Paying House Off Early

Homebrewale

Old Mossy Horns
And the part that’s held less than 18 months is taxed at the higher rate of ordinary income, not capital gains.
Less than 12 months, earnings are short term gains taxed as ordinary income. After 12 months, they are taxed at the lower capital gains tax rate.
 

UpATree

Six Pointer
Contributor
Less than 12 months, earnings are short term gains taxed as ordinary income. After 12 months, they are taxed at the lower capital gains tax rate.
I didn’t know they had dropped it to 12 from 18. Thanks for fixing that!
 

bigten

Twelve Pointer
Contributor
I don't know one mortgage where you can skip payments. You can get a $200k loan, pay it faster with extra payments, have $5k left on the loan, decide not to make the next payment, and the mortgage company can foreclose on your home for missing that payment.
Mine was. I payed up on my payments and got notices that I wouldn't have to pay the next month. Then two. Then three.. after that, I recieved letters monthly stating I didn't need to make a payment for three months and what I was paying was going to principal on the end. Continued doing so and paid mine off early. The bank didn't like it as it cost them money, but I was rather relieved to get that behind me. Afterward, I increased my investments accordingly. May not work for all, but my piece of mind was/is of value to me just knowing that check doesn't have to be written any longer.
 

KTMan

Twelve Pointer
Contributor
With the 2018 tax reform, the standard deduction is now $24,000 for married couples. Unless you can find more than $24,000 in mortgage, property tax, charity, and a couple of small things, your mortgage interest no longer reduces your tax bill.

You aren’t talking about a lump sum investment, either, right? It’s $2500 a month, sixty times. So only one month will be for five years. The rest of it will be for periods as short as a month. No financial professional would assume a 7% return—or even a positive return—in such short time frame. And the part that’s held less than 18 months is taxed at the higher rate of ordinary income, not capital gains.

Paying the mortgage is a guaranteed 3.5% instant tax-free return, which is a lot better than a highly speculative return that will be taxed at a much higher rate.
Pretty much what my father said. He said mortgage interest is quarantined.
 

nccatfisher

Old Mossy Horns
Contributor
Mine was. I payed up on my payments and got notices that I wouldn't have to pay the next month. Then two. Then three.. after that, I recieved letters monthly stating I didn't need to make a payment for three months and what I was paying was going to principal on the end. Continued doing so and paid mine off early. The bank didn't like it as it cost them money, but I was rather relieved to get that behind me. Afterward, I increased my investments accordingly. May not work for all, but my piece of mind was/is of value to me just knowing that check doesn't have to be written any longer.
Mine was the same way. We were several years ahead at one time, like you said it was one of the best days of my life when the last payment was made.
 

beard&bow

Ten Pointer
Contributor
I can't wait until this is an actual discussion at our dinner table. I don't even own a house right now.

Reading through this post is inspiring. Thank you guys. You've definitely helped more people than just the OP.
 

aya28ga

Old Mossy Horns
Contributor
Mine was the same way. We were several years ahead at one time, like you said it was one of the best days of my life when the last payment was made.
Ditto for us.

Making that final payment is an extremely liberating feeling; and my wife was smart enough to re-invest the monthly amount she was paying on reducing the mortgage towards funding her retirement fund.

Having financial freedom from debt is the secret; when you don't have debt and have money in the bank, you make the decisions and your options are unlimited......
 

30/06

Twelve Pointer
It’s all already been said but I agree with the pay off the principle. Too much risk in a 5 year investment in the market. Especially given the 8-9 year run we’ve had.

Best of luck. We payed ours off Nov 2017. Had wife write the check while I was in KY on my rutcation. Been able to save a ton of money and don’t worry about job status or really anything financial. Could quit my job tomorrow and be fine. It’s pretty liberating. If you don’t like the feeling you can always go borrow money against the house👍
 

MJ74

Old Mossy Horns
Your going to pay off 250k in 5yrs? Thats putting away some jack right there...

Sent from my LG-US996 using Tapatalk
 

jug

Old Mossy Horns
Contributor
I paid our house off just in time to pay for college. Come December of 2020, I will have spent close to 164,000 on college since 2012, for my kids and wife. I know some people want to retire but i cant see myself retiring until I have to. I enjoy working too much .
Good luck to you.
 

KTMan

Twelve Pointer
Contributor
Your going to pay off 250k in 5yrs? Thats putting away some jack right there...


Sent from my LG-US996 using Tapatalk
That is the plan. Might not make it but going to bust butt trying. If I don’t it will be seriously knocked down. As long as the good lord don’t have other plans. Barring nothing major unexpected events I might be able to do it.
 

UpATree

Six Pointer
Contributor
That is the plan. Might not make it but going to bust butt trying. If I don’t it will be seriously knocked down. As long as the good lord don’t have other plans. Barring nothing major unexpected events I might be able to do it.
Dave Ramsey says that if you live like nobody else now, you can live like nobody else later in life. For years I watched my coworkers vacation in Europe and drive nice cars. We vacationed in a popup camper and drove older, but reliable cars. I was pretty sure I was making at least what they were. But here I am at 60, and a week ago, I put in my retirement papers, last day May 9. I owe nobody, and tomorrow I will go to the Toyota dealer and pick up my retirement present: a new Tundra 4x4 Limited TRD Off Road.

My only regret is that my parents, who sacrificed so much to send three kids to college by driving a tow truck, didn't live to see it.
 

KTMan

Twelve Pointer
Contributor
Dave Ramsey says that if you live like nobody else now, you can live like nobody else later in life. For years I watched my coworkers vacation in Europe and drive nice cars. We vacationed in a popup camper and drove older, but reliable cars. I was pretty sure I was making at least what they were. But here I am at 60, and a week ago, I put in my retirement papers, last day May 9. I owe nobody, and tomorrow I will go to the Toyota dealer and pick up my retirement present: a new Tundra 4x4 Limited TRD Off Road.

My only regret is that my parents, who sacrificed so much to send three kids to college by driving a tow truck, didn't live to see it.
My daily driver is a 95 escort that gets 31 mpg. I got it with 27000 miles on it for $800. Broke 140000 Miles last week. I’ll buy another rental property before I spend $50000 on a vehicle. I’ve always felt vehicle payments are the biggest burden on families. I look for good reliable used vehicles and drive until they cost more to keep on the road than they worth.

Have not made a vehicle payment it over 15 years.
 

DBCooper

Old Mossy Horns
Contributor
Dave Ramsey says that if you live like nobody else now, you can live like nobody else later in life. For years I watched my coworkers vacation in Europe and drive nice cars. We vacationed in a popup camper and drove older, but reliable cars. I was pretty sure I was making at least what they were. But here I am at 60, and a week ago, I put in my retirement papers, last day May 9. I owe nobody, and tomorrow I will go to the Toyota dealer and pick up my retirement present: a new Tundra 4x4 Limited TRD Off Road.

My only regret is that my parents, who sacrificed so much to send three kids to college by driving a tow truck, didn't live to see it.
The flip side of this is.....there are things I love doing with my wife, while we’re younger, that I won’t enjoy so much, later.

We’re still going to retire, “early”. Could it have been sooner? Sure. Do we have regrets? No.

Enjoy your truck. Great vehicles.
 

Homebrewale

Old Mossy Horns
Making that final payment is an extremely liberating feeling; and my wife was smart enough to re-invest the monthly amount she was paying on reducing the mortgage towards funding her retirement fund.

Having financial freedom from debt is the secret; when you don't have debt and have money in the bank, you make the decisions and your options are unlimited......
I didn't find it liberating. Also I like using other people's money. Just paid off a 5 year 0% loan on a mattress.
 

Homebrewale

Old Mossy Horns
Dave Ramsey says that if you live like nobody else now, you can live like nobody else later in life. For years I watched my coworkers vacation in Europe and drive nice cars. We vacationed in a popup camper and drove older, but reliable cars. I was pretty sure I was making at least what they were.
How sure are you? My coworkers know my income (public information) so they may think we have similar household incomes but they don't know how much my wife is earning. That changes the equation pretty significantly.
 

MJ74

Old Mossy Horns
I didn't find it liberating. Also I like using other people's money. Just paid off a 5 year 0% loan on a mattress.
I know what you mean, but if your paying it off with your own money thats not necessarily using other people's money is it?

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firedawg60

Eight Pointer
I know what you mean, but if your paying it off with your own money thats not necessarily using other people's money is it?

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And you are giving them a lot of money just to use their money.
 

sky hawk

Old Mossy Horns
Contributor
Dave Ramsey says that if you live like nobody else now, you can live like nobody else later in life.
That's one of the few things I don't agree with DR on. I know what he's trying to say, but if you take that statement at face value, it means, "live in poverty now so you can live in luxury later".

That's not how I want to live my life, and frankly, I don't even think that's biblical. I prefer a life of moderation on both ends. My goal is not to be a multi-millionaire when I die. You can't take it with you, and as DBC points out, you can't even use it like you want to once you reach a certain point. Your body and your kids are only young once.

As far as the mortgage, I'd pay it off as soon as you can, but I wouldn't put the rest of your life on hold to do it.
 
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ABolt

Twelve Pointer
Contributor
I see both sides.

You have to live like today's is your last day, while trying to save like you will live to be 100.

However, I also understand that you can finance a house, but you can't finance retirement.

The time value of investments is powerful - the sooner you put money away to work for you, the better. Don't put off saving for retirement to pay off a 3% mortgage. If you can do both, that's great, but some sort of balance is likely best.
 

DBCooper

Old Mossy Horns
Contributor
Think about it...
That just means you over paid for the mattress. ... Nothing is free..
Even at 0% apr it is still costing you.
Seriously? The price on the mattress was the same if you paid cash or financed it.

That’s a weak argument against people using credit to their advantage - typically used by people who aren’t responsible enough to do the same.

My cousin’s a multi-millionaire. He has the Midas touch, except everything he touches turns green. He purchased his last Suburban and did the 60 mos 0% financing.

I PROMISE you, if it didn’t make fiscal sense to do that, he wouldn’t have.
 

bigten

Twelve Pointer
Contributor
Without fail, EVERY item I have checked on that the 0% interest applies to comes with a larger up front price. Enough to pay the interest on the same term loan at standard rates.
 

DBCooper

Old Mossy Horns
Contributor
Without fail, EVERY item I have checked on that the 0% interest applies to comes with a larger up front price. Enough to pay the interest on the same term loan at standard rates.
The qualification process weeds out most. It’s no secret that credit rating affects loan terms and rates.

I’m not implying you’re not an excellent credit risk. I’m just stating a fact.

Make your deal before you bring up how you’re going to pay for it and be willing to walk away. My first job out of college was doing F&I. Everybody makes their own deal.
 

jug

Old Mossy Horns
Contributor
That's one of the few things I don't agree with DR on. I know what he's trying to say, but if you take that statement at face value, it means, "live in poverty now so you can live in luxury later".

That's not how I want to live my life, and frankly, I don't even think that's biblical. I prefer a life of moderation on both ends. My goal is not to be a multi-millionaire when I die. You can't take it with you, and as DBC points out, you can't even use it like you want to once you reach a certain point. Your body and your kids are only young once.

As far as the mortgage, I'd pay it off as soon as you can, but I wouldn't put the rest of your life on hold to do it.
Well said. Wise words.
My dad worked his whole life for Westinghouse. Retired at 60 and instead of taking the big payoff and investing it, he chose to take the guaranteed monthly check .... pension plan.
He only got to enjoy his pension 6 years .
CBS and Siemens Westinghouse got to keep the rest of his pension money. All those years saving and putting back and since he was not married, all the pension money went back to the company.
No way am I going to live like a miser after I saw what happened to my dad.
I have worked for men from up North who came down here to retire and play golf. Worked all their lives , saving up ..... only to die within a few years after retiring.
You got to live one day at a time.... and enjoy it.
 
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Ncfish001

Spike
We’ve paid off one and it was a great feeling. We weren’t as disciplined afterwards and those mortgage payments we were making sort of disappeared in the monthly expenses. Not good. Upgrade to a far larger and expensive house. It does have a 3.5 acre pond in the back so yes I’m happy we did It. I fish all the time. New mortgage and paying it down proactively but not as aggressively before. I have a chunk of cash that I was planning to put down on it but have been dragging my feet. Still debating on investing it or paying down the mortgage. Time will tell.
 

bigten

Twelve Pointer
Contributor
The qualification process weeds out most. It’s no secret that credit rating affects loan terms and rates.

I’m not implying you’re not an excellent credit risk. I’m just stating a fact.

Make your deal before you bring up how you’re going to pay for it and be willing to walk away. My first job out of college was doing F&I. Everybody makes their own deal.
Just stating fact as to what I have seen. Yes, I have excellent credit. There were a couple of larger purchases I was looking at, specifically a nee tractor and a new zero turn. With both, at various dealers, without running my credit, the normal mode is that the zero interest determines larger cost, while the interest loan would dictate a lower sale price. Not happy with either choice, I got my best deals as cash purchases and not looked back. Just recently did the same on a truck purchase. I am not a banker, nor a math whiz, but can see and figure the costs involved in each scenario.
And, as I stated in an earlier post, I paid my home off ahead of time. Doing so worked for me. Your situation may be different.
 

DBCooper

Old Mossy Horns
Contributor
Just stating fact as to what I have seen. Yes, I have excellent credit. There were a couple of larger purchases I was looking at, specifically a nee tractor and a new zero turn. With both, at various dealers, without running my credit, the normal mode is that the zero interest determines larger cost, while the interest loan would dictate a lower sale price. Not happy with either choice, I got my best deals as cash purchases and not looked back. Just recently did the same on a truck purchase. I am not a banker, nor a math whiz, but can see and figure the costs involved in each scenario.
And, as I stated in an earlier post, I paid my home off ahead of time. Doing so worked for me. Your situation may be different.
A classic example is an $80 K vehicle with 12 month terms at 0%.

That’ll weed out a lot of people.
 
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