But note, just because you pay off the mortgage doesn't mean you're home free. You still have to pay insurance, taxes, maintenance, etc.
>> “But why not invest that cash in the market and make 10, 11% returns on it?”
tax on gains, but also deductibles on the mortgage interest so the margins and risks will vary
We paid off our thirty year loan in seven. Countrywide let you pay extra every month, and I paid as much as I could. Having a paid for house enabled us to save a lot more afterwards.
It would be foolish to pay off a 3% fixed rate mortgage early instead of using that money to buy the 5.9% government bonds available right now. This woman is an idiot or a fraudster. Only the banks are better off whem these below market rate loans are paid off early.
I was 38 with prior degrees and with a brand new degree in pharmacy, and recently divorced and a son and financially on my ass. I had a few thousand dollars in credit card debt and wisely paid this off as soon as able as Dave Ramsey says you should. I did. I also had my son.
I bought a house when interests rates were low and sold it to buy a nicer house. But I was still paying interest on a low interest loan.
Oddly I used my credit cards for virtually all my daily purchases about 2500 a month. I paid them off each month. I have not had an interest payment on a credit card in 30 years. Also made a lot of travel points for several trips to Europe. The credit card companies call us “Dead Beats” Mr.Dave Ramsey calls us wise.
I retired with good retirement plans and was actually gaining income in excess of the debt on my house. I wrote the mortgage company a check for the pay off. That was a good day!
I and my wife owe nothing to anybody and have a good income stream. We are not extravagant in our vacations and spending. We just do what we want to do. Our vacations may be to western USA or a country in Europe when we want.
My scenario: 15 year mortgage at 2 1/8%.
Plenty of money to pay off the house note sitting in 4-week T-bills at around 4.25%.
Yes, the house is debt.
I focus on net worth. My net worth grows more quickly earning a higher return than the interest on my debt.
4-week Treasury bills are the safest investment out there. No risk.
I'd be an idiot to pay off the house. I also have complete peace of mind that I CAN pay off the house at any time I so choose.
If the Fed takes us back to 0% then I'll pay off the debt, since the 2 1/8% would then be more than I could safely earn other ways.
Illogical. How do you have peace of mind when your monthly property taxes and insurance is more than your mortgage payment? If you invest in an aggressive index fund, your money will double every 7 to 8 years, so if you have a very low interest rate it would be foolish NOT to invest. I did exactly that, and have absolutely no regrets. I could have easily paid off my remaining balance at any time for many years now, so I still have “peace of mind”, but not paying it off was also a hedge against extreme inflation... that was on target too after Bidenflation.
Been there-done that.
When we retired, we moved our IRAs out of the regular market for a guaranteed 6% (4.8% after fees) where if the market goes up we earn more - but if the market tanks, we don’t lose a penny of principal.
Could have made a lot more in the market during the first Trump years but we couldn’t afford a 3rd hit after we retired..
Current mortgage is small and we pay cash for our cars.
Different situations call for different strategies.
Yes, paying off a mortgage early is the thing to do, if you can. After all, is there really any such thing as “good’ debt?
Rather than pay off the mortgage, invest the cash earning ore than the cost of the mortgage interest.
It’s not really that hard to do
When my folks bought their retirement home they took out a small mortgage equal to about 20% of the value of the property. With taxes and insurance the monthly was about $400.
They did this mostly for the convenience of making one payment, monthly. In our county property taxes are paid in a lump sum twice a year. It was easier to have a small mortgage, at at low (4%) interest rate, that included insurance and taxes, than to come up with the larger lump sum twice a year.
Mom and dad have passed and it was put into a trust with the stipulation that my sister could live in it as long as she made the payments. She recently passed, but had decided a couple of months before she met her maker to stop paying all of her bills. It went into foreclosure before we could get her death certificate. It was a mess. I kept offering to take over the payment and make the back payments, but Bank of America kept putting up road blocks. Six months after her death they “allowed” me to assume the mortgage if I paid the penalties and legal fees, totaling about $7.000. We did.
We came to discover that the property needed a lot of work, totaling about $40K. There was also the expenses of her cremation, the lawyer, the utilities, etc.
We have mixed legal opinions on whether we need to use the assets of the sale of the property to pay off my sister’s debts. Her car was repo’ed and auctioned off and they want $7K to make up the difference. She owed her mobile company $1000.
One expert tells me that since the property was in a trust and neither of us could access the value unless the other passed, I am not required to use the proceeds to pay her debts. Another says that because she was one of the trustees, half the value was hers and we do need to pay off her debts.
What a mess.
Not that many people have extra money to pay off their houses.
Get out of DEBT and stop borrowing. I changed everything when the people decided to elect a marxist muslim that never had a job as President. I had 2 mortgages at the time, paid off one, sold one house then bought another house, paid it off in 10 months and built another ALL CASH and ended up with 3 paid for houses and don’t owe anybody a dime. Debt free for a long time now and never going back.
but what if your investment tanks?
Exactly.
A mortgage is DEBT.
I don’t like DEBT.
I’m not smart enough in economics to explain specifically all of the parameters of my thinking other than to say that, to me, using depreciated (by inflation) dollars to pay a fixed mortgage sum (including a fixed loan rate of 2 1/8%) makes sense to me. In other words, we purchased my home in 2002 dollars and are repaying the mortgage in successively less value dollars each year.
Yes the American way...Pay off your house just so you never own it ever...govt will always own it.
48K to go on a 350Kish home. I can’t wait. I give much more than the monthly. I’m hoping to pay off in two years.
So my military retired pay was going toward the mortgage. We paid extra and the house was debt free in 15 years vs 30. I have taken that military retirement (which is completely mine now), and using that in my investments. It feels great knowing I’m completely debt free and all my cash and investments are mine. Pay it off as early as possible!