View Full Version : If you have paid off your mortgage,
jgenie
03-07-2013, 11:55 AM
do you have any regrets? We've been in a position to be able to pay off our mortgage for a while now but I've been hesitant to send that much cash out of our accounts. I think I'm ready now but thought I would check with those that have done it to see if you have any regrets. DH has been wanting to just pay it off for a while but has been waiting for me to be ok with it. Paying off the mortgage won't deplete our emergency fund. The money will come from separate money we have saved. TIA
janine
03-07-2013, 12:00 PM
What a great position to be in! I haven't so maybe shouldn't comment but I've been thinking about saving towards this instead of saving towards investment.
The negatives to me are if you have an extremley low mortgage rate, it might not be the most beneficial use of cash compared to investing. And if someone is only able to pay of some of the mortgage down it doesn't reduce your montlhy payment as much as you'd think it would as principle goes up as interest goes down. For us our tax portion is almost 1/2 our monthly payment so that never goes away.
Having said that in your position where you can pay it off completely without touching the emergency fund, I think I would. Congrats :).
pinkmomagain
03-07-2013, 12:04 PM
For us, no regrets whatsoever.
Giantbear
03-07-2013, 12:09 PM
this should be a simple cost/benefit analysis since you have other funds for emergency. True, mortgages are cheap money right now, but it only makes sense if the money you could have used to pay down the mortgage will earn more for you than the interest on the mortgage you will be saving. for example, you have a 4% mortgage but are only earning 3% on the money in an account. It is costing you 1%.
Snow mom
03-07-2013, 12:09 PM
We've been happy with our decision to pay off (several years ago). We were paying about 5% which was much more than the money was earning. We also weren't paying enough in interest to itemize and get the interest deduction. Plus it's just nice to not have a mortgage.
katydid1971
03-07-2013, 12:11 PM
Is there any chance that you might move? If so I wouldn't pay off your mortgage if this is your forever house that you will never leave I would and start investing the money instead.
scrooks
03-07-2013, 12:13 PM
Is there any chance that you might move? If so I wouldn't pay off your mortgage if this is your forever house that you will never leave I would and start investing the money instead.
:yeahthat:
Globetrotter
03-07-2013, 12:31 PM
We are about to pay off ours and I wonder the same thing. I know it's a good position to be in - mainly wondering about tax implications! We do have good savings, college plans, etc..
ETA: No plans to move unless we have to accommodate aging parents - we could move them in here as we have a downstair's BR, but it's not the best layout for that.
vonfirmath
03-07-2013, 12:55 PM
Is there any chance that you might move? If so I wouldn't pay off your mortgage if this is your forever house that you will never leave I would and start investing the money instead.
Why? if you pay off the mortgage, then everything you earn when you sell is pure profit. why pay even 4% now if you don't have to?
As for the tax implications -- do your taxes both ways. Both with and without the mortgage deduction. Then look at the amount of extra taxes you "save" versus the amount of interest you paid and see which is more advantageous.
cilantromapuche
03-07-2013, 01:00 PM
No regrets at all. Just make sure you have some cash for emergencies. You'll have. money that was going into your mortgage go into savings, so it really frees up money.
Giantbear
03-07-2013, 01:00 PM
Why? if you pay off the mortgage, then everything you earn when you sell is pure profit. why pay even 4% now if you don't have to?
As for the tax implications -- do your taxes both ways. Both with and without the mortgage deduction. Then look at the amount of extra taxes you "save" versus the amount of interest you paid and see which is more advantageous.most sellers will take into account how much cash you come to the table with, more cash equals less mortgage needed. I was not high bidder for my home, but got it anyway cause i had more down payment than anyone else.
The tax advantage of a mortgage is a fallacy in this case. no matter what your tax savings, it will never be more than the interest paid since you only save a % of the interest paid. You are, in essence, paying $0.65 to get $0.35 for every dollar spent (assuming a blended 35% rate). You have to look at the net effect of the total transaction. What are you getting net and what is it costing you net.
echoesofspring
03-07-2013, 01:14 PM
We paid ours off a year ago. No regrets. For us, the security of having a paid for house outweighed the other considerations, opportunities for investment, etc. No matter what happens we still have our house.
We don't plan on staying in this house forever, but we didn't plan on staying here for 11 years, which is how long we've lived here... and that's life, right? If we leave we'll likely keep it as a rental property, so that's the only kink in the plan- we're back to starting from scratch as far as a down payment goes. The timing was a little weird - we paid it off a couple months before I got pregnant with DD, and in hindsight, had we known she was coming along, we might not have paid it off and instead would have looked for a larger house. OTOH, having it paid off has made my decision to extend my maternity leave a fairly easy choice.
vonfirmath
03-07-2013, 01:19 PM
most sellers will take into account how much cash you come to the table with, more cash equals less mortgage needed. I was not high bidder for my home, but got it anyway cause i had more down payment than anyone else.
The tax advantage of a mortgage is a fallacy in this case. no matter what your tax savings, it will never be more than the interest paid since you only save a % of the interest paid. You are, in essence, paying $0.65 to get $0.35 for every dollar spent (assuming a blended 35% rate). You have to look at the net effect of the total transaction. What are you getting net and what is it costing you net.
Agreed Giantbear. That's why I suggested she try it both ways. In our case. We bought a house in July and it didn't affect our taxes at ALL. Good thing we didn't buy a house for the tax implications :)
glbb35
03-07-2013, 01:27 PM
We have been trying to pay ours off and have been making extra payments when we can. I would love the security of knowing that if I lost my job (which right now is a big maybe) then we would keep our house as it would be paid for. I don't think of houses in terms of "forever houses" I just don't think there is any such thing. No one ever knows what the future holds and if you lost your job or your parents fell ill or your spouse died things would change and rather quickly. It just may not be beneficial to stay in the "forever house" if big changes occurred.
If we had the money I would for sure make sure we were saving enough for retirement but also pay the mortgage off to provide that financial security. How many older adults right now are having to live with their children as they have run out of retirement funds and still owe on a mortgage? My parents paid there house off years ago and are so happy they did it. They now have some flexibility with their money as a large chunk isn't going to a mortgage.
I would also think about college for your kids. IF they live at home at the time they apply for college then your house being paid off could impact how much they receive in financial aid. A recent financial advisor came and spoke to a group of us two months ago and made mention of it. He did however suggest that if you could pay off your house to do it.
Congrats for having the money to do that!
B
DS 03, 06, twins 09, 11
sidmand
03-07-2013, 01:39 PM
Intellectually it probably didn't make sense for us. My Dad is a big believer in investments and most investments have a better return than our mortgage. And having a mortgage gave us a tax deduction as well.
But I knew that DH really wanted to pay off our mortgage and have the piece of mind that came with owning our home outright. So that's what we did. We made extra payments until there wasn't much left at all and then paid that off in a lump sum. No regrets. We still have enough for emergency funds and even I'm happy with the piece of mind, that even if something happens to our job(s), we own our house. I especially appreciated that after watching "Queen of Versailles"! They could have owned their home outright but were getting "cheap money" so he mortgaged the home and they nearly lost everything.
ETA: This IS probably our (almost) forever home. We've lived here 10 years already and plan to live here until the kids leave, anyway.
sariana
03-07-2013, 02:04 PM
Why? if you pay off the mortgage, then everything you earn when you sell is pure profit. why pay even 4% now if you don't have to?
This is assuming you can sell at a profit. Some of us can't. We still are paying over 6% because DH refused to bring to the table the $40,000 difference between what we owed and what our house appraised for. Hat was a year ago. Now values have come up, so as soon as our remodel is finished, we will try again.
vonfirmath
03-07-2013, 02:06 PM
This is assuming you can sell at a profit. Some of us can't. We still are paying over 6% because DH refused to bring to the table the $40,000 difference between what we owed and what our house appraised for. Hat was a year ago. Now values have come up, so as soon as our remodel is finished, we will try again.
If your mortgage is paid off, then ANYTHING you sell your house for is cash that goes into your pocket, even if it is less than you originally paid for your house.
No stress over having to take $40K to the table when you don't have it.
lovin2shop
03-07-2013, 02:14 PM
Zero regrets here!
niccig
03-07-2013, 02:14 PM
I would, but only after doing the cost benefit analysis and have retirement, college other investments taken care of.
We have 2 friends that had to retire earlier than planned. They both wished they had put less money into their house. They finally sold, but for much less because of housing prices so didn't get back all that they paid for house/renovations. Their advice was to not put everything into the house as it turned out to be lousy investment. One friend got burned twice, crash in 90s and again now.
sariana
03-07-2013, 02:21 PM
If your mortgage is paid off, then ANYTHING you sell your house for is cash that goes into your pocket, even if it is less than you originally paid for your house.
No stress over having to take $40K to the table when you don't have it.
But if you have to move, you can do a short sale. If you've already "sunk" the money into the house, it's gone. My response was based on it not being a forever house. DH was looking for a new job and wanted the flexibility to move out of the area.
KonzaPrairie
03-07-2013, 02:26 PM
I would absolutely pay it off if I had the funds! Assuming you don't have any other debt, and an emergency fund, the security of knowing the house is yours should anything happen is way more peace of mind in my book than any investment profit would give me.
belovedgandp
03-07-2013, 02:45 PM
If you don't see needing those liquid funds for any other expenses in the next few years and are disciplined on your budget, then I'd say go for it.
We are right on the edge of starting to make that decision. Just now almost to the point that we could pay it off, but it would take our emergency fund to nothing. Our move is still 4-7 years off. I'd want some money available because moving and new houses always seem to bring expenses. Only an issue if you see moving close in time to paying it off.
smilequeen
03-07-2013, 02:53 PM
No regrets, but you might consult with a financial planner to make sure that's the most efficient use of your money.
I have never been in this position (way to go!) and have no advice. Just wanted to mention that in some states you are legally entitled to walk away from the house and turn the keys over to the mortgage company (there are some restrictions on this). So if you all lost your jobs and had to move and the housing market had tanked, you could keep your cash and leave the house. Since you have an emergency fund this is less important to you, I imagine, but just some thing to consider if you are in a state with that right.
Catherine
♥ms.pacman♥
03-07-2013, 03:08 PM
The negatives to me are if you have an extremley low mortgage rate, it might not be the most beneficial use of cash compared to investing..
Yes, this is what DH keeps telling me. We have considered going to a 15 year mortgage when we refinanced last year, but decided against it as it would be pretty tight, with me as a SAHM. Now that I work fulltime, it is much easier, and i was talking to DH about just making payments so we're done in 15 years instead of 30 (no penalty for paying ahead). That way when DC go off to college we won't have a mortgage payment. But he argues that with interest rates so low we could make more $$$ in the end with investments, putting more $ into our 401k, etc. So i don't know. I think we need to revisit the idea..just heard a coworker say he's finally done paying off the house (they have 4 dc, their oldest is a senior in HS) and how with the money saved for that year they were going on their first cruise! I am jealous...love to say i'd be done paying off the house. Though need to figure out if it's the best thign to do for us. Not entirely sure how much longer we'll be in this home.
georgiegirl
03-07-2013, 03:28 PM
No regrets at all. We paid ours off almost 1.5 years ago, and it's amazing how much faster the money accumulates in the bank when you don't have to pay a mortgage. If you can afford it (have emergency savings as well), I say go for it. Then you can invest any additional funds...since they will accumulate faster w/o a mortgage.
janine
03-07-2013, 03:33 PM
No regrets at all. We paid ours off almost 1.5 years ago, and it's amazing how much faster the money accumulates in the bank when you don't have to pay a mortgage. If you can afford it (have emergency savings as well), I say go for it. Then you can invest any additional funds...since they will accumulate faster w/o a mortgage.
I can imagine it's a wonderful feeling! For us though (NJ) our proprety taxes are half of our monthly payment, so a bit of a damper even if we did pay off the house. My parents paid off their house years ago (and had double digit mortgage rates back then) yet have $20K bill in prop taxes each year but that's a whole other conversation!
janine
03-07-2013, 03:37 PM
Yes, this is what DH keeps telling me. We have considered going to a 15 year mortgage when we refinanced last year, but decided against it as it would be pretty tight, with me as a SAHM. Now that I work fulltime, it is much easier, and i was talking to DH about just making payments so we're done in 15 years instead of 30 (no penalty for paying ahead). That way when DC go off to college we won't have a mortgage payment. But he argues that with interest rates so low we could make more $$$ in the end with investments, putting more $ into our 401k, etc. So i don't know. I think we need to revisit the idea..just heard a coworker say he's finally done paying off the house (they have 4 dc, their oldest is a senior in HS) and how with the money saved for that year they were going on their first cruise! I am jealous...love to say i'd be done paying off the house. Though need to figure out if it's the best thign to do for us. Not entirely sure how much longer we'll be in this home.
I had the same conversation with my DH, but for us we can't pay it off in full-it would just be paying it down faster. DH told me we can't do that without refinancing (I didn't know that) and with our current rate of 3.25, doesn't make sense. Still a good question for your DH (and mine) is while that is low, where can we get a reliable return higher than that now that is relatively safe? I suppose the stock market, more real estate, but then that is risky..and so so far my savings sits in an account at a measly 0.2% savings rate while I try to think of the best options.
nfowife
03-07-2013, 03:52 PM
No regrets, but you might consult with a financial planner to make sure that's the most efficient use of your money.
This. Your money might be better off invested, if your interest rate/payments are low.
niccig
03-07-2013, 03:57 PM
This. Your money might be better off invested, if your interest rate/payments are low.
There also more available in investment -well if not locked away or big penalties to cash out.
This is what our friends found when they were suddenly retired early. All the money in the house could only be access if they wanted to sell, and they didn't want to sell.
There also more available in investment -well if not locked away or big penalties to cash out.
This is what our friends found when they were suddenly retired early. All the money in the house could only be access if they wanted to sell, and they didn't want to sell.
Not to derail the OP, but why couldn't you just take out another mortgage in this case?
niccig
03-07-2013, 04:18 PM
Not to derail the OP, but why couldn't you just take out another mortgage in this case?
Our friend had no job. He was laid-off at 57. You can't get a loan if you don't have regular income. They had retirement savings, but having to quit a few years earlier than planned has meant a huge change in their retirement. He wishes they hadn't tied up as much money in house as they did.
My point is don't put all eggs in the house basket. If you have diversified your savings, and have extra cash and can pay it off, then I would do it. I would just want that diversification.
Our friend had no job. He was laid-off at 57. You can't get a loan if you don't have regular income. They had retirement savings, but having to quit a few years earlier than planned has meant a huge change in their retirement. He wishes they hadn't tied up as much money in house as they did.
My point is don't put all eggs in the house basket. If you have diversified your savings, and have extra cash and can pay it off, then I would do it. I would just want that diversification.
Ah, right, sorry, missed that part somehow! Thanks!
niccig
03-07-2013, 04:27 PM
Ah, right, sorry, missed that part somehow! Thanks!
I should add his advice about not sinking too much into house also includes not buying so much house and not putting too much into renovations. People talk about home as an investment, but you don't get the full return on renovations etc. You need a place to live and it needs to be comfortable, but don't count on it alone for investments.
vonfirmath
03-07-2013, 05:37 PM
Question: Are you allowed to short sale your house if you have enough money in savings to pay it off?
They certainly took a VERY close detailed look at our entire financial picture before giving us the mortgage in the first place.
katydid1971
03-07-2013, 05:48 PM
Why? if you pay off the mortgage, then everything you earn when you sell is pure profit. why pay even 4% now if you don't have to?
As for the tax implications -- do your taxes both ways. Both with and without the mortgage deduction. Then look at the amount of extra taxes you "save" versus the amount of interest you paid and see which is more advantageous.
Because the housing market is still not 100% stable and if you pay it off and it loses value you are out that money when its time to sell.
nfowife
03-07-2013, 05:51 PM
Unless you short sell you would be out that money either way- the mortgage company wants what they are owed regardless of the overall price of your home.
If your money was tied into the house but you suddenly needed it you could always get a heloc. Interest rates are much lower than a mortgage too. My in-laws took out a heloc and used it to lay off their mortgage so now their payments are much lower.
I had the same conversation with my DH, but for us we can't pay it off in full-it would just be paying it down faster. DH told me we can't do that without refinancing (I didn't know that)
Hmm, that seems strange to me. We certainly can pay ours off faster without refinancing, just have to indicate that any extra payment goes to the principal. And I didn't think you could do a mortgage with penalties for paying off early any more. If you really want to pay it down faster, I would check with the mortgage company.
Catherine
niccig
03-07-2013, 06:05 PM
Unless you short sell you would be out that money either way- the mortgage company wants what they are owed regardless of the overall price of your home.
If your money was tied into the house but you suddenly needed it you could always get a heloc. Interest rates are much lower than a mortgage too. My in-laws took out a heloc and used it to lay off their mortgage so now their payments are much lower.
Again you have to qualify for a heloc. I don't think you can get one if you don't have a regular income, so if you get laid off and need access to money that's in your house, you can't get at it.
I'm not saying don't pay it off, I just would want to have diversified savings, as well as an emergency fund.
KrisM
03-09-2013, 05:27 PM
We had no regrets on the first house. We are looking forward to it now.
Yes, investments might make more, and surely will overall. But, the feeling you have knowing you own your house is really great.
If you're concerned about lack of tax deduction, you can donate money to a charity instead of giving it to the bank as interest. It's the exact same savings on taxes.
We would not dip into emergency funds or sinking funds for new car or house repair, but will use other money to pay it faster.
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