Any tips from those who have paid off their house early or are on track to do so?

[tvguy]

If you've got a 2.75% rate, and you can earn 3%+ elsewhere, aren't you throwing away money by paying off the mortgage?

If I could get 3%+ in a safe investment, maybe.

As you may recall, I refinanced twice, and continued making the same payment that my original 12.25% mortgage had. If I had an emergency, I always had the option of just making the required payment, which would free up $600 a month for other expenses.

All I can say is, when my oldest hit college 5 years after I paid off the house, and I had saved that house payment money in the college fund, it was a very comfortable feeling. And 6 months after my oldest hit college and I lost my job, I can not tell you how glad I was that I didn't have a house payment.

 

[chicagodisneyfan]

You are not a fan of paying off a mortgage early but you are a fan of wasted thousands of dollar on yearly interest payments! Wow must be nice to have money to burn freely. The interest makes up a huge chunk of the monthly payment and I would rather pay my loan off early verses lining the pockets of the bank.

You are not understanding. I would NEVER pay off my mortgage early - not at 3% interest. Why?? I am earning between 10-30% on my investments over the past 5 years. It makes NO economic sense to pay off something at 3%.

If would be a financial blunder to throw extra cash towards my mortgage - that money has a much bigger return elsewhere.

 

[supersnoop]

If I could get 3%+ in a safe investment, maybe.

5 and 7 year CD's are returning 3.04 APY:
https://www.penfed.org/Certificates_Overview/

 

[eliza61]

If I could get 3%+ in a safe investment, maybe.

As you may recall, I refinanced twice, and continued making the same payment that my original 12.25% mortgage had. If I had an emergency, I always had the option of just making the required payment, which would free up $600 a month for other expenses.

All I can say is, when my oldest hit college 5 years after I paid off the house, and I had saved that house payment money in the college fund, it was a very comfortable feeling. And 6 months after my oldest hit college and I lost my job, I can not tell you how glad I was that I didn't have a house payment.

You're kidding right? My investments are uber conservative and I had a 20% return this year? Dude, where are you at that you are not getting at least 3% outside of a regular old savings account. My stable value mutual fund which is about as safe as you can get outside of sticking it under the mattress returned 3.65% over the last 5 years.

LOL that's why I took out the mortgage instead of paying off the house. Now my emergency fund is stocked so if I lost my job yes I would probably consider paying it off.

My objective is to get the greatest net gain giving up 18% to save 4.125% is not a smart decision for me. but like I said my goal is not directed toward being debt free, my goal is to increase my net worth every year at least by the rate of inflation.

My five year rate of return including the free fall of 07 is still over 7%. Even in retirement part of my portfolio will be in stocks, if not you don't have any growth and inflation will eat you up.

 

[mbf]

I agree with what a lot of people have said.

We refinanced our original 25 year mortgage after 3 years at a lower interest rate with no fees. We turned it into a 15 year mortgage and our payment only went up by about $100 a month. On top of that, we paid an extra $100 a month and then whenever we had extra money (overtime, income tax refund) we applied it to our mortgage. We paid the 15 year refi off in just shy of ten years. Yes, that is right. Less than HALF the time period of our original mortgage. Once the payments ended we started socking the money (including any extra) away in CD's.

It meant that we did not go on fabulous vacations every year or buy brand new cars but now that DD's are in college we can write checks for tuition without having to take out any parent loans and we can do a nice vacation (road trip style) once or twice a year and an even nicer vacation every couple of years.

 

[disney1990]

That's an incorrect statement. Many people can and do retire with a mortgage - we have plans to buy a 2nd home and if interest rates are low - we will take out a mortgage.

Retiring does not mean you are poor.

Maybe you are in a position to afford two mortgages. However, we are in the Washington DC area. Most of our friends have mortgages that are so high that they admit that they have no plans to retire because they "can't afford to". The only friends we have that are retired, have no mortgage payment.

 

[tvguy]

5 and 7 year CD's are returning 3.04 APY:
https://www.penfed.org/Certificates_Overview/

Holy crow. That's amazing. The highest rate I can find here is at the credit union at 1.09% and that's with a minimum of $100,000.
https://www.golden1.com/Rates/RateDetails?rid=8&l=en

And the above is twice what the banks are paying.
https://www.wellsfargo.com/savings-cds/certificate-of-deposit/

What are your mortgage rates? They have to be higher than the 3.375% this credit union has if they are paying 3% interest.

 

[tvguy]

You're kidding right? My investments are uber conservative and I had a 20% return this year? Dude, where are you at that you are not getting at least 3% outside of a regular old savings account. My stable value mutual fund which is about as safe as you can get outside of sticking it under the mattress returned 3.65% over the last 5 years.

LOL that's why I took out the mortgage instead of paying off the house. Now my emergency fund is stocked so if I lost my job yes I would probably consider paying it off.

My objective is to get the greatest net gain giving up 18% to save 4.125% is not a smart decision for me. but like I said my goal is not directed toward being debt free, my goal is to increase my net worth every year at least by the rate of inflation.

My five year rate of return including the free fall of 07 is still over 7%. Even in retirement part of my portfolio will be in stocks, if not you don't have any growth and inflation will eat you up.

I said safe, not conservative. My "conservative" 401k fund have returned 34% over the past 12 months.....BUT THAT IS NOT INSURED OR GUARANTEED.

See my other post and links, I sure can't find an insured CD even close to 3%, which makes sense, since mortgages start just over 3% here.

 

[davedmaine]

The only bad thing about paying off early is losing a huge chunk of your tax deduction.

That's backwards thinking -- you're paying way more in mortgage interest than you're getting back as a deduction.

 

[Sleepy425]

The biggest thing we did was refinance to a 15 year mortgage at 2.625%. It's amazing how much more of the payment goes towards the principal rather than interest. Also, we don't have an escrow account which we prefer. Why let the bank make money on your hard earned dollars when you could yourself.

This is what we just did. I was single when I bought my house. The mortgage was at 5.625%, and I was an idiot who took it for 40 years. This was in 2008. In July 2013 we refinanced to 15 years for 2.625%. Instead of $140 going to principle, now $780 does. HUGE difference!
And once we pay off our cars in Sept, we will be putting a small part of that payment towards the mortgage (the rest will go into an account for car repairs, etc).
Our oldest is 3.5, so we are on track for having the mortgage paid off by the time he starts college (as long as we don't move or have any setbacks).

 

[crisi]

Maybe you are in a position to afford two mortgages. However, we are in the Washington DC area. Most of our friends have mortgages that are so high that they admit that they have no plans to retire because they "can't afford to". The only friends we have that are retired, have no mortgage payment.

I have a girlfriend who owns her condo in NYC and a house in the Berkshires - a LOT of people on the East Coast own multiple homes. Granted, they probably make more money than you do, but "we live in Washington DC" isn't the reason.