mesquite77
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Post by mesquite77 on Feb 21, 2011 1:22:51 GMT -5
Imagine that you had no mortgage payment. What would or could you do with the extra money? Liquidity is the new black. And I love to wear black. What extra money? That would mean I have a couple hundred thousand that I can't touch. I'd much rather have that cheap money (4.5% over the next 30 yrs) working for me.
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schildi
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Post by schildi on Feb 21, 2011 1:25:38 GMT -5
Imagine that you had no mortgage payment. What would or could you do with the extra money? Liquidity is the new black. And I love to wear black. What extra money? That would mean I have a couple hundred thousand that I can't touch. I'd much rather have that cheap money (4.5% over the next 30 yrs) working for me. It could end up being expensive money, though ....
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Wisconsin Beth
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No, we don't walk away. But when we're holding on to something precious, we run.
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Post by Wisconsin Beth on Feb 21, 2011 11:53:07 GMT -5
I vote for paying off the mortgage and for 2 (non-financial) reasons: 1. I'm definitely a "payoff house before retirement for the emotional security" girl and 2. I listened to my ILs bitch about not being able to retire until the house was paid off for 2+ years (what did they expect was going to happen with a 30 year mortgage started at 55?)
We're not prepaying ours right now but we've got roughly 9 years to go on our mortgage so it should be paid off when we're 50.
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Post by Savoir Faire-Demogague in NJ on Feb 21, 2011 12:02:59 GMT -5
Just to name a couple of differences, I'd say liquidity and transaction costs.
Selling real estate in the last few years has been a very trying experience. Sellers rarely get anywhere near their asking price. Homes sit unsold for easily a year or more, even with deep cuts in asking price. Cash has always been king.
Man, talk about transaction costs.
Oh please. Talk about a rip off of the consumer.
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Post by Savoir Faire-Demogague in NJ on Feb 21, 2011 12:05:24 GMT -5
I listened to my ILs bitch about not being able to retire until the house was paid off for 2+ years (what did they expect was going to happen with a 30 year mortgage started at 55?)
I'm not seeing the correlation. They dumped two years of payments into paying off a mortgage, and lost all the liquidity. They could have still retired, and continued to utilize the cash they had to make payments.
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RoadToRiches
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Post by RoadToRiches on Feb 24, 2011 12:29:50 GMT -5
another vote for paying off mortgage.
I have never met anyone with paid off mortgage that told me they wake up every morning wishing they had mortgage payments.
I am 35. I am working on my debt payoff plan. Next thing up, paying off mortgage. I don't really care what all the numbers "if this, if that, 10% crap" mean. I want paid off mortgage and peace of mind. But that's me.
About that story... what did the woman do in 20 years with her money since she paid off her mortgage? There is more to the story I think.
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Deleted
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Post by Deleted on Feb 24, 2011 13:00:43 GMT -5
We kind of landed in the middle of these 2 schools of thought by locking in a 15 year fixed last fall at 3.5% (the 30 year rate at that moment was 4.125%). We plan to never prepay this amount at this rate.
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qofcc
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Post by qofcc on Feb 24, 2011 15:27:45 GMT -5
"I can't retire earlier (insurance reasons). "
If health insurance is the only thing keeping you from retiring early and enjoying the rest of your husband's life, then I would re-evaluate that statement. I'm not sure what the options are where you live, but around here, a small business owner can get group health insurance (BCBS HMO and other good options) through a state plan with payments about what I pay for a plan at work (about $250/mo for a family plan). A part-time private tutor could be considered a small business owner.
But as to pre-paying the mortgage, as long as you have other investments, an investment with a guaranteed 5% return is not bad at all for the conservative part of your portfolio. It sounds like the balance on your mortgage is small compared to the size of your investment portfolio.
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phil5185
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Post by phil5185 on Feb 24, 2011 17:38:28 GMT -5
I have never met anyone with paid off mortgage that told me they wake up every morning wishing they had mortgage payments.I am 35. I am working on my debt payoff plan. Next thing up, paying off mortgage. I don't really care what all the numbers "if this, if that, 10% crap" mean. You never met me. Years ago, when we had 2 of our 4 houses paid-off, I realized that my ReturnOnEquity had taken a big hit and that my Net Worth plan went flat. And your description fit me, woke up each day wondering what the check was I thinking? Refinanced 3 of the houses, and have refi'd some of them multiple times. Got one 30-yr mortgage at age 64. But there is no wrong answer - you can have either safety or wealth but not both, so each of us gets to pick.
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Post by debtheaven on Feb 24, 2011 18:15:35 GMT -5
But there is no wrong answer - you can have either safety or wealth but not both, so each of us gets to pick.
Phil I basically agree with you but not completely ... I think you CAN have both. Perhaps not "as much" wealth, but perhaps "enough"?
I feel we basically have "enough" wealth now. Yes obviously I am continuing to build our wealth, but on MY terms, and within my definition of "safety".
IOW, like everything else, it's not necessarily either-or, it's generally a continuum. Everybody must decide for themselves where they want to be on that continuum.
Also, wealth comes in different shapes and sizes. At this point in our lives, for us, wealth means having more discretionary income. But for sure, we do not have the net worth that Phil does.
But we do have a paid-off house. As does Phil, because Mrs Phil insisted on having that paid-off house, then let Mr Phil do whatever he wanted with their rentals. ;-)
ETA: One caveat: I am in Europe and health care is not the issue here that is in the US.
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kansasflower
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Post by kansasflower on Feb 24, 2011 22:04:14 GMT -5
I've taken the route that mmc has done. Refi'd to a 15-year low rate (4.25%, guess I missed the super low 3.5% rate...). When the rates drop and the new 15-year mortgage is about the same as the old 30-year note, it can be a painless move.
I don't understand the outright aversion to paying off a home. As long as a person is adequately funding other aspects of life (retirement, emergency fund, etc), the next best thing is to pay down your mortgage. Someone else said it, but balance is the key.
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suziq38
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Post by suziq38 on Feb 26, 2011 13:35:33 GMT -5
I like the idea of a paid off mortgage by the time you retire. You could always buy another house and have a mortgage with the next house.
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schildi
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Post by schildi on Feb 26, 2011 16:21:03 GMT -5
But there is no wrong answer - you can have either safety or wealth but not both, so each of us gets to pick.
I don't think so. But it always depends on your definition of wealth, I guess. As an example, I would consider my parents as wealthy, but they never invested any money in the stock market. They just both worked, with two high incomes. They were never the market risk kind of people, but are still wealthy. I think they still have a lot of investments that pay them a fixed 7% rate. Another example is a friend of mine. He "does not want to waste his time with the stock market". That's what he says. He does not invest, but he owns a company with 180 employees. Yes, he is wealthy, by any standards.
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SVT
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Post by SVT on Feb 26, 2011 16:34:12 GMT -5
But there is no wrong answer - you can have either safety or wealth but not both, so each of us gets to pick.
I don't think so. But it always depends on your definition of wealth, I guess. As an example, I would consider my parents as wealthy, but they never invested any money in the stock market. They just both worked, with two high incomes. They were never the market risk kind of people, but are still wealthy. I think they still have a lot of investments that pay them a fixed 7% rate. Another example is a friend of mine. He "does not want to waste his time with the stock market". That's what he says. He does not invest, but he owns a company with 180 employees. Yes, he is wealthy, by any standards. Right, so instead of taking risk in the stock market, he's taking a risk with his income by owning a business, with a presumably very high income. If I owned a business, I would risk very little in stocks.
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schildi
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Post by schildi on Feb 26, 2011 16:43:21 GMT -5
I don't think so. But it always depends on your definition of wealth, I guess. As an example, I would consider my parents as wealthy, but they never invested any money in the stock market. They just both worked, with two high incomes. They were never the market risk kind of people, but are still wealthy. I think they still have a lot of investments that pay them a fixed 7% rate. Another example is a friend of mine. He "does not want to waste his time with the stock market". That's what he says. He does not invest, but he owns a company with 180 employees. Yes, he is wealthy, by any standards. Right, so instead of taking risk in the stock market, he's taking a risk with his income by owning a business, with a presumably very high income. If I owned a business, I would risk very little in stocks. His business is way less risky than the average job, I have to say. He is paid mostly by tax money, with a lot of guarantees. All based on subsidized renewable energy in Europe. No, not much risk, he was just very smart at the right time. That's not the average business, I agree, but it sure does exist. He builds / operates wind farms. Before he puts up a wind mill, he has a contract with the power company that they will buy the energy for at least xx euros per year for the next 20 years. It's the law, the power company does not have much of a choice. Kind of a neat business model, isn't it? The only risk is the amount of wind blowing, but that is very low because good statistical data exists for different areas.
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