Debt Dumpers 2021

[barkley]

The current dream is to have a WFH job that can be done anywhere, and will allow us to travel across the country in an RV for perhaps months at a time, stopping wherever we want for a few weeks, and then moving on

if you arrange to do this you might want to check out kim komando's radio show and website b/c recently she's had several discussions of how to set up an rv for optimal wfh capacity. she's talked of what's available internet wise at private and public rv areas and how to set yourself up without breaking the bank on data usage.

 

[DLgal]

All this mortgage talk is interesting to me. I've never had one. We are perpetual renters. We rent for about half of what a mortgage would cost us and we are happy with that. It allows us to invest more money over a longer period of time. I can't even imagine living in a home for longer than 10 years though. We move every 5 years or so. I like being able to choose a different house type as our needs change and we are a military family so we have never been able to put down "roots."

My parents retired to Florida at around age 67 and 65. They bought a new home in a 55+ community and mortgaged it. Their payments are so low...like under 25% of their net monthly income. They could have bought the house in cash but my dad wanted to keep the money invested and it has since grown an astronomical amount (somewhere around 20% growth). The house hasn't appreciated nearly that much. They know they won't ever pay it off. And that's fine. When they pass, we will just sell it and keep whatever proceeds.

Why would you ever opt to pay off a low rate mortgage if you can make way more money on investment returns? I mean, your housing costs even with a paid off mortgage are never going to reach zero. There will always be maintenance, repairs, property taxes, insurance, etc. I just can't wrap my head around it. It's kind of like why we finance cars. We always get rates around 1% and we make those small monthly payments while allowing our money to grow in investment accounts.

I guess it's a matter of the mental aspect of having it "paid off?"

 

[RamblingMad]

All this mortgage talk is interesting to me. I've never had one. We are perpetual renters. We rent for about half of what a mortgage would cost us and we are happy with that. It allows us to invest more money over a longer period of time. I can't even imagine living in a home for longer than 10 years though. We move every 5 years or so. I like being able to choose a different house type as our needs change and we are a military family so we have never been able to put down "roots."

My parents retired to Florida at around age 67 and 65. They bought a new home in a 55+ community and mortgaged it. Their payments are so low...like under 25% of their net monthly income. They could have bought the house in cash but my dad wanted to keep the money invested and it has since grown an astronomical amount (somewhere around 20% growth). The house hasn't appreciated nearly that much. They know they won't ever pay it off. And that's fine. When they pass, we will just sell it and keep whatever proceeds.

Why would you ever opt to pay off a low rate mortgage if you can make way more money on investment returns? I mean, your housing costs even with a paid off mortgage are never going to reach zero. There will always be maintenance, repairs, property taxes, insurance, etc. I just can't wrap my head around it. It's kind of like why we finance cars. We always get rates around 1% and we make those small monthly payments while allowing our money to grow in investment accounts.

I guess it's a matter of the mental aspect of having it "paid off?"

A mortgage is a drag on your retirement income. And if you experience some steep investment losses early in retirement, having a mortgage can restrain your spending.

Right now, mortgage rates are higher than treasury rates, so it really doesn’t make sense to have a bond portfolio and a mortgage. The math doesn’t work out. So there is definitely a psychological aspect to paying off debt.

 

[DLgal]

A mortgage is a drag on your retirement income. And if you experience some steep investment losses early in retirement, having a mortgage can restrain your spending.

Right now, mortgage rates are higher than treasury rates, so it really doesn’t make sense to have a bond portfolio and a mortgage. The math doesn’t work out. So there is definitely a psychological aspect to paying off debt.

Not everyone keeps their money in bonds in retirement. My dad keeps about 80% in stocks and it's working out extremely well for him. He has been retired 5 years now and doesn't need those funds. He takes RMDs and reinvests the money in a taxable account because they live comfortably off Social Security and his small pension. He expects us to inherit his retirement and brokerage accounts. He has much more in his IRA and 401k now than he did when he retired 5 years ago.

 

[barkley]

All this mortgage talk is interesting to me. I've never had one. We are perpetual renters. We rent for about half of what a mortgage would cost us and we are happy with that. It allows us to invest more money over a longer period of time. I can't even imagine living in a home for longer than 10 years though. We move every 5 years or so. I like being able to choose a different house type as our needs change and we are a military family so we have never been able to put down "roots."

My parents retired to Florida at around age 67 and 65. They bought a new home in a 55+ community and mortgaged it. Their payments are so low...like under 25% of their net monthly income. They could have bought the house in cash but my dad wanted to keep the money invested and it has since grown an astronomical amount (somewhere around 20% growth). The house hasn't appreciated nearly that much. They know they won't ever pay it off. And that's fine. When they pass, we will just sell it and keep whatever proceeds.

Why would you ever opt to pay off a low rate mortgage if you can make way more money on investment returns? I mean, your housing costs even with a paid off mortgage are never going to reach zero. There will always be maintenance, repairs, property taxes, insurance, etc. I just can't wrap my head around it. It's kind of like why we finance cars. We always get rates around 1% and we make those small monthly payments while allowing our money to grow in investment accounts.

I guess it's a matter of the mental aspect of having it "paid off?"

for us we've never lived in an area where rents were 50% lower than what we could comfortably afford for a house payment. i mentioned in an earlier post that it was our cpa who encouraged us when we were first married to look at home ownership for the tax benefits in existence at that time. we ended up buying an older home that wasn't in need of any repairs so our output for the 7 years we lived there was for the most part the house payment (inclusive of property taxes and insurance)-that payment was at or below what we had previously paid/the going rate over the years for rent of a much smaller house or an apartment. it allowed us to itemize so we saw much less going out of our paychecks to both the state and feds. when we sold that one we didn't make allot (about 10%) but with the tax savings it was an overall positive.

2nd house-brand new, again at or less than rents were going for lesser homes/apartments during the 7 years we lived there. still able to use ownership as a means to save tax wise but the big benefit was selling during an insane sellers market and making a 222% return on our investment.

3rd and final (current/no plans to ever move)-brand new at purchase and what we were paying for the mortgage was comparable at the time we moved here but now would be half of what a comparable place would rent for (if you could even find one). yup, we still have expenses but our property taxes and insurance run about 15% of what rent would run. repairs and upkeep? we keep on top of stuff and budget for those but that maybe bumps us up that 15% figure to 25% of what rent would cost us. when it hit the point that we no longer could benefit from itemizing on our taxes we asked ourselves why we were paying 5% interest when we could just pay it off and pocket both the interest and the bulk of the payment.

i'll admit, i've never been big on investing. i fall on the side of safe/secure lower earning options. might not make us rich in the end but i can go to sleep at night and not worry like many of my friends approaching what they know will need to be retirement (i have way too many who despite some recent tremendous gains are only a smidge better off w/their retirement investments than they were when the 2008 crash happened-they've spent over a decade trying to get back to their then account balance and as a result have way less than they and their financial advisors anticipated and few if any years to try and bulk it up).

 

[imbatman]

No snowman making for these freezing sisters!

Oh my word! The HIGH when I was there was 33.

Can I join in, albeit, late? I've been following this thread for a few years and feel like I know some of you.

a new tiny breast cancer diagnosis,

You are an amazing and strong woman. If you need to vent or cry or rage or whatever to a perfect stranger, I'm here!

 

[imbatman]

making a 222% return on our investment

 

[barkley]

ours was LITERALLY the last house to sell in our northern california town before the bubble burst-it was also the only house that sold for a couple of months. i recently looked it up on zillow and despite the hot california real estate market it's still not valued at what we got for it (though the people who own it now got it for a steal at public auction after our buyers lost it as did the subsequent owners-if they sold now they would be looking at a 535% profit ).

 

[CastAStone]

Why would you ever opt to pay off a low rate mortgage if you can make way more money on investment returns?

Yes. For 2.75% I feel as if I am getting free money. I guess it’s most logical if you want to retire early with no debt payments. My feeling is that I’m paying all that interest now. In 20 years I’ll have already paid 85% of the interest on the loan.

 

[DLgal]

for us we've never lived in an area where rents were 50% lower than what we could comfortably afford for a house payment.

Well, we started off married life in Southern California with zero money for a down payment and with some significant debt (to us) from just having graduated college and largely supporting ourselves. Neither of our families had money sitting around to gift us for anything (we paid for our own wedding). We weren't even making enough to qualify for a VA loan with zero down. Houses in the area at that time were all over $300k and with a net income of around $3000/month, we were doomed to begin life as renters. We were stationed in Southern California for the next 10 years, with never an opportunity to buy. We briefly moved to Northern Virginia where we could have bought a home, but again, without money for a down payment, our payment would have been about 33% more than comparable rent, due to high COL there too.

We are back in So Cal and prices are even higher now. We've been married 20 years this year, but in order to buy a house comparable to the one we rent, we are looking at $1M. Seriously. Now we actually have some money for a down payment. We could do like 5% (although it would be near impossible to get a house with a VA loan in this market). Our resulting housing payment would be 40% higher than our rent, and that would just be the mortgage payment and property taxes. We would still need money set aside for home maintenance. In the 5 years we have lived in this house as renters, our landlord has already spent over $3000 on repairs (new dishwasher, plumbing clog that affected the HVAC unit, A/C repair).

I did one of those rent vs. buy calculators from Nerd Wallet for my zip code and they said "Buying will never be cheaper than renting." At the 30 year mark, renting puts us ahead by ONE MILLION dollars, taking into account an 8% return on investments, 2% annual rent increase (not our actual experience--our landlord has raised our rent exactly $50 in six years), 2% inflation, a 4% home value appreciation, and a whole host of other metrics that you can personalize to your tax situation. It was extremely eye opening.

I'm now almost convinced to NEVER buy a home here and just keep renting unless we decide to move to a place we can buy a house with cash.

 

[jackers]

Well, zip code certainly makes a difference. Where I live, buying is cheaper than renting after just 3.5 years.

I rented for the first 4-ish years of my adult life and despised every minute of it. So, to each their own - we all need to make the decisions that we feel is best for our personal situations.

 

[RamblingMad]

Well, zip code certainly makes a difference. Where I live, buying is cheaper than renting after just 3.5 years.

I rented for the first 4-ish years of my adult life and despised every minute of it. So, to each their own - we all need to make the decisions that we feel is best for our personal situations.

Pretty much. It’s very location specific.

 

[barkley]

Well, zip code certainly makes a difference. Where I live, buying is cheaper than renting after just 3.5 years.

I rented for the first 4-ish years of my adult life and despised every minute of it. So, to each their own - we all need to make the decisions that we feel is best for our personal situations.

i am waiting to see how the eviction moratorium is going to effect rental costs in upcoming months. my oldest's rent has been fairly stable for the 4 years she's lived in her place (renewing renters who sign leases early have gotten a much better rate than newbies) but her complex like most around here, along with many rental homes have people who have now not paid rent for close to a year (recent estimate is $100 million per month in unpaid rents is accruing state wide-and i have no doubt our governor will do another extension before the end of march when the current extension expires). i don't know what's going to happen but i fear that those that have continued to pay their rent may find that their rental rates will significantly increase

 

[DLgal]

i am waiting to see how the eviction moratorium is going to effect rental costs in upcoming months. my oldest's rent has been fairly stable for the 4 years she's lived in her place (renewing renters who sign leases early have gotten a much better rate than newbies) but her complex like most around here, along with many rental homes have people who have now not paid rent for close to a year (recent estimate is $100 million per month in unpaid rents is accruing state wide-and i have no doubt our governor will do another extension before the end of march when the current extension expires). i don't know what's going to happen but i fear that those that have continued to pay their rent may find that their rental rates will significantly increase

This is always a problem with renting from a large company or complex. We switched to private landlord rentals in 2011 and never looked back. We find that actual people are far more willing to work with you because they want stability. It costs them a lot to turn over a place to a new tenant and most want to keep you in as long as possible. We have been very lucky with 2 amazing landlords in the houses we rent. Our current one REALLY wants us to stay forever.

 

[jen7233]

i am waiting to see how the eviction moratorium is going to effect rental costs in upcoming months. my oldest's rent has been fairly stable for the 4 years she's lived in her place (renewing renters who sign leases early have gotten a much better rate than newbies) but her complex like most around here, along with many rental homes have people who have now not paid rent for close to a year (recent estimate is $100 million per month in unpaid rents is accruing state wide-and i have no doubt our governor will do another extension before the end of march when the current extension expires). i don't know what's going to happen but i fear that those that have continued to pay their rent may find that their rental rates will significantly increase

I noticed a rental increase in our area, we've been looking for a new place, so noticed the rates also. It's a tough market though, things move fast at least a single family does if it's decent and in a decent area.

 

[EilonwyWanderer]

Well, zip code certainly makes a difference. Where I live, buying is cheaper than renting after just 3.5 years.

I rented for the first 4-ish years of my adult life and despised every minute of it. So, to each their own - we all need to make the decisions that we feel is best for our personal situations.

Yeah I was coming here to post that owning is so much better/cheaper in my area (Massachusetts). Where we were before buying a house STUDIOS went for at least $2100. We're now in a 4 bedroom house for $2700 a month!

 

[Minniemoo15]

I am coming out of the woodworks with all this mortgage talk.. we are set to pay off our mortgage on Thursday! We are young (mid-late 30’s) and maybe it didn’t make the most financial sense as our interest rate was low, it brings so much peace of mind and freedom. My husband works in a volatile industry, so the thought that we now own our house completely should something ever happen to his income is a safety I am thankful to have. I am not telling anyone in my “real life” as I don’t want to sound braggy, but I knew my Dis friends would understand how happy this makes me !

 

[imbatman]

we are set to pay off our mortgage on Thursday!

 

[barkley]

I am coming out of the woodworks with all this mortgage talk.. we are set to pay off our mortgage on Thursday! We are young (mid-late 30’s) and maybe it didn’t make the most financial sense as our interest rate was low, it brings so much peace of mind and freedom. My husband works in a volatile industry, so the thought that we now own our house completely should something ever happen to his income is a safety I am thankful to have. I am not telling anyone in my “real life” as I don’t want to sound braggy, but I knew my Dis friends would understand how happy this makes me !

congratulations! it's a great feeling, the only exception being that unlike in the movies you're not sent a copy of the mortgage to burn

just a suggestion-if you haven't already looked into one, getting an umbrella insurance policy to protect what will be a large asset that is entirely yours is advisable once the mortgage is paid in full.

 

[Nettlelondon]

I really want to get our mortgage paid off, it is the only debt we have thankfully but my DH is of the opinion that we should be saving as much as possible in to our pensions instead and let the mortgage just carry on to its scheduled end date. We have compromised by overpaying the mortgage by about 50% every month and putting as much in to my pension as we can under UK tax legislation. We can't put any more money in to his pension fund, again due to tax implications. We could save/invest in other ways but I just want to get rid of the mortgage.

As I have said before, as we work for our own company we have a lot of flexibility around how we take our income and do so in a way that tries to balance tax efficiency with a reasonable standard of living. This was all going fine until DH announced a few weeks ago that he would like to bring his retirement date forward a few years and start winding down in about 3 years, not the 8 we had been heading for. I think the last year has been quite hard for him as he has basically been working flat out since Covid first appeared on the scene which is great for boosting the bank balance, but not so good for boosting the life balance. The additional work has helped bring retirement forward too - just in terms of ensuring the funds are there to pay for it.

It is likely that he will transition from working full time to being fully retired over a period of years, rather than just overnight, as he works in a field that allows a lot of flexibility for providing consultancy on an ad hoc basis so it isn't a hard stop.

I just need to shift how I think about the next few years - it is very nice, but any change comes with a bit of mental adjustment and I am not quite there yet.