Anyone regret paying off mortgage early?

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corn18
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Re: "Nobody's ever regretted paying off the mortgage."

Post by corn18 »

csmath wrote: Mon Apr 19, 2021 6:38 pm
corn18 wrote: Mon Apr 19, 2021 6:29 pm There is a 100% probability that a 60/40 portfolio will return more than 2.75% nominal over a 30 year period. I'm not sure how you argue otherwise. Once we agree on that, then we can introduce other variables.
I'm pretty incapable by nature of agreeing that anything is 100% but I concede the point because it is irrelevant. Based on your confidence in the 60/40 portfolio over 30 years, I have a few questions for you.
  • Which AA has the highest 30 year return, 60/40 or 75/25?
  • Is an investor with 60/40 and a $2,000,000 mortgage taking the same risk as a 60/40 investor with a paid off home?
You tell me. I have no interest in finding data for you.
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csmath
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Re: "Nobody's ever regretted paying off the mortgage."

Post by csmath »

corn18 wrote: Mon Apr 19, 2021 6:44 pm
csmath wrote: Mon Apr 19, 2021 6:38 pm
corn18 wrote: Mon Apr 19, 2021 6:29 pm There is a 100% probability that a 60/40 portfolio will return more than 2.75% nominal over a 30 year period. I'm not sure how you argue otherwise. Once we agree on that, then we can introduce other variables.
I'm pretty incapable by nature of agreeing that anything is 100% but I concede the point because it is irrelevant. Based on your confidence in the 60/40 portfolio over 30 years, I have a few questions for you.
  • Which AA has the highest 30 year return, 60/40 or 75/25?
  • Is an investor with 60/40 and a $2,000,000 mortgage taking the same risk as a 60/40 investor with a paid off home?
You tell me. I have no interest in finding data for you.
/shrug
So you make a statement with a graph that doesn't support your statement. Not because the graph is not factual, but because it compares apples to oranges. I ask you two leading questions to help you see why you are not making a fair comparison and now I have to answer my own questions so that you can avoid seeing your mistake?

And for the record, everyone knows the most likely answer to the first question and the obvious answer to second. It shouldn't require you to find anything.
Last edited by csmath on Mon Apr 19, 2021 6:57 pm, edited 1 time in total.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by PowderDay9 »

corn18 wrote: Mon Apr 19, 2021 6:29 pm There is a 100% probability that a 60/40 portfolio will return more than 2.75% nominal over a 30 year period. I'm not sure how you argue otherwise. Once we agree on that, then we can introduce other variables.
There is no minimum guaranteed return of a 60/40 portfolio over a future 30 year period, therefore the probability must be less than 100%.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by watchnerd »

RDP wrote: Sat Apr 17, 2021 9:22 pm
6. Those who recommend Investing your extra cash flow (after maxing out tax deferred) in stocks instead of using that money to pay off your house are advocating by default to borrow money to invest in stocks. By this same logic should you borrow extra money beyond the value of your house to invest? For those who hold this position what is the optimum amount to borrow to invest in the market?
Using leverage / borrowing money to buy stocks looks really great in bull markets.

Not so fun in a bear, though.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vanbogle59 »

corn18 wrote: Mon Apr 19, 2021 6:29 pm There is a 100% probability that a 60/40 portfolio will return more than 2.75% nominal over a 30 year period. I'm not sure how you argue otherwise. Once we agree on that, then we can introduce other variables.
"will return"?
Did you just predict the future? With 100% certainty?
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Re: "Nobody's ever regretted paying off the mortgage."

Post by willthrill81 »

Rex66 wrote: Mon Apr 19, 2021 6:17 pm Nobody would admit to it even if it were true.
A poster did report a year or two ago that he regretted paying off his mortgage early. Still, I think that those who wouldn't regret paying off the mortgage know that in advance with a high degree of accuracy.
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watchnerd
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Re: "Nobody's ever regretted paying off the mortgage."

Post by watchnerd »

csmath wrote: Mon Apr 19, 2021 6:54 pm And for the record, everyone knows the most likely answer to the first question and the obvious answer to second. It shouldn't require you to find anything.
I'm going to dig into the second answer for a second, because, aside from risk, there is another angle.

Real estate, generically and generally, absent any other speculative or demand factors, has tended to keep pace with inflation.

So zero real return.

Which doesn't sound so hot, until you look at bonds with a duration <30 Years offering negative real returns right now.

Plus, the capital gains are tax free (within limits).

I like the inflation hedge that my house provides when compared to the same money in bonds, at present rates.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by watchnerd »

coachd50 wrote: Sat Apr 17, 2021 7:47 pm I think from some of those perspectives, the argument regarding mortgage vs taxable investing is also a forced savings one. Bogleheads are not the general public when it comes to financial behavior. I could see an argument being made that people investing in taxable might just as easily spend THAT as if they never invested in the first place.
Or invested it really stupidly on some moonshot meme stonk.

Dave's audience has a sizable chunk of people who tend to have a history of having made bad money choices in the past....
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Re: "Nobody's ever regretted paying off the mortgage."

Post by aj76er »

bmelikia wrote: Wed Apr 14, 2021 2:06 pm
bertilak wrote: Wed Apr 14, 2021 12:21 pm Paying down does not improve cash flow by one penny.
Paying down your mortgage can improve cash flow if you elect to recast your mortgage during the course of your mortgage pay down process.

Our monthly PITI used to be $1,600.00/month but now it is around $775.00/month due to recasting our mortgage during pay down.

We will have our mortgage hopefully paid off by the end of June 2021.
The downside is that you’re paying more interest over the entire payment schedule.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by JBEB »

aj76er wrote: Mon Apr 19, 2021 8:25 pm
bmelikia wrote: Wed Apr 14, 2021 2:06 pm
bertilak wrote: Wed Apr 14, 2021 12:21 pm Paying down does not improve cash flow by one penny.
Paying down your mortgage can improve cash flow if you elect to recast your mortgage during the course of your mortgage pay down process.

Our monthly PITI used to be $1,600.00/month but now it is around $775.00/month due to recasting our mortgage during pay down.

We will have our mortgage hopefully paid off by the end of June 2021.
The downside is that you’re paying more interest over the entire payment schedule.
How so?

Sorry Im trying understand recasting
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Re: "Nobody's ever regretted paying off the mortgage."

Post by albireo13 »

We have a fresh 30 yr fixed mortgage. It allowed us to buy our last last, forever house. Being 65yo, I may not see it paid off. Do I care? Naah. The monthly payment is factored into our living expenses during financial planning and we are just fine. In fact, we just refinanced to 2.625% and are doing better than we had expected. Considering tax deductions our effective rate is even lower.

Would it be better to have it paid off? Sure. Still, I don't lose any sleep over it. It's just like my cable bill, a monthly utility payment. It helps that we have decent equity. We could pay it off if we dip into our nest egg but, no reason to do that. I don't attach any emotional value to the mortgage being paid off.

Looking back over the years, a few unplanned life events prevented us from paying off our mortgage. While I thought about it, I always put my first priority into 401K investing. We are not rich but we did very well.

Different paths to getting to the same spot. It's all good and I applaud those who paid off their mortgage.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by awval999 »

You may as well rename the thread:
"Nobody's ever regretted *having children*"

You'll get the same hot takes and opinions.

Paying off the mortgage is an emotional decision. Similar to choosing your life partner, having children, or selecting a retirement date. All of these things have financial implications, but they are *secondary* to the emotional life choice. Literally the definition of *personal* finance.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by LongRoad »

corn18 wrote: Mon Apr 19, 2021 5:46 pm I'll just post this again so we don't lose sight of the non-emotional side of the equation. Anyone paying cash for a house today with the 30 year fixed rate @ 2.75% is going to lose money over 30 years. A lot of money.

Image
One other issue here is that the invested funds aren't simply all being invested on day one and sitting for 30 years.

Depending on how the comparison is framed, the funds are being DCA'ed either into or out of the account based on the amortization schedule of the avoided loan.

If I invest my $500K and take a mortgage (instead of simply spending it on my house), I'm taking 360 regular equal withdrawals from that investment account over the next 30 years to pay off the loan. This considerably reduces the returns shown in this graph, and also introduces a significant sequence of returns risk, precisely as it does for a retiree planning to spend down a portfolio over a 30 year retirement. In fact, in real terms, the withdrawals are front loaded because they aren't inflation adjusted, as the 30-year retiree's are.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by nolesrule »

JBEB wrote: Tue Apr 20, 2021 5:29 am
aj76er wrote: Mon Apr 19, 2021 8:25 pm
bmelikia wrote: Wed Apr 14, 2021 2:06 pm
bertilak wrote: Wed Apr 14, 2021 12:21 pm Paying down does not improve cash flow by one penny.
Paying down your mortgage can improve cash flow if you elect to recast your mortgage during the course of your mortgage pay down process.

Our monthly PITI used to be $1,600.00/month but now it is around $775.00/month due to recasting our mortgage during pay down.

We will have our mortgage hopefully paid off by the end of June 2021.
The downside is that you’re paying more interest over the entire payment schedule.
How so?

Sorry Im trying understand recasting
When you do a recast, you make a lump sum payment that lowers the balance, and then the lender re-amortizes the loan so it ends on the original due date. This lowers the monthly payment amount, which means each month you are paying less to principal.

Compared to not doing the recast and sticking to the original mortgage payment amount after the lump sum, you end up paying more in interest because with the lower recast payment you pay less toward principal. Either way is probably still better than not having made the lump payment in terms of total interest, but the point is that there is a tradeoff to doing the recast and making the smaller payment.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by Triple digit golfer »

corn18 wrote: Mon Apr 19, 2021 5:46 pm I'll just post this again so we don't lose sight of the non-emotional side of the equation. Anyone paying cash for a house today with the 30 year fixed rate @ 2.75% is going to lose money over 30 years. A lot of money.

Image
Nice chart. If history is any indicator, I should get at least 6% on a 60/40 portfolio over 30 years.

At what point does it make sense to pay OFF the mortgage?

Let's say I have a 30 year mortgage at 3% and I plow money into 60/40 instead of paying down the mortgage. When is it prudent to pay it off? With 15 years remaining? Seems like over most 15 year periods, you're very likely to beat 3%. 10 years? There have been lost decades, but still unlikely not to get 3%. 5 years?

In other words, when should one de-risk and take the guaranteed 3% return?
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Re: "Nobody's ever regretted paying off the mortgage."

Post by CoastLawyer2030 »

I have read every post in this thread and still can't find myself leaning one way or another. We just refinanced our mortgage to 2.88% (yay). Still, like so many others, on one hand I do not like debt; on the other I know the long term probability play is to invest in a taxable brokerage.

My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the time my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). The thought being that this would help for FAFSA purposes and also improve cash flow for the amount we wanted to pay out of pocket.

Now it seems there is a consensus that simply paying down the mortgage (versus paying it off) is a waste of time. Hmm.
Last edited by CoastLawyer2030 on Tue Apr 20, 2021 7:48 am, edited 1 time in total.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by KlangFool »

Triple digit golfer wrote: Tue Apr 20, 2021 7:17 am
In other words, when should one de-risk and take the guaranteed 3% return?
Triple digit golfer,

My answer when your portfolio and EF is big enough. In my case, it meant portfolio = 25X and the EF = 3X.

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Re: "Nobody's ever regretted paying off the mortgage."

Post by Triple digit golfer »

KlangFool wrote: Tue Apr 20, 2021 7:44 am
Triple digit golfer wrote: Tue Apr 20, 2021 7:17 am
In other words, when should one de-risk and take the guaranteed 3% return?
Triple digit golfer,

My answer when your portfolio and EF is big enough. In my case, it meant portfolio = 25X and the EF = 3X.

KlangFool
Correct me if I'm wrong, but it seems that you'd only pay anything extra on a mortgage when you're financially independent. Is that correct?
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Re: "Nobody's ever regretted paying off the mortgage."

Post by KlangFool »

CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am
My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the times my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings).
CoastLawyer2030,

As long as you are sure that you do not need to take a student loan. It would seem to make more sense to me that you invest the money in the taxable account first. Only pay off the mortgage a few years before the kid started college.

<<This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). >>

Which is one way to look at it. The other way is unless and until you reach your FI number, you could use all the possible money to speed up the process.

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Re: "Nobody's ever regretted paying off the mortgage."

Post by KlangFool »

Triple digit golfer wrote: Tue Apr 20, 2021 7:47 am
KlangFool wrote: Tue Apr 20, 2021 7:44 am
Triple digit golfer wrote: Tue Apr 20, 2021 7:17 am
In other words, when should one de-risk and take the guaranteed 3% return?
Triple digit golfer,

My answer when your portfolio and EF is big enough. In my case, it meant portfolio = 25X and the EF = 3X.

KlangFool
Correct me if I'm wrong, but it seems that you'd only pay anything extra on a mortgage when you're financially independent. Is that correct?
Yes.

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Re: "Nobody's ever regretted paying off the mortgage."

Post by manatee2005 »

“Nobody ever regretted paying off the mortgage”

Only Sith deal in absolutes.

My friend has a 1 mil house paid off, when I told him I doubled my money in the market in 2020 he regretted paying it off.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by manatee2005 »

Triple digit golfer wrote: Tue Apr 20, 2021 7:47 am
KlangFool wrote: Tue Apr 20, 2021 7:44 am
Triple digit golfer wrote: Tue Apr 20, 2021 7:17 am
In other words, when should one de-risk and take the guaranteed 3% return?
Triple digit golfer,

My answer when your portfolio and EF is big enough. In my case, it meant portfolio = 25X and the EF = 3X.

KlangFool
Correct me if I'm wrong, but it seems that you'd only pay anything extra on a mortgage when you're financially independent. Is that correct?
No.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by LongRoad »

CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am I have read every post in this thread and still can't find myself leaning one way or another. We just refinanced our mortgage to 2.88% (yay). Still, like so many others, on one hand I do not like debt; on the other I know the long term probability play is to invest in a taxable brokerage.

My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the time my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). The thought being that this would help for FAFSA purposes and also improve cash flow for the amount we wanted to pay out of pocket.

Now it seems there is a consensus that simply paying down the mortgage (versus paying it off) is a waste of time. Hmm.
I don't see anything wrong with your plan. The objections seem to center either on the funds being paid to the mortgage being unavailable when you have a personal 'liquidity event', or the expectation that investing in stocks has a greater likely return.

If you're saving/investing $80K+ a year, are you going to miss that $6000 in case of an emergency? Can you earn more than 2.88% guaranteed on any fixed income investment over your timeframe?
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Re: "Nobody's ever regretted paying off the mortgage."

Post by galving »

"Nobody" as in anyone ever in the history of the humankind?
There's at least someone who's regretted paying off the mortgage at some point.

Though generally speaking, it is a good feeling and likely that the majority of the people paying off the mortgage believe its a good decision.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vanbogle59 »

manatee2005 wrote: Tue Apr 20, 2021 7:56 am “Nobody ever regretted paying off the mortgage”

Only Sith deal in absolutes.

My friend has a 1 mil house paid off, when I told him I doubled my money in the market in 2020 he regretted paying it off.
Only doubled? Clearly you missed the BTC runup.
Should we start a new topic: "Nobody ever regretted selling VTSAX and going all in on BTC?"
Apples/oranges.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by CoastLawyer2030 »

KlangFool wrote: Tue Apr 20, 2021 7:50 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am
My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the times my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings).
CoastLawyer2030,

As long as you are sure that you do not need to take a student loan. It would seem to make more sense to me that you invest the money in the taxable account first. Only pay off the mortgage a few years before the kid started college.

<<This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). >>

Which is one way to look at it. The other way is unless and until you reach your FI number, you could use all the possible money to speed up the process.

KlangFool
I agree about positioning ourselves not to need student loans.

My rebuttal to the bolded is that I view small mortgage payoff versus investing almost as a rounding error. With my savings rate this high, dedicating less than 8% of savings to extra mortgage payoff doesn't move the needle that much in terms of my overall FI number.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by CoastLawyer2030 »

LongRoad wrote: Tue Apr 20, 2021 7:59 amIf you're saving/investing $80K+ a year, are you going to miss that $6000 in case of an emergency? Can you earn more than 2.88% guaranteed on any fixed income investment over your timeframe?
This is why I largely lean towards slight mortgage payoff. In a couple years my deferred comp account will be $150,000. Our Roths will be $100,000. Our brokerages will be $200,000.

As I've posted in more detail before, I call these "flex assets" that will get me through any liquidity crisis. And when we make $175,000 a year and spend $75,000 a year, maintaining such a moderate standard of living is in itself a hedge against a liquidity crisis.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by KlangFool »

CoastLawyer2030 wrote: Tue Apr 20, 2021 8:26 am
KlangFool wrote: Tue Apr 20, 2021 7:50 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am
My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the times my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings).
CoastLawyer2030,

As long as you are sure that you do not need to take a student loan. It would seem to make more sense to me that you invest the money in the taxable account first. Only pay off the mortgage a few years before the kid started college.

<<This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). >>

Which is one way to look at it. The other way is unless and until you reach your FI number, you could use all the possible money to speed up the process.

KlangFool
I agree about positioning ourselves not to need student loans.

My rebuttal to the bolded is that I view small mortgage payoff versus investing almost as a rounding error. With my savings rate this high, dedicating less than 8% of savings to extra mortgage payoff doesn't move the needle that much in terms of my overall FI number.
If you had done the calculation, then go ahead. Just make sure that this amount doesn't push your FI date one year earlier.

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Re: "Nobody's ever regretted paying off the mortgage."

Post by KlangFool »

CoastLawyer2030 wrote: Tue Apr 20, 2021 8:28 am
LongRoad wrote: Tue Apr 20, 2021 7:59 amIf you're saving/investing $80K+ a year, are you going to miss that $6000 in case of an emergency? Can you earn more than 2.88% guaranteed on any fixed income investment over your timeframe?
This is why I largely lean towards slight mortgage payoff. In a couple years my deferred comp account will be $150,000. Our Roths will be $100,000. Our brokerages will be $200,000.

As I've posted in more detail before, I call these "flex assets" that will get me through any liquidity crisis. And when we make $175,000 a year and spend $75,000 a year, maintaining such a moderate standard of living is in itself a hedge against a liquidity crisis.
CoastLawyer2030,

Assuming that you have 450K and saving 85K per year and your target is 25X 75K = 1.875 million.

You will reach your number in 9+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $85,000 $1,875,000
Years
Annual Return Rate 7 8 9 10
5.00% $1,325,266 $1,476,529 $1,635,356 $1,802,123
6.00% $1,390,110 $1,558,516 $1,737,027 $1,926,249
7.00% $1,458,193 $1,645,267 $1,845,436 $2,059,616

Assuming that you save extra 6K per year.

You will reach your number in 8+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $91,000 $1,875,000
Years
Annual Return Rate 7 8 9
5.00% $1,374,118 $1,533,824 $1,701,515
6.00% $1,440,473 $1,617,901 $1,805,975
7.00% $1,510,118 $1,706,826 $1,917,304

How much is reaching your FI target one year earlier worth to you?

I reached my FI number with my severance pay last year. I made it barely just in time.

6K per year over 16 years and earning 5% extra per year is worth 131K.

Starting Net Worth $0
Annual Savings $6,000
Years
Annual Return Rate 16
4.00% $130,947

KlangFool
Last edited by KlangFool on Tue Apr 20, 2021 9:04 am, edited 1 time in total.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by delamer »

CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am I have read every post in this thread and still can't find myself leaning one way or another. We just refinanced our mortgage to 2.88% (yay). Still, like so many others, on one hand I do not like debt; on the other I know the long term probability play is to invest in a taxable brokerage.

My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the time my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). The thought being that this would help for FAFSA purposes and also improve cash flow for the amount we wanted to pay out of pocket.

Now it seems there is a consensus that simply paying down the mortgage (versus paying it off) is a waste of time. Hmm.
Not a waste of time, but a waste of cash. 8-)

If you pay it off, then you free up income to use for other expenses. But as you are paying it down, you are sinking cash into a non-liquid asset.

I believe it was KlangFool who once suggested that the best option is to invest your excess cash into a taxable account rather than making additional principal payments. Then once you have enough in the taxable account to completely pay off the mortgage, do so. That way, you keep your liquidity in the shorter term, but can pay off the mortgage in the longer term (assuming that’s your goal).

Recasting is an interesting hybrid option.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vineviz »

Triple digit golfer wrote: Tue Apr 20, 2021 7:17 am
Nice chart. If history is any indicator, I should get at least 6% on a 60/40 portfolio over 30 years.
It’s not an indicator, sadly.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by graspau »

delamer wrote: Tue Apr 20, 2021 9:02 am Recasting is an interesting hybrid option.
We did a recast, and it was nice to drop the minimum payment in a situation of little to no job security. We still paid the old amount and had the extra go to principal, but if laid off, it was a nice drop in fixed expenses we could go to in a pinch without having to pay the whole loan off in one chunk.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by CoastLawyer2030 »

delamer wrote: Tue Apr 20, 2021 9:02 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am I have read every post in this thread and still can't find myself leaning one way or another. We just refinanced our mortgage to 2.88% (yay). Still, like so many others, on one hand I do not like debt; on the other I know the long term probability play is to invest in a taxable brokerage.

My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the time my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). The thought being that this would help for FAFSA purposes and also improve cash flow for the amount we wanted to pay out of pocket.

Now it seems there is a consensus that simply paying down the mortgage (versus paying it off) is a waste of time. Hmm.
Not a waste of time, but a waste of cash. 8-)

If you pay it off, then you free up income to use for other expenses. But as you are paying it down, you are sinking cash into a non-liquid asset.

I believe it was KlangFool who once suggested that the best option is to invest your excess cash into a taxable account rather than making additional principal payments. Then once you have enough in the taxable account to completely pay off the mortgage, do so. That way, you keep your liquidity in the shorter term, but can pay off the mortgage in the longer term (assuming that’s your goal).

Recasting is an interesting hybrid option.
The more I read this thread, the more I lean towards that option and away from my slow paydown option.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by manatee2005 »

vanbogle59 wrote: Tue Apr 20, 2021 8:20 am
manatee2005 wrote: Tue Apr 20, 2021 7:56 am “Nobody ever regretted paying off the mortgage”

Only Sith deal in absolutes.

My friend has a 1 mil house paid off, when I told him I doubled my money in the market in 2020 he regretted paying it off.
Only doubled? Clearly you missed the BTC runup.
Should we start a new topic: "Nobody ever regretted selling VTSAX and going all in on BTC?"
Apples/oranges.
I didn’t miss the Bitcoin runup, have had Bitcoin since 2015. I think at some point the government will confiscate it so it’s not a major part of my portfolio.
Last edited by manatee2005 on Tue Apr 20, 2021 9:11 am, edited 1 time in total.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by queso »

CoastLawyer2030 wrote: Tue Apr 20, 2021 9:08 am
delamer wrote: Tue Apr 20, 2021 9:02 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am I have read every post in this thread and still can't find myself leaning one way or another. We just refinanced our mortgage to 2.88% (yay). Still, like so many others, on one hand I do not like debt; on the other I know the long term probability play is to invest in a taxable brokerage.

My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the time my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). The thought being that this would help for FAFSA purposes and also improve cash flow for the amount we wanted to pay out of pocket.

Now it seems there is a consensus that simply paying down the mortgage (versus paying it off) is a waste of time. Hmm.
Not a waste of time, but a waste of cash. 8-)

If you pay it off, then you free up income to use for other expenses. But as you are paying it down, you are sinking cash into a non-liquid asset.

I believe it was KlangFool who once suggested that the best option is to invest your excess cash into a taxable account rather than making additional principal payments. Then once you have enough in the taxable account to completely pay off the mortgage, do so. That way, you keep your liquidity in the shorter term, but can pay off the mortgage in the longer term (assuming that’s your goal).

Recasting is an interesting hybrid option.
The more I read this thread, the more I lean towards that option and away from my slow paydown option.
As I posted upthread, I used to be in the camp that believed in taking a hybrid approach of mostly taxable investing but throwing a bit extra at the mortgage simultaneously (in my case $1k/mo so $12k/yr total extra principal payments). I did that for years, but stopped last year when I refinanced into a 15 year @ 2%. I just couldn't make the math work in a way that satisfied me that it was a good use of extra cash so now that is going into taxable and I am just paying the minimum on the mortgage. I probably have enough in taxable to pay off the mortgage 6 times over, but so far I can't convince myself that is a good idea either. :happy
Last edited by queso on Tue Apr 20, 2021 9:12 am, edited 2 times in total.
Triple digit golfer
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Re: "Nobody's ever regretted paying off the mortgage."

Post by Triple digit golfer »

KlangFool wrote: Tue Apr 20, 2021 8:57 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 8:28 am
LongRoad wrote: Tue Apr 20, 2021 7:59 amIf you're saving/investing $80K+ a year, are you going to miss that $6000 in case of an emergency? Can you earn more than 2.88% guaranteed on any fixed income investment over your timeframe?
This is why I largely lean towards slight mortgage payoff. In a couple years my deferred comp account will be $150,000. Our Roths will be $100,000. Our brokerages will be $200,000.

As I've posted in more detail before, I call these "flex assets" that will get me through any liquidity crisis. And when we make $175,000 a year and spend $75,000 a year, maintaining such a moderate standard of living is in itself a hedge against a liquidity crisis.
CoastLawyer2030,

Assuming that you have 450K and saving 85K per year and your target is 25X 75K = 1.875 million.

You will reach your number in 9+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $85,000 $1,875,000
Years
Annual Return Rate 7 8 9 10
5.00% $1,325,266 $1,476,529 $1,635,356 $1,802,123
6.00% $1,390,110 $1,558,516 $1,737,027 $1,926,249
7.00% $1,458,193 $1,645,267 $1,845,436 $2,059,616

Assuming that you save extra 6K per year.

You will reach your number in 8+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $91,000 $1,875,000
Years
Annual Return Rate 7 8 9
5.00% $1,374,118 $1,533,824 $1,701,515
6.00% $1,440,473 $1,617,901 $1,805,975
7.00% $1,510,118 $1,706,826 $1,917,304

How much is reaching your FI target one year earlier worth to you?

I reached my FI number with my severance pay last year. I made it barely just in time.

KlangFool
Would you mind checking my numbers?

Let's just assume $20,000 annual savings (just a bad case scenario), $80k annual expenes, current portfolio $1 million.

I see that I get to 25x expenses:

5%: 11 years
6%: 10 years
7%: 9 years

If I assume my current savings of $60,000, I'll get to 25x expenses:

5%: 10 years
6%: 8 years
7%: 7 years

This tells me a few things, none of which are a surprise to an experienced Boglehead:

1. Increased rate of return doesn't really get me financially independent a whole lot sooner.
2. Current portfolio balance is a larger driver than returns at this point.
3. New contributions tripling only get me financially independent a year or two sooner.
4. If my expenses were higher and/or I wanted to get to 35x instead of 25x, then new contributions would be more of a contributing factor. But being only 10 years from the goal, new contributions don't have a lot of time to compound, so they don't play a relatively large part of reaching the goal compared to current balance.


At this point, I think the important thing is to not get overly greedy, keep my nose to the grindstone and keep saving.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by willthrill81 »

awval999 wrote: Tue Apr 20, 2021 6:54 am Paying off the mortgage is an emotional decision.
Sometimes, but not always. Paying down/off one's mortgage often provides a higher return than what fixed income can provide. When someone says that their AA is X/Y, it's pretty uncommon for someone to say criticize it on the basis of the person having made it for 'emotional reasons', even though that's very often the case.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by willthrill81 »

Triple digit golfer wrote: Tue Apr 20, 2021 9:12 am
KlangFool wrote: Tue Apr 20, 2021 8:57 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 8:28 am
LongRoad wrote: Tue Apr 20, 2021 7:59 amIf you're saving/investing $80K+ a year, are you going to miss that $6000 in case of an emergency? Can you earn more than 2.88% guaranteed on any fixed income investment over your timeframe?
This is why I largely lean towards slight mortgage payoff. In a couple years my deferred comp account will be $150,000. Our Roths will be $100,000. Our brokerages will be $200,000.

As I've posted in more detail before, I call these "flex assets" that will get me through any liquidity crisis. And when we make $175,000 a year and spend $75,000 a year, maintaining such a moderate standard of living is in itself a hedge against a liquidity crisis.
CoastLawyer2030,

Assuming that you have 450K and saving 85K per year and your target is 25X 75K = 1.875 million.

You will reach your number in 9+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $85,000 $1,875,000
Years
Annual Return Rate 7 8 9 10
5.00% $1,325,266 $1,476,529 $1,635,356 $1,802,123
6.00% $1,390,110 $1,558,516 $1,737,027 $1,926,249
7.00% $1,458,193 $1,645,267 $1,845,436 $2,059,616

Assuming that you save extra 6K per year.

You will reach your number in 8+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $91,000 $1,875,000
Years
Annual Return Rate 7 8 9
5.00% $1,374,118 $1,533,824 $1,701,515
6.00% $1,440,473 $1,617,901 $1,805,975
7.00% $1,510,118 $1,706,826 $1,917,304

How much is reaching your FI target one year earlier worth to you?

I reached my FI number with my severance pay last year. I made it barely just in time.

KlangFool
Would you mind checking my numbers?

Let's just assume $20,000 annual savings (just a bad case scenario), $80k annual expenes, current portfolio $1 million.

I see that I get to 25x expenses:

5%: 11 years
6%: 10 years
7%: 9 years

If I assume my current savings of $60,000, I'll get to 25x expenses:

5%: 10 years
6%: 8 years
7%: 7 years

This tells me a few things, none of which are a surprise to an experienced Boglehead:

1. Increased rate of return doesn't really get me financially independent a whole lot sooner.
2. Current portfolio balance is a larger driver than returns at this point.
3. New contributions tripling only get me financially independent a year or two sooner.
4. If my expenses were higher and/or I wanted to get to 35x instead of 25x, then new contributions would be more of a contributing factor. But being only 10 years from the goal, new contributions don't have a lot of time to compound, so they don't play a relatively large part of reaching the goal compared to current balance.


At this point, I think the important thing is to not get overly greedy, keep my nose to the grindstone and keep saving.
Your numbers look right (and are actually similar to ours), and I agree with your conclusions. Increasing one's saving rate and achieving higher returns have a diminishing marginal impact on the time it takes to reach FI, especially when you have a decade or less left to go.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vanbogle59 »

KlangFool wrote: Tue Apr 20, 2021 8:57 am I reached my FI number with my severance pay
CHEATER!
LOL
Seriously, congratulations.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by AerialWombat »

deleted
Last edited by AerialWombat on Sat Feb 05, 2022 6:05 pm, edited 1 time in total.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by Triple digit golfer »

willthrill81 wrote: Tue Apr 20, 2021 9:15 am
Triple digit golfer wrote: Tue Apr 20, 2021 9:12 am
KlangFool wrote: Tue Apr 20, 2021 8:57 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 8:28 am
LongRoad wrote: Tue Apr 20, 2021 7:59 amIf you're saving/investing $80K+ a year, are you going to miss that $6000 in case of an emergency? Can you earn more than 2.88% guaranteed on any fixed income investment over your timeframe?
This is why I largely lean towards slight mortgage payoff. In a couple years my deferred comp account will be $150,000. Our Roths will be $100,000. Our brokerages will be $200,000.

As I've posted in more detail before, I call these "flex assets" that will get me through any liquidity crisis. And when we make $175,000 a year and spend $75,000 a year, maintaining such a moderate standard of living is in itself a hedge against a liquidity crisis.
CoastLawyer2030,

Assuming that you have 450K and saving 85K per year and your target is 25X 75K = 1.875 million.

You will reach your number in 9+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $85,000 $1,875,000
Years
Annual Return Rate 7 8 9 10
5.00% $1,325,266 $1,476,529 $1,635,356 $1,802,123
6.00% $1,390,110 $1,558,516 $1,737,027 $1,926,249
7.00% $1,458,193 $1,645,267 $1,845,436 $2,059,616

Assuming that you save extra 6K per year.

You will reach your number in 8+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $91,000 $1,875,000
Years
Annual Return Rate 7 8 9
5.00% $1,374,118 $1,533,824 $1,701,515
6.00% $1,440,473 $1,617,901 $1,805,975
7.00% $1,510,118 $1,706,826 $1,917,304

How much is reaching your FI target one year earlier worth to you?

I reached my FI number with my severance pay last year. I made it barely just in time.

KlangFool
Would you mind checking my numbers?

Let's just assume $20,000 annual savings (just a bad case scenario), $80k annual expenes, current portfolio $1 million.

I see that I get to 25x expenses:

5%: 11 years
6%: 10 years
7%: 9 years

If I assume my current savings of $60,000, I'll get to 25x expenses:

5%: 10 years
6%: 8 years
7%: 7 years

This tells me a few things, none of which are a surprise to an experienced Boglehead:

1. Increased rate of return doesn't really get me financially independent a whole lot sooner.
2. Current portfolio balance is a larger driver than returns at this point.
3. New contributions tripling only get me financially independent a year or two sooner.
4. If my expenses were higher and/or I wanted to get to 35x instead of 25x, then new contributions would be more of a contributing factor. But being only 10 years from the goal, new contributions don't have a lot of time to compound, so they don't play a relatively large part of reaching the goal compared to current balance.


At this point, I think the important thing is to not get overly greedy, keep my nose to the grindstone and keep saving.
Your numbers look right (and are actually similar to ours), and I agree with your conclusions. Increasing one's saving rate and achieving higher returns have a diminishing marginal impact on the time it takes to reach FI, especially when you have a decade or less left to go.
I am considering loosening the purse strings a little bit and allowing some more entertainment spending. We've saved $180k the last three years and $72k last year and that is even after buying a new roof, furnace, and air conditioner. Nothing crazy, I'm thinking a nice vacation every couple years and maybe some more allowance for fun family things. Memories, not stuff. Probably $5-6k a year would do it.

But at the same time, I want to be responsible. We're a one-income household for the time being, we have a child to send to college in 14 years, and will have no pensions. We have almost $1.1 million plus another $40k in our daughter's 529 plan. $300k left on the mortgage for 29 years at 2.99%, so not paying that off anytime soon, likely.

Lowering savings by $5k a year for the next 10 years at a 6% return will result in $66k less of a nest egg in a decade. We're talking less than 1 year of expenses to build some great memories and do some really fun things.

I think I just talked myself into it. Maybe.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by willthrill81 »

Triple digit golfer wrote: Tue Apr 20, 2021 9:33 am
willthrill81 wrote: Tue Apr 20, 2021 9:15 am
Triple digit golfer wrote: Tue Apr 20, 2021 9:12 am
KlangFool wrote: Tue Apr 20, 2021 8:57 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 8:28 am

This is why I largely lean towards slight mortgage payoff. In a couple years my deferred comp account will be $150,000. Our Roths will be $100,000. Our brokerages will be $200,000.

As I've posted in more detail before, I call these "flex assets" that will get me through any liquidity crisis. And when we make $175,000 a year and spend $75,000 a year, maintaining such a moderate standard of living is in itself a hedge against a liquidity crisis.
CoastLawyer2030,

Assuming that you have 450K and saving 85K per year and your target is 25X 75K = 1.875 million.

You will reach your number in 9+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $85,000 $1,875,000
Years
Annual Return Rate 7 8 9 10
5.00% $1,325,266 $1,476,529 $1,635,356 $1,802,123
6.00% $1,390,110 $1,558,516 $1,737,027 $1,926,249
7.00% $1,458,193 $1,645,267 $1,845,436 $2,059,616

Assuming that you save extra 6K per year.

You will reach your number in 8+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $91,000 $1,875,000
Years
Annual Return Rate 7 8 9
5.00% $1,374,118 $1,533,824 $1,701,515
6.00% $1,440,473 $1,617,901 $1,805,975
7.00% $1,510,118 $1,706,826 $1,917,304

How much is reaching your FI target one year earlier worth to you?

I reached my FI number with my severance pay last year. I made it barely just in time.

KlangFool
Would you mind checking my numbers?

Let's just assume $20,000 annual savings (just a bad case scenario), $80k annual expenes, current portfolio $1 million.

I see that I get to 25x expenses:

5%: 11 years
6%: 10 years
7%: 9 years

If I assume my current savings of $60,000, I'll get to 25x expenses:

5%: 10 years
6%: 8 years
7%: 7 years

This tells me a few things, none of which are a surprise to an experienced Boglehead:

1. Increased rate of return doesn't really get me financially independent a whole lot sooner.
2. Current portfolio balance is a larger driver than returns at this point.
3. New contributions tripling only get me financially independent a year or two sooner.
4. If my expenses were higher and/or I wanted to get to 35x instead of 25x, then new contributions would be more of a contributing factor. But being only 10 years from the goal, new contributions don't have a lot of time to compound, so they don't play a relatively large part of reaching the goal compared to current balance.


At this point, I think the important thing is to not get overly greedy, keep my nose to the grindstone and keep saving.
Your numbers look right (and are actually similar to ours), and I agree with your conclusions. Increasing one's saving rate and achieving higher returns have a diminishing marginal impact on the time it takes to reach FI, especially when you have a decade or less left to go.
I am considering loosening the purse strings a little bit and allowing some more entertainment spending. We've saved $180k the last three years and $72k last year and that is even after buying a new roof, furnace, and air conditioner. Nothing crazy, I'm thinking a nice vacation every couple years and maybe some more allowance for fun family things. Memories, not stuff. Probably $5-6k a year would do it.

But at the same time, I want to be responsible. We're a one-income household for the time being, we have a child to send to college in 14 years, and will have no pensions. We have almost $1.1 million plus another $40k in our daughter's 529 plan. $300k left on the mortgage for 29 years at 2.99%, so not paying that off anytime soon, likely.

Lowering savings by $5k a year for the next 10 years at a 6% return will result in $66k less of a nest egg in a decade. We're talking less than 1 year of expenses to build some great memories and do some really fun things.

I think I just talked myself into it. Maybe.
We came to the same conclusion. Increasing our 50% saving rate to something like 55% would significantly reduce our discretionary spending but only reduce the time to reach FI by about a year. In our view, it wasn't worth that at all, especially since I don't care to retire until our daughter graduates HS.

Many focus on reducing spending to build larger portfolios, but many with large portfolios later in life would rather have smaller balances and more memories made earlier in their lives. It can be a difficult balancing act.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vanbogle59 »

AerialWombat wrote: Tue Apr 20, 2021 9:31 am I can’t speak for the entire 30/70 AA crowd, but yeah, it’s 100% emotional. There is zero mathematical logic to it.
Is it likely to support the lifestyle you desire? In a manner that allows you to sleep at night?
If yes, sounds to me like: X = "Oh, yeah"
Even if N=1. So what?

What other math do you need?
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Re: "Nobody's ever regretted paying off the mortgage."

Post by KlangFool »

vanbogle59 wrote: Tue Apr 20, 2021 9:30 am
KlangFool wrote: Tue Apr 20, 2021 8:57 am I reached my FI number with my severance pay
CHEATER!
LOL
Seriously, congratulations.
Thanks. It was a very close call.

KlangFool
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Re: "Nobody's ever regretted paying off the mortgage."

Post by Triple digit golfer »

willthrill81 wrote: Tue Apr 20, 2021 9:37 am We came to the same conclusion. Increasing our 50% saving rate to something like 55% would significantly reduce our discretionary spending but only reduce the time to reach FI by about a year. In our view, it wasn't worth that at all, especially since I don't care to retire until our daughter graduates HS.

Many focus on reducing spending to build larger portfolios, but many with large portfolios later in life would rather have smaller balances and more memories made earlier in their lives. It can be a difficult balancing act.
Exactly. When we were very young, I wanted to save as much as possible to let compounding work for us. We're not financially independent yet, but off to a really good start. Now we're at a midpoint where maybe we can let our foot off the gas just a bit and still reach our goals in an acceptable time frame while allowing some additional spending. Working an extra year to be able to have 10 years of good family memories and experiences seems worth it to me.
delamer
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Re: "Nobody's ever regretted paying off the mortgage."

Post by delamer »

queso wrote: Tue Apr 20, 2021 9:11 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 9:08 am
delamer wrote: Tue Apr 20, 2021 9:02 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am I have read every post in this thread and still can't find myself leaning one way or another. We just refinanced our mortgage to 2.88% (yay). Still, like so many others, on one hand I do not like debt; on the other I know the long term probability play is to invest in a taxable brokerage.

My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the time my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). The thought being that this would help for FAFSA purposes and also improve cash flow for the amount we wanted to pay out of pocket.

Now it seems there is a consensus that simply paying down the mortgage (versus paying it off) is a waste of time. Hmm.
Not a waste of time, but a waste of cash. 8-)

If you pay it off, then you free up income to use for other expenses. But as you are paying it down, you are sinking cash into a non-liquid asset.

I believe it was KlangFool who once suggested that the best option is to invest your excess cash into a taxable account rather than making additional principal payments. Then once you have enough in the taxable account to completely pay off the mortgage, do so. That way, you keep your liquidity in the shorter term, but can pay off the mortgage in the longer term (assuming that’s your goal).

Recasting is an interesting hybrid option.
The more I read this thread, the more I lean towards that option and away from my slow paydown option.
As I posted upthread, I used to be in the camp that believed in taking a hybrid approach of mostly taxable investing but throwing a bit extra at the mortgage simultaneously (in my case $1k/mo so $12k/yr total extra principal payments). I did that for years, but stopped last year when I refinanced into a 15 year @ 2%. I just couldn't make the math work in a way that satisfied me that it was a good use of extra cash so now that is going into taxable and I am just paying the minimum on the mortgage. I probably have enough in taxable to pay off the mortgage 6 times over, but so far I can't convince myself that is a good idea either. :happy
We followed a similar path. Our last 2 mortgages were 10 year loans. (We ended up refinancing when we did a major remodel.) The amount of each payment that is applied to principal is so much higher with the shorter loans and you get a lower interest rate too (yes, I know those things are related). Psychologically and financially, the shorter loan term is really beneficial if you can carry the larger monthly payment.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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JoeRetire
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Re: "Nobody's ever regretted paying off the mortgage."

Post by JoeRetire »

Triple digit golfer wrote: Tue Apr 20, 2021 7:17 am In other words, when should one de-risk and take the guaranteed 3% return?
When the risk keeps you awake at night.
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vanbogle59
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vanbogle59 »

willthrill81 wrote: Tue Apr 20, 2021 9:37 am Many focus on reducing spending to build larger portfolios, but many with large portfolios later in life would rather have smaller balances and more memories made earlier in their lives. It can be a difficult balancing act.
I am 62. If you can set your priorities first, then arrange your finances to meet them, you are playing the game right.
Not everyone has that luxury. Enjoy it if you do. Congratulations.
Remember, you could get hit by a bus tomorrow.

As the wizard said: "All we have to decide is what to do with the time that is given us." :sharebeer
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willthrill81
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Re: "Nobody's ever regretted paying off the mortgage."

Post by willthrill81 »

vanbogle59 wrote: Tue Apr 20, 2021 9:45 am
willthrill81 wrote: Tue Apr 20, 2021 9:37 am Many focus on reducing spending to build larger portfolios, but many with large portfolios later in life would rather have smaller balances and more memories made earlier in their lives. It can be a difficult balancing act.
I am 62. If you can set your priorities first, then arrange your finances to meet them, you are playing the game right.
Not everyone has that luxury. Enjoy it if you do. Congratulations.
Remember, you could get hit by a bus tomorrow.

As the wizard said: "All we have to decide is what to do with the time that is given us." :sharebeer
Well said, especially the Mithrandir quote. :D
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vanbogle59
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vanbogle59 »

willthrill81 wrote: Tue Apr 20, 2021 9:49 am Well said, especially the Mithrandir quote. :D
I thought you might appreciate that. :D
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