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InvisibleAhab McBathsalts
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Mortgage strategy?
    #27658269 - 02/14/22 05:59 AM (1 year, 11 months ago)

Are you trying to pay off your mortgage as soon as possible? Or are you doing the minimum payments on a longer term and directing cashflow else where to generate income?


I can honestly see both options are fine if you are making a conscious decision and executing on it.

On the one had I believe that equity markets are getting into late stage and it could be flatter than we have seen for the past 2 years. I'm getting to the stage too where buying small businesses, rental properties or farm land could be an option rather than just straight liquid equity market investments.


Holding any debt increases your leverage and your risk. My residence will not be in the hot urban markets that have seen considerable price appreciation, but it does have some great local factors that could drive jobs and home values in the area.


Realistically I think I could pay off the mortgage within 4 or 5 years that would save me 10's of thousands in interest, but you are putting all that capital into a non-productive and illiquid asset. I could see a scenario where you lose your job, or quit, but you have limited non-retirement savings because your house is paid off. But it doesn't sell quickly and has to sit on the market for a long time.


In Canada at least, you could save up and just payoff the whole amount after 5 years when the term renews, but it will cost you another 10k in interest by not making additional payments earlier on in the mortgage.



:bubbles:

Anyway what is your strategy for dealing with your mortgage debt?


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"Nobody exists on purpose. Nobody belongs anywhere. Everybody's going to die."


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InvisibleTheFakeSunRa
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Registered: 03/01/05
Posts: 16,449
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Re: Mortgage strategy? [Re: Ahab McBathsalts]
    #27658315 - 02/14/22 07:41 AM (1 year, 11 months ago)

Quote:

  My residence will not be in the hot urban markets that have seen considerable price appreciation, but it does have some great local factors that could drive jobs and home values in the area.




I’m almost sorry to be the first to comment seeing as to how I’m one of the least informed but I’m going to offer my thoughts and you can take it with a grain of salt.

I’ve been looking online at property all over the United States and there isn’t an inch of land that hasn’t gone up unless it’s basically impossible to build on on grid. I’ve thought a lot about it and I’ve concluded if it is a bubble it’s not only a bubble. Now, I live in Florida and down here, once you own your home, it’s almost like a taboo for the courts allow you to lose it. I’m not a home owner but the security it would provide including piece of mind would be tremendous.

Should you pay off your mortgage ASAP? Even though the real question is can other investment pay more than the interest on the house loan costs you, very obviously. But IMO, fuck yes you should get that house full in your name yours free and clear no more payments no more interest it’s yours ASAP if you’re blessed with the means.

It’s pretty much a guaranteed financial winner and even more so a psychological winner.

A house with a yard, a dog, and a shotgun that’s the (North) American dream brother.

Congrats on your success either way.


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[quote]Asante said:
You constantly make posts thatr fling middle school insults at people you don't like mixed in with maladjusted psychopathic comments about wanting to beat up the other poster with a crowbar.

You know how shit you are, you just don't give a fuck for precisely that reason.

I disendorse you.[/quote]


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Invisiblebadchad
Mad Scientist

Registered: 03/02/05
Posts: 13,372
Re: Mortgage strategy? [Re: Ahab McBathsalts]
    #27658840 - 02/14/22 04:02 PM (1 year, 11 months ago)

Riding it out for the long term.

Housing is too expensive where I am, so I had no choice but to opt for a 30 year.  Also, for other reasons (family, career) etc. I plan to be in my residence for some time.  Lastly, I got a great rate (~2.75%) so borrowing the money is cheap.


--------------------
...the whole experience is (and is as) a profound piece of knowledge.  It is an indellible experience; it is forever known.  I have known myself in a way I doubt I would have ever occurred except as it did.

Smith, P.  Bull. Menninger Clinic (1959) 23:20-27; p. 27.

...most subjects find the experience valuable, some find it frightening, and many say that is it uniquely lovely.

Osmond, H.  Annals, NY Acad Science (1957) 66:418-434; p.436


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InvisibleAhab McBathsalts
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Folding@home Statistics
Registered: 11/25/02
Posts: 35,107
Loc: Wind Turbine, AB Flag
Re: Mortgage strategy? [Re: badchad] * 1
    #27659388 - 02/15/22 06:18 AM (1 year, 11 months ago)

I asked some people at work. They make good money, but seem like they should have been able to retire years ago based off their income. These are tradesmen that have been making 100k+ for the last decade.


They are all paying the mortgage as slow as possible.



I'm going to do the opposite and pay it quickly and intentionally. 5 years is the goal.


--------------------
"Nobody exists on purpose. Nobody belongs anywhere. Everybody's going to die."


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InvisibleTheFakeSunRa
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Registered: 03/01/05
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Re: Mortgage strategy? [Re: Ahab McBathsalts]
    #27659439 - 02/15/22 07:44 AM (1 year, 11 months ago)

Quote:

They are all paying the mortgage as slow as possible. 




Not that it’s a big conspiracy or anything but that’s obviously what the banks want so those are the loans they sell. Those are probably smart dudes, I mean it’s hard to make 100g so they’re doing something right, but they probably just figure it ain’t broke don’t fix it and not thinking about the big picture as much as you are.


--------------------
[quote]Asante said:
You constantly make posts thatr fling middle school insults at people you don't like mixed in with maladjusted psychopathic comments about wanting to beat up the other poster with a crowbar.

You know how shit you are, you just don't give a fuck for precisely that reason.

I disendorse you.[/quote]


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Invisiblebadchad
Mad Scientist

Registered: 03/02/05
Posts: 13,372
Re: Mortgage strategy? [Re: TheFakeSunRa]
    #27659775 - 02/15/22 10:58 AM (1 year, 11 months ago)

Quote:

TheFakeSunRa said:

Not that it’s a big conspiracy or anything but that’s obviously what the banks want so those are the loans they sell. .




It's not a conspiracy, it's a numbers game.  My mortgage is 2.75%.  Depending on your source, the market returns 6-8%.

It's a better bet to put my cash into the market, vs. paying off my mortgage.  Basic math, no conspiracy involved.


--------------------
...the whole experience is (and is as) a profound piece of knowledge.  It is an indellible experience; it is forever known.  I have known myself in a way I doubt I would have ever occurred except as it did.

Smith, P.  Bull. Menninger Clinic (1959) 23:20-27; p. 27.

...most subjects find the experience valuable, some find it frightening, and many say that is it uniquely lovely.

Osmond, H.  Annals, NY Acad Science (1957) 66:418-434; p.436


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InvisibleAhab McBathsalts
OTD Windmill Administrator
Other User Gallery Ultimate Champion: Blackjack


Folding@home Statistics
Registered: 11/25/02
Posts: 35,107
Loc: Wind Turbine, AB Flag
Re: Mortgage strategy? [Re: badchad] * 1
    #27660618 - 02/15/22 09:59 PM (1 year, 11 months ago)

From a math point it absolutely makes sense. But from a math point no one should carry consumer debt either, and that isn't the case.

It would absolutely work if you took all those extra payments and put it in an index fund, but most aren't that disciplined and would rather get a new car, or snowmobile or something and then the whole thing goes to shit.

I'm going with low risk, low reward strategy of paying off all mortgage debt as fast as possible and then buying rental houses straight cash, or maybe starting a laundry matt.


--------------------
"Nobody exists on purpose. Nobody belongs anywhere. Everybody's going to die."


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Invisiblebadchad
Mad Scientist

Registered: 03/02/05
Posts: 13,372
Re: Mortgage strategy? [Re: Ahab McBathsalts]
    #27661020 - 02/16/22 08:27 AM (1 year, 11 months ago)

Quote:

Ahab McBathsalts said:
From a math point it absolutely makes sense. But from a math point no one should carry consumer debt either, and that isn't the case.




I'd argue that a home is an exception.  My home is appreciating at a rate greater then my mortgage interest (at least currently).  You mentioned being a landlord and this is how many make their money: They leverage their debt.  As long as the rental income exceeds your debt, you're coming out ahead.

Quote:

Ahab McBathsalts said:
It would absolutely work if you took all those extra payments and put it in an index fund, but most aren't that disciplined and would rather get a new car, or snowmobile or something and then the whole thing goes to shit.





Very true.  Discipline is key.  I find auto-payments makes things so much easier.  My salary is direct deposit, while my mortgage and investments are also autopaid or auto-deducted monthly.  Makes it easy since I never actually "see" the money.


--------------------
...the whole experience is (and is as) a profound piece of knowledge.  It is an indellible experience; it is forever known.  I have known myself in a way I doubt I would have ever occurred except as it did.

Smith, P.  Bull. Menninger Clinic (1959) 23:20-27; p. 27.

...most subjects find the experience valuable, some find it frightening, and many say that is it uniquely lovely.

Osmond, H.  Annals, NY Acad Science (1957) 66:418-434; p.436


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OnlinegeokillsA
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Re: Mortgage strategy? [Re: Ahab McBathsalts]
    #27661297 - 02/16/22 12:35 PM (1 year, 11 months ago)

There is no definitive right or wrong here, as you and others have alluded.  Leveraging low interest debt to capitalize on a higher return elsewhere is certainly a way that many people have met and exceeded their financial targets.  But leveraging does, in most cases, exposure yourself to significant additional risk.  If you want to build an empire, it's pretty much the only way to go... but for my part, I always wanted my primary home to be paid off as a priority, and it is.

The security and peace of mind derived from knowing that I have my own piece of unencumbered land to keep me protected from the elements, regardless of fluctuations in income, is huge.  I had at one time signed up for shorter term low interest HELOC (home equity line of credit) to finance improvements on the property or as a down payment toward additional income property (tapping no more than 20% of the primary property's value), but I never did end up using it.  Were I a bit hungrier, I probably would have levered up to generate more long term value, but as it was/is, I have my needs met and then some, and I'd rather keep things simpler to avoid the additional stress that comes with additional projects/complexity.

TLDR: I prefer minimal leverage/debt and happily forego dreams of creating an empire in exchange for simplicity and peace of mind.


--------------------

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OfflineBSUUF2
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Re: Mortgage strategy? [Re: Ahab McBathsalts]
    #27661579 - 02/16/22 04:57 PM (1 year, 11 months ago)

Quote:

Ahab McBathsalts said:
Are you trying to pay off your mortgage as soon as possible? Or are you doing the minimum payments on a longer term and directing cashflow else where to generate income?


I can honestly see both options are fine if you are making a conscious decision and executing on it.

On the one had I believe that equity markets are getting into late stage and it could be flatter than we have seen for the past 2 years. I'm getting to the stage too where buying small businesses, rental properties or farm land could be an option rather than just straight liquid equity market investments.


Holding any debt increases your leverage and your risk. My residence will not be in the hot urban markets that have seen considerable price appreciation, but it does have some great local factors that could drive jobs and home values in the area.


Realistically I think I could pay off the mortgage within 4 or 5 years that would save me 10's of thousands in interest, but you are putting all that capital into a non-productive and illiquid asset. I could see a scenario where you lose your job, or quit, but you have limited non-retirement savings because your house is paid off. But it doesn't sell quickly and has to sit on the market for a long time.


In Canada at least, you could save up and just payoff the whole amount after 5 years when the term renews, but it will cost you another 10k in interest by not making additional payments earlier on in the mortgage.



:bubbles:

Anyway what is your strategy for dealing with your mortgage debt?




I tried to get out off that debt trap ASAP (mostly student debt), ran a BTC/alt farm 2011-2015 in university, did what every sane investor does: Paid off student debt and didn't mess up with cards. If I'd have hold everything, I'd be worth low to mid eight figures now (I still have priv keys from 2013, can sign a message to a trusted individual with that to confirm I'm not a fraud). Coulda, woulda, shoulda...


--------------------
LAGM2022


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Offlinemm.
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Re: Mortgage strategy? [Re: Ahab McBathsalts]
    #27662033 - 02/16/22 11:47 PM (1 year, 11 months ago)

If you can earn more than the mortgage interest rate with your cash, it makes sense to do so, rather than pay down the mortgage. However, it pays to do some stress tests. You get sick, can't work, get unjustly fired for misconduct, yadda yadda. It really won't be nice to find yourself being foreclosed because your money is tied up in a stockmarket crash or unsellable investment.

It might be an idea to hedge your bets and do both - pay down your mortgage more quickly, but also invest elsewhere.


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OfflineBSUUF2
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Re: Mortgage strategy? [Re: mm.]
    #27662037 - 02/17/22 12:00 AM (1 year, 11 months ago)

Quote:

mm. said:
If you can earn more than the mortgage interest rate with your cash, it makes sense to do so, rather than pay down the mortgage. However, it pays to do some stress tests. You get sick, can't work, get unjustly fired for misconduct, yadda yadda. It really won't be nice to find yourself being foreclosed because your money is tied up in a stockmarket crash or unsellable investment.

It might be an idea to hedge your bets and do both - pay down your mortgage more quickly, but also invest elsewhere.




FIRST get rid off all debt, THEN invest. Only sane strategy. Everything else is just going to the casino and waiting to get REKT.


--------------------
LAGM2022


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