I made my last 438 k mortgage payment just now. My bank doesn't seem happy.

[Calculator2]

Quote from Scataphagos:

Well....

I'm not in the camp of "the bank's primary motive is to have you as a slave forever".

The longer your mortgage The more your bank likes you. That should give you HUGE RED ALARM

That means bigger the chance that something will happen in a very unpredictable life and Bank will take your home. You will have worked half your life for nothing in the end.

And bank doesn't lose at all.

Maybe you are forgetting Gnome that most people have 300 bucks in their account. And live paycheck to paycheck.

Maybe you forget at times that most people are not kick ass traders with few million.

 

[Scataphagos]

Quote from Calculator2:

The longer your mortgage The more your bank likes you. That should give you HUGE RED ALARM

That means bigger the chance that something will happen in a very unpredictable life and Bank will take your home. You will have worked half your life for nothing in the end.

And bank doesn't lose at all.

Maybe you are forgetting Gnome that most people have 300 bucks in their account. And live paycheck to paycheck.

Maybe you forget at times that most people are not kick ass traders with few million.

Nope, I didn't forget anything. AM described the conditions for paying off the mortgage, and I think he said it perfectly. In other words, "when you can comfortably afford to pay off your mortgage, then it's financially OK to do so". Until that time, one could argue that your best options would be from having the house mortgaged to the max... though I'd recommend against refi cashouts as a souce of funds for consumption.

As far as "somebody liking you being in debt".... that sounds more like a government objective. As for the banks, I doubt they care one way or another.. they don't have any skin in the game any more... as soon as they clerk a deal, they cash out through Freddie or Fannie ASAP.

As for your observation, "...The longer your mortgage... bigger the chance that something will happen in a very unpredictable life and Bank will take your home. You will have worked half your life for nothing in the end....", that is true.

But rather than having a $400K house with $200K equity, the homeowner would have more options if he refi'd and invested his equity outside his home. Not without risk, however..... as his investments might go sour and compound his troubles.

There is no "sure" way to be financially successful.

 

[Angrycat]

Quote from Calculator2:



Not even a congratulations on my last payment. Not even Thank you It was a pleasure doing business with you for the last 8 years.

Why do I get the feeling that my bank doesn't like people that pay mortgage on time and over the set payment whenever possible. I get the feeling they would be more polite to a deadbeat.

Did you send them a thank you note for taking a chance on you and lending you money?

Why do you think you're owed a "congratulations"? It's a business arrangement.

Banks like people to pay their mortgages on time, but they don't like them to prepay their mortgages because it results in a lower profit for the bank. This is not a mystery.

Paying your mortgage is your duty. That should be the norm.

The real question is shy do people suddenly think they deserve a parade for performing ordinary life duties?

 

[Scataphagos]

Quote from Angrycat:


Banks like people to pay their mortgages on time, but they don't like them to prepay their mortgages because it results in a lower profit for the bank. This is not a mystery.

That was always the problem with investing with Fannie Mae in their income portfolio. If interest rates went higher, people would keep paying the normal schedule on their lower rate home loans. But if rates fell, people would pay their loans off early with lower rate refi's.

 

[SDiegoTrader]

As I said, paying off the mgte depends on your ability to balance profitability vs liquidity. Those who pay off the mgte too soon when their income is falling (as they approach retiremt age) will find themselves facing liquidity problem. Hence, it's no surprise negative amortization mgte become an industry by itself for "house rich and cash poor" homeowners.

Looking at mgte pymt schedule, you'll find that interest cost is highest during the first 5 yrs and lower and lowest after that because of declining bal. Simply, it means your tax benefit deductions maximized during the early yrs. So, it's no use paying your mgte off early during the later yrs since the tax benefits are reduced. Most people never live in the same home for 20 - 30 yrs. Nothing to do with the banks. That's right, they move on and have a new mgte. New job. New place, etc, etc. (does that sound logical that most mgtes are not held to maturity, so why pay higher closing cost for 30 yr mgte). And, those whose funds are tied up in their home without liquidity cannot do so profitably and held captive by their economic conditions. Of cos, there are banks/lenders who exploit this conditions. So.. it's critical to bal what is described above and utilize the extra funds efficiently as described by many of the postings here.

 

[Trexticle]

Quote from SDiegoTrader:



Looking at mgte pymt schedule, you'll find that interest cost is highest during the first 5 yrs and lower and lowest after that because of declining bal. Simply, it means your tax benefit deductions maximized during the early yrs. So, it's no use paying your mgte off early during the later yrs since the tax benefits are reduced. [/B]

Did you mean to say it makes more sense to pay it off in later years because you are not getting near as much of a tax write off. That is what you should have meant to say. Although it would be even better to pay it off in the earlier years so you don't have to pay as much interest.

Also, Who here wants to work less? I do. And guess what? I can work less if I don't have a mortgage. Get rid of all debt if possible.

 

[drcha]

Congratulations, Calculator. Although I disagree with your sentiments about paying off a house (in another post), still I am very happy for you.

As for the bank, I've had the experience of nearly getting ripped off when paying off a loan. I sent a payoff amount that was somewhat greater than the payoff (since I could not know the exact day of arrival) but I received no refund. Upon calling the bank, I was informed that the "change" under a certain amount was not normally returned. I told them to send me the "change"--all of it-- and they did. Interestingly, this was a small community bank, not some big outfit.

So if you have done this by some method other than wire transfer-- be a squeaky wheel.

 

[Angrycat]

Quote from drcha:

Congratulations, Calculator. Although I disagree with your sentiments about paying off a house (in another post), still I am very happy for you.

As for the bank, I've had the experience of nearly getting ripped off when paying off a loan. I sent a payoff amount that was somewhat greater than the payoff (since I could not know the exact day of arrival) but I received no refund. Upon calling the bank, I was informed that the "change" under a certain amount was not normally returned. I told them to send me the "change"--all of it-- and they did. Interestingly, this was a small community bank, not some big outfit.

So if you have done this by some method other than wire transfer-- be a squeaky wheel.

That's pretty dirty. Bet they would have been all over you if you underpaid by the same amount.

 

[Pension_Admin]

I guess banks are like casinos--they don't like customers being better off.

I still remember the bank manager trying to get me to invest in a higher fee mutual fund a few months ago. He walked into the office like some big shot and started talking about diversifications and dollar cost averaging. As a student of finance, I am fully aware of these concepts. What I wanted to do was invest just a couple thousands of dollars into an index fund, an Asian equity fund, and a bond fund. Still, he kept trying to persuade me to invest in that high fee fund by telling me how it fit into my investor risk profile. I think he went on for 20mins or so. I finally convinced him that I am set to go with my initial decision. I also politely told him the logicality of it. Then all of a sudden, he started saying that my real investor risk profile is like that of a gambler. Then he said that if I like to gamble, I should open a self direct investment account with them.

 

[DrPepper]

Quote from Pension_Admin:

I guess banks are like casinos--they don't like customers being better off.

I still remember the bank manager trying to get me to invest in a higher fee mutual fund a few months ago. He walked into the office like some big shot and started talking about diversifications and dollar cost averaging. As a student of finance, I am fully aware of these concepts. What I wanted to do was invest just a couple thousands of dollars into an index fund, an Asian equity fund, and a bond fund. Still, he kept trying to persuade me to invest in that high fee fund by telling me how it fit into my investor risk profile. I think he went on for 20mins or so. I finally convinced him that I am set to go with my initial decision. I also politely told him the logicality of it. Then all of a sudden, he started saying that my real investor risk profile is like that of a gambler. Then he said that if I like to gamble, I should open a self direct investment account with them.

I bet that his tactics convince over 90% of his clients to invest in this fund. I also bet that he gets a big fat commission for the sale.

However, I am curious why you invest in mutual funds through your bank. Why not go through a discount broker?