We have to address this issue. Paying off your home or not. So much foolishness

Quote from mksummny:

I figured I would put my two cents in on this thread. So I have been trading for 12 years now and have had multiple opportunities to put excess cash in a variety of places. I have over the years bought several rental properties along with my main living residence. I have had on the advice of both my CPA and CFP been told to keep a considerable amount of debt and leverage my cash strength to make more. I for a time listened to them only to realize that not only did I sleep better at night by not being in debt but if I was doing this for "tax deductions" it would be much better for me to write a check to a charity then to a bank and get a "writeoff". I have learned that the borrower is truly slave to the lender. Now I understand that not everyone can be in the position to be debt free, but if you are in a position to pay off your debt because of some cash you have laying around then I emplore you to do it. Its a much better lifestyle and like I said, if your main motivation is to have tax writeoffs, then help out a local charity.
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Hey, if you can't handle the pressure of managing rental properties, then by all means, don't.

IMHO, hope you don't end up regretting it.

Having rental income is much more secure than a pension, social security or an insurance annuity because it's the only one that will more closely track inflation over time.
 
It really depends on what kind of interest you can make on the cash yourself, If i can make 15-20% on 100k why would i pay off my mortgage which is only charging me 5%, I am losing 5k, and making 15-20k.

I get to write 5k off the top of my income, so i, so i save 2500 there, and then pocket half of 15-20k, (after taxes)which is 7500-10k, so overall i come out up roughly a thousand dollars a month by not paying off my mortgage, why would I sacrifice 1k a month in income just so i can say i paid off my mortgage?

I agree that if i can not make more interest off the money then the bank is charging me that it would be stupid not to pay off my mortgage but it all depends on what kind of interest you can make on your money.

Quote from Calculator2:

I couldn't believe my eyes reading that home mortgage thread. So many of you believe that keeping your mortgage for 20-30-40 years is a smart thing to do.

You are foolish.

I am sorry but all of you who believe that your Job/Business is guaranteed to last
and therefore you are guaranteed to hold the mortgage for 20-30-40 years

You are not bright in my opinion.

Not to mention you can get sick and lose ability to work. And whole lot of other things that can happen. And your bank is counting on that to eventually take your home.

You clueless masses. You think your Bank is your friend.

To make matters even worse, so many of you buy your homes completely out of your price range. You can afford lets say 150 k home. Yet you buy 250 k home. How f-in ridiculous.
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What you have gained from paying off the mortgage is equivalent to the interest rate on the mortgage you had on your house less the mortgage interest deduction less opportunity cost. Not a lot to say the least.

Quote from Calculator2:

LOL You are a funny little man.

I now have paid off house and my cash is now available for other adventures.

While you are in 30 year debt because you listen to your bank's advice.

Dafts like you believe that more debt and longer debt is better. Case close pal. Go Home.
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30-year 4.45
Corporate bonds
Aaa 5.25
Baa 6.25
Conventional Mortgages 4.50

Think of it like this…You have $1 Million to invest and you’re interested in a conventional 30 Year Fixed Rate 4.5% Mortgage. 4.5% on $1 Million note is $45,000. The bank allows you to only put 10% down on your investment. So you only have to write a check for $100,000. So, you invest the other $900,000 in triple Aaa Corporates @ 6.25%. That equates to $56,250. So, $56,250 minus $45,000 is a profit of $11,250. Or a 11.25% annual return on your $100k investment not including the tax deductions.

Compare above to paying in full for the note upfront and having to pay the bank to get your money back out and risking your home assessing or selling for less than what you paid for it.
 
You have to pay the bank "interest" to get back the money that you once owned free and clear and could borrow or invest from @ 0%!!!

You have 1,000,000
You buy house pay cash.
Wait, now you need money for college or other life events.
Now you pay interest to borrow your own money!

Haha!!!
 
When I was trading for a living. I enjoyed keeping my nut low. it was great to say I think I will go snowboarding for 10 days and not worry about income.
 
You're saying if I have a mortgage at 30 years, it is better to pay it off early, in say 15 years? That way I have 15 extra years of no interest payments.

So it would be even better to pay it off in 10 years, and better still to pay it off in 5 years.. still with me?

I guess the best thing would be save up and buy a house with cash, right? That way I'm not paying any interest at all!

The only problem of course is that if I buy a house with cash, I am using today's dollars. Which are worth more than tomorrow's dollars because of inflation, time value of money and so on.

And actually, don't forget that I am using yesterday's dollars (it took me a while to save up) and those are worth more than today's dollars and a lot more than tomorrow's dollars.
 
I think you would be better off funding a whole life policy or building cash reserves for an immediate annuity. Paying off takes the money away from you and then lets you take it back for a fee! Imagine rates skyrocket to 10% and you need to borrow back your money via equity.
 
You got it all wrong. Banks want you to pay your mortgage off!
Your interest payments equate to a rental equivalent. When you have more of your own coin invested in the home (paying it down) they know statistically that you will come a knocking to borrow it back.
 
Quote from SomeYoungGuy:

You're saying if I have a mortgage at 30 years, it is better to pay it off early, in say 15 years? That way I have 15 extra years of no interest payments.

So it would be even better to pay it off in 10 years, and better still to pay it off in 5 years.. still with me?

I guess the best thing would be save up and buy a house with cash, right? That way I'm not paying any interest at all!

The only problem of course is that if I buy a house with cash, I am using today's dollars. Which are worth more than tomorrow's dollars because of inflation, time value of money and so on.

And actually, don't forget that I am using yesterday's dollars (it took me a while to save up) and those are worth more than today's dollars and a lot more than tomorrow's dollars.
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Yes, the inflation argument is a good one. I'd also add that if property taxes skyrocket due to the ~100B deficit the states face right now, you are still on the hook for it if the house is paid off. Someone who has not paid the house can simply walk away/default and cut their losses. Someone who has paid the house has to find a buyer. The buyer would most likely be looking for a discount.

So, I would imagine many people with fixed rates don't pay for the house early to leave the foreclosure option open, if needed in the worst case and to keep emergency cash on hand.
 
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