Advantages and disadvantages of paying off a mortgage early.

[LostintheOzone]

We're in about the same place. Both my wife and I are retired with good income from pensions, social security and investments. All of our investments are professionally managed and the return is around 7%. Our investments grow every year because we don't use those accounts much to live on. We are both fairly frugal in our spending habits and have no other debt except a 50K mortgage at 3.3%.

My feeling is there is no financial incentive to pay this off although we could without any problem. In a few years we will be selling the property and moving anyway so a few years of no mortgage isn't going to matter greatly one way or another. I would rather have the money invested in something other than real estate. I never did like real estate as an investment. Stocks have a history of out performing real estate and when you consider the cost of maintenance, taxes and insurance on real estate the gap is even wider.

There's a reason the fed gives people a break on their taxes when they own a house to live in. If they didn't most people wouldn't have a mortgage and banks would have to find some other way to rip people off. I don't like banks either. I just happen to be beating them at their own game now by using their money to make money.

 

[BAM-BAM]

The two interest rates say no ; your ahead paying $1,600 in interest vs losing $2000-3200 in income ...... also

do you have other funds available in case of an emergency or other need...... hate to have to get a home equity loan if you need cash.

 

[joeintexas]

Couldn't tell you what to do in your situation but I can say we own our home, our vehicles and no credit card debt. It is a good feeling. I'm certainly no financial genius but not making a mortgage or car payment every month works for us. Good luck with your decision.

 

[THE PILGRIM]

As we move into the later innings of life,
The good feeling of Having everything free and clear probably exceeds actual money-interest computations.
If you can come up with the money without causing a problem elsewhere, like taxes or early withdrawal penalties,
There is only upside if you pay off your house!

 

[SweetMK]

As THE PILGRIM says,, there is only upside to being paid off.

Those few dollars that you make on interest can in no way equate to the mental satisfaction of have a paid for home.

We paid our home off in ~1994,, 23 years of not thinking about the payments.

The topic comes up about 4 times a year, the wife and I discuss being paid off.

Usually the discussion occurs when we see someone overextended,,,

 

[Vulcan Bob]

Ok, I'm going to adress this from an emotional point rather than a financial view point. I rather like owning my own home free of debt. The idea of not owing anyone for my home or vehicles is comforting to me. Now I know that I do not really own my home as I do have to pay "rent" to my county and school district's tax bill to keep it.

 

[Golddollar]

Ok, I'm going to adress this from an emotional point rather than a financial view point. I rather like owning my own home free of debt. The idea of not owing anyone for my home or vehicles is comforting to me. Now I know that I do not really own my home as I do have to pay "rent" to my county and school district's tax bill to keep it.

My feelings exactly. I had two bouts of unemployment while I was working and the prospect of losing my house was scary. When I could start making penalty free withdrawals from my IRA I started using the income to pay down my mortgages. I got the second mortgage paid off before I retired and after my dad died the first thing I did was to pay off the first. My retirement came a little earlier than I was expecting and not having a house payment has made retirement a lot easier.

 

[CalmerThanYou]

My wife and I chose to be 100% debt free. It is a super good feeling, and these days applying for a loan of any sort is such a pain, even for well qualified buyers I want nothing to do with credit.
There is some intangible positive to not having loans to answer to. Taxes and other costs of living is plenty to be held accountable for.

 

[wood714]

My wife and I chose to be 100% debt free. It is a super good feeling, and these days applying for a loan of any sort is such a pain, even for well qualified buyers I want nothing to do with credit.
There is some intangible positive to not having loans to answer to. Taxes and other costs of living is plenty to be held accountable for.

It's a great feeling to be debt free. I paid my house off in 10 years, sucks that tax's and insurance will never be paid off.

I have a credit card from my bank I use on almost everything I buy, plus my utilities. It gets paid off every month thou. Getting cash back for using my banks money is pretty cool too.

 

[RSanch111]

Paid mine off as fast as I possibly could. Never regretted it, it's my house now.

It's only "your house" for as long as you pay the taxes.........

 

[RSanch111]

Here's a reason not to pay off your house: If the housing market crashes again and you have a house worth 300k that is now worth 150k what do you do if you need to move for a job or because you're downsizing at that point in your life or for many other reasons?

If you own the house, you take a 150k hit if you need to sell. If the house is worth 150k and you only have 20k into it, you can walk away like "everyone" else did! My house was paid off and both of my neighbors walked away from their houses. Luckily, I didn't have a compelling reason to move and was able to ride it out.

One neighbor mortgaged his house, took every bit of equity, bought another house for cash and left the house next to me for the bank to deal with.

Mortgage fraud, you say? It's a lot less "fraudy" when "everyone is doing it". Local prosecutor wouldn't touch a case of suspected fraud for under a million dollars. Feds' threshold was even higher.

Ruined credit rating? Not forever.

After that fiasco, I'm a lot more likely to live in my next houses with "OPM"; Other peoples' money--And put my own into mutual funds.

 

[H Richard]

Romans 13, Vs 8. "Let no debt remain outstanding except the continuing debt to love one another".

Just think, you would have the added income of whatever your mortgage payments were. How many S&W's could you buy that might go up in value, as well as enjoyment.

 

[TheHobbyist]

Get a reputable financial advisor. Period.

Step #2, pay off your debts.

Step #3, You did NOT free up money; instead, take that money that is no longer associated with a monthly bill and invest it.


This is the best financial advice I ever got in my life. Your mileage may vary. Stay diligent.

 

[TheHobbyist]

Please understand this is meant with the greatest sincerity. I wish you the best. Stay focused and determine your goals. Reward yourself periodically for staying the course.

 

[BigBill]

My first mortgage payment was $191 per month. The interest rate was very low, we let the mortgage run its 30 year stretch. I invested the extra money. My coporate job offered me a 401k I put in 6% to 16% of my pay which they gave me 10% interest every year. Plus they matched my amount with their 3%. They told me (example) for a $29k investment in 8 years they would give me $79k for a 6% investment of my pay. I put in 16% right away. The company stock did split. I'm not rich at 67yo but comfortable. I say invest now you younger guys. Keep on top of your health too. At 70yo it's all tax free if you withdraw it. Spend just enough to support yourselves and bank/ invest the rest even if it's 6%. Do it now. It's a roller coaster ride, up and down following the stock market but remember with the down market your buying more for less. When the market goes back up it doubles your money. You can't win if you don't play, invest for yourself.

I always had two or three jobs in my younger days. I grew up poor I was happy to have a p&j sammich and a 25 cent Coke to wash it down. Before this I was taking back deposit cans/bottles so we had bread to eat. I quit school to earn money. Just stay focused on the prize.

 

[Lee's Landing Billy]

I am old and Southern. All of us were taught when you own your home you are bullet proof.
We haven't had a mortgage in a L O N G time. In our part of the world if someone is 60 years old and still has a house payment, it is generally accepted he made some bad decisions somewhere.
Pay off your house. I have friends that were fat in investments and in 60 days had lost 70% of their portfolio. Put that money to good use while you have the opportunity. Making money aggressively, also puts you I'm a position to lose it aggressively.
I wish you nothing but the best of luck with your decision.