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Started By
Message
Should I Payoff Mortgages?
Posted on 2/2/23 at 5:39 pm
Posted on 2/2/23 at 5:39 pm
I owe about $45k on one property that almost the entire payment is principal (year 8 on 10 yr note) with rate at 2.75%. Have another property, year 4 of 30 yr note, 4.75% with balance of about $360k. Should I pay off the first note and then use those funds I’ve been using to make the payments, about $4k/mo, and apply it to the 30 yr mortgage, or put the $4k a month into the market? Or leave things as is?
9
Posted on 2/2/23 at 5:48 pm to rlp
Do not pay off the 2.75% note. That's like free money. If you want less mortgage debt then put any extra against the 4.75%.
Any Dave Ramsey loyalist saying you should pay off the 2.75% note need not reply.
Any Dave Ramsey loyalist saying you should pay off the 2.75% note need not reply.
Posted on 2/2/23 at 6:10 pm to lynxcat
What’s the benchmark rate for "free money" mortgage? Anything 3.5% or less?
Posted on 2/2/23 at 6:17 pm to rlp
1 question you should ask yourself. IMO
Do you want a debt free house(s) or would you like to have money in the market with some risk.
History shows the market is the better long play but a paid for mortgage is really nice to have.
Do you want a debt free house(s) or would you like to have money in the market with some risk.
History shows the market is the better long play but a paid for mortgage is really nice to have.
Posted on 2/2/23 at 6:24 pm to rlp
In a simple way, paying off the second mortgage is essentially a 4.75% guaranteed return on your investment (not sure about the details, though some tax strategies my lower this). Unless you are getting a CD at a higher rate, then there is nothing safer than paying it off. But if you’re aggressive with investing, then don’t waste your money paying it off
This post was edited on 2/2/23 at 6:26 pm
Posted on 2/2/23 at 6:25 pm to rlp
Paying off 2.75% loan just to free up cash to pay on 4.75% makes no sense mathematically. Only advantage I can see is it gives you more flexibility to reallocate the payment elsewhere if things get tight etc.
The safe play is to pay off the 4.75% loan.
However, historic average market returns have exceeded 4.75% but there's risk and future returns may be lower.
The safe play is to pay off the 4.75% loan.
However, historic average market returns have exceeded 4.75% but there's risk and future returns may be lower.
Posted on 2/2/23 at 6:37 pm to BHTiger
quote:
Do you want a debt free house
No such thing - my house has been paid off for a year and I still pya $600 a month.
Posted on 2/2/23 at 6:37 pm to TorchtheFlyingTiger
That was my thoughts as well…thanks for your advice!
Posted on 2/2/23 at 11:56 pm to rlp
quote:
I owe about $45k on one property that almost the entire payment is principal (year 8 on 10 yr note) with rate at 2.75%
no
quote:
Have another property, year 4 of 30 yr note, 4.75% with balance of about $360k.
no
quote:
Should I pay off the first note and then use those funds I’ve been using to make the payments, about $4k/mo, and apply it to the 30 yr mortgage, or put the $4k a month into the market? Or leave things as is?
I'd get another cash flowing house.
This is from somene who panicked and paid off my primary home.
Posted on 2/3/23 at 5:10 am to BHTiger
quote:
some risk.
This some risk bs has been going on for 3 years now. Yea I'm perturbed. Apologies.
This post was edited on 2/3/23 at 5:13 am
Posted on 2/3/23 at 6:54 am to cable
quote:
No such thing - my house has been paid off for a year and I still pya $600 a month.
Often in threads like this, the response is that keeping the mortgage is the best choice due to the math, whereas paying it off gives you this warm & fuzzy feeling that can't be quantified.
Well, your comment is the exact reason that people need to follow the math. Even on a mortgage free property, there will always be bills due. Screw the warm & fuzzies.
Posted on 2/3/23 at 7:13 am to rlp
I wouldn’t do either, but if you want to go harder at 5% 360k mortgage you could do something like bi/monthly payment. I rather be cash heavy right now.
Posted on 2/4/23 at 8:33 am to cable
When I made this realization is when I decided to be happy paying my 2.5% for a long time.
Posted on 2/5/23 at 8:49 am to lynxcat
quote:
Do not pay off the 2.75% note. That's like free money. If you want less mortgage debt then put any extra against the 4.75%.
Any Dave Ramsey loyalist saying you should pay off the 2.75% note need not reply.
Agreed, but only if you don't dine out, buy nice clothes, give to charity, or have a newer vehicle. If you're gonna math, gotta go all the way.
Posted on 2/5/23 at 8:58 am to lynxcat
quote:
Any Dave Ramsey loyalist saying you should pay off the 2.75% note need not reply.
This is never true if a paid off mortgage brings comfort and security to the person with the mortgage and the money to pay it off.
Posted on 2/5/23 at 8:59 am to cable
quote:
No such thing - my house has been paid off for a year and I still pya $600 a month.
Not so fun fact. You don't own any of your big purchases that have annual tax assessments.
Posted on 2/5/23 at 10:00 am to kywildcatfanone
quote:
Not so fun fact. You don't own any of your big purchases that have annual tax assessments.
You don’t even own the right to earn money via labor. If you don’t pay your tax bill for it, they’ll take that ability away from you.
Posted on 2/5/23 at 4:38 pm to rlp
If you don’t want debt- pay it off.
I’m paying some extra every month just to eliminate all debt Before I retire
I’m paying some extra every month just to eliminate all debt Before I retire
Posted on 2/5/23 at 6:32 pm to rlp
quote:
I owe about $45k on one property that almost the entire payment is principal (year 8 on 10 yr note) with rate at 2.75%. Have another property, year 4 of 30 yr note, 4.75% with balance of about $360k. Should I pay off the first note and then use those funds I’ve been using to make the payments, about $4k/mo, and apply it to the 30 yr mortgage, or put the $4k a month into the market? Or leave things as is?
Id pay off the 45K property today then you can decide what to do with the extra 4K. Hell you could double up on the notes for the 360k mortgage one month then the next month put the 4K in the market. Just my opinion.
Posted on 2/7/23 at 7:32 am to makersmark1
OP, you will have quite a bit of fluff to sift through to make up your mind. IMHO.....
This is my personal goal...at this point. "At this point" because interest rates are so much higher right now.
Pay off the higher interest debt first. easy decision. any "extra" money should go towards this.
second one can linger because 2.75% is literally free money. You can find CDs paying +/- 4.5% and have a check book with them. IE liquid.
The guy that told the Dave Ramsey guys not to reply is missing the RISK part of everything. No one thinks they will become unemployed....until they are. D. Ramsey has offered me a ton of direction over the years, but I disagree with him on this one. 2.75% debt can be paid slowly.
quote:
I’m paying some extra every month just to eliminate all debt Before I retire
This is my personal goal...at this point. "At this point" because interest rates are so much higher right now.
Pay off the higher interest debt first. easy decision. any "extra" money should go towards this.
second one can linger because 2.75% is literally free money. You can find CDs paying +/- 4.5% and have a check book with them. IE liquid.
The guy that told the Dave Ramsey guys not to reply is missing the RISK part of everything. No one thinks they will become unemployed....until they are. D. Ramsey has offered me a ton of direction over the years, but I disagree with him on this one. 2.75% debt can be paid slowly.
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