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Brobocop
LSU Fan
Baton Rouge, LA
Member since Feb 2018
964 posts

re: Does it ever make sense to pay off your home mortgage early?
The problem with the theory of "Investing the money will grow at a higher interest rate than your mortgage rate" is:

The average american does not have the discipline nor probably the education to invest that money that they would have otherwise put toward the mortgage for early payoff, so they just end up spending it more than likely.

Every swinging dick can manage to figure out how to throw extra at their mortgage which is more beneficial than spending it on God knows what.


lynxcat
Rutgers Fan
Member since Jan 2008
21051 posts

re: Does it ever make sense to pay off your home mortgage early?
Paying off a mortgage doesn’t stop the cost of home ownership. The mortgage might only be 50-60% of the total monthly bill once you factor in property tax, insurance and HOA.


jimbeam
USA Fan
University of LSU
Member since Oct 2011
59253 posts

re: Does it ever make sense to pay off your home mortgage early?
quote:

The average american does not have the discipline nor probably the education to invest that money that they would have otherwise put toward the mortgage for early payoff, so they just end up spending it more than likely. Every swinging dick can manage to figure out how to throw extra at their mortgage which is more beneficial than spending it on God knows what.


Why do you think people can easily throw money at a mortgage but not into VTSAX? The amount of education it would take would be minimal.


TigerintheNO
LSU Fan
New Orleans
Member since Jan 2004
32528 posts

re: Does it ever make sense to pay off your home mortgage early?
quote:

The average american does not have the discipline nor probably the education to invest that money that they would have otherwise put toward the mortgage for early payoff, so they just end up spending it more than likel


The average American can't pay off their mortgage early, but the ones that have the financial wherewithal to pay their mortgage off early also are the ones that are likely to save/invest their money.


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elposter
Alabama Fan
Member since Dec 2010
17543 posts

re: Does it ever make sense to pay off your home mortgage early?
Ramsey's advice accounts for the reality that most people who say things like "I'll just invest the money elsewhere for a higher return rather than pay off my mortgage faster" do not actually invest the money (or at least not all of it). They may have every intention of doing so at first but then life happens, they "need" this thing this month so they will just double up the investment next month, but the next month the kids "need" something so the investment will have to be deferred to the next month, etc.

Ramsey's advice might not make sense for the perfect disciplined investor but it does make sense for a lot of people who lack that discipline. And most of us lack it more than we might admit.


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OleVaught14
Member since Jun 2019
433 posts

re: Does it ever make sense to pay off your home mortgage early?
quote:

The mortgage might only be 50-60% of the total monthly bill once you factor in property tax, insurance and HOA.


Sure, but it's easier to float on owing $600 a month into escrow for tax/insurance than $2,000 a month on that plus your mortgage.


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Popths
LSU Fan
Baton Rouge
Member since Aug 2016
2188 posts

re: Does it ever make sense to pay off your home mortgage early?
I saved more money in my 50’s than the rest of my life due to being debt free. That’s just my experience.


jimbeam
USA Fan
University of LSU
Member since Oct 2011
59253 posts

re: Does it ever make sense to pay off your home mortgage early?
Your money also had way less earning power in your 50s than in your 40s. Not saying what you did was wrong, but there’s two sides to the coin
This post was edited on 2/12 at 11:53 am


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21JumpStreet
Texas Tech Fan
Member since Jul 2012
11341 posts

re: Does it ever make sense to pay off your home mortgage early?
Of course it doesn't. I didn't say that.

Paying off your mortgage is a guaranteed return on whatever interest you have.

Can you use the money to invest and get better return, sure, but that's not guaranteed.


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FrenchToast
LSU Fan
The French Kitchen
Member since Jan 2016
1785 posts

re: Does it ever make sense to pay off your home mortgage early?
The no debt answer is a good one.

Imagine using those $ for nothing but investments and savings. The mortgage deduction is capped now, not that it would matter for some.


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USA
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buckeye_vol
Ohio State Fan
Member since Jul 2014
32453 posts

re: Does it ever make sense to pay off your home mortgage early?
quote:

Imagine using those $ for nothing but investments and savings.
But if investment returns are the goal, you’re more likely to have considerably greater gains investing the extra funds instead of putting extra towards and investing only when it’s paid off.


bayou choupique
LSU Fan
the banks of bayou choupique
Member since Oct 2014
1297 posts

re: Does it ever make sense to pay off your home mortgage early?
i max out a roth, pay an additional 400 per month on my house (3.89%), and contribute 8% (plus employer 6%) to my 401k. should i contribute more to the 401k or dump some into a traditional IRA?


jimbeam
USA Fan
University of LSU
Member since Oct 2011
59253 posts

re: Does it ever make sense to pay off your home mortgage early?
If you’re maxing a roth you can’t contribute to traditional IRA.


bayou choupique
LSU Fan
the banks of bayou choupique
Member since Oct 2014
1297 posts

re: Does it ever make sense to pay off your home mortgage early?
quote:

If you’re maxing a roth you can’t contribute to traditional IRA.
them put the additional 400/month into the 401k instead of the mortgage?


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crazycubes
Member since Jan 2016
5105 posts

re: Does it ever make sense to pay off your home mortgage early?
quote:

But as far as paying off the mortgage, it's a huge peace of mind to not have a mortgage, and that is worth some amount of money
this is me. Now that I own my home , I compensation negotiate very hard with the company I work for (Fortune 500 big boy). If they tell me to hit the road, I know I have a roof over my head for my wife (sorry no pics) and two kids. This has paid off (no pun intended) for me.

But, everyone is different . Talking to folks who invest extra $$$ rather than pay down mortgage? Cheers from me to them


buckeye_vol
Ohio State Fan
Member since Jul 2014
32453 posts

re: Does it ever make sense to pay off your home mortgage early?
quote:

should i contribute more to the 401k or dump some into a traditional IRA?
Well if you maxed out your Roth then you can’t contribute to the IRA since the max applies to both whether you contribute to one or the other or a combination of both.


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Popths
LSU Fan
Baton Rouge
Member since Aug 2016
2188 posts

re: Does it ever make sense to pay off your home mortgage early?
I also have come to the realization that equally as important in retirement, which I now am, is to be debt free as having a good nest egg. Once debt free, it really doesn’t cost much to live.


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21JumpStreet
Texas Tech Fan
Member since Jul 2012
11341 posts

re: Does it ever make sense to pay off your home mortgage early?
Yup, for me, give me the GUARANTEE.


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Fat Bastard
Boston College Fan
Member since Mar 2009
45848 posts

re: Does it ever make sense to pay off your home mortgage early?
it is all relative man.

i did not owe a whole lot left on mine and i was stuck with a high interest rate. Did not pay to refinance so I just paid it off in early 2012. kept the mortgage for like 18.5 years. In instances where you owe a ton and have a low rate just milk it. invest instead. pay off other crap but milk that low rate.


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moneyg
LSU Fan
Member since Jun 2006
36436 posts

re: Does it ever make sense to pay off your home mortgage early?
quote:

I realize the numbers say to not pay it off but in the back of my mind, I hate the idea of having a mortgage to worry about. If the market tanks, and I lost my job that is an added stressor. I'd rather pay it off and focus on my next financial goal in life retirement.

So I think it comes down to how risk-averse you are.



This is a good post. And, for many, paying off a mortgage actually frees them up to take on more risk investing in other areas because the most basic concern is secure. That's not something a lot of people mention.


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