Pay off the house or not?

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Buy another place and rent it out!

To put it simple, lets say you're in the 20% tax bracket so for every $1 you pay in interest you get back $.20, i think i would want the whole $1.

There's a reason why FWF is not a good place to get investment advice.

I wouldn't pay off the house. I'd put the 160k in a closed end fund that yields 8-10% and use the payments to pay my mortgage. You have the best of both worlds and you still keep the cash.

I'm not OP but his situation is similar to mine a few years ago...however, we don't know OP's financial picture completely to offer a lot of suggestions - is he married? does he have kids? does he have other debts? What is his employment situation and how stable is it? does he have any medical issues? Too many variables.

In my own situation, it was hardest to save up that first 100k. When I'd achieved that goal, I was paying 7% interest on the mortgage and had two auto loans. The auto loan balances were lower, so I decided that using a 6% monthly CD account at WaMu was the way to knock those off. A year later, the auto loans were paid off when the WaMu CD matured. Next was mortgage...but I didn't want to keep paying 7% or dip it savings - so I first refi'd into a PenFed 5/5 and lowered rate. Then over a year later I paid a little bit to lower it again with their re-rate offer. At this point, my wife and I were in stable jobs and we could save 25k a year to pay down mortgage...and with economy and markets tanking, this was the best thing to do. As markets turned upward, we invested the savings the last 2 years and have handsome gains...just this year alone the portfolio is up 9%. But a tragedy has struck and we may have no savings this year because of it. We're still in good shape though.

cajundavid said:   Not having a house payment is a great feeling!That's an emotional decision, not a financial one. Most of my "great feelings" end up costing me money. At the end of the day, I'd put paying off my mortgage in the same category.

g0dMAn said:   Buy another place and rent it out!

My thoughts exactly.

I second and can attest to that!!

I second that, it is a great feeling of accomplishment!!


cajundavid said:   Not having a house payment is a great feeling!

ducky51 said:   I second that, it is a great feeling of accomplishment!!


cajundavid said:   Not having a house payment is a great feeling!


Great feeling, but is it financially responsible?

Sometimes

How were you investing that 160k before now? If you we're unwilling to invest in options that are likely to perform better than 3% and you feel comfortable reducing your stock pile then pay it off. If you feel comfortable investing in such a manner then refi. Just don't keep it at the current rate.

RiceBOX said:   sell the house, move overseas and retire on a beach in mexico, south america, or southeast asia.

Anywhere but Belize!

http://www.wired.com/wiredenterprise/2012/12/mcafee-belize/

horizon6 said:   You really don't want advice, you want to recognize the need to learn about this "stuff".
The answer to you question is "it depends" as comments here have indicated; you must take into accounts many factors.
One factor not mentioned here, what do expect interest rates to be in five years or so. Suppose you're borrowing at 3% for 15 years and can then put it in a bank a few years from now at 5% or invest it over those fifteen years at an average rate of return of 6%+, free money but no guarantees.


Thousands of people have been trying to play this interest rate arbitrage for the past couple years and they have lost money every month during that time with no end in sight.

It's important to admit that you can't predict interest rates. We could have 15% mortgages in 2015 or 1%. If you think it is as low as it can possibly be, you are mistaken.

I am a fan of paying off mortgages but one thing to be aware of... In most jurisdictions it is trivial to look up your home worth and the amount of the lien on your home to see how much equity you have.

Scumbags use this information for targeting purposes. The most frequent use of this info is by plaintiff attorneys. If it is public record that you have any money, you are much likelier to be targeted by a frivolous lawsuit you'll have the pleasure of spending $350 per hour defending yourself against.

Isn't that a good reason for umbrella insurance

Most people plan to pay it off eventually any way

FinancialAnalyst said:   horizon6 said:   You really don't want advice, you want to recognize the need to learn about this "stuff".
The answer to you question is "it depends" as comments here have indicated; you must take into accounts many factors.
One factor not mentioned here, what do expect interest rates to be in five years or so. Suppose you're borrowing at 3% for 15 years and can then put it in a bank a few years from now at 5% or invest it over those fifteen years at an average rate of return of 6%+, free money but no guarantees.


Thousands of people have been trying to play this interest rate arbitrage for the past couple years and they have lost money every month during that time with no end in sight.

It's important to admit that you can't predict interest rates. We could have 15% mortgages in 2015 or 1%. If you think it is as low as it can possibly be, you are mistaken.


Enjoy your mattress, but consider the consequences.

FinancialAnalyst said:   I am a fan of paying off mortgages but one thing to be aware of... In most jurisdictions it is trivial to look up your home worth and the amount of the lien on your home to see how much equity you have.

Scumbags use this information for targeting purposes. The most frequent use of this info is by plaintiff attorneys. If it is public record that you have any money, you are much likelier to be targeted by a frivolous lawsuit you'll have the pleasure of spending $350 per hour defending yourself against.


You get a line of credit...they will see the max line amount, not the zero balance. Plus it is a safeguard should employment, medical, or any other emergency occur. You dont want to attempt to get that heloc once the shit hits the fan.

As has been said... you can certainly refinance to a lower rate. Everything depends on your risk tolerance. Personally, if I were sitting on that, I would look for a way to to get your rate as low as possible and then find a way to maximize your return... We are about the same age, too, so it isn't like you are going to be retiring tomorrow. I owe about the same amount on my mortgage and do no claim the standard deduction... and I live in a relatively low cost area that (while they have been historically high, here) does not have a high property tax rate compared to other states. As another has mentioned, maybe you want to get it paid off and get a second home, renting out the first. Again, this depends on what you want...

Umbrella insurance doesn't cover everything. The person I sold my last house to is going into foreclosure so they figured they'd sue me on trumped up non disclosure laws.

Not covered by umbrella or any other insurance. Totally frivolous but I have to pay an attorney to defend myself from these scumbags and their attorney is working contingency basis.

psychtobe said:   alamo11 said:   Yeah, I would pay it off. Two reasons:

1. You can always cash-out refi when CD rates see signs of recovery
2. It's a GREAT feeling being debt free
3. Your paying more in interest then you gain by letting the cash just sit there


This is a terrible post.

1. When CD rates are higher so will be mortgage rates.
2. Successful investors don't invest based on emotion.
3. It's "you're" not "your".
4. 3. /= "two reasons"


5. It's than not then

Suppose you're borrowing at 3% for 15 years and can then put it in a bank a few years from now at ( 5% ) That will be the nail in the coffin here in the States. What's the national debt ? They are trying like to keep rates as low as possible indefinitely .. Game OVER WHEN RATES HIT 5%.. Best to move out the country then..

You know the old saying Oppinions are like A$$wholes, Everyone has one and they all stink... In any event If you can swing it and you pay the house off, put what would be your payments aside to invest or pay off other bills. don't get into the mindset that you have all this freed up money and go crazy. build up a savings/emergency fund.

BlueSeaLake said:   Unless your property taxes are extremely high or other itemizable items, you probably will take the standard deduction when you do your taxes. If this is true, then you have no benefit (tax wise) from having a mortgage and its basically BAD debt.
Personally I would pay it off, because living debt free is wonderful, and you will save paying 5K per year in interest.
Even if you get to deduct the interest, only the amount of total itemized deduction over the standard deduction counts, meaning your benefit (if any) might only be a $500 deduction not 5K worth.
Others will want you to stay in debt, but what else will you do with your money, as interest rates are practically zero, and the stock market is at a 5 year peak, so good chance it might flatten or even drop down in the next few years.


I think you are making outlanding claims, like "there is a good chance that stock market might flatten or even drop down in the next few years".
As far as the deductibility of his mortgage interest, you are again making outlandish claims. If OP is making decent income, and pays some state income taxes, then those taxes might be enough to put him over the threshold of standard deduction.

There are gains which are conditional (on personal situation, income, tax bracket, etc), and gains which are absolute. Paying a mortgage at 5% is one of those situations in which you can make absolute gains if refinanced, say, into 3.5% or 3.75%.

On the other hand, keeping the mortgage or paying off can result in conditional gain or loss.

I suggest that before giving advice, you take the time to learn more about OPs individual circumstances.

BEEFjerKAY said:   cajundavid said:   Not having a house payment is a great feeling!

Knowing I can stiff my lender when I die is a great feeling!


How are you planning to do that, I am curious? Your lender has a lien on your house, which is worth roughly more than your mortgage.

I paid off my mortgage in 2012. The payoff was about $130K. My mortgage was $1500 interest+principle per month. I initial mortgage was 5.75%, then refi 2 year later to 4.5%. I was debating should I just leave those investment in market should I take out to pay off the mortgage. If I leave money at stock market, so I will need to refi again to take advantage lower rate. Refi will cost me about $2000-3000 fees. If I leave my money in bank I will lose money to Fed pretty quickly. With current situation, I don't see the interest rate can be lift up within next 3-4 years. Also, due to the low interest rate, people are force to invest into market.
More important, I always believe you have to sell your stock to make money. There always will be higher highs or lower lows, I can never timing the marketing unless I trade on insider info. My best move was to take the profit and payoff my mortgage. I also have 2 very young kids, paying off feel more secure if laid off happens. After I payoff the mortgage, my wife and I max out our 401K. Sametime, I find my family can save the money much quickly than use to be, since we require us stay with our old saving plan plus the mortgage.

I never liked debt of any kind hanging over my head, that peace of mind trumps any savvy investment deal or stock pick that I could make, and yeah paying off a 600K mortgage, student loans and 4 credit cards is pretty financially responsible to me

jason745 said:   ducky51 said:   I second that, it is a great feeling of accomplishment!!


cajundavid said:   Not having a house payment is a great feeling!


Great feeling, but is it financially responsible?

BEEFjerKAY said:   There's a reason why FWF is not a good place to get investment advice.

Sure it is, you just have to remember to do the opposite.

ptiemann said:   Refinance it to 3% interest

Refinance to 3% BUT with a lower term because since 2009 you have been paying a LOT of interest and you don't want to do that again my friend

If your mortgage interest and other deductions aren't higher than the standard deduction, you could get a penfed HEL could emply Dave Hansen's HEL simple interest loan manipulation coupled with charitable contributions to stack your deductions every other year.

http://www.fatwallet.com/forums/finance/60734/

Refinance and invest in GOLD... long term you will get bigger returns

Can I ask what the OP's income is?

Good stuff folks, appreciate your responses, especially the analytical ones with numbers to back it up.

I'm leaning towards paying it off, I think the peace of mind will be worth more than any potential rewards from investments. Subconsciously I think I want to see how it feels to be debt free..

b0mbrman said:   Can I ask what the OP's income is?

p.s. Probably not as much as one may think comparing to my savings. Last year for the first time I've cleared 100K, but this year will be less. Probably averaged 40-80K/year since I've graduated from college. But the savings came at a substantial cost and I'm not sure I would recommend this lifestyle to anyone. I have rarely eaten out, I drive a 13 year old beat up car, I haven't bought any fancy furniture for the house, haven't gone on vacation for 15+ years (or travel anywhere), waited almost a year to buy washer/dryer to save on black Friday deals, constantly checking for lowest prices, etc, etc, the list goes on.
After ten+ years, I feel a little burned out..

I think paying the house off will feel great...I can almost feel it..

Take care folks

dcwilbur said:   cajundavid said:   Not having a house payment is a great feeling!That's an emotional decision, not a financial one. Most of my "great feelings" end up costing me money. At the end of the day, I'd put paying off my mortgage in the same category.

I'm pretty sure that the OP asked, "Will paying off my mortgage give me a good feeling?"



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