market.
Well said.
ensign
Posts: 133
Joined: Wed Jan 06, 2016 9:18 am

Re: anyone regret paying off mortgage early

Post by ensign »

smitcat wrote: Tue Jun 08, 2021 7:10 pm
ensign wrote: Tue Jun 08, 2021 4:51 pm
Admiral wrote: Tue Jun 08, 2021 10:47 am
TheDogFather wrote: Tue Jun 08, 2021 10:41 am I don't have any regrets about paying off our mortgage. At the time interest rates were low and the markets were producing excellent returns, and we had experienced a great run-up in our investments.

I felt the time was right to be a little more conservative and decided to get rid of our largest debt and monthly expense. Add of course step up monthly investments of the monthly payments we had eliminated.

While my instinct is that market returns have continued to be excellent, I'm not interested in going back to see 'what if' I'd kept the mortgage and a different investment strategy.

Living debt-free has felt very good and our investments have grown more than we needed anyway.
Therefore the only thing that matters is the math: can you hold your money and make more than the mortgage costs you? That's the same decision that people make when they hold a mortgage and invest instead of paying it down.
There is no “math” to it because no one knows what the future holds. Holding debt in order to invest those funds is speculative. Markets are not risk-free, despite the “sure thing” so many here seem to espouse. Getting rid of debt is ALWAYS wise.
"Getting rid of debt is ALWAYS wise."
Not at all accurate.
How is it not accurate. Arguing that debt is good is nonsensical.
ensign
Posts: 133
Joined: Wed Jan 06, 2016 9:18 am

Re: anyone regret paying off mortgage early

Post by ensign »

smitcat wrote: Tue Jun 08, 2021 7:13 pm
ensign wrote: Tue Jun 08, 2021 4:42 pm
KlangFool wrote: Tue Jun 08, 2021 8:36 am
mrsgoldilocks wrote: Mon Jun 07, 2021 9:29 pm
I really hate myself always going back to revisit my decision. I just wonder if others' personal experience can help me settle the issue.
mrsgoldilocks,

A) It is common for some of my income peers to either pay down or pay off their mortgage and assuming that they will be fully-employed continuously until retirement age. Then, they were permanently unemployed or under-employed in their 40s and 50s when their kids go to college. They have to take a more expensive student loan for their kids' college education.

KlangFool
If one is underemployed or unemployed in their 40s and 50s the last thing he or she needs is a mortgage.
I agree with Klang - often its much better to have that mortgage at any age - even if you get laid off.
I give up. Can’t argue with farcical statements. Good luck with your lifelong, “smart” debt.
ensign
Posts: 133
Joined: Wed Jan 06, 2016 9:18 am

Re: anyone regret paying off mortgage early

Post by ensign »

Afty wrote: Tue Jun 08, 2021 7:29 pm I used to pay extra on my mortgage until we refinanced recently. I kind of regret it. Because of the refinance, the benefit isn’t as much as I thought it would be. It would have been better to invest that money in taxable instead.
Why? Because markets always go up? I’m done with Bogleheads. It’s become a “meme” board. Good luck everyone.
coachd50
Posts: 1778
Joined: Sun Oct 22, 2017 10:12 am

Re: anyone regret paying off mortgage early

Post by coachd50 »

ensign wrote: Tue Jun 08, 2021 8:11 pm
Afty wrote: Tue Jun 08, 2021 7:29 pm I used to pay extra on my mortgage until we refinanced recently. I kind of regret it. Because of the refinance, the benefit isn’t as much as I thought it would be. It would have been better to invest that money in taxable instead.
Why? Because markets always go up? I’m done with Bogleheads. It’s become a “meme” board. Good luck everyone.
No, markets don't. BUT that is the basis of "nobody knows nothin". No one can predict the future. No one knows for certain that for some unbeknownst reason the Sun will not extinguish tomorrow and the Earth become a lifeless rock. What one can do is say over the last 200 years, the market has trended upward providing returns of X, and that inflation has been Y the last several years. If the interest rate on your loan is less than X and/or Y, then the probability says that is the best course of action if you want to optimize your return.

It isn't a very difficult concept to understand, BUT it does often conflict with ones emotions.

To directly answer the OP's question, I don't "regret" it, but Yes, I mathematically I made the suboptimal decisions to pay down my 4% mortgage each month with extra principal payments of around $400 a month and then in January used a very small inheritance from deceased mom and sold some of my taxable funds to pay off the remaining $50,000. You can 100% show on paper that it was not the optimal choice. I am ok with that though.
Last edited by coachd50 on Tue Jun 08, 2021 8:42 pm, edited 2 times in total.
smitcat
Posts: 13308
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Re: anyone regret paying off mortgage early

Post by smitcat »

ensign wrote: Tue Jun 08, 2021 8:08 pm
smitcat wrote: Tue Jun 08, 2021 7:10 pm
ensign wrote: Tue Jun 08, 2021 4:51 pm
Admiral wrote: Tue Jun 08, 2021 10:47 am
TheDogFather wrote: Tue Jun 08, 2021 10:41 am I don't have any regrets about paying off our mortgage. At the time interest rates were low and the markets were producing excellent returns, and we had experienced a great run-up in our investments.

I felt the time was right to be a little more conservative and decided to get rid of our largest debt and monthly expense. Add of course step up monthly investments of the monthly payments we had eliminated.

While my instinct is that market returns have continued to be excellent, I'm not interested in going back to see 'what if' I'd kept the mortgage and a different investment strategy.

Living debt-free has felt very good and our investments have grown more than we needed anyway.
Therefore the only thing that matters is the math: can you hold your money and make more than the mortgage costs you? That's the same decision that people make when they hold a mortgage and invest instead of paying it down.
There is no “math” to it because no one knows what the future holds. Holding debt in order to invest those funds is speculative. Markets are not risk-free, despite the “sure thing” so many here seem to espouse. Getting rid of debt is ALWAYS wise.
"Getting rid of debt is ALWAYS wise."
Not at all accurate.
How is it not accurate. Arguing that debt is good is nonsensical.
Have had a number of 'good' debts...
- education
- business
- home
- rental
etc
smitcat
Posts: 13308
Joined: Mon Nov 07, 2016 9:51 am

Re: anyone regret paying off mortgage early

Post by smitcat »

ensign wrote: Tue Jun 08, 2021 8:10 pm
smitcat wrote: Tue Jun 08, 2021 7:13 pm
ensign wrote: Tue Jun 08, 2021 4:42 pm
KlangFool wrote: Tue Jun 08, 2021 8:36 am
mrsgoldilocks wrote: Mon Jun 07, 2021 9:29 pm
I really hate myself always going back to revisit my decision. I just wonder if others' personal experience can help me settle the issue.
mrsgoldilocks,

A) It is common for some of my income peers to either pay down or pay off their mortgage and assuming that they will be fully-employed continuously until retirement age. Then, they were permanently unemployed or under-employed in their 40s and 50s when their kids go to college. They have to take a more expensive student loan for their kids' college education.

KlangFool
If one is underemployed or unemployed in their 40s and 50s the last thing he or she needs is a mortgage.
I agree with Klang - often its much better to have that mortgage at any age - even if you get laid off.
I give up. Can’t argue with farcical statements. Good luck with your lifelong, “smart” debt.
Thank you - we do not need any luck at this time. The practice of utilizing debt when it made sense worked out really well.
We still do have a small amount of debt but will likely wipe it out shortly, untill/unless a future smart debt situation arises.
aj44
Posts: 309
Joined: Sat May 10, 2014 11:22 am

Re: anyone regret paying off mortgage early

Post by aj44 »

Nope, but I also don’t want any more house than we need so I purchased my townhome with $135k cash in 2018.
ROIGuy
Posts: 2452
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Re: anyone regret paying off mortgage early

Post by ROIGuy »

No regrets, but it really is nice not having a mortgage payment every month. With last year, it was doubly good not having that burden.
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Que1999
Posts: 274
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Re: anyone regret paying off mortgage early

Post by Que1999 »

ensign wrote: Tue Jun 08, 2021 8:08 pm
smitcat wrote: Tue Jun 08, 2021 7:10 pm
ensign wrote: Tue Jun 08, 2021 4:51 pm
Admiral wrote: Tue Jun 08, 2021 10:47 am
TheDogFather wrote: Tue Jun 08, 2021 10:41 am I don't have any regrets about paying off our mortgage. At the time interest rates were low and the markets were producing excellent returns, and we had experienced a great run-up in our investments.

I felt the time was right to be a little more conservative and decided to get rid of our largest debt and monthly expense. Add of course step up monthly investments of the monthly payments we had eliminated.

While my instinct is that market returns have continued to be excellent, I'm not interested in going back to see 'what if' I'd kept the mortgage and a different investment strategy.

Living debt-free has felt very good and our investments have grown more than we needed anyway.
Therefore the only thing that matters is the math: can you hold your money and make more than the mortgage costs you? That's the same decision that people make when they hold a mortgage and invest instead of paying it down.
There is no “math” to it because no one knows what the future holds. Holding debt in order to invest those funds is speculative. Markets are not risk-free, despite the “sure thing” so many here seem to espouse. Getting rid of debt is ALWAYS wise.
"Getting rid of debt is ALWAYS wise."
Not at all accurate.
How is it not accurate. Arguing that debt is good is nonsensical.
Pretty broad statement there. I use a bunch of different credit cards with great rewards, 5% cash back, tons of reward points to put toward travel, direct discounts on purchases, extended warranties/coverage, etc... And I pay them all in full on auto-pay so I never pay interest. Is this bad debt too?
anon3838
Posts: 198
Joined: Fri May 03, 2019 11:54 am

Re: anyone regret paying off mortgage early

Post by anon3838 »

Not exactly regret, but I wish I understood the tax implications of cash out refi vs putting so much into principle up front.
drummer
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Re: anyone regret paying off mortgage early

Post by drummer »

Afty wrote: Tue Jun 08, 2021 7:29 pm I used to pay extra on my mortgage until we refinanced recently. I kind of regret it. Because of the refinance, the benefit isn’t as much as I thought it would be. It would have been better to invest that money in taxable instead.
I paid off my mortgage and took what was once my monthly mortgage payment and invested that. It's the best of both worlds.
drummer
Posts: 68
Joined: Tue Jun 08, 2021 5:41 pm

Re: anyone regret paying off mortgage early

Post by drummer »

Que1999 wrote: Tue Jun 08, 2021 8:33 pm
ensign wrote: Tue Jun 08, 2021 8:08 pm
smitcat wrote: Tue Jun 08, 2021 7:10 pm
ensign wrote: Tue Jun 08, 2021 4:51 pm
Admiral wrote: Tue Jun 08, 2021 10:47 am

Therefore the only thing that matters is the math: can you hold your money and make more than the mortgage costs you? That's the same decision that people make when they hold a mortgage and invest instead of paying it down.
There is no “math” to it because no one knows what the future holds. Holding debt in order to invest those funds is speculative. Markets are not risk-free, despite the “sure thing” so many here seem to espouse. Getting rid of debt is ALWAYS wise.
"Getting rid of debt is ALWAYS wise."
Not at all accurate.
How is it not accurate. Arguing that debt is good is nonsensical.
Pretty broad statement there. I use a bunch of different credit cards with great rewards, 5% cash back, tons of reward points to put toward travel, direct discounts on purchases, extended warranties/coverage, etc... And I pay them all in full on auto-pay so I never pay interest. Is this bad debt too?
No, that's not bad debt because you pay them off every month. Applying that same practice to your mortgage is even better.
LateStarter1975
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Re: anyone regret paying off mortgage early

Post by LateStarter1975 »

For all those who stated that they regret paying off their mortgage, I'm just wondering, is it not possible to take out a new mortgage on your home and then use that money to invest while you start paying your monthly mortgage for another 30 years? I mean, if you have to use that word regret about eliminating your mortgage, then why don't you try to get it back and use the money to invest instead? And if you wouldn't do this, why not?
Debt is dangerous...simple is beautiful
miket29
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Re: anyone regret paying off mortgage early

Post by miket29 »

flyingcows wrote: Tue Jun 08, 2021 7:42 am Why would you hold bonds and a mortgage at the same time?
Because they are different buckets with different access. Suppose the market drops 30%. Holding bonds, one can easily rebalance and buy into the market at what may an opportune time. With no bonds in your investing accounts, the only way to invest more in the market would be to take out a HELOC which may be both more expensive and impractical.

Back to the OP, with a 2% loan rate that is such a low hurdle that the market is likely to exceed it over a 10 year period. You talk of wanting to retire in 15 years so I would revisit the decision in about 10 years. You don't want to wait until shortly before retirement 15 years hence to sell your investments and pay off the house in case the market has a significant decline. So 10 years or so hence I'd start taking investments off the table and using them to pay down the mortgage.
Last edited by miket29 on Tue Jun 08, 2021 10:03 pm, edited 1 time in total.
coachd50
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Re: anyone regret paying off mortgage early

Post by coachd50 »

LateStarter1975 wrote: Tue Jun 08, 2021 9:08 pm For all those who stated that they regret paying off their mortgage, I'm just wondering, is it not possible to take out a new mortgage on your home and then use that money to invest while you start paying your monthly mortgage for another 30 years? I mean, if you have to use that word regret about eliminating your mortgage, then why don't you try to get it back and use the money to invest instead? And if you wouldn't do this, why not?
For me- it is time horizon. But also, as I mentioned, I don't think many would say they "regret" it as much as just recognize that it wasn't the most optimal. At least that is my take. So the regret is really more of a "ugh, it would have been better if.."
miket29
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Re: anyone regret paying off mortgage early

Post by miket29 »

coachd50 wrote: Tue Jun 08, 2021 8:22 pm To directly answer the OP's question, I don't "regret" it, but Yes, I mathematically I made the suboptimal decisions to pay down my 4% mortgage each month with extra principal payments of around $400 a month and then in January used a very small inheritance from deceased mom and sold some of my taxable funds to pay off the remaining $50,000. You can 100% show on paper that it was not the optimal choice. I am ok with that though.
I don't get it. Knowing the market returns lately, you would have been better off with the mortgage. But decisions should be judged on the information available at the time, not on the results. Annie Duke (poker player, PhD, writer) talks about this in her books. See https://nautil.us/issue/55/trust/the-re ... -decisions

So my question is, prior to starting the extra $400 monthly payments what would have shown this to be suboptimal?
mrsgoldilocks
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Re: anyone regret paying off mortgage early

Post by mrsgoldilocks »

Thanks everyone for you input. Talked to my husband, so we decided to keep our mortgage and invest the diff in a vanguard fund that's dedicated to hold the monthly diff of our 30 vs 15 years mortgage; so we can see how it goes. I certainly can report this experiment back after 15 years: :wink:

Honestly speaking, I believe we won't "regret" (which is a strong word as pointed out by a few response) the decision either way. But it is nice to have the option at year 15 to decide if we still want to pay off the mortgage or we want to keep it.
dboeger1
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Re: anyone regret paying off mortgage early

Post by dboeger1 »

ensign wrote: Tue Jun 08, 2021 8:10 pm
smitcat wrote: Tue Jun 08, 2021 7:13 pm
ensign wrote: Tue Jun 08, 2021 4:42 pm
KlangFool wrote: Tue Jun 08, 2021 8:36 am
mrsgoldilocks wrote: Mon Jun 07, 2021 9:29 pm
I really hate myself always going back to revisit my decision. I just wonder if others' personal experience can help me settle the issue.
mrsgoldilocks,

A) It is common for some of my income peers to either pay down or pay off their mortgage and assuming that they will be fully-employed continuously until retirement age. Then, they were permanently unemployed or under-employed in their 40s and 50s when their kids go to college. They have to take a more expensive student loan for their kids' college education.

KlangFool
If one is underemployed or unemployed in their 40s and 50s the last thing he or she needs is a mortgage.
I agree with Klang - often its much better to have that mortgage at any age - even if you get laid off.
I give up. Can’t argue with farcical statements. Good luck with your lifelong, “smart” debt.
Nothing farcical about it. Debt is objectively good when immediate ownership and short-term liquidity are more valuable than future ownership and long-term liquidity. Here's a trivial example: imagine someone with arbitrarily high income and minimal assets who is in critical condition following a car crash. It's pretty obvious that person should borrow money to pay for their life-saving medical treatment, because they need money now, and the debt won't be difficult for them to pay off in the future once they recover. You might say it's not a fair comparison because it introduces a time variable, but something similar is often true for housing. Most people can't afford to buy a house outright for cash up front, but if they know they need to rent a place to live in perpetuity anyway and the combined costs of buying a home are similar to current rent payments (which themselves tend to increase over time), then it's extremely advantageous to buy a home, even if one doesn't pay it off early. If the logic of "debt is always bad" were true, then it would always be preferable to rent until one could pay cash for a home. Even if that were true in nominal terms, try telling that to someone about to have kids while renting a studio apartment above an urban liquor store. You can't really eliminate the biological time constraints of having children, so you can forget about time not being a factor for the vast majority of people who do actually intend to have children.

Klang's point is that there are plenty of sensible justifications for not paying off a mortgage early, such as prioritizing paying for a child's education. Note that many such examples are not necessarily set in stone, and the typical 30-year time frame for fixed mortgages is a long time for things to be static. It's very likely that even someone who prioritizes paying off the mortgage early decides at some point during those 30 years to prioritize something else for a while. Another trivial example would be paying to renovate a property before selling if there is good ROI in the form of a higher sale price. It would make no sense for someone to forego a $5k renovation that could result in a $30k higher sale price on the principle that they need to continue putting an extra $1k per month towards the mortgage because "debt is always bad". There are absolutely times where taking on debt now is optimal because it means trading unneeded future dollars for something needed now.
mrsgoldilocks
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Re: anyone regret paying off mortgage early

Post by mrsgoldilocks »

LateStarter1975 wrote: Tue Jun 08, 2021 9:08 pm For all those who stated that they regret paying off their mortgage, I'm just wondering, is it not possible to take out a new mortgage on your home and then use that money to invest while you start paying your monthly mortgage for another 30 years? I mean, if you have to use that word regret about eliminating your mortgage, then why don't you try to get it back and use the money to invest instead? And if you wouldn't do this, why not?
Yes, it's possible to take a loan out of your equity with a HELOC or cash out refi (at least, those are the 2 means I know). I don't know a lot about HELOC, but for cash out refi, I know the following (please correct me if I'm wrong).

1. Cash out refi involves quite a hefty fee. For example, if I have no mortgage, and now I borrowed 500K against my home's equity. In my county, I have to pay a) i.e. 5.5 per 1000 dollar fee as recordation tax, and b) county transfer tax which is 1.4% over my 500K. Not to mention other overheads, i.e. lender fee etc etc. If I have a mortgage of 200K and now cash out 300K to get a 500K mortgage, then, I pay the fee over the cash out portion.

2. You can "deduct" the mortgage interest from your original loan when you purchase the house. Yes, SALT cap may make it not happening, but any way ... that is on schedule to expire on 2025. BUT if you take out a cash-out refi, you can only deduct the mortgage interest on your itemized deduction, if and only if you use the proceed to make "improvement" to your property, i.e. renovation.

Hence, you better keep your original mortgage if you ever thinking you may not want to put all your money into your house. but once you put the money into the equity of the house, it is not that easy to take it back unless you sell it.
Scotttheking
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Re: anyone regret paying off mortgage early

Post by Scotttheking »

I would if I did pay it off…hence not. Paying it off would make me cash poor. Whether the market returns better than 2% per year I cannot say, but there is a decent likelihood of it doing so. I’d rather keep investing through ups and downs.
QinTX
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Re: anyone regret paying off mortgage early

Post by QinTX »

Doctor Rhythm wrote: Tue Jun 08, 2021 12:52 am I wouldn’t say that I regret it, but in retrospect, it wasn’t the financially optimal decision. But that’s the rub - everything is obvious in retrospect, but at the time, there was a lot more uncertainty, including an adjustable rate mortgage and having just experienced a 50% drop in stock prices.

In the end, there wasn’t any meaningful consequence to the decision, so no regrets.
Same!
I paid mine off at 3.3% but I was 100% equities so I looked at this at the "stable" part of my portfolio, not sure I would do it at 2.5
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Yesterdaysnews
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Re: anyone regret paying off mortgage early

Post by Yesterdaysnews »

Debt is just a tool and can of course be useful. I would say most the world’s financial system runs on debt / credit.

The funny thing is looking back I do feel that I probably should have kept the mortgage and invest instead…. But if someone offered me a second mortgage right now to invest I’d probably pass 😂
lightfighter214
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Re: anyone regret paying off mortgage early

Post by lightfighter214 »

Ive been paying extra on mine, even at a 2.1% 15year mortgage.

Should be done in 21 months.

Is it the optimal thing to do? No. Frankly, i don't care. I really dont care about optimal, i care about safe. Paying off the mortgage is the safest. I also dont care about maximizing my retirement, I care about having enough to retire.

I also think there is a lot of recency bias with people going into a taxable over a mortgage. Wasn't it just 2019 where cash was the best year end investment over the course of a year?

If alot of people truly thought a taxable was the best, the would cash out refi and invest it all, but they don't.
TheDDC
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Re: anyone regret paying off mortgage early

Post by TheDDC »

smitcat wrote: Tue Jun 08, 2021 2:38 pm "It just feels really good not to have to make payments to a bank anymore, even at 2-3%, and it frees up cash flow for other pursuits."
Financial decsions we do with the best math we have available - other activities we do when it feels good.

"If you disagree, would you honestly tell us you would borrow against your home to invest?"
If the math works - then yes.
OK... then the “math” works too when one looks at financial risk (or lack thereof) after being debt free. “Feels good” is a bad rationale - point taken. I was going for the sleep well at night effect here.

So what’s your AA? Is it 100% equities for new money that you’ve leveraged? If so you could probably more confidently (than most) say your plan has a chance of working. I DCA what I would have paid into the mortgage into VTSAX. It works well mathematically and from a “SWAT” perspective, and I wouldn’t have done anything differently.

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
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Re: anyone regret paying off mortgage early

Post by ApeAttack »

ensign wrote: Tue Jun 08, 2021 8:11 pm
Afty wrote: Tue Jun 08, 2021 7:29 pm I used to pay extra on my mortgage until we refinanced recently. I kind of regret it. Because of the refinance, the benefit isn’t as much as I thought it would be. It would have been better to invest that money in taxable instead.
Why? Because markets always go up? I’m done with Bogleheads. It’s become a “meme” board. Good luck everyone.
Adios.
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LittleMaggieMae
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Re: anyone regret paying off mortgage early

Post by LittleMaggieMae »

LateStarter1975 wrote: Tue Jun 08, 2021 9:08 pm For all those who stated that they regret paying off their mortgage, I'm just wondering, is it not possible to take out a new mortgage on your home and then use that money to invest while you start paying your monthly mortgage for another 30 years? I mean, if you have to use that word regret about eliminating your mortgage, then why don't you try to get it back and use the money to invest instead? And if you wouldn't do this, why not?
I did just that... I used my "paid off" house to generate cash (cheapest way to buy money!) to buy rental/investment properties because when the Great Recession happened I was still employed (and was working steadily to increase my contributions to my retirement accounts), had a paid off house, and housing prices were scary rock bottom. I was willing to gamble that eventually housing prices would go up (and in the mean time I could collect rent). Mind you, I was 45yo when I paid off my house the first time. Taking out new mortgage(s) wasn't all that risky - I still had 20 years until retirement age.

My regrets came from the years (before I was 45) of "belt tightening" I had done to pay off my mortgage in under 15 years. The "feel good" of having a paid off house (and not a lot in my retirement accounts) wasn't all that warm and fuzzy. I'm not sure what I gave up was worth it to have a paid off house. I was contributing about 10% of my income to Retirement savings.

In hindsight I should have taken a 30y mortgage and spent those early years contributing more money into my retirement/savings accounts (even 300 a month for 10 years would have put me in a different place today). But, hindsight is 20/20. OK, I kind of wish I had bought a couple additional properties in 2010, 2011, and 2012. :)

On the other hand, isn't part of the reason a younger person takes a 30 year mortgage (hopefully at the lowest interest rate they can get) is to have a steady long term "housing expense"? Wasn't the idea that one's income would steadily go up over the years - but the "house payment" would stay more or less the same? And that as income went up - one would have more disposable income and would be able to increase their savings and then reap the long term compounding interest goodness (basically taking a mortgage so they could invest more of the income going forward.)? Isn't that how regular Joes and Janes built wealth back in the day? By taking a 30 year mortgage and then building savings during those 30 years while also slowly paying off the mortgage?
simpletone
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Re: anyone regret paying off mortgage early

Post by simpletone »

No regrets for me and a lifelong milestone that I took personal pride in achieving.
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camillus
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Re: anyone regret paying off mortgage early

Post by camillus »

6 years in to a 15 year, 3.0% mortgage, remaining balance 5 figures

This year we decided to "do something" about our mortgage. So far we've made a large principal payment. Then became interested in inflation and began thinking about my mortgage as a (small?) hedge against inflation. I hesitated. Then I learned about Series I Bonds and maxed out 10k for myself for the year (currently 3.54%). I am dedicating this money as a "mortgage equivalency fund." Next, my wife will buy 10k. When I bought I Bonds, I exchanged 10k of bonds in a 403b for equities.

In other words, we have a full-blown mental accounting circus going on over here.

It's hard to know what's optimal, but I think one element that's undersold in this thread is that "paying off your mortgage" is a behavioral forced savings. You trick yourself to juicing your savings rate. If you can trick yourself into doing the same forced savings into a taxable account, that is probably the best of all worlds - especially given current truly historically low mortgage rates.
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Admiral
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Re: anyone regret paying off mortgage early

Post by Admiral »

mrsgoldilocks wrote: Tue Jun 08, 2021 9:52 pm Thanks everyone for you input. Talked to my husband, so we decided to keep our mortgage and invest the diff in a vanguard fund that's dedicated to hold the monthly diff of our 30 vs 15 years mortgage; so we can see how it goes. I certainly can report this experiment back after 15 years: :wink:

Honestly speaking, I believe we won't "regret" (which is a strong word as pointed out by a few response) the decision either way. But it is nice to have the option at year 15 to decide if we still want to pay off the mortgage or we want to keep it.
An excellent choice, IMO. The money will be there for you to use toward your mortgage, or something with a higher priority.
KlangFool
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Re: anyone regret paying off mortgage early

Post by KlangFool »

camillus wrote: Wed Jun 09, 2021 3:02 am
It's hard to know what's optimal, but I think one element that's undersold in this thread is that "paying off your mortgage" is a behavioral forced savings. You trick yourself to juicing your savings rate. If you can trick yourself into doing the same forced savings into a taxable account, that is probably the best of all worlds - especially given current truly historically low mortgage rates.
camillus,

The forced savings part could be achieved by maximum contribution to the tax-advantaged account. Many folks choose to pay a lot more taxes (10+% to 20+%) and lower their contribution to the tax-advantaged accounts in order to pay down their 3+% mortgages. How does that make any sense?

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Re: anyone regret paying off mortgage early

Post by goodenyou »

I don't regret paying off my mortgage 10 years ago. I also enjoyed selling my house 2 months ago and getting all the cash back. I don't know what the future holds as far as ownership, but renting and being cash-flush really feels good right now. It was a reminder of the discipline of paying off the house.
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RJC
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Re: anyone regret paying off mortgage early

Post by RJC »

If you refinanced for a less than 2% rate, are there any circumstances where you should pay it down early?
lakpr
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Re: anyone regret paying off mortgage early

Post by lakpr »

RJC wrote: Wed Jun 09, 2021 8:27 am If you refinanced for a less than 2% rate, are there any circumstances where you should pay it down early?
Yes. If you have any bonds in your portfolio earning less than that 2% rate.
Admiral
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Re: anyone regret paying off mortgage early

Post by Admiral »

lakpr wrote: Wed Jun 09, 2021 8:27 am
RJC wrote: Wed Jun 09, 2021 8:27 am If you refinanced for a less than 2% rate, are there any circumstances where you should pay it down early?
Yes. If you have any bonds in your portfolio earning less than that 2% rate.
In your TAXABLE portfolio, IMO.
lakpr
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Re: anyone regret paying off mortgage early

Post by lakpr »

Admiral wrote: Wed Jun 09, 2021 8:29 am
lakpr wrote: Wed Jun 09, 2021 8:27 am
RJC wrote: Wed Jun 09, 2021 8:27 am If you refinanced for a less than 2% rate, are there any circumstances where you should pay it down early?
Yes. If you have any bonds in your portfolio earning less than that 2% rate.
In your TAXABLE portfolio, IMO.
Not necessarily. If you have bonds in your 401k, you can pay down the mortgage and shift equivalent amount of bonds to stocks in the 401k.

You can tax adjust the balance, for example if you are in 22% tax bracket, you pay down the mortgage by $1000 and shift $1000/0.78 = $1,282 from bonds to stocks in the 401k .
Last edited by lakpr on Wed Jun 09, 2021 8:32 am, edited 1 time in total.
RJC
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Re: anyone regret paying off mortgage early

Post by RJC »

Admiral wrote: Wed Jun 09, 2021 8:29 am
lakpr wrote: Wed Jun 09, 2021 8:27 am
RJC wrote: Wed Jun 09, 2021 8:27 am If you refinanced for a less than 2% rate, are there any circumstances where you should pay it down early?
Yes. If you have any bonds in your portfolio earning less than that 2% rate.
In your TAXABLE portfolio, IMO.
I'm not sure what the current bond rates are but I am assuming it will be less in the coming years?
mrsgoldilocks
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Re: anyone regret paying off mortgage early

Post by mrsgoldilocks »

camillus wrote: Wed Jun 09, 2021 3:02 am 6 years in to a 15 year, 3.0% mortgage, remaining balance 5 figures

This year we decided to "do something" about our mortgage. So far we've made a large principal payment. Then became interested in inflation and began thinking about my mortgage as a (small?) hedge against inflation. I hesitated. Then I learned about Series I Bonds and maxed out 10k for myself for the year (currently 3.54%). I am dedicating this money as a "mortgage equivalency fund." Next, my wife will buy 10k. When I bought I Bonds, I exchanged 10k of bonds in a 403b for equities.

In other words, we have a full-blown mental accounting circus going on over here.

It's hard to know what's optimal, but I think one element that's undersold in this thread is that "paying off your mortgage" is a behavioral forced savings. You trick yourself to juicing your savings rate. If you can trick yourself into doing the same forced savings into a taxable account, that is probably the best of all worlds - especially given current truly historically low mortgage rates.
Yes, as long as you're really investing the extra payment instead of letting it be dead cash sitting there or using it up, I this this is a good choice.

Interestingly, I also just purchased i-bond. I knew about it for a while, but I am never really looked into it. But now that inflation is coming, even the fixed rate is still 0%, this is still way better than any CD or high yield saving account I can find.
lakpr
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Re: anyone regret paying off mortgage early

Post by lakpr »

RJC wrote: Wed Jun 09, 2021 8:32 am
Admiral wrote: Wed Jun 09, 2021 8:29 am
lakpr wrote: Wed Jun 09, 2021 8:27 am
RJC wrote: Wed Jun 09, 2021 8:27 am If you refinanced for a less than 2% rate, are there any circumstances where you should pay it down early?
Yes. If you have any bonds in your portfolio earning less than that 2% rate.
In your TAXABLE portfolio, IMO.
I'm not sure what the current bond rates are but I am assuming it will be less in the coming years?
Yes, the same assumption the entire bond market is making, going by the SEC yields of various bond funds. Short term bond funds are yielding 0.8%, intermediate term bond funds are yielding 1.3%, and long term bond funds are yielding from 1.7% (treasuries) to 2.1% (LT corporate)..
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Re: anyone regret paying off mortgage early

Post by KlangFool »

Folks,

A) When you asked the wrong question, you would never get the right answer!

Why would you consider the mortgage a burden to you? If it does, why are you buying the house?

I bought my house at price X a few years ago. My portfolio excluding the house is at 2.5X. The PITI of the house is 20% to 30% lower than the market rent. I enjoy paying my mortgage. My house is cheap enough that I save money every month. And, I can pay off the house at any time.

B) My peers bought too much house. Hence, the mortgage feels like a burden to them. Then, they compounded their mistakes by not maxing up their 401K. They pay 20+% to 30+% taxes in order to pay down their mortgage. Then, when their kids go to college, they took a more expensive student loan for their kids.

If they are lucky and continuously fully-employed until retirement, they have the house and not much else. If they are not, they may lose everything.

KlangFool
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Admiral
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Re: anyone regret paying off mortgage early

Post by Admiral »

lakpr wrote: Wed Jun 09, 2021 8:30 am
Admiral wrote: Wed Jun 09, 2021 8:29 am
lakpr wrote: Wed Jun 09, 2021 8:27 am
RJC wrote: Wed Jun 09, 2021 8:27 am If you refinanced for a less than 2% rate, are there any circumstances where you should pay it down early?
Yes. If you have any bonds in your portfolio earning less than that 2% rate.
In your TAXABLE portfolio, IMO.
Not necessarily. If you have bonds in your 401k, you can pay down the mortgage and shift equivalent amount of bonds to stocks in the 401k.

You can tax adjust the balance, for example if you are in 22% tax bracket, you pay down the mortgage by $1000 and shift $1000/0.78 = $1,282 from bonds to stocks in the 401k .
This is fine if you subscribe to the mortgage-as-negative-bond theory of finance. I don’t. But I’m not taking the this thread down that deep and winding rabbit hole.

I agree that at current rates and providing one is not saving for a specific purpose/purchase in a taxable account that pre-payment is better MATHEMATICALLY than buying lower rate bonds.
smitcat
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Re: anyone regret paying off mortgage early

Post by smitcat »

TheDDC wrote: Tue Jun 08, 2021 11:07 pm
smitcat wrote: Tue Jun 08, 2021 2:38 pm "It just feels really good not to have to make payments to a bank anymore, even at 2-3%, and it frees up cash flow for other pursuits."
Financial decsions we do with the best math we have available - other activities we do when it feels good.

"If you disagree, would you honestly tell us you would borrow against your home to invest?"
If the math works - then yes.
OK... then the “math” works too when one looks at financial risk (or lack thereof) after being debt free. “Feels good” is a bad rationale - point taken. I was going for the sleep well at night effect here.

So what’s your AA? Is it 100% equities for new money that you’ve leveraged? If so you could probably more confidently (than most) say your plan has a chance of working. I DCA what I would have paid into the mortgage into VTSAX. It works well mathematically and from a “SWAT” perspective, and I wouldn’t have done anything differently.

-TheDDC

"So what’s your AA?"
We are retired and past the point where any of this makes much difference.
Over the years we have had mortgages which had interests rates less than the current CD rate.
We had taken on debt for a number of reasons when it made sense - education, home, business, auto, etc.
We did borrow against our home to 'invest'.
We paid off debt when it did not make sense - but not in a hurry.
Currently have a smaller mortgage that we have held for quite some time that will be paid off shortly.
I do not know how others feel but I can guarantee you that we will feel no different the end of this month when we pay it off.

"OK... then the “math” works too when one looks at financial risk (or lack thereof) after being debt free."
Being debt free without a higher level of liquidity has been and represents a higher risk from our experience.
Admiral
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Re: anyone regret paying off mortgage early

Post by Admiral »

KlangFool wrote: Wed Jun 09, 2021 8:35 am Folks,

A) When you asked the wrong question, you would never get the right answer!

Why would you consider the mortgage a burden to you? If it does, why are you buying the house?

I bought my house at price X a few years ago. My portfolio excluding the house is at 2.5X. The PITI of the house is 20% to 30% lower than the market rent. I enjoy paying my mortgage. My house is cheap enough that I save money every month. And, I can pay off the house at any time.

B) My peers bought too much house. Hence, the mortgage feels like a burden to them. Then, they compounded their mistakes by not maxing up their 401K. They pay 20+% to 30+% taxes in order to pay down their mortgage. Then, when their kids go to college, they took a more expensive student loan for their kids.

If they are lucky and continuously fully-employed until retirement, they have the house and not much else. If they are not, they may lose everything.

KlangFool
Klang:

What’s the point of finger-wagging at those who have already purchased their home? We are attempting to help the OP for their situation, not preach to those who are house hunting.

The OP is not going to sell their home and buy another based on your particular requirements.

Let’s try to be constructive at least with our advice.
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