Bonny
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Post by Bonny on Nov 26, 2022 10:42:44 GMT -5
Ummh, what is going on here? If you have no intention to borrow again, you have no reason to juice up or maintain your credit score by making sure that you have current installment loans.
Why are you using the effect on your credit score (which is probably excellent, and could easily take a 50-100 point hit without you paying a cent of additional interest on any new credit line) to justify either the decision to pay off your mortgage or not do so?
I'm beginning to wonder if you've done any math at all. You appear way too interested in paid-off houses and high credit scores. Those things have a role in personal finance, but they pale in the face of compound interest.
Because other things than borrowing affect how much you pay for other things. I occasionally change credit cards and have been denied for a cards for not having ‘enough’ on my report. My score is lower than I would like it to be, and it has dropped well over 100 points since I paid off my car. I have no debt, and since I paid for my car over 7 years ago, it dropped even more since my car dropped off my credit report. Despite being married, if something happens to TD, I will be required to get things on my own again. That includes getting utilities in my name, or possibly buying another home. It used to be I had sufficient that I never had to put a deposit down. I doubt I’d get that now. Oh, and I get the math part, but I guess you didn’t see the part about paying it off quickly to avoid much interest. Mich, What is your current credit score?
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Ava
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Post by Ava on Nov 26, 2022 10:53:33 GMT -5
You have the financial means to do what makes more sense to you. And you're retired so it's not like you have a 401k to max out.
In your particular situation I will pay it of if that's what you want to do
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azucena
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Post by azucena on Nov 26, 2022 11:06:09 GMT -5
Only on YM could a retiree get the advice to payoff their mortgage but be sure to save the monthly payment.
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Post by minnesotapaintlady on Nov 26, 2022 11:08:21 GMT -5
Ok, so you don't really care about the tax deduction and you're higher income and give a 1/3 of it away as it is not including what you put in the grandkids accounts. The tiny difference investing vs paying off a 55K mortgage over 7 years is irrelevant in the big picture so just do whatever you want.
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Post by minnesotapaintlady on Nov 26, 2022 11:10:02 GMT -5
Thought if using the standard deduction only get $600 for charity deduction even if giving more? We’ll probably use the std deduction for first time next April. She itemizes and would even without the mortgage.
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Post by The Walk of the Penguin Mich on Nov 26, 2022 11:12:26 GMT -5
Because other things than borrowing affect how much you pay for other things. I occasionally change credit cards and have been denied for a cards for not having ‘enough’ on my report. My score is lower than I would like it to be, and it has dropped well over 100 points since I paid off my car. I have no debt, and since I paid for my car over 7 years ago, it dropped even more since my car dropped off my credit report. Despite being married, if something happens to TD, I will be required to get things on my own again. That includes getting utilities in my name, or possibly buying another home. It used to be I had sufficient that I never had to put a deposit down. I doubt I’d get that now. Oh, and I get the math part, but I guess you didn’t see the part about paying it off quickly to avoid much interest. Mich, What is your current credit score? Last time I looked, high 600s. It was 100+ more before. The only thing that has changed is that my car payments dropped off my credit report. The credit cards I have, I have had 30+ years and are paid in full each month.
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pooks
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Post by pooks on Nov 26, 2022 14:57:51 GMT -5
I would pay it off. I always like some of our money to be fairly safe and this is 3% return with no taxes and no risk.
Our mortgage is paid off and our credit score took a 50 point hit. It is still high and hasn't had an impact on car insurance or qualifying for other loans.
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steph08
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Post by steph08 on Nov 26, 2022 20:01:19 GMT -5
You seem to have plenty of money for your wants and needs, so if that $700 monthly payment is becoming a pain, then pay it off!
But, I have always hated mortgage payments and do whatever I can to shorten them. We refinanced to a 15-year mortgage last year and at 1.75% (paid a point or two), it doesn't make any sense to pay it off early, but I still feel the need to put more money on it (I have resisted so far).
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Bonny
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Post by Bonny on Nov 27, 2022 15:44:58 GMT -5
Mich, What is your current credit score? Last time I looked, high 600s. It was 100+ more before. The only thing that has changed is that my car payments dropped off my credit report. The credit cards I have, I have had 30+ years and are paid in full each month. Wow! That seems super low given your long history and I presume long time history of on time payments. Are there any negative marks? We're still in the 815ish range with a small mortgage but no car payments for over 25 years. We have three active CCs. Is your name on any utilities?
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Post by The Walk of the Penguin Mich on Nov 27, 2022 16:56:23 GMT -5
Last time I looked, high 600s. It was 100+ more before. The only thing that has changed is that my car payments dropped off my credit report. The credit cards I have, I have had 30+ years and are paid in full each month. Wow! That seems super low given your long history and I presume long time history of on time payments. Are there any negative marks? We're still in the 815ish range with a small mortgage but no car payments for over 25 years. We have three active CCs. Is your name on any utilities? I had a medical account that wound up in collections (stupid story in that after my medical nightmare I was trying to pay everything off about 6 months after I had been released. I asked for a final balance, paid it and was quoted $70 short. I was never billed, and it wound up in collections. I paid it off in 2013, so should have dropped off by now too.). I have no utilities in my name.
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Post by minnesotapaintlady on Nov 27, 2022 17:39:40 GMT -5
Utilities don't report anyhow. At least none of mine do.
Do you use Credit Karma to track? It's free and let's you know what is dragging you down if anything. DS checked his when he was home over Thanksgiving and his score is 755 with nothing but being an authorized user on a few of my cards and a couple small federal student loans that are still in deferral for a couple years yet. It says he has a 3 year credit history and 6 accounts (his only negatives).
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seriousthistime
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Post by seriousthistime on Nov 28, 2022 13:37:08 GMT -5
I paid off my mortgage a few months ago. My credit score has fluctuated since then, up or down the same <5 points.
When I paid off my car a few years ago, I don't think there was much effect on my credit score.
If you're going to finance a car to increase your credit score and then pay it off soon after, beware the Rule of 78s. About half the states have outlawed this rule that more heavily weights the interest charges early in the loan, more so than simple interest does. Federal law outlaws the use of the Rule of 78s for loans greater than 61 months, so if you are taking out a car loan with the intent to pay it off quickly, go for a loan greater than 5 years.
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Deleted
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Post by Deleted on Nov 28, 2022 14:19:02 GMT -5
If you're going to finance a car to increase your credit score and then pay it off soon after, beware the Rule of 78s. About half the states have outlawed this rule that more heavily weights the interest charges early in the loan, more so than simple interest does. Federal law outlaws the use of the Rule of 78s for loans greater than 61 months, so if you are taking out a car loan with the intent to pay it off quickly, go for a loan greater than 5 years. No way! The last car I financed through a car loan (later used HELOCs) was in 1991 (I have a long memory). They folded the cost of the rustproofing and burglar alarm system (yeah, I know ) into the loan and made it 36 months even though I wanted 30 months. I added the costs of the extras to the first payment and then calculated what it would take to pay it off in 30 months. I found after 30 months I still owed $1,000 because the finance charge did not decrease if you accelerated payments- only if you paid it off in a lump sum. Never again. If I were to finance a car I might use a HELOC. Hopefully that won't be for a long time.
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seriousthistime
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Post by seriousthistime on Nov 28, 2022 14:52:06 GMT -5
No way you'd ever finance a car for greater than 5 years, @athena53? I said that only in regard to taking out a loan with the intent to pay it off quickly. Then you'll only have to pay simple interest as opposed to front-loaded interest. The duration doesn't matter in that instance, except as to how interest is charged. I'd take out a 10 year car loan if I had to, and pay it off after a month, just to ensure I was only charged simple interest.
When I paid off my 5-year loan after 4 years of payments, I was paying something like $5 per payment in interest. The payments in the first year were mostly interest. It was at a 0.9% interest rate, so it was pretty close to paying cash for the car. The only reason I paid it off at 4 years instead of letting it ride to 5 years was because I wanted to free up that payment amount to invest. Kind of like what you want to do with paying off your house.
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Deleted
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Post by Deleted on Nov 29, 2022 9:51:46 GMT -5
No way you'd ever finance a car for greater than 5 years, @athena53 ? I said that only in regard to taking out a loan with the intent to pay it off quickly. Then you'll only have to pay simple interest as opposed to front-loaded interest. The duration doesn't matter in that instance, except as to how interest is charged. Only if I could read the loan document beforehand and that's unlikely to happen. When I financed the Toyota, I'd been waiting 3 hours to get the paperwork done (large dealership, not enough people available, guys in front of me spent ages trying to re-negotiate their deal, it was 9 PM, I had DS with me and it was a school night). They had my trade-in. I just wanted outta there. And would it really do any good to have a car loan on your record that you paid off after only a month ro so?
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seriousthistime
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Post by seriousthistime on Nov 29, 2022 9:54:43 GMT -5
I suspect having a car loan on your record for a month isn't going to do much to your credit score. One month is not a track record.
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Post by The Walk of the Penguin Mich on Nov 29, 2022 12:22:09 GMT -5
I suspect having a car loan on your record for a month isn't going to do much to your credit score. One month is not a track record. If this was meant for me, I’d plan on paying it off in about 6 payments, long enough to get verification of payments. It will cost me a little in interest, but will reset my clock since apparently having only credit cards on my record isn’t sufficient.
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Deleted
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Post by Deleted on Nov 29, 2022 13:01:21 GMT -5
I suspect having a car loan on your record for a month isn't going to do much to your credit score. One month is not a track record. If this was meant for me, I’d plan on paying it off in about 6 payments, long enough to get verification of payments. It will cost me a little in interest, but will reset my clock since apparently having only credit cards on my record isn’t sufficient. It may have been meant for me since I cited an example of paying for only a month. As I noted, I would REALLY insist on seeing the loan docs first or would use a HELOC, which would be far more transparent. At ay rate, I'm driving a 2020 model and hope it will be many years before I have to replace it. OTOH, I could borrow against the HELOC periodically. That's what I like about these Boards- I get a lot of useful suggestions when I'm thinking things over!
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seriousthistime
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Post by seriousthistime on Nov 29, 2022 13:02:13 GMT -5
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Post by The Walk of the Penguin Mich on Nov 29, 2022 13:42:22 GMT -5
If this was meant for me, I’d plan on paying it off in about 6 payments, long enough to get verification of payments. It will cost me a little in interest, but will reset my clock since apparently having only credit cards on my record isn’t sufficient. It may have been meant for me since I cited an example of paying for only a month. As I noted, I would REALLY insist on seeing the loan docs first or would use a HELOC, which would be far more transparent. At ay rate, I'm driving a 2020 model and hope it will be many years before I have to replace it. OTOH, I could borrow against the HELOC periodically. That's what I like about these Boards- I get a lot of useful suggestions when I'm thinking things over! My car is a 2007. It is in excellent condition but I’m looking ahead a few years as unless something happens unplanned, I’m waiting until the car market loosens up some…maybe 2024-25.
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Post by The Walk of the Penguin Mich on Nov 29, 2022 13:43:46 GMT -5
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laterbloomer
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Post by laterbloomer on Nov 29, 2022 14:01:00 GMT -5
One point in favor of paying off the mortgage. A mortgage free house simplifies the process of settling an estate. On the other hand, I saw an article a few days ago where the writer projected 20% gains in the market for 2023. If the fed backs off on interest rates as expected, I think those kind of returns are entirely possible for the next couple of years. Can you point me to that article.
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countrygirl2
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Post by countrygirl2 on Nov 29, 2022 14:51:03 GMT -5
Ours has been in the 800's for years, it always says it would be higher if we had more credit. I use a Mastercard, Pennys sometimes, we have a Lowe's business card, but we rarely use it anymore. Hubs has a bank credit card he never uses.
I called Mastercard and had the balance raised to $35000 and then we paid for his new truck on it in 2021. I paid it off in a few days, just did it to get the reward points!!
We can't stand debt; I pay the credit card off couple times a month. I won't have a mortgage, we did once way back when. I bought a new truck years ago and took my whole salary, working part time that year and paid it off. It was simple interest but that has been, humm, in 2006 I think it was.
I just won't pay those folks interest when we don't have too, waste of money in my book, but I'm old school.
Son is the same way, he only has a credit card, hadn't lived in the states for years. But because he could pay down over half of his house loan this time, he got 2.3% or something like that so guess it didn't hurt him.
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tskeeter
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Post by tskeeter on Nov 29, 2022 18:36:10 GMT -5
One point in favor of paying off the mortgage. A mortgage free house simplifies the process of settling an estate. On the other hand, I saw an article a few days ago where the writer projected 20% gains in the market for 2023. If the fed backs off on interest rates as expected, I think those kind of returns are entirely possible for the next couple of years. Can you point me to that article. No. It was just something I came across that was linked to Yahoo Finance.
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