Mortgage Debt Paydown

[trimatty471]

Yesterday I finally got serious about paying off my mortgage. I have been in my house for 5yrs and now owe approx $92,000.

What brought this on was when I tried refinancing but I did not get the good rate b/c my appraisal value dropped 10% and the bank were only going to give me a 1% rate decrease.

Did any of you pay off your mortgage prior to 20/30 yrs? How long did it take you?

[dancinmama]

House #1: 10 or 11 years.

House #2: Less than 2 years.

House #3: 5 1/2 years and counting.

[trimatty471]

Thanks for the reply. I am definitely the average working Schmo. I just hate having debt hanging over my head.

[blackcard]

Current home, if all pans out well, in about 2 or 3 more years. That will be about 7 years of mortgage payments.
If we had kept the full term we would have paid about $245K interest. By making big extra payments, we will pay only $43K in total interest. That leaves us with over $200K interest savings.

[upstatemom]

Mar 19, 2011 19:36:52 GMT -5 blackcard said:

Current home, if all pans out well, in about 2 or 3 more years. That will be about 7 years of mortgage payments.
If we had kept the full term we would have paid about $245K interest. By making big extra payments, we will pay only $43K in total interest. That leaves us with over $200K interest savings.

Karma for you! Impressive goal to pay off 69000 in 3 more years. Keep us posted

[blackcard]

Karma 4 me? ooooohhhhh thank you. Karma coming right back at you upstate.

[Deleted]

We had a 15 year mortgage... paid it off in seven.

[debtheaven]

Trim, I just want to point out that "common wisdom" is that if you are planning on staying there for a while, is is generally worth doing a refi if you are going to gain a full point. I'm not telling you to do it, but I would certainly consider it. Remember, you can STILL choose to prepay your mortgage even after the refi, but you'd be paying lower interest in the interim.

We did not prepay ours much (only by 3K), but 15Y mortgages are standard here (France) so DH and I paid off ours at 47 (me) and 51 (DH).

WOW did that feel GREAT! Three and a half years later, it still does!

[blackcard]

LuAnn wonderful! Just what we are trying to do. About the same timeframe also.

Karma 4 LuAnn

[yogiii]

Wow, we have been paying down also. Glad to see some other people feel the same way. With the interest rates on savings the way they are, I figure why not. The only debt we have is our mortgage. We should be 3.5 years into a 30 year loan and right now we have 16 years left. We recently had a baby so not sure if we'll be able to stay as aggresive now that our expenses will go up some but just the fact that we've reduced it to close to 15 makes me very happy. Hoping to still make extra payments when we can swing it though

[Clever Username]

Remember the key is BALANCE!
Yes, paying off the home is a good financial goal.
But not if it causes you to defer other goals such as staying otherwise debt free, building savings and retirement assets.

[yogiii]

Agreed, I should have mentioned we fund our retirement first!

[dragon2008]

My scheduled payoff date is 12/31/2014 (when I make the final large payment). I have been paying on this mortgage since November 2003, but only got really serious about paying it down in 2009. I chose a particular mortgage that would force me to pay the darn thing off, and I'm really glad I got it - the more accountablility the better!

It also helps that my best friends just paid off their mortgage early and I'm so jealous!

[shanendoah]

If we stay paying extra at the rate we are now, we'll only pay off our 30 year mortgage about 2 years early. However, we're currently sticking all of our extra money in to student loan repayment. The plan is, once we get the SLs paid off, to put the money going toward that toward the mortgage. That will have us paid off about 13 years early, and assumes that our income level and total debt payment stays exactly as it is now. Hopefully, that will not be the case over the next 11 years.

[Wisconsin Beth]

DH bought the house a couple of years before we met. He was paying extra to principal then. He refi'd in 2004, about 6 months before we were married so I'm not on the mortgage. We've got a 5.25% interest rate and owe about $39K on the house. We will likely take the entire 15 years to pay it off.

I wouldn't mind paying it off faster but we've got 2 toddlers in dcp three days a week and we're trying to ramp up our IRA/Roths this year, so prepaying the mortgage isn't high on the list of priorities right now.

[gooddecisions]

"Did any of you pay off your mortgage prior to 20/30 yrs? How long did it take you?"

No, I'm a conscientious objector of prepaying a mortgage. I shell out $20,000/year in retirement accounts and another 10-15K/year in taxable accounts and that's about all I have to work with on my modest income. My goal is to have 20x as much as my mortgage with the flexibility to pay off my mortgage with those funds if I had a dire need. If I had a health crises or long term unemployment, I could not live off my partially paid off house. And, unfortunately my mortgage payment would be the same, I'd be too young for a reverse mortgage and there would be no way to refinance without a job.

That said, if prepaying a mortgage is the only motivation/method a person has to "save", I guess that is the right decision.

[debtheaven]

Gooddecisions
I totally respect your point of view. I find, however, that sometimes people assume that if you are pre-paying your mortgage (which I didn't do, as I said above) it implies that you are not saving for retirement or any other goals.

As I usually say, it rarely has to be either-or. But I do see your point.

WisconsinBeth
It bothers me that seven years after that refi and a marriage and two kids later, you are still not on the mortgage. Why not? I do understand that DH originally purchased the house on his own. I'm in France so I'm not up on US law but it would bug me to be paying off a mortgage for a house I did not partially own. I'm guessing that like here, if Gd forbid anything happened to either of you, the other would be in a much better financial position if they were a joint or co-owner. Perhaps that's not an issue in your state, but I would encourage you and your DH to make sure.

[blackcard]

Yes, it really is amazing how people assume, assume, assume, that every dollar of your income goes to paying off your mortgage! Our retirements accounts are fully funded every month up to the full 401k match. IRA's are funded fully each year. EF is now at a full 39 months and still adding to it.
On top of that, we still have some extra money to enjoy life daily.

[gooddecisions]

I don't see anywhere in this thread where anyone assumed that paying off your mortgage meant not funding retirement accounts, etc. Although I will say only contributing up to the employer match may not be enough- especially if that employer match is only 6% and the IRS limits continue to be only 5K/year for an IRA. If BOTH spouses are MAXING out (not just matching) retirement accounts and funding taxable accounts and still have disposable income then by all means, prepay the mortgage if that makes you happy. Or, just prepay it and save minimal outside the mortgage if that gives you the outcome you want.

Everyone's situation is different. Chances are I'm not going to stay in my home another 23 years, and will have a need to sell it plus buy another. That means I could have two mortgages at the same time, which would also make stock piling that money outside the mortgage a lot more convenient than relying on a sell to qualify for a new mortgage. If I do stay in it 30 years, my mortgage payment will be minimal given the inflation rate and I'll have more than enough money to continue making the regular monthly payments. Yes, that means paying more interest in the long run, but if my wealth building plan works- the market growth in my investments will be significiantly higher than any mortgage interest I paid.

Really, I was just providing a different wealth building strategy the OP might not have considered that provides a lot more options in the event of loss of income or a health crises (the number 1 and 2 reasons people lose their homes) while still providing the peace of mind that you could pay off the mortgage if you wanted/needed to.

[Agatha]

I moved into my current home three years ago with a 30 year mortgage. I already owned another home in another state and was in the process of selling it but this house came up. I didn't want to wait. The first house was mortgage-free, btw.

After my first house sold, I spent some of the cash, stashed some in savings (thank goodness, since I had major plumbing problems here the first year). I didn't have quite enough money left to pay off the current house and didn't want to/didn't have to refinance. So I placed the rest in a 5 year CD. In 2013 I will have ample funds to pay this house off.

Yes, I throw a little bit extra at the principal each month but that has more to do with the notion I like whole numbers so I round things up. It makes bookkeeping easier for me, the mathematically challenged. I do that to all my bills. The utilities don't complain.

[Clever Username]

Mar 21, 2011 18:24:06 GMT -5 @debtheaven said:

WisconsinBeth
It bothers me that seven years after that refi and a marriage and two kids later, you are still not on the mortgage. Why not?

One quick clarification.
There are two parts to this equation.

1. Mortgage. Who owes the money. Really the only benefit to adding a spouse onto a mortgage would be to list a positive ontime payment each month when you pay ontime.

2. Ownership. For about $20 you could file a paper to add the wife as co-owner of the property. This may have been done, it was not noted in the PP.

But even thinking worst case scenarios...
One key element of divorce proceedings is the division of assets.... regardless of whose name is on it, this will be discussed.
And if he should kick the bucket instead, the home is in his estate, where the wife typically figures prominently.

[phil5185]

Yes, it really is amazing how people assume, assume, assume, that every dollar of your income goes to paying off your mortgage! Our retirements accounts are fully funded every month up to the full 401k match. IRA's are funded fully each year. EF is now at a full 39 months and still adding to it.

'Fully funded to the match' is way different than 'fully funded' ($16,500/yr each).

[Wisconsin Beth]

WisconsinBeth
It bothers me that seven years after that refi and a marriage and two kids later, you are still not on the mortgage. Why not? I do understand that DH originally purchased the house on his own. I'm in France so I'm not up on US law but it would bug me to be paying off a mortgage for a house I did not partially own. I'm guessing that like here, if Gd forbid anything happened to either of you, the other would be in a much better financial position if they were a joint or co-owner. Perhaps that's not an issue in your state, but I would encourage you and your DH to make sure.


One quick clarification.
There are two parts to this equation.

1. Mortgage. Who owes the money. Really the only benefit to adding a spouse onto a mortgage would be to list a positive ontime payment each month when you pay ontime.

2. Ownership. For about $20 you could file a paper to add the wife as co-owner of the property. This may have been done, it was not noted in the PP.

But even thinking worst case scenarios...
One key element of divorce proceedings is the division of assets.... regardless of whose name is on it, this will be discussed.
And if he should kick the bucket instead, the home is in his estate, where the wife typically figures prominently.

*-*-*-*-*

The short answer to why I'm not on the mortgage is procrastination in dealing with the paperwork at the County Courthouse and to the lender.

DH and I combined money and we both have excellent credit in the low 800s. This just hasn't been real high on our priority list.

[debtheaven]

I don't see anywhere in this thread where anyone assumed that paying off your mortgage meant not funding retirement accounts, etc.

Good Decisions, sorry for the misunderstanding. I agree, it was nowhere on this thread, but it usually comes up in these discussions, especially at YM.

WisconsinBeth / Clever Username
This just hasn't been real high on our priority list.

I would not be comfortable with that situation. Rectifying it would be a priority to me, but I do realize I'm pretty anal about these things.

[blackcard]

<<'Fully funded to the match' is way different than fully funded ($16,500/yr each).>>

'Funded to the match' is receiving free money, equal to what we put into it. After that we fully fund our IRA acconts to the legal limit $5,000 each.

We want to fully fund our 401K's? Are you kidding? The only reason these Mutual fund companies are so profitable, are from the huge fees that they impose on people. We have better investing choices.

Phil, I am sure we are doing it all wrong, by paying off our home. I have lurked for a few years, and read many of your old MSN posts. We are trying to establish a high income, debt-free cash flow. I know, all wrong, according to you.


For us, having a paid off home is a priority. Besides, like another poster used to always say. "Please show me how to live in my 401K"

[gooddecisions]

"Please show me how to live in my 401K"


That's like saying you can't live in your $4MM bank account. No, but with your 401(k) and taxable accounts, you can buy or continue to live in whatever house you want and not worry about paying for tax increases, health problems or the other bills that you can't pay prepay. You can't live in a house if you don't have the funds to continue to pay everything else associated with it.

[Wisconsin Beth]

I would not be comfortable with that situation. Rectifying it would be a priority to me, but I do realize I'm pretty anal about these things.

Debtheaven, we've got a lot of "paper" stuff to deal with like wills, POA, etc too. The house is in that mix too.

[Clever Username]

Beth.
One quick note. The only way to add someone as liable on a mortage is to refi. If they are not offering better rates/terms. Don't waste your time.

But you note a 5.25% rate with 15 years left. You can probably refi this into a 4.25 at 15 years. Depending on closing costs and how long to recoup, it might be a good time to refi.

Again, the only big downsides I see to not being on title is it puts you in a tougher position to argue in a divorce that you deserve equitable interest for your contribution towards the payment.

The other major issue would be if he has some old will laying around somewhere that specifically gives it to someone else.

As for helping the procrastination.
Quit claiming you onto the property should cost less than $200 to hire an attorney and it'll take less than a half hour.
Refi is a bit further along on the effort scale. I think they're worse than doing your own taxes.
But even so, I'm working on one right now and I'm shaving over 2% off of my rate.

[Wisconsin Beth]

Actually, Clever, it's 5.25% with 9 years to go on what was a 15 year mortgage with Wells Fargo. DH has looked at a refi and says we'd need a rate under 3.5% to make it worth doing. We owe about $39K right now on it. I don't remember his criteria for a refi offhand but we've talked about it and it made sense at the time.

My sister's a lawyer, if DH and I were to divorce, she'd be there helping me deal with it. ;D No old will for either of us. We did do all the changes at work for insurance/401K/457B/etc. So that's done.

Yeah, the procrastination is the kicker. I checked into the quit claim stuff a while ago and we have to do forms on the County Courthouse level plus the quit claim and get me on the title. I finally got the forms for that and we just need to fill them all out. I think doing it ourselves is like $30 and however long the line is in the deeds area. We've got no excuse for not handling it prior to this, really.

[Clever Username]

Ah, I missed that note about the age of your loan.
I'm working on a refi of a 10 year loan at 4.0.
My loan balance isn't much more than yours, so I'd been kicking around with a seemingly high interest rate of 6.875.
Same deal as you're looking at. Becuase it'll cost $1-2k to refi, you need to have a big drop in rate to justify spending that money.
Personally, I think of a 1 year break even point.

For example, you only pay about $2000 a year in interest on this loan.
If they charged $2000 in closing fees to refi, you'd basically need a 0% loan to break even in a year.
Crazy, huh?