Paying off your house

I have one paid-off house and a second home with a mortgage. I could pay the second one off, but the money I'd use to pay it off is currently in a 457 (401k-type) account making a guaranteed 4% interest. My mortgage is at a fixed 3.75% and I can write that interest off. Would it still make sense for me to pay off the house?

I'm thinking about selling the paid-off house and getting a boat. I'd heard that I can write off the interest on a "boat mortgage" like a second home. Is that true? Anybody here do this???
 
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Bought the house I currently own in '98. Shortly after that the housing prices started to launch upwards. Refinancing became all the rage as the interest rates had dropped, and property values were skyrocketing.

Decided to knock down the interest rate on the mortgage and ten years off the current loan, with a 15 year fixed.

So I'm sitting across the desk from the loan officer going through the process, and as she's typing away, without even looking up she asks, "so, how much do you want?"

I say " nothing", she stops cold, and looks at me and says
"no, really,,,,,how much $20,000, $30.000?"

I say "nothing"........I get this stare like I have a third eye in the middle of my forehead.

Paid my house off early this year........Great Feeling!!!

Knew many people back then pulling money on the inflated equity through refinance, all are trapped in underwater mortgages still today.
 
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Do what you feel is best and let the "experts" worry about their own issues.

We're about half way thru a 15 year note and see no reason to change it.
 
Paying off your house is fine if you still have plenty of liquid assets afterwards. If paying off your house leaves you with no cash, it's a bad idea.
 
I say pay off the mortgage as soon as possible and keep the plastic to a minimum.

I'm single but this scenario could apply to anyone.I paid off my mortgage some years ago then started building up a cash reserve incase I got injured or laid off for an extended period.Little did I know what the future was about to dump in my lap.

I was forced into retirement at the age of 58.My pension amounted to a measly $782/mo. and if I still had that home mortgage ($650/mo.) I wouldn't be here today.I take a small amount of money from my 401k to supplement my pension and that money has replaced itself each year with the percentage of return I make.I plan on delaying Social Security until age 66 (2yrs from now) and will no longer have to touch the 401k.

I would suggest to anyone listening to live within your means and prepare for the worse.It doesn't always happen to "the other guy".

Having foresight beats out hindsight every time.
 
I guess it depends on your income tax bracket or what you are trying to do with your money. I know a guy who has a business and makes at least 1M a year. I know what he owns because he is my wife's BIL. He has 3 or 4 houses, one worth several million, and one on a lake that he uses as recreation property. We talk about money from time to time and he told me didn't actually own any property free and clear. He leases his office space, he has several offices, and has mortgages on all of his houses.

Not exactly sure why he does that except I know he has an accountant that advises him. I think his goal is to not own any real estate but to make as much money as he can with plenty of investment capitol. He's purchased several law firms in the past 5 years and made them part of his. The guy has money to burn. He likes boats and has 2 or 3. I don't mean small boats either, 28' and bigger. I think he pays cash for those. He leases all of his cars through his business.

I would think the guy would own his real estate but I guess he has better things to do with his money.
 
LostintheOzone said:
I guess it depends on your income tax bracket or what you are trying to do with your money. I know a guy who has a business and makes at least 1M a year. I know what he owns because he is my wife's BIL. He has 3 or 4 houses, one worth several million, and one on a lake that he uses as recreation property. We talk about money from time to time and he told me didn't actually own any property free and clear. He leases his office space, he has several offices, and has mortgages on all of his houses.

Not exactly sure why he does that except I know he has an accountant that advises him. I think his goal is to not own any real estate but to make as much money as he can with plenty of investment capitol. He's purchased several law firms in the past 5 years and made them part of his. The guy has money to burn. He likes boats and has 2 or 3. I don't mean small boats either, 28' and bigger. I think he pays cash for those. He leases all of his cars through his business.

I would think the guy would own his real estate but I guess he has better things to do with his money.
Click to expand...
What's he really got if he cashes out today?
 
gregintenn said:
What's he really got if he cashes out today?
Click to expand...

Well, he has considerable equity in his houses, probably at least 50% or better on the ones he's owned for awhile. He doesn't buy boats on credit. I'm not sure what they're worth but it has to be plenty. I think his business is his primary investment. Not sure what that would be worth. I just goggled his business and he has 7 law offices. He doesn't have any partners in the business so I think he is the sole owner.

I honestly believe he thinks real estate is just too risky these days to invest in with the bubble we just had, although he did buy a house on a lake about 3 years ago. Probably 25% down with a 3% mortgage which was the rate back then. He doesn't live in it and keeps it for a family retreat.
 
LostintheOzone said:
Well, he has considerable equity in his houses, probably at least 50% or better on the ones he's owned for awhile. He doesn't buy boats on credit. I'm not sure what they're worth but it has to be plenty. I think his business is his primary investment. Not sure what that would be worth. I just goggled his business and he has 7 law offices. He doesn't have any partners in the business so I think he is the sole owner.

I honestly believe he thinks real estate is just too risky these days to invest in with the bubble we just had, although he did buy a house on a lake about 3 years ago. Probably 25% down with a 3% mortgage which was the rate back then. He doesn't live in it and keeps it for a family retreat.
Click to expand...
So, he owns three boats?
 
Old TexMex said:
Bought mine with cash. Taxes are over 5k every year. Who's the landlord??
Click to expand...

If.... TSHTF for me....... I'd rather have to come up with $416 a month than......

Around here that level of tax represents a $500,000 to $600,000 property..

or $416/moth in escrow (taxes) and $2,500/month towards principle and interest on a $500,000 mortgage.......

In the not so distance past a $500,000 30 year mortgage; would, over those 30 years cost you $1,000,000...... at 3-4% today maybe only $750,000 or more.
 
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I am not smart about money. Never have been. But I really do not like borrowing money. I did take out student loans when I was a young man. Paid them off in less than ten years. Got behind with the IRS at one point, when I was going through a divorce, but caught up in a couple of years.

Did not buy real estate until I was 50, and took out a mortgage to do so. Wound up owning two houses, both with mortgages, when I retired sooner than expected. Was really happy to finally sell one of them at the end of last year and used the proceeds to pay off both mortgages. Put the remainder in the bank, at least for the time being

I know some people enjoy investing, manipulating their money, and some are even quite good at it. I just don't enjoy it, and I actively dislike having to fret about it.

Free and clear feels great!
 
Having a tax deduction is nice. But I have a hard time with it when you think of it as "buying" the right to take a tax deduction. You pay $x/month, to get <$x/month credit on your tax bill. For us we'd rather not pay the $x in the first place. And that's not counting the interest on the loan itself.

Paying it off was as much for our own mental calmness as anything else. And it is astounding how it frees up money for other things.
 
There's a statistic that comes into play when deciding whether to pay off your home or to invest the money elsewhere.

Without exception 100% of all foreclosures occur on homes with a mortgage. It's your home. Knowing it's paid off is a great comfort.

There's also another way to look at it . . . if your home was paid off would you take out a mortgage to invest in futures, mutual funds, GM stock, etc. etc.? For most of us the answer is no way. The ones who say yes, must have a REALLY high tolerance for risk.
 
We paid Our Home off as soon as We could.Now We always have a Roof over Our Heads.
The extra Money we have is really handy,Instead of giving it to the Bank each Month we can do what We want with it.
 
gregintenn said:
So, he owns three boats?
Click to expand...

I don't know what his net worth is. For all I know it could be several million. I think his personal goal is to own the largest law firm in the area. Looks like he may already be there.

If we are talking about residential real estate here's a good comparison to other investments.

For the period 1890-2005, inflation-adjusted home prices rose just 103 percent, or less than 1 percent a year.
History says home real estate is a bad investment - CBS News

A lot depends on the interest rate on your mortgage. A lot also depends on what you are doing with the money instead of paying your mortgage down with extra payments. If you purchased a house in 2006 and for some reason lost your job in 2012 the best possible scenario would be to have some cash on hand or liquid investments to bridge your mortgage payments until you could find work. Cash is king in a bad economy. Why did so many people get foreclosed on during that period? It wasn't because they had too little money in their house, it was because they didn't have enough cash to carry them through.
 
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