Like so much else, it depends. What is the mortgage rate? What are the terms? What are present interest rates? What are other investment alternatives? What is your personal comfort with having debt? It depends. And the answers often are different for different people.
When the tax laws changed in 2017, we determined the standard deduction was best for our situation (SALT cap at $10K), so we paid off the mortgage balance. I discussed it with a couple of older coworkers and they had done the same. We would have paid it off before retiring anyway (to have zero debt in retirement).
Great point. The TCJA made it easier for me to make the decision to payoff the mortgage early. I wanted to anyway, just to be out of debt, but not getting the deduction put me over the top.
I looked and I hadn’t answered this. We prepaid our mortgage since we were within 5 years of retirement and wanted to be debt free. Our daughter and son in law were in their 20s and did not prepay their mortgage, they put more in their retirement, then when the rates got really low during Covid, they refinanced to a 15 year. I think we both did what made sense for the times we were in our lives. Chris
YES, absolutely! Even though we had enough in savings to pay it off through the years, my wife and I convinced ourselves that we were earning more my keeping our low interest rate mortgage (3%) and keeping our investments. As we approached 60, we decided to speed up our prepayments and pay the mortgage off. Have the mortgage paid off at 60 enabled me to move out of industry and in Not for Profit work with a lower salary, but satisfaction that I am investing in a worthy cause. Additionally, it just felt good to have ZERO debt! Having no mortgage to pay each month has been a great ride the past six years.
Agree with most of what’s already been said – if you have a low interest rate relative to the returns on your portfolio, then carrying a mortgage and not trying to pay it off quickly makes sense.
With the market tumbling, and interest rates climbing, I’m feeling pangs of regret in not taking out a home equity loan back in November or December 2021. We retired a couple weeks ago and now have to rely on our portfolio for income at a time when withdrawing from it will be painful. Fortunately we have a cash buffer for a year or two.
Otoh, with inflation raging and our home value reaching dizzying pandemic heights, I’m feeling pretty good about a 2% fixed mortgage. It’s really the only offset to the rest of our net worth portfolio, which has definitely taken a hit.
I’m starting to understand why wealthy people carry a lot of debt. It’s because they can; and it lets them keep their invested money invested where it will work harder for them than paying the interest on loans (at least loans that were taken out up until lately).
Thanks to the rise in bond market yields, we’re reaching a tipping point today — mid-May 2022 — where some mortgage borrowers may find they can earn more by buying bonds than paying down their home loans. For four decades, that typically hasn’t been the case. But the math has now changed, at least for some homeowners.
Years ago, I noticed beer cans on my lawn. Some tossed among my neighbor’s lawns also. I picked them up and throw them into my return empty bin. After weeks of finding them, I was getting aggravated. I returned my bottles & cans and the beer cans for the deposit. My next errand was my bank…… Idea!!! Use the empty’s to prepay my mortgage at my bank. Beer can equity ! For months, I payed down my principal with beer can donations. Sorry to say, the lawn donations stopped. But, I continued to prepay with empty’s till the mortgage was paid. I want to Thank that guy some day.
Paying off a mortgage should only be considered if all 401(k) and IRA contributions have been maxed out. You also need to ensure that you are not carrying any higher cost debt. Once those boxes are ticked, it really comes down to your risk-orientation. If you are a risk accepter and your after tax mortgage cost is low (say below 2.5%), the best move in my mind is to keep the low-cost debt and invest for the long-term.
Like so much else, it depends.
What is the mortgage rate? What are the terms? What are present interest rates? What are other investment alternatives? What is your personal comfort with having debt?
It depends. And the answers often are different for different people.
When the tax laws changed in 2017, we determined the standard deduction was best for our situation (SALT cap at $10K), so we paid off the mortgage balance. I discussed it with a couple of older coworkers and they had done the same. We would have paid it off before retiring anyway (to have zero debt in retirement).
Great point. The TCJA made it easier for me to make the decision to payoff the mortgage early. I wanted to anyway, just to be out of debt, but not getting the deduction put me over the top.
We accelerated paying off our mortgage in 2009 and paid it off in 2012 for the following reasons:
We considered the mortgage as part of our bond portfolio (a negative bond) and interest rates were lower than our mortgage rates.
We were maxed out on 401(k) contributions
We wanted to be mortgage free to reduce our ongoing living expenses in order to maintain our goal being able to comfortably live off of one salary.
I looked and I hadn’t answered this. We prepaid our mortgage since we were within 5 years of retirement and wanted to be debt free. Our daughter and son in law were in their 20s and did not prepay their mortgage, they put more in their retirement, then when the rates got really low during Covid, they refinanced to a 15 year. I think we both did what made sense for the times we were in our lives. Chris
The peace of mind generated by no mortgage provides more value than the piece of my mind that was always focused on how to pay off the mortgage.
YES, absolutely! Even though we had enough in savings to pay it off through the years, my wife and I convinced ourselves that we were earning more my keeping our low interest rate mortgage (3%) and keeping our investments. As we approached 60, we decided to speed up our prepayments and pay the mortgage off. Have the mortgage paid off at 60 enabled me to move out of industry and in Not for Profit work with a lower salary, but satisfaction that I am investing in a worthy cause.
Additionally, it just felt good to have ZERO debt!
Having no mortgage to pay each month has been a great ride the past six years.
Agree with most of what’s already been said – if you have a low interest rate relative to the returns on your portfolio, then carrying a mortgage and not trying to pay it off quickly makes sense.
With the market tumbling, and interest rates climbing, I’m feeling pangs of regret in not taking out a home equity loan back in November or December 2021. We retired a couple weeks ago and now have to rely on our portfolio for income at a time when withdrawing from it will be painful. Fortunately we have a cash buffer for a year or two.
Otoh, with inflation raging and our home value reaching dizzying pandemic heights, I’m feeling pretty good about a 2% fixed mortgage. It’s really the only offset to the rest of our net worth portfolio, which has definitely taken a hit.
I’m starting to understand why wealthy people carry a lot of debt. It’s because they can; and it lets them keep their invested money invested where it will work harder for them than paying the interest on loans (at least loans that were taken out up until lately).
Thanks to the rise in bond market yields, we’re reaching a tipping point today — mid-May 2022 — where some mortgage borrowers may find they can earn more by buying bonds than paying down their home loans. For four decades, that typically hasn’t been the case. But the math has now changed, at least for some homeowners.
Years ago, I noticed beer cans on my lawn.
Some tossed among my neighbor’s lawns also.
I picked them up and throw them into my return empty bin.
After weeks of finding them, I was getting aggravated.
I returned my bottles & cans and the beer cans for the deposit.
My next errand was my bank…… Idea!!!
Use the empty’s to prepay my mortgage at my bank.
Beer can equity !
For months, I payed down my principal with beer can donations.
Sorry to say, the lawn donations stopped.
But, I continued to prepay with empty’s till the mortgage was paid.
I want to Thank that guy some day.
Paying off a mortgage should only be considered if all 401(k) and IRA contributions have been maxed out. You also need to ensure that you are not carrying any higher cost debt. Once those boxes are ticked, it really comes down to your risk-orientation. If you are a risk accepter and your after tax mortgage cost is low (say below 2.5%), the best move in my mind is to keep the low-cost debt and invest for the long-term.