For those who have paid off their mortgage

[QT Pooh]

Just curious...my husband and I will be paying off our mortgage in a few years while we're in our mid 40's. For those who have done this...what did you do with all that extra money? Did you invest it, stick it in some sort of savings or annuity account or ???

Seems like we worked so hard to get here but now that it's almost here I'm confused about what to do!

 

[01spirit750]

You probably should talk to a financial advisor.

But here is what are going to do when we pay off our mortgage in a 7 years.

1. Keep the money fairly liquid (some in CD's and some in high yield savings accounts).
2. Maybe take out a small HELOC to do some house projects and pay it off in a two years or less.
3. But ultimately we are going to use the "extra" money to pay cash for my daughters college (she is 5 now).
4. Maybe travel a little. By the time the mortgage is paid off we might take my daughter to Europe (DLP).

What we won't buy?
1. New House -We plan to stay in our house. (we just remodeled it a few years ago).
2. Cars. We don't put a lot of miles on our cars and they are fairly new with low miles (2003 with 47k, 2006 with 35k). I do all the maintenance and keep them running. My last car had 250k miles and my wife made me sell it because it didn't have antilock brakes or air bags.
3. Inventment Stocks. We are already invested in the stock marked with our 401k's.

 

[jocotter]

Paying off ours didn't give us a huge amount more each month, since we still save the part of the house payment for taxes and insurance. Plus, since housing is so inexpensive where we are, the amount of the mortage payment left to save was less than $700 monthly. We are saving some of it and using the rest to finish paying off a home improvement loan during the next 12 months. After that, we plan on saving and doing some delayed upkeep on our property.

The best part is not so much the money, it's the peace of mind and knowing when we retire, we won't have to worry about a mortgage.

 

[trasor]

Our mortgage will also be paid off in about 5 years. I plan to talk to our accountant at tax time but for anyone who has paid off recently, did you find a big difference in your taxes not having the deduction?

 

[DawnM]

Even if we pay off our mortgage in the next few years, we still have 3 kids to put through college, so we don't have questions like yours!

We will be close to 60 when our youngest finishes college and ready for retirement.

We ARE seriously looking at trying to sell, even at a slight loss, and downsizing to pay off something ASAP though. I hate our high (to me) house payments.

Dawn

 

[LovableGluttons]

We saved for several years and bought our house outright without a mortgage. The extra money we have in our budget each pay period goes into our savings.

From our savings, once a month DH and I decide which investment we will be transferring it to.

We pay our homeowners insurance and property taxes once a years.


ETA: Sorry I can't answer the income tax question. When we considered a mortgage, the amount we would have to pay in interest was a lot more than the tax break would have been, so we didn't do it.

 

[scard192]

Great discussion. I am thinking of paying off my mortgage. I bought my small condo 17 years and and only owe 8 more years. The last 2 years Turbo Tax has told me that I am better off filing the 1040A as my standard deduction is more than the itemized ones. With no tax benefits and having the cash to pay it off there doesn't seem to be any reason not to do so. I've calculated that I will save over $5,000 if I pay it off now. The extra money will go into my retirement account(s).

 

[budbeerlady]

We cannot wait for this day, we joke we will be able to retire at 42! Dh and I were just talking about this Wednesday night.

For us the extra will mostly go into maxing out the 401Ks and then some extra traveling. The same year the mortgage is done Dd will graduate private school, oh happy day!!!!!!! Our taxes are currently very low and the home insurance is also pretty reasonable so we will have an electric bill and a gas bill pretty much to pay.

 

[NotUrsula]

Daycare and tuition. Right now the bill is $14K/yr, but next yr. DS will start HS, so it will go up to nearly $20K. Then there will be college, which the last one won't finish until 2029.

Our mortgage wasn't nearly that high; we only paid about $9500/yr on that, including taxes and escrow.

 

[Conkozan]

We knew when we took our mortage out it would be paid for a year before our oldest child started college. We would then have college bills for the next 10 years for all the kids. (And yes, as long as they do well, we pay 100% for college.)

Someday, the extra money might be seen!

 

[jmpellet]

Ours will be paid off in the next year as well (at ages 42) and we are not sure what to do. We had thought about another home -- lake house or something but not sure we want the upkeep. There is some good information on fatwallet.com finance forums where that's all they talk about. They suggest maxing out pre-tax accounts such as 401ks. Instead of saving for college in a 529 plan, max out mom and dad on a Roth IRA each year if you can (there are income limitations). For us we have gotten hit hard with taxes in the last few years as our interest has gone down so I know we need to do something to lower our taxable income.

 

[maddiesmom0116]

All of mine seems to go into upkeep, things break all the time, it is unbelievable. In the last 18 months: a new well, new furnance (this month), new central air, basement moisture issues ($$$), new freezer, new washer, now a new dryer this month too. Don't worry the money will find a place to go, mine now goes to pay for all of the above from my home equity line of credit I have.

 

[QVCshopper]

We paid ours off 4 years ago, just after my DS was born. We figured paying off the house would make me quitting my f-t job less stressful. Then the market went down, and I swear it's been one of the best decisions of my life.

The money we have been able to save has been incredible. It goes into retirement and college savings, however we have enough to pay cash for our next car and an ample emergency fund. My husband put the max into his 401K, I participate heavily in mine, and we fully fund our Roth IRAs and our kid's ESA, as well as some into their 529s. We haven't really changed our lifestyle much; we hope to retire early. I'm in my 30s now; hoping for 55-60 if all goes well. And we vacation a good amount.

We pay our taxes yearly when they are due. We try to stay up on repairs. But, we have been able to save the $1200 a month payment and just live life without worrying about the mortgage.

That said, we're debating moving to a more expensive area/better school district. We'd probably have a mortgage again if we did that, so it's a tough decision.

Hope that helps.

 

[punkin]

I will never pay off my mortgage. I figure I will sell this house and downsize before that happens.

 

[QVCshopper]

Great discussion. I am thinking of paying off my mortgage. I bought my small condo 17 years and and only owe 8 more years. The last 2 years Turbo Tax has told me that I am better off filing the 1040A as my standard deduction is more than the itemized ones. With no tax benefits and having the cash to pay it off there doesn't seem to be any reason not to do so. I've calculated that I will save over $5,000 if I pay it off now. The extra money will go into my retirement account(s).

If you plan to stay there, I'd say do it! You're really not getting the mortgage interest deduction if you're using the 1040A (I also use that). Interest rates are low now, so your money isn't gaining much in the bank... After you pay it off, put your extra money into your 401K to lower your income taxes.

 

[SPBendersky]

Most people invested and then lost half in the recent economic down turn. Best thing in my opinion is to take some specialized investment courses and manage it yourself. You can easily beat the market for a safe 12-15%.

 

[SPBendersky]

I agree with Barry. Some of us are always behind the eight ball not in front of it.

 

[terri01p]

 

[bigbabyblues]

Ours will be paid off on my 40th birthday. That will be a year or so before our oldest starts college, and the other one is coming up right behind him, so....

Our taxes and insurance are separate from our mortgage, so we'll be "saving" the whole amount of our monthly payment.

 

[crisi]

We put ours into college savings - for the most part. We paid it off about four years ago - and took one out again this summer to buy a place to rent to my brother in law - but the payment is half our previous payment and the interest rate is 4%. We'd maxed out 401ks before we paid extra to the mortgage.

Other things we did - we take more/better vacations - took the family out of the country twice last year. Bought a new car for my husband with cash shortly after the mortgage was paid off, bought one for me this year - with cash. Give more to the church than we did. Gave a bunch of money to the PTO last year to send kids to camp and fund some improvements at the school.