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Started By
Message
re: Remainder Of Mortgage - Which Path To Take?
Posted on 6/28/23 at 12:24 pm to thunderbird1100
Posted on 6/28/23 at 12:24 pm to thunderbird1100
quote:
Monthly cash flow, which can be important to some people. Just a lot more money each month to do as you wish ultimately.
That just doesn't make any sense. He's talking about PAYING MORE MONTHLY in order to pay it off. And if he didn't do that, he would pay it all in a lump sum upfront - that's a steep price to pay for "more monthly cash flow".
ETA: If he decides to not pay it, he can always decide the next day to do so - that is, he retains full optionality.
But if he PAYS it, then he forever loses the optionality of having free money for 2 years.
This post was edited on 6/28/23 at 12:31 pm
3
Posted on 6/28/23 at 12:41 pm to Big Scrub TX
quote:
That just doesn't make any sense.
Sure it does. You just dont like it.
Lowering monthly expenditures is valuable to many folks. It lowers stress and creates more job opportunities as it lowers your required income threshold. Less stress about losing current job, too.
Keep making your same argument over and over but there are many different financial choices that work for many different types of situations. Dont pretend like you drive a 1999 honda civic with 700k on the odometer.
This post was edited on 6/28/23 at 12:42 pm
Posted on 6/28/23 at 2:03 pm to notsince98
quote:I get lowering monthly expenditures - just not at the cost of draining tens of thousands of liquid savings. And how does it create job opportunities? Let's say he wanted to take a risk and make an expensive move to another market - well, can't, because we just paid down $30K of savings in order to spend $x less/month. etc.
Lowering monthly expenditures is valuable to many folks. It lowers stress and creates more job opportunities as it lowers your required income threshold. Less stress about losing current job, too.
Less stress about losing current job? LOL You think it's LESS stress to lose current job after having drained tens of thousands of liquid savings? THAT'S A BIG REASON THE SAVINGS ARE THERE!
And even if I did agree with some kind of Dave Ramsey approach, it wouldn't seem overly applicable to someone who has obviously had the discipline to pay a mortgage for 13/28 years (not sure the tenor of the mortgage in question). This isn't some kid who needs forced savings.
quote:I'm not sure what this quasi-dig is supposed to mean. If anything, it's the people paying the mortgage early that are living an overly ascetic lifestyle.
. Dont pretend like you drive a 1999 honda civic with 700k on the odometer.
Here's the real bottom line: basically 100% of the time, one should accept a 0% loan.
This post was edited on 6/28/23 at 2:05 pm
Posted on 6/28/23 at 2:12 pm to Big Scrub TX
quote:
That just doesn't make any sense
Makes perfect sense and you're only seeing this on one side here.
quote:
He's talking about PAYING MORE MONTHLY
Yes, a LITTLE more monthly, not like double full payment or throw $20k at it today necessarily. No real issue with moving the payoff date a little up in this instance. Sure it's not completely maximizing every dollar for you, but the reality if there's basically no one out there really doing that anyways. It's a big psychological thing and not having that payment at all might be beneficial to him in other ways you're simply not thinking of.
There's nothing really wrong with what he's doing or would do there and would rather someone be this way than "TAKE ALL DEBT AND KEEP IT FOREVER" attitude if it's cheap, etc etc as fact is most people CAN'T manage that right. Not to sound Dave Ramsey-like but sometimes it is just freeing to get rid of something like a mortgage even if it isnt costing you much. Worst case he doesnt make some extra money on like $20k over a few years which in the grand scheme of things means nothing if the goal is to pay the house off to get rid of the payment a little quicker for their own reasons.
This post was edited on 6/28/23 at 2:14 pm
Posted on 6/28/23 at 2:23 pm to thunderbird1100
quote:I mean, I hear you, but I've explained why a lot of that, IMO, doesn't apply to this seasoned borrower.
Yes, a LITTLE more monthly, not like double full payment or throw $20k at it today necessarily. No real issue with moving the payoff date a little up in this instance. Sure it's not completely maximizing every dollar for you, but the reality if there's basically no one out there really doing that anyways. It's a big psychological thing and not having that payment at all might be beneficial to him in other ways you're simply not thinking of.
There's nothing really wrong with what he's doing or would do there and would rather someone be this way than "TAKE ALL DEBT AND KEEP IT FOREVER" attitude if it's cheap, etc etc as fact is most people CAN'T manage that right. Not to sound Dave Ramsey-like but sometimes it is just freeing to get rid of something like a mortgage even if it isnt costing you much. Worst case he doesnt make some extra money on like $20k over a few years which in the grand scheme of things means nothing if the goal is to pay the house off to get rid of the payment a little quicker for their own reasons.
But in any event, it's bizarre to me that draining savings doesn't subtract more psychologically than whatever gains come from "not having a payment". Again - not paying it down today DOES NOT preclude choosing to pay it down tomorrow. But in the reverse, you are stuck with the decision.
It's not like we're talking credit cards here, either. A mortgage is a particularly valuable and utile type of loan.
The real truth is I'm guessing all of these amounts are rather piddly for the OP, so it doesn't actually matter hardly at all. I still think it makes sense to walk through the logic, though. A lot of people have had a Depression-era mentality pummeled into them by older relatives over the years. I've watched that lead to some fairly negative outcomes with people I know.
Posted on 6/28/23 at 2:46 pm to Big Scrub TX
quote:
The real truth is I'm guessing all of these amounts are rather piddly for the OP, so it doesn't actually matter hardly at all. I still think it makes sense to walk through the logic, though. A lot of people have had a Depression-era mentality pummeled into them by older relatives over the years. I've watched that lead to some fairly negative outcomes with people I know.
No, I can't say it's piddly. If I wanted to pay off the house tomorrow, technically, I could do it, but I'm not going to compromise savings to do that.
Heck, I suppose I could do a 1.5 X principal payment (instead of a double) and extend the mortgage to 3.5 years instead of 2.5 years, but is that really going to generate a whole lot of extra scratch?
Getting it done really is important to me.
Posted on 6/28/23 at 3:38 pm to TimeAndTide
quote:Oh yeah - what is the actual maturity of the mortgage?
3.5 years instead of 2.5 years,
Also, what is your (regular) payment - like $700?
Posted on 6/28/23 at 3:41 pm to TimeAndTide
quote:Also, despite the perhaps differing perspectives, I did want to congratulate you on being at the tail end of your mortgage. That's a big day and something to be celebrated. I hope the rest of your life is doing well too.
TimeAndTide
Posted on 6/28/23 at 4:36 pm to Big Scrub TX
quote:
Oh yeah - what is the actual maturity of the mortgage? Also, what is your (regular) payment - like $700?
I wish I knew an exact date on the maturity, but if I refi'd in 2009, does that mean it's 2039? Sorry for not knowing the ins and outs about that stuff. Monthly payment is $500, and there is no escrow involved.
This post was edited on 6/28/23 at 4:51 pm
Posted on 6/28/23 at 4:36 pm to Big Scrub TX
quote:
Also, despite the perhaps differing perspectives, I did want to congratulate you on being at the tail end of your mortgage. That's a big day and something to be celebrated. I hope the rest of your life is doing well too.
Much appreciated, and same wishes to you!
This post was edited on 6/28/23 at 4:39 pm
Posted on 6/28/23 at 6:49 pm to TimeAndTide
If you are looking for pure math advice you will get it but the math as you pointed out in subsequent posts does not amount to much based on the remaining balance.
I ran with minimal savings as I knocked out my mortgage years ago. Once it was paid off building up the savings account was a cake walk not paying any towards mortgage and adding extra to it to knock it down.
If you are looking at savings from a 3-6 months of expenses scenario most subscribe to you will also notice when you do not have your mortgage obligation if lowers what you need to make it 3 -6 months as you have one less expense.
The flexibility of not having a mortgage payment was a good experience for me and I do not regret it.
You may have paid "most of the interest in the start of the loan" but in my simple understanding of it, whatever your balance that you have left (27K) accrues at the loan interest rate each month in exactly the same way as if you had money in your savings account. There is no secret hidden savings that is occuring later in the life of your loan. You are still incurring the interest on the monthly balance. That does not sway the math either way and I truly do not understand this explanation.
It is not therefore a 0% loan. It is still a 4.5% loan.
I ran with minimal savings as I knocked out my mortgage years ago. Once it was paid off building up the savings account was a cake walk not paying any towards mortgage and adding extra to it to knock it down.
If you are looking at savings from a 3-6 months of expenses scenario most subscribe to you will also notice when you do not have your mortgage obligation if lowers what you need to make it 3 -6 months as you have one less expense.
The flexibility of not having a mortgage payment was a good experience for me and I do not regret it.
You may have paid "most of the interest in the start of the loan" but in my simple understanding of it, whatever your balance that you have left (27K) accrues at the loan interest rate each month in exactly the same way as if you had money in your savings account. There is no secret hidden savings that is occuring later in the life of your loan. You are still incurring the interest on the monthly balance. That does not sway the math either way and I truly do not understand this explanation.
It is not therefore a 0% loan. It is still a 4.5% loan.
This post was edited on 6/28/23 at 7:24 pm
Posted on 6/30/23 at 1:27 am to whiskey over ice
quote:
This. He has 2.5 years left. He’s already paid all the interest for the most part
I scratch my head when I hear that.
Interest is compounded monthly or daily on what you owe. If I borrowed 300,000 for a house on 30 year mortgage, and a month later I win the lottery and pay off the loan, I don’t have to pay 300,000 plus 30 years of future interest that hasn’t accrued yet.
I would just owe one month of interest, closing costs for the loan, and 300,000 dollars.
Yes, early on on any long term loan, most of your payment goes toward interest on most repayment schedules depending on the interest rate and term of the loan. That is why when you pay extra, you pay down principal and your repayment time gets shorter because less interest is being charged in future months allowing more principal to be paid in the future.
I am nearly in the same boat. I have about 42k left and about 450 a month is going to principal 250 for interest, and the rest is escrow.
Posted on 6/30/23 at 9:42 am to Tarps99
Do what works for you. Nothing beats the feeling of being TOTALLY debt free. I’m sure that when I did it that there was some better strategy but that’s micro managing to me. The sooner to get there was a more overriding factor than any money amount. I was able to save more in my 50’s than any other time in my life due to doing it. This was my plan and I did what felt best for me. I have no regrets but everyone has to do what puts a smile on their face. Mine is still there. Congrats. FREEDOM!!!
Posted on 6/30/23 at 9:00 pm to Big Scrub TX
What kind of vehicle do you drive?
Posted on 7/1/23 at 3:02 pm to TimeAndTide
No mortgage is a good feeling.
Posted on 7/1/23 at 3:47 pm to TimeAndTide
he has 27 k balance, 2 years + remaining, 4.5% interest.
He'll pay about $1500-$2500 in interest til its paid off.
He'll pay about $1500-$2500 in interest til its paid off.
This post was edited on 7/1/23 at 3:48 pm
Posted on 7/1/23 at 4:14 pm to SalE
Being debt free is meaningless. I cannot comprehend the obsession with “it feels so good”…I never think twice when my escrow is paid each month.
Keep low interest debt for as long as possible.
Keep low interest debt for as long as possible.
Posted on 7/1/23 at 4:22 pm to Big Scrub TX
quote:
Big Scrub TX
Mathematically, this is such an easy choice. Not only the math but the optionality with cash that it provides. Keep fighting the good fight
Posted on 7/1/23 at 6:09 pm to lynxcat
edited - deleted as I really don't think it is a worthwhile comment to add to the discussion and not really why I come to this board.
Thx
Thx
This post was edited on 7/1/23 at 6:23 pm
Posted on 7/1/23 at 6:30 pm to TimeAndTide
Congrats!
I’d throw the cash in a MM or something else rather than tie it up in the house. 2 years isn’t that long and the rate isn’t terrible.
I’d throw the cash in a MM or something else rather than tie it up in the house. 2 years isn’t that long and the rate isn’t terrible.
This post was edited on 7/1/23 at 7:24 pm
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