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Would it be a bad idea to try to pay off my mortgage at this time?

Posted on 5/24/17 at 1:47 pm
Posted by WG_Dawg
Hoover
Member since Jun 2004
86438 posts
Posted on 5/24/17 at 1:47 pm
Background: 31 years old, just purchased a condo in December. Will probably get married in the next year. No kids but expect some within 5 years. No debt (besides mortgage), give a good % to my employer that matches, max out Roth yearly.

So I want to retire as soon as I can (novel concept I know), maybe early 50s at best, but don't make a frick ton of money, but am comfortable and put as much towards retirement now as I am comfortable with. I'm only 6 months into my first home purchase but the thought occurred to me to be super aggressive and put everythign I have towards paying it off. I see one potential con and 3 major pros:

[disclosure: my current percentage taken out from work and my annual Roth max will NOT change, that is a constant from here on out]

Con: In the ~8 to 10 years it would take, that's 8-10 years I could be putting extra money towards some sort of retirement vehicle. Taht could be a good bit of lost savings.

Pros:

1) After it's paid off everythign I get in my paychecks is essentially free to do whatever I want with it. Be it saving up for my next (and last) home purchase, resume putting "extra" towards retirement, starting a 529 plan, whatever.

2) Beign that I won't have multiple millions saved at retirement time, I basically HAVE to have a good passive income stream. I could potentially be around 40ish and have a monthly rental income until whenever I decide not to. I like that.

3) Whenever the day comes (maybe in my 60s) that I'm done renting it I can sell it and get all of the profit.


Am I off base here? I know the common mindset is to never put more towards the mortgage that you have to unless you're gonna stay for a while, or potentially stay forever. But when I think about wanting to retire early I just can't get around the fact I'll need income still coming in and this seems like a great avenue for that.

Any thoughts?
Posted by ATLdawg25
Atlanta, GA
Member since Oct 2014
4370 posts
Posted on 5/24/17 at 1:48 pm to
What is your interest rate?
Posted by WG_Dawg
Hoover
Member since Jun 2004
86438 posts
Posted on 5/24/17 at 1:55 pm to
3.8%
Posted by barry
Location, Location, Location
Member since Aug 2006
50337 posts
Posted on 5/24/17 at 2:00 pm to
Probably not a good idea on inflation alone. Have you thought about getting a roommate to accelerate your savings?
Posted by Mingo Was His NameO
Brooklyn
Member since Mar 2016
25455 posts
Posted on 5/24/17 at 2:02 pm to
quote:

essentially free to do whatever I want with it. Be it saving up for my next (and last) home purchase,


You said your probably about to get married and want to have kids in the somewhat near future. You don't know what the hell is going to happen. I have no real advice towards your specific question, but your life is about to change a ton so I would weigh that heavily into whatever you decide to do.
Posted by WG_Dawg
Hoover
Member since Jun 2004
86438 posts
Posted on 5/24/17 at 2:11 pm to
quote:

Have you thought about getting a roommate to accelerate your savings?


I live with my gf so don't think getting a roommate is in the cards. And she does help throw some money towards the mortgage as well.
Posted by WG_Dawg
Hoover
Member since Jun 2004
86438 posts
Posted on 5/24/17 at 2:17 pm to
quote:

You said your probably about to get married and want to have kids in the somewhat near future. You don't know what the hell is going to happen. I have no real advice towards your specific question, but your life is about to change a ton so I would weigh that heavily into whatever you decide to do.


I hear ya. We're just going to the courthouse so I'm not worried about marriage expenses (besides a ring), and I've got a good chunk saved up for emergencies, disasters, miscellaneous, etc.

A kid is going to be the real monkey wrench and I understand that. But we have good insurance and heck if all goes well the place will be paid off before he's in 1st grade.

I know this is somewhat ambitious, and maybe not the best course I don't know...I just can't shake the fact that if I want to retire before age 60, based on waht I make now, I HAVE to have some good income coming in and it seems like renting the place out would be the way to go.
Posted by AUjim
America
Member since Dec 2012
3662 posts
Posted on 5/24/17 at 2:24 pm to
What is the house worth? How much do you currently owe? How much extra per month do you have to throw at the mortgage?
This post was edited on 5/24/17 at 2:25 pm
Posted by barry
Location, Location, Location
Member since Aug 2006
50337 posts
Posted on 5/24/17 at 2:30 pm to
quote:

I HAVE to have some good income coming in and it seems like renting the place out would be the way to go.



So why does it need to be paid off? That's the beauty of real estate. LEVERAGE.
Posted by OysterPoBoy
City of St. George
Member since Jul 2013
34998 posts
Posted on 5/24/17 at 2:32 pm to
I don't know many people that say "Man, I wish my house wasn't paid off."
Posted by barry
Location, Location, Location
Member since Aug 2006
50337 posts
Posted on 5/24/17 at 2:36 pm to
quote:

"Man, I wish my house wasn't paid off."



Because no one accidently pays off their house, its a conscience effort.

I understand why people would WANT to pay off their house and the feeling of security they get from that. But it's a clear cognitive bias as it will cause you to have less wealth in the long term.
Posted by WG_Dawg
Hoover
Member since Jun 2004
86438 posts
Posted on 5/24/17 at 3:06 pm to
quote:

What is the house worth?


about 165

quote:

How much do you currently owe?


about 150

quote:

How much extra per month do you have to throw at the mortgage?


that's a sliding scale, I figured I could put anywhere from $300-500 extra on top of the payment each month. And any small windfalls (tax returns, gifts, etc) could go towards it as well. Also my gf is currently aggressively paying off her car note but when that is done she'll be able to contribute even more.
This post was edited on 5/24/17 at 3:07 pm
Posted by WG_Dawg
Hoover
Member since Jun 2004
86438 posts
Posted on 5/24/17 at 3:07 pm to
quote:

So why does it need to be paid off?


Well, before I rent it out I'd need to be living somewhere else. And I certainly don't have the means to buy another place and pay 2 mortgages while the rental situation gets figured out.
Posted by notsince98
KC, MO
Member since Oct 2012
17954 posts
Posted on 5/24/17 at 3:19 pm to
not having a mortgage gives you lots of benefits financially.

1) It reduces the amount you need in your emergency fund.
2) it is a big step toward retiring early as the income you need during retirement gets greatly reduced w/ not having a mortgage to fund.
3) No more chances to have a bank screw you over and steal your house through a crazy paperwork error.
4) You can drop homeowners insurance and self insure if you want.

People will try and tell you that it isn't the financial savvy choice because of the low interest rate but anytime you can improve your budget and free up discretionary spending, that opens so many more doors.
Posted by Mingo Was His NameO
Brooklyn
Member since Mar 2016
25455 posts
Posted on 5/24/17 at 3:25 pm to
quote:

anytime you can improve your budget and free up discretionary spending, that opens so many more doors.


When you're 50. Not necessarily when you're 30.
Posted by barry
Location, Location, Location
Member since Aug 2006
50337 posts
Posted on 5/24/17 at 3:34 pm to
quote:

People will try and tell you that it isn't the financial savvy choice because of the low interest rate but anytime you can improve your budget and free up discretionary spending, that opens so many more doors.


Like with the money you would have if you WERENT paying off your mortgage early???
Posted by notsince98
KC, MO
Member since Oct 2012
17954 posts
Posted on 5/24/17 at 3:40 pm to
quote:


Like with the money you would have if you WERENT paying off your mortgage early???


I see you are not a free thinker.
Posted by barry
Location, Location, Location
Member since Aug 2006
50337 posts
Posted on 5/24/17 at 4:01 pm to
quote:

I see you are not a free thinker.




Quite the contrary.
Posted by wope
Member since Aug 2011
5682 posts
Posted on 5/24/17 at 5:06 pm to
Assuming its a 30-year fixed, why not start paying it on a 15-year schedule? It won't be a whole lot more per month, but will save you tons of interest.
Posted by WG_Dawg
Hoover
Member since Jun 2004
86438 posts
Posted on 5/24/17 at 6:41 pm to
Do I have to tell my loan company to change it to a 15
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