#61
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The sequence of returns (in the context of the mortgage vs. no mortgage issue) affects the details, but it does not change the overall financial picture. |
#62
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True enough, but that is historical performance. Markets change - look at the stock market with the elimination of floor specialists, flash trading, more products to short the market with, ETFs, etc. And performance is only as good as when you need to withdraw/sell - 2009 is very different from 2019. Portfolio construction points to diversification amongst assets, including bonds, real estate and hard assets (gold). A diversified portfolio has a slightly lower return than an all-equity portfolio and has much less volatility. Sent from my iPad using Tapatalk
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#63
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There's more than just equity needed. Where's the income to pay back the loan ? Land is great. Buy as much as you can because they're not making any more land. ...but... buying land is the same as paying off your mortgage: there's zero (or less) liquidity and a potentially large down side. The up side to buying land *could* be very large if you guess right tho. M |
#64
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Historical performance is all we've got -- no one can predict the future.
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#65
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I would not move into a higher interest mortgage at age 61 unless I were strapped for cash.
That said, I think a lot of people see they have had a 10% rate of return from the equity markets over the past decade and prefer to put extra cash in the market as a result rather than pay down low interest mortgages. |
#66
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Separately, the home ownership math isn't quite that simple anymore. Depending on local/regional housing costs and a variety of other factors, a case can be made for renting versus owning.
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#67
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Camp B prefers to pay off their mortgages. They are (generally) more risk averse. |
#68
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Yeah, you're quite right. The changing value of the house is actually irrelevant, because you realize that change regardless of whether or not you have a mortgage. The real issue is, how much does it cost you to pay off a mortgage in terms of lost investment opportunity?
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#69
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Both extremes are risky (heavy leverage or no diversified retirement planning). If you are already maxing out 401k and IRA contributions I support throwing money at the mortgage to get rid of it. That said, I think it is much riskier to aggressively pay down a mortgage if you are not simultaneously making adequate investments for retirement.
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#70
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I am on year 1 of a 30 year mortgage. If you are in the last few years of the amortization schedule, there's not a very good reason to pay it off early.... you might save a few hundred to a few thousand bucks.
If you are early in the mortgage, that is the time to find ways to decrease your over all interest expense.
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#71
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Yes it is nice to live debt free, but also the opportunity cost of using that money to fund something other than a house is also an option. Depends on Jim's risk tolerance, insurance strategy, and retirement goal age/spending habits.
I'd sell the house and downsize. Use the extra money to inflate the nestegg going into retirement and have the next house paid for with a nice piece of change in the bank collecting steady interest instead of the other way around. |
#72
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As I mentioned in a post up the thread....and I'm a retiree of a career at Merrill Lynch (financial services firm).....I am well familiar with this discussion.
The reason we live in a paid for home is I wanted to be in a position in retirement where no one can kick me out of my home as long as I pay my taxes and HOA fees. Other expenses such as HO insurance, utilities, and maintenance are somewhat under my control....but taxes have to be paid. I totally understand my paid for home represents dead money. Even though we are currently in a hot RE market around here. That most likely I could do better in the markets with a 75% mortgage. And all I get out of it is it's rent value. But I sleep good at nights in my old age knowing I have a place to live should I get sick and disabled. And BTW.....if one of us were to require skilled nursing care at $10,000 per month or so....and if we spent down all our money in a nursing home.....well.....Medicaid usually lets one of you stay in the house until you are both dead. But they require you to spend down other financial assets. If you lay in a nursing home bed for a couple years at $10,000 per month.....you go thru a lot of life's savings in a hurry. I've seen folks blow thru a million bucks before the state took over. Life doesn't always have a happy ending. Last edited by Ralph; 08-12-2019 at 01:50 PM. |
#73
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I payed off my mortgage when I retired. I only had about 5-6 years left on it so the payment was mostly principal. Just wanted to be debt free when I retired. Financially, it was probably better to keep paying on the loan.
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#74
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*Except for maybe a month of interest. |
#75
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I think he meant his payments (at the time) were mostly principle, as opposed to the early years when payments are mostly interest.
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