quote:
I'll give a different set of advice. There's 0 reason to pay the bank more than your payment until you can pay the entire thing. The bank having more of your money doesn't change your future payments. Better advice would be to put away money into an interest accruing account like a money market or investment account and save up until you can pay your mortgage off.

I'm basically in the camp of, not only don't pay it off early, but try to get the very longest mortgage you can ever get.

Think of it this way: where else can you get 30 year debt, at low rates with no ability for the lender to make a margin call? Literally, all you have to do is make the same monthly payment year in and year out and there's nothing the lender can do to worsen your lot. PLUS, YOU retain the free option to refinance to a lower rate anytime you see fit. IMO, mortgages are mispriced in favor of the borrower.

Also, I just don't see the argument for feeling better about paying it down - it LOWERS your cash on hand. That seems LESS secure to me.

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Posted by notsince98

KC, MO

Member since Oct 2012

18099 posts

Posted on 12/6/23 at 1:38 pm to Big Scrub TX

quote:
Also, I just don't see the argument for feeling better about paying it down - it LOWERS your cash on hand. That seems LESS secure to me.

How much income do you need to cover your life expenses and a mortgage?

How much income do you need to cover just life expenses with no mortgage?

Would you say the second option is less than the first? If you need less income to sustain your life, does that increase the pool size of jobs that you could take and cover your needs/wants? Is there more security in having more job options? Is there a greater potential for finding the right job if you have more to pick from?

Not saying this is for everyone but there absolutely is more security for many folks when they have less allocated income to to pay debts.

EDIT: I should also add that as a sole provider for a family of 5, knowing that my house was owned completely by me would really reduce the stress of keeping a well paying job. If I had no mortgage and I lost my job, it would be super easy to find enough income to get us by.

This post was edited on 12/6/23 at 1:40 pm

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Posted by McLemore

Member since Dec 2003

31581 posts

Posted on 12/6/23 at 2:09 pm to Big Scrub TX

quote:
Also, I just don't see the argument for feeling better about paying it down - it LOWERS your cash on hand. That seems LESS secure to me.

I think there’s some version of sunk-cost fallacy at play with a lot of homeowners who “missed out” on historically and absurdly low rates. Paying double on a 6% rate to simulate a 3% rate for instance.

I sort of did that by doing a 15 year fixed as rates were starting to go up. I fell prey to the psychological factor I derided above. I really wanted the first figure in my rate to be a 3. Not a huge deal because it was a small now-rental-property refi and isn’t significant one way or another. But a proper analysis would’ve resulted in a 30year at higher rate.

This post was edited on 12/6/23 at 2:41 pm

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