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Message
paying down principal on home
Posted on 5/27/13 at 3:47 pm
Posted on 5/27/13 at 3:47 pm
new construction, lived in almost 1 year, equity(atleast 20%, probably more). Overall portfolio pretty good b/t 401ks, IRAs, stocks,etc. oh, and late 30's. We have a great rate, believe it's slightly above 3.5%.
is it worth it to put a few xtra thousand towards the principal the first year(s)? if so, how much to make it worthwhile?
is it worth it to put a few xtra thousand towards the principal the first year(s)? if so, how much to make it worthwhile?
2
Posted on 5/27/13 at 3:53 pm to specchaser
Put it in the market and in 28 years if you wanna pay it off sooner pull it out then.
Or, no, don't do it.
Or, no, don't do it.
Posted on 5/27/13 at 4:48 pm to ItNeverRains
If you have a 30 year fixed mortage, just doubling up one payment per year knocks off six years. I wouldn't suggest doing too much more than that considering all the interest you pay is tax deductible and prinicpal payments are not.
Posted on 5/27/13 at 5:31 pm to rpg37
Seriously why would you want to pay down principal, do you realize how worthless our US dollar will be in 30 years at the rate they're printing money.
I'd imagine even a $5,000/month mortgage in 2035 will be a $2000 or less payment today. Just think back 15-20 years about what $100k was, I remember being in high school then and it was the benchmark everyone mentioned to define a succesful job. Fast forward 20 years and waitresses at a nice nightclub in LA,NYC,Miami makes $200K serving up bottle service.
Times are different, take on all the low interest debt you can and laugh in 20+ years
Think about a $300K house today that was $100K 20 years ago, that owner could be making a $500/month payment today with 7 or 8 years to go, you will be that owner in 20 years smiling at what a miniscule payment you're making
I'd imagine even a $5,000/month mortgage in 2035 will be a $2000 or less payment today. Just think back 15-20 years about what $100k was, I remember being in high school then and it was the benchmark everyone mentioned to define a succesful job. Fast forward 20 years and waitresses at a nice nightclub in LA,NYC,Miami makes $200K serving up bottle service.
Times are different, take on all the low interest debt you can and laugh in 20+ years
Think about a $300K house today that was $100K 20 years ago, that owner could be making a $500/month payment today with 7 or 8 years to go, you will be that owner in 20 years smiling at what a miniscule payment you're making
This post was edited on 5/27/13 at 5:35 pm
Posted on 5/27/13 at 7:35 pm to ThaBigFella
quote:
you will be that owner in 20 years smiling at what a miniscule payment you're making
Or you can be the owner with NO house payment
I choose the latter every time.
Im only 36 and will pay my house off in a few months in under 9 yrs. I will take that financial freedom anyday.
Posted on 5/27/13 at 7:40 pm to LSUWhoDat
The main question:
What else would you be doing with the money if not paying down principal?
1) Investing for a return greater than your rate? Don't pay it down.
2) Spending it and getting a nice "return on life"? Don't pay it down.
3) Nothing? (Or returning less than your mortgage rate? Pay it down.
What else would you be doing with the money if not paying down principal?
1) Investing for a return greater than your rate? Don't pay it down.
2) Spending it and getting a nice "return on life"? Don't pay it down.
3) Nothing? (Or returning less than your mortgage rate? Pay it down.
This post was edited on 5/27/13 at 7:40 pm
Posted on 5/27/13 at 8:00 pm to LSUWhoDat
quote:
Or you can be the owner with NO house payment I choose the latter every time. Im only 36 and will pay my house off in a few months in under 9 yrs. I will take that financial freedom anyday.
Financial freedom? Are you retiring after its paid off? If not, wouldn't you rather take the tax breaks and cheap money and throw the extra into something that will compound over the next 30 years at a much higher rate historically than home value? Since I'm working I'd rather parlay the financial freedom now for my non working years later in life. Again, with tax advantages.
Sounds like you kicked arse throwing a majority of your eggs at something that in all likelihood is worth less than what you paid for it in 04'. At best even money. For bragging rights?
Posted on 5/27/13 at 8:33 pm to ItNeverRains
Exactly, my parents home was $485k in 1998 when they bought it, today its maybe $900k bc its in a great neighborhood, how the hell is a home a good investment? They pay nearly 20K/yr in property taxes which means they've shelled out probably $250k in property tax since they've owned it
So....15 years
$485k purchase price
+250k in property taxes
$900k value today 15 years later
- subtract realtor fees
total value today in sale after fees is $850k
I feel like with the value of money 15 years later $485k to turn into $850k that they've barely made anything and that doesnt even count property taxes they've paid
I believe in owning a home, but I believe in taking my mortgage deductions for all 30 years and probably refinancing at that point, I just don't see any benefit of paying off your home, they're a necessity, but they're hardly an investment. They are the biggest purchase most people will make but I'd rather let my money compound in stocks than pay off a home
So....15 years
$485k purchase price
+250k in property taxes
$900k value today 15 years later
- subtract realtor fees
total value today in sale after fees is $850k
I feel like with the value of money 15 years later $485k to turn into $850k that they've barely made anything and that doesnt even count property taxes they've paid
I believe in owning a home, but I believe in taking my mortgage deductions for all 30 years and probably refinancing at that point, I just don't see any benefit of paying off your home, they're a necessity, but they're hardly an investment. They are the biggest purchase most people will make but I'd rather let my money compound in stocks than pay off a home
Posted on 5/27/13 at 9:14 pm to ItNeverRains
Is there anyone out there who paid off their house and regrets it?
Mine was paid off two years ago and is not my only investment. There is a sizable HELOC available in the event that I want to draw for an investment or expense, and repayment terms on the HELOC are pretty cush (interest only, I think).
Mine was paid off two years ago and is not my only investment. There is a sizable HELOC available in the event that I want to draw for an investment or expense, and repayment terms on the HELOC are pretty cush (interest only, I think).
Posted on 5/27/13 at 9:26 pm to Bayou Tiger
If you can afford it I don't think its a huge deal. Yes your money can work harder elsewhere but there is a real sense of peace coming home to a place that you own and not the bank (yes I understand RE taxes).
Posted on 5/27/13 at 9:34 pm to LSUWhoDat
quote:
LSUWhoDat
Is your last name Ramsey?
Posted on 5/27/13 at 9:36 pm to I Love Bama
quote:
If you can afford it I don't think its a huge deal. Yes your money can work harder elsewhere but there is a real sense of peace coming home to a place that you own and not the bank (yes I understand RE taxes).
I suppose it would depend on the property tax situation too
I know people here in TX who would have a 600 dollar note if their home was paid off just with the tax bill. I suppose I don't see the point in a case like that. If you have low property taxes it might be comforting to have essentially minimal bills.
Posted on 5/27/13 at 9:40 pm to iknowmorethanyou
quote:
Is your last name Ramsey?
I get that paying off your home isn't technically the smartest thing in the world.
But I suppose if you look at it in terms of other poor choices it's probably better to put 2K a year extra toward your mortgage principal than it would be to do something completely stupid like blowing 5K on jewelry or a sound system for your car....
Posted on 5/27/13 at 9:51 pm to Bayou Tiger
quote:
Is there anyone out there who paid off their house and regrets it?
Did it, no regrets , and was more than happy to lose the tax deduction, I never saw the logic in giving a lender $10,000.00/year in tnterest to avoid $3000.00/year in taxes.
This post was edited on 5/27/13 at 10:37 pm
Posted on 5/27/13 at 10:02 pm to EA6B
Right...because over the course of a 30 year mortgage most people only pay 10K in interest.
Posted on 5/27/13 at 11:02 pm to I Love Bama
Peace of mind is a major consideration. We own our home and are in the process of building our retirement home. We could pay cash with the sale of our current home and liquid capital in our construction fund, but the idea of such cheap mortgage money is tempting.
Posted on 5/28/13 at 3:24 am to islandtiger
Right now with inflation rate around 2.8% and 30 year mortgages around 3.75%
Paying down your principal is almost a waste of money.
When you factor in the tax deductions based on interest payments, it doesn't make sense to pay down your principal as you are essentially getting free money at that point when combining tax benefits and inflation rate.
Paying down your principal is almost a waste of money.
When you factor in the tax deductions based on interest payments, it doesn't make sense to pay down your principal as you are essentially getting free money at that point when combining tax benefits and inflation rate.
Posted on 5/28/13 at 6:20 am to LSUWhoDat
quote:
Or you can be the owner with NO house payment
I choose the latter every time.
This. For those who say "don't pay it off because of the tax deduction", have you ever done the math on that? It's like paying a bank $1, and getting 25 cents in return via a tax deduction.
I paid my house off a couple of years ago, gave a bit more money to charity, and now get a bigger refund. Just using it for a tax deduction is no reason to not pay off your house.
This post was edited on 5/28/13 at 6:38 am
Posted on 5/28/13 at 6:38 am to islandtiger
quote:
Peace of mind is a major consideration.
We are mid 30's, owe 29 years on our home and have almost 200k in retirement accounts that will compound over the next 29 years at a rate greater than the 3.5% we owe on the home says the history of everything ever. Will probably build one more time so paying this off is not concern
I just can't see how someone could have more peace of mind knowing they crapped on future them by throwing all that $ at something that doesn't give close to a return other avenues do.
GC wrote
quote:
Right now with inflation rate around 2.8% and 30 year mortgages around 3.75% Paying down your principal is almost a waste of money. When you factor in the tax deductions based on interest payments, it doesn't make sense to pay down your principal as you are essentially getting free money at that point when combining tax benefits and inflation rate.
Yeah but you don't own your house
ILB wrote
quote:
Yes your money can work harder elsewhere but there is a real sense of peace coming home to a place that you own and not the bank
Talk to 65 year olds who can draw 4k a month for the rest of their life and ask them about sense of peace.
This post was edited on 5/28/13 at 6:52 am
Posted on 5/28/13 at 7:02 am to ItNeverRains
People always say "free money" when talking about how low interest rates are. I just don't see it that way. I look at the amount of interest on the loan and see that as savings if I pay off early.
People talk about the mortgage interest deduction- ok so lets pay 5K in interest so I can get $1250 back! How is that a good strategy??
Another claim is that you can invest the money somewhere else and make a better return. That may be true, but who really does that? I have a Roth IRA that I contribute the max to every year, and also an HSA that I max out. Where else am I going to put my money and make such a great return? I'm not one to play the stock market, and I doubt many average joe's are, so I would rather save the monthly house payments and just keep increasing savings.
For those who say invest it in stocks or mutual funds, more than likely a large % of the money you keep will be blown on needless items, not invested. And let's say I have 50K cash and can pay my mortgage off- that's a no brainer to me, I'm not going to dump 50K in a volatile stock market.
I know there may be people that don't see it the same way, but I just can never get over the fact of why would you pay any interest if you don't have to. I don't care how low the rate is. On a $200K mortgage @ 3.5%, you would pay over $120K in interest over 30 years. "But you can get $30k back on taxes!" I would rather keep from paying the interest and have no monthly note.
People talk about the mortgage interest deduction- ok so lets pay 5K in interest so I can get $1250 back! How is that a good strategy??
Another claim is that you can invest the money somewhere else and make a better return. That may be true, but who really does that? I have a Roth IRA that I contribute the max to every year, and also an HSA that I max out. Where else am I going to put my money and make such a great return? I'm not one to play the stock market, and I doubt many average joe's are, so I would rather save the monthly house payments and just keep increasing savings.
For those who say invest it in stocks or mutual funds, more than likely a large % of the money you keep will be blown on needless items, not invested. And let's say I have 50K cash and can pay my mortgage off- that's a no brainer to me, I'm not going to dump 50K in a volatile stock market.
I know there may be people that don't see it the same way, but I just can never get over the fact of why would you pay any interest if you don't have to. I don't care how low the rate is. On a $200K mortgage @ 3.5%, you would pay over $120K in interest over 30 years. "But you can get $30k back on taxes!" I would rather keep from paying the interest and have no monthly note.
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