Poll: Should Engineer pay off his house with savings...

[Engineer]

Originally posted by: spidey07

Originally posted by: bernse
Yes. Having a half million (or so) asset is "poor" managment. It looks great if you have your money tied up in uncashable $$$ when your house gets taken away because you can't make the payments for whatever reasons.

Like I said - even if it costs you a couple points, its worth it. If you have to suffer to pay it off (cash savings, whatever) don't.. but if you can do it otherwise, go for it.

If the interest rates go up a few points and you see all these poor slobs that are pushed to the limit for fianancing, and you own your own home clear, it'll be an easy sell.. and maybe buy some other properties for cheap while some (or many?) are in bankruptcy.

Like I said, speak with a financial planner as you throw money away. I mean it's not like I'm preaching anything new. Somebody needs to do the math.

As I said earlier, I want my money to work for me...not against me.

Look at the market and tell me that it's went up 7% per year for the last 5 years? Sure, there are funds that may have done it and there are definitely stocks that have done it. Would I have picked one of them? Guaranteed? Nobody knows including me. I do know one thing...I've got a 7% return on my mortgage that's not being paid.

And as for the tax deduction, I don't really mind as I would rather have 100% - taxes than pay 100% and get tax deduction!

Originally posted by: skyking
If it takes the savings too low, I'd tend to agree. If he has 6 month's expenses left over after doing it, then I'd go for it. Heck, I AM going for it

That's the only reason that I may not go for it, as it would wipe my savings (although low) out. I could tap a Roth in an emergency, but would rather not. I may just wait until Feb. to throw the tax refund toward the bill and then wipe it out then!

I wanted to do it before I'm 37 (Jan. 4th), but I guess I won't die!

 

[bernse]

Sounds like your mind is already made up anyhow.

 

Ya'll missed the point of the thread, to brag!

At this point I would say keep your savings and just ride it out for the next 3 months. In three months spring will be here and you'll have your savings money, extra checking account money AND you'll now have the extra money every month from your non-existent mortgage.
If you spend your savings, you're going to spend the same amount of time putting money away to build it back up.

 

[Engineer]

Originally posted by: bernse
Sounds like your mind is already made up anyhow.

Well, it wasn't but It's getting closer. I'm going to see what kind of a raise I get on Jan 1 and that may also help make up my mind. Damn, it's so tempting....*sigh*

 

[Engineer]

Originally posted by: SampSon
Ya'll missed the point of the thread, to brag!

That too!

 

[skyking]

I did it about 3 minutes ago. :beer:

 

[LS20]

Originally posted by: Engineer

Well, you never truely own it. The local "property tax man" always keeps his hands on the door...just waiting for you to miss a tax payment!

true that.. i was gonna mention it.. plus them over-appraising your house so they can tax higher :laugh:

hell, if its only 3 months away, just pay it off now.. if anything its a Huge psychological thing.. big monkey off yer back

 

[CrimsonChaos]

Originally posted by: spidey07

Originally posted by: bernse

Originally posted by: Engineer
By the way, I'm at the 6.5 year mark of 30 years. Of course, I paid a little extra along the way!

Good for you! We're at the 3 year mark of 20.. and within months she'll be gone. I think people like us are a rarity. Good job son!

And not very fiscally wise.

If these things don't make sense one should seek out a financial planner to discuss needs and goals. Like all things decisions like this are best answered with "it depends"

Do the math.

I'd beg to differ with the "not very fiscally wise" statement. The fact is, as long as you have formulated a plan and are working toward a goal, you're already half-way to success. For me, as my signature states "moderation is the key to life". And no, I'm not talking about the forum moderators.

I believe you should take half of what you can afford and put it toward your mortgage, and take the other half and invest it. There's no reason to put all your eggs into one basket, whether that be towards savings or towards eliminating debt.

However in this scenario, since the money is available -- why not pay it off? The only reason to NOT pay it off is if Engineer decides to go on a spending spree with the surplus cash coming in every month. Somehow, I doubt he'll do that. More likely, he'll take his extra monthly payments that he was making toward the mortgage and start investing.

 

[Mday]

save the money for a "THIS FSKCING HOUSE IS FINALLY MINE" party.

 

[MikeyIs4Dcats]

<jealous

 

[Engineer]

Originally posted by: CrimsonChaos


However in this scenario, since the money is available -- why not pay it off? The only reason to NOT pay it off is if Engineer decides to go on a spending spree with the surplus cash coming in every month. Somehow, I doubt he'll do that. More likely, he'll take his extra monthly payments that he was making toward the mortgage and increase investing like hell.

Corrected!

Oh, but the wife will still want a small spending spree. It's our 15th anniversary in April so a little Spring trip might be in order along with a new kitchen and roof, but those can wait a tad.

 

[bernse]

Originally posted by: skyking
I did it about 3 minutes ago. :beer:

Congrats! I hope to be in the same boat within a few months!
:beer::wine::thumbsup:

 

How do you people pay off 30 year mortgages in less than a 1/3rd of the term?

Do you borrow a very minimal amount? Do you buy a home that is cheap while you make much more than the average for your area?

 

[Engineer]

Originally posted by: SampSon
How do you people pay off 30 year mortgages in less than a 1/3rd of the term?

Do you borrow a very minimal amount? Do you buy a home that is cheap while you make much more than the average for your area?

You work 3,400 hours per year (at least this year) and send every drop of OT to them because you have no time in life to do anything else. You then get house paid off, say piss on company and do something less stressful!

Oh, and I paid down 18% on the house when I bought it. Pissed me off as I had to pay PMI for 1.5 years because I didn't pay down 20% initially - grrrr!!! :|

Home wasn't cheap for area but cheap compared to rest of country ($134,500 in 1999. Would be $180,000 ish now based on neighborhood homes that have sold lately). While that still may be cheap for many parts of the country, salaries here are also behind many parts of the country. I see EE's starting out for as much as I make now but I notice where they are and realize that the cost of living here is very low compared to other areas.

 

[Engineer]

Originally posted by: skyking
I did it about 3 minutes ago. :beer:

:beer:

CONGRATS!!!!!!!!!

 

[flot]

Originally posted by: spidey07
[
Like I said, speak with a financial planner as you throw money away. I mean it's not like I'm preaching anything new. Somebody needs to do the math.

As I said earlier, I want my money to work for me...not against me.

Spidey, do you own a house? For that matter, are you over 25?

Making a blanket statement that you are throwing your money away by paying off your home early is ridiculous. While it isn't something I choose to do with my current financial situation, I envy those who have the drive and determination to do it.

My neighbor makes half as much as I do, but his monthly home expenses (mortgage is paid off) are approx $400 vs my monthly expenses (including mortgage) of $1800. Who is doing better for himself?

I have a friend who lives in a $800,000 home (he paid $300k and probably now owes $400,000) that can continue to slave away earning $80k-90k a year to afford it - or he can sell the house, move to the middle of nowhere, pay cash for a nice new home and 2 new cars - and work at home depot the rest of his life.

-or-

He could take that money and invest it in the stock market and watch it dwindle to pennies on the dollar.

Investments are NOT guaranteed. It's a nice idea, but ask those who invested $500,000 in the stock market in 1999 how they are doing today.

PS: To answer Engineer's question - I say congrats on making so much progress, and that it sounds like the $$ difference is so minor that it really doesn't matter if he pays it off now or waits a few months.

 

Originally posted by: Engineer

Originally posted by: SampSon
How do you people pay off 30 year mortgages in less than a 1/3rd of the term?

Do you borrow a very minimal amount? Do you buy a home that is cheap while you make much more than the average for your area?

You work 3,400 hours per year (at least this year) and send every drop of OT to them because you have no time in life to do anything else. You then get house paid off, say piss on company and do something less stressful!

Oh, and I paid down 18% on the house when I bought it. Pissed me off as I had to pay PMI for 1.5 years because I didn't pay down 20% initially - grrrr!!! :|

Home wasn't cheap for area but cheap compared to rest of country ($134,500 in 1999. Would be $180,000 ish now based on neighborhood homes that have sold lately).

So that's about 65-70 hours a week? That isn't that much really, though if you get OT pay I'm sure it's good. The govt rapes you on taxes for OT pay though. You have to make quite a nice hourly/salary rate in order to pay off $110,000 so quickly.

I take it that you live in Kentucky like your profile says? I guess that is a fairly normal market like the rest of the country, as opposed to areas like NYC and so cal.
You should have refi'ed your house in the first year of ownership to dump that PMI payment. The appreciation rates support it and you needed very minimal amounts of it to achieve the minimum of 20%. Though that doesn't really matter for sh!t now, does it?

 

[Engineer]

Originally posted by: SampSon

Originally posted by: Engineer

Originally posted by: SampSon
How do you people pay off 30 year mortgages in less than a 1/3rd of the term?

Do you borrow a very minimal amount? Do you buy a home that is cheap while you make much more than the average for your area?

You work 3,400 hours per year (at least this year) and send every drop of OT to them because you have no time in life to do anything else. You then get house paid off, say piss on company and do something less stressful!

Oh, and I paid down 18% on the house when I bought it. Pissed me off as I had to pay PMI for 1.5 years because I didn't pay down 20% initially - grrrr!!! :|

Home wasn't cheap for area but cheap compared to rest of country ($134,500 in 1999. Would be $180,000 ish now based on neighborhood homes that have sold lately).

So that's about 65-70 hours a week? That isn't that much really, though if you get OT pay I'm sure it's good. The govt rapes you on taxes for OT pay though. You have to make quite a nice hourly/salary rate in order to pay off $110,000 so quickly.

I take it that you live in Kentucky like your profile says? I guess that is a fairly normal market like the rest of the country, as opposed to areas like NYC and so cal.
You should have refi'ed your house in the first year of ownership to dump that PMI payment. The appreciation rates support it and you needed very minimal amounts of it to achieve the minimum of 20%. Though that doesn't really matter for sh!t now, does it?

It only cost $30 to get the PMI removed. A "market analysis" was all that was needed when we were close to the 20% paid point (of the original value). Besides, it was only $30 per month PMI, but it was MY $30 and it pissed me off!

Oh, and 3,400 hours were exclusive of the 3 weeks vacation and 11 holidays that I had this year. That was in-plant work. 6 week were over 100 hours each. I think it was excessive, regardless of OT pay or not. Also, it seems to be unappreciated to those who received the equipment or those above my plant manager in the management chain. They only want more at any cost, and with two children growing up, it get old fast!

Yep, government get's their share but with 401k maxing out, child credits, etc., it's better then it's been in the past. I had 8 dependents listed on the W4 (as advised to do so by the worksheet) and will still receive a small refund this year!

 

[spidey07]

Flot,

Yes I own a home, and 34 years old. I focus on building wealth and making my money make more money for me now as I refused to listen to smart financial people earlier in life.

you're right, I made a mistake with a blanket statement. But so many people think paying off a home early is a smart financial move and that simply isn't true for many people. I thought it was a great idea as well, until I did the math.

I'm just saying that many (and depending on plans, most) shouldn't do so.

do the math.

-edit- and I severely doubt any decent investing would result in pennies on the dollar. That is really just impossible.

 

[flot]

Originally posted by: spidey07
you're right, I made a mistake with a blanket statement. But so many people think paying off a home early is a smart financial move and that simply isn't true for many people. I thought it was a great idea as well, until I did the math.

I'm just saying that many (and depending on plans, most) shouldn't do so.

do the math.

-edit- and I severely doubt any decent investing would result in pennies on the dollar. That is really just impossible.

Sorry I questioned your age.

The problem with doing the math is that there are so many things the math doesn't account for. Plus "the math" always, ALWAYS counts on a consistant and positive market return.

I haven't watched a lot of people make mistakes with mortgages (well a few) but have watched plenty make mistakes in the stock market. The people I know who are most "comfortable" financially are the ones who either worked hard at, or applied a windfall to, owning their house outright.

I've certainly gotten conservative over the last 10 years or so - but if I could bring myself to do it - I'd be one of those people who put every penny towards the house, and then once THAT was under control, would feel much, much more comfortable doing other things with my money. (like purchasing a 2nd/3rd/4th)

It also depends a LOT on your housing market... my home has appreciated 50% in 2 years so even if I was pouring every last cent into it, I'd still be getting a pretty remarkable return if I chose to sell.

edit: as for pennies on the dollar - that's easier to do than you'd think... it's very, very easy to convince yourself a sinking ship is just around the corner from making an incredible comeback.

 

[Engineer]

Originally posted by: flot


edit: as for pennies on the dollar - that's easier to do than you'd think... it's very, very easy to convince yourself a sinking ship is just around the corner from making an incredible comeback.

Or as they say in the market..."avoid the dead cat bounce" (A dead cat will bounce if you drop it far enough. Don't get suckered in! )

 

[bernse]

Originally posted by: SampSon
How do you people pay off 30 year mortgages in less than a 1/3rd of the term?

Do you borrow a very minimal amount? Do you buy a home that is cheap while you make much more than the average for your area?

My best answer.....

Live within your means. Don't necessarily buy everything you want.. ESPECIALLY ON CREDIT. Every time you have a few extra G$ in the bank, put it towards the mortgage instead of blowing it. Every time you make even a small (say $1000-$2000 payment) on your mortgage, you'll likely take off months of your term.. and soon enough, they'll add to years.

Of course, this is easier to do with a multiple income household (or a high salary) but the basic priniples are the same and everyone situtions are different, but that is basically what my wife and I have done. We bought our first house in 2000. Put a few extra grand in mortgage prepayments. Sold it in 2001 and upgraded to our present one (with a healthy down payment thanks to paying down our earlier mortgage a bit and saving as I mentioned earlier) which will be paid off (knock on wood) sometime this spring/early summer.

I have neighbors who are virtually identical in age and professions to my wife and I... as a matter of fact I used to go out with the wife when I was a teenager. I see these people and I know with a large degree of certainty they will likely never get out of debt. They have to have a new vehicle every year or two. Bought a new 30' RV. Bought a new pick up. New big screen TV. All fiananced. If you want to live that way, fine, but that is not how you're going to get ahead in life.

I'll admit, I'd love a new motorcycle... maybe an RV.. but spending that $15,000 while not owning the roof over your head does not compute for me (note: I live in Canada and our tax laws aren't the same regarding to writing off mortage stuff).

Soon with the mortgage being paid off, I'll top up my retirement contributions to the max, maybe invest some more and then I'll have my money left over to play.. and I am 33 so its not like I am too old to not enjoy my toys.. yet.

 

[Engineer]

Well, I paid half of it off and didn't touch my savings. I'll pay it off next month or March with the tax refund that I should receive (already calculated! ). It was so very tempting, but my work situation (fear of telling them to piss up a rope! :shocked) and the idea of having NO liquid backup scared me.

My work situation may have improved a tad and a pretty good sized raise might also be in the works. The promise to change things so that I don't work my arse off is more important than the money, at this point.

Thanks for all the advise. Regardless of whether I followed (or even agreed) with everyone's advise, I still appreciate and respect it.

Thanks everyone!!!

 

[bsobel]

While I disagree with the idea, I do understand the motivation. If your still concerned about savings, go open a second mortgage (one from a bank who will charge you nothing) and then lock the checkbook in your safe deposit box.

If you are changing jobs, easier to qualify now. Not suggesting you go have a party in vegas with the money (I'm suggesting you don't EVER use it unless it's truely an emergency). But, if you do have one, it will be there for you.

 

[JacobJ]

invest...put your money in foreign etfs that track latin america, japan, and other emerging markets.