re: When to pay off the mortgage

IMO, it's all a cash flow preference. As many have, and will, pointed out, a low interest rate note is a great hedge against inflation and the market routinely will beat the 3-5% most people have. However, with that said, there is a point in time that it makes sense from a cash flow perspective.

Want to lower monthly expenditures for retirement, want to go to a single income household without downsizing, hedge against huge swings in income.

For me, I am pacing mine to be paid off 3 years before I plan to retire. At that time, I want to upgrade any major item that hasn't been upgraded in the past few years (a/c, compressor, generator, appliances, roof...) so I have some piece of mind about a major hit once my regular income stops.

Just curious: What will your argument be when the FED pivots or we head into deflation?

The main issue with your argument is, that it's all math and fails to take account of other variables. It's also just looking at current mkt conditions and not where mtks are headed.

I'm unsure what I'm supposed to "log back into", this seems to be an inane comment.

oh... Got it! Nope, just this account. I have no need for multiple accounts.

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What parameters would you look at that would tell you to use savings to pay off your mortgage?

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In a world of high inflation, my low interest, fixed rate mortgage is the best hedge I have in my portfolio. In the simplest terms, inflation is helping pay my mortgage off

With that said, I understand that 99.9% of the country does not understand this concept. It's not straightforward math to a typical American and it definitely isn't something that gives warm and fuzzy 'peace of mind'.

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the market doesn't beat 3-5% annualized returns over the next 30 years, woof.

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Serious question, but would you be shocked at all if the market didn’t beat that over the next 5 years?

Since the average homeowner moves every 5-6 years, wouldn’t it make more sense to pay down on some principal and give yourself more equity when you sell?

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In the simplest terms, inflation is helping pay my mortgage off

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I’m pretty dumb, so this makes no sense to me even in the simplest terms. Can you elaborate?

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In a world of high inflation, my low interest, fixed rate mortgage is the best hedge I have in my portfolio. In the simplest terms, inflation is helping pay my mortgage off

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finally someone with more than 3 brain cells

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Serious question, but would you be shocked at all if the market didn’t beat that over the next 5 years?

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Shocked? I don't know if I would be shocked but I would definitely be surprised if we don't average 5% over the next 5 years (starting from today). I would be curious if there has ever been a previous time in history where the market had already fallen 20% and then from that point it hadn't averaged 5% per year for the next 5 years. That would basically mean the SP500 getting to 4900 which is only slightly above the high in late 2021.

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Since the average homeowner moves every 5-6 years

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I believe the actual average is 7 years but I think this is also a different conversation. Would you pay extra on your mortgage if you had no intention of every paying it off? If you are only staying for a few years, you likely won't actually pay it off so you don't get the no debt emotional feeling. It really does just become a math equation at that point.

If we are seriously considering the benefit of the emotional feeling of no debt then the timeframe is probably closer to 15-20 years. That only strengthens the math in the investment side of the equation because the probability of the market gaining less than 5% annualized for 15 years is much lower than lowered returns for only 5 years.

I also find it funny that everyone brings up the returns of the last 10 years and the impact on the next 10 without taking into account the 10 years prior. Maybe the last 10 years of returns were also propped up because of the lost decade of the 2000s.

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wouldn’t it make more sense to pay down on some principal and give yourself more equity when you sell?

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If you are planning on moving in the near term, I would rather have the liquidity of money outside of home equity than home equity for buying my next house. It just allows more flexibility. I can buy before selling if I want versus having to sell first or spend money extracting the equity out of my home to put on the next home. Again this comes down to ensuring you actually invest or save the money. If the options are paying extra on your mortgage or spending it then of course the better purely financial situation is to pay extra on your mortgage.

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The assumption is that you’re using the debt to create leverage to purchase things that can be relatively easily exchanged for dollars.

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This is my sticking point. Say your plan works. How do you take advantage of it other than the ability to say "My house is worth more"? Sell? Cash out refi? There are significant drawbacks to either of those.

I understand the argument to beat a mortgage rate by investing - that I can get behind if someone is willing and able to take that risk. But using the mortgage as an inflation hedge doesn't make sense to me. The S&P 500, since 1926, has an average return of over 7% (last I checked) adjusted for inflation. So how do you beat inflation? You stay invested.

Those are the drawbacks I see. If I'm thinking through this incorrectly, please tell me so - genuinely. (Other than telling me I have three brain cells.)

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I’m batting about .010 when it comes to convincing clients that paying off their home early is a relatively poor financial decision, but I don’t lose much sleep over it as long as they’re educated on the pros/cons.

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Yea - if I tried to explain using a mortgage as an inflation hedge to maybe all buy 1 or 2 of my clients, they would drift off in about 30 seconds. I do have some clients who understand and have prescribed to investing what they would have used to pay extra on the mortgage. Unfortunately, one of them started that strategy about 18 months ago...

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I think it comes down to the type of person you are and your unique scenario. I'm the type that hates having debt. I pay up on the mortgage when I can and have usually paid off my vehicles early. The only non-home debt the wife and I carry are credit cards, which we pay off every month. All that said, if I had the excess cash right now (ie: on top of emergency fund), I would pay off my mortgage immediately.

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I think this makes sense.

I’m don’t like debt, and am paying more than $20K a year in mortgage interest. Current loan is at 3.25%.