The article is dead on, the problem is that most people will hot have the discipline to invest that money and consequently they end up with zero return or even more debt because they buy the big screen TV on time and fail to make the payments.

I use to have an employee that gave financial advice on the side in seminars. Her biggest issue was paying off your mortgage. She even went so far as to postpone her (2nd) wedding in order to not interfere with her accelerated payments. Her mortgage was modest but I thought she was nuts (and even told her, in not so much those words). She is now an ex employee, but at least my arguments were correct.

This may be true but I sleep a lot better knowing mine is paid off, something no amount of money can buy.. and I am close to retirement too..

When the post-tax mortgage interest expense exceeds the post-tax investment earnings for a protracted period of time (think stagflation), it seems wise to pay down/off the mortgage as quickly as possible.

If your post-tax investment earnings don't outstrip the post-tax mortgage interest by at least the rate of inflation, paying down the mortgage is a better "investment."

Paying off your mortgage is almost always a good idea. Having no mortgage increases your cash flow. That increases your discretionary income far beyond what good stock returns can do. Second, it's 100% safe. If I pay of my mortgage this year (I plan to) I'm making the equivilent of a 6% return without being taxed on it. Interest alone is something like $800 a month. Despite the proven returns of the PPOTBB stock picks, I am not confident that the market will beat my mortgage rate for several years - with risk and taxes and fees. Finally, a paid off house is the most security you can buy. A house you can afford to keep up in a good neighborhood where there are good schools and a paid off mortgage, I can't see how that's a worse investment that your average mutual fund.

I figure the market's going sideways for a few years due to this sub-prime/Alt-A *******. I'll have my mortgage paid off by the time it begins to rebound. I'll be able to double my current healthy monthly investment rate at that time. :)

There was a book on the subject several years ago. I'll try to remember the name and report back.

Add: I think it was "Rich Daddy, Poor Dad"...heavily criticized.

Different strokes... I don't think I've known anyone who's payed off their mortgage have any regrets whatsoever. No debts = No stress + LOTs of disposable income (for investing, enjoying life, etc.) when times are good, and in a worst case scenario (job loss, economy tanks, etc.) No debts = NO STRESS and the world doesn't come to an end :). Leverage has a price...

+1

+2

I read that article a few days ago and cannot argue with the logic. That said, I have to agree with some of the other thoughts here.

I know of zero people that had the discipline to save the money that would have paid off their mortgage. I paid off my 2nd home at age 26, had a mortgage for 8 months at age 41 when I bought a bigger house in the country.

With the money most were spending on a mortgage, I paid cash when I built my cabin at the lake, paid cash when I build my retirement home (own all 3 now; mortgage free) and put over 400K in IRA and Investments by age 55.....Dunno if I could have done that AND retired at age 52 by paying a mortgage for 30 yrs???

The article focused on 2 variables: early prepayment of mortgage,adding $100 per month or investing $100 in the stock/fund market.

My reason to payoff the mortgage:

The person making these choices is employed, uncertain of future compensation and wants stability in their lives. Peak earning years are in the late 40's/early 50's. Think GM current buyout scheme: $140K now and no pension or $70K now and maybe/maybe not future pension. The choice is made easier if the mortgage was paid down.
This is even more obvious with todays market down 15 to 20% from the October 2007 peak. Individual investors tend to buy high and sell low-making emotional decisions. Another point missed by the article-stock market fear.

Pay off the house if financially able-do the credit cards first. $6K-$9K typical balance due per household. Many of the nations work force do not have the luxury of the salary given to executives or the golden parachute.

John_AZ

I love the assumption that article makes that you will always see a 10% return on the market over a period of years. Sure you will, if you pick the right period. I'm like the others, I am paying down the mortgage as fast as I can.

I put in an extra $80/month towards my mortgage and $200/month towards stocks plus my regular retirement savings. I will have my mortgage paid off by 40, hopefully sooner. The stock market may "out perform" paying off my mortgage but the peice of mind will be nice. I once saw David Chilton (author of the wealthy barber) speak he said that he has never met a person who said "I wish I didnt pay off my mortgage so early"

Couldn't agree more. Half of a mortgage payment goes to interest. How is saving that not the best investment around? If you pay cash for your house that is money you are saving that can be spent on your next house or retirement fund.

Figures lie and liars figure.

Pay the mortgage down FIRST. You will never regret it.

Been there ...done that!

:) <---- look at that smile!

I agree with the article.......if you are disciplined enough to actually follow through. (And not just increase spending.)

99.99% of the population of this country is not that disciplined.

+3 Exactly my feelings.

One thing to consider - everyone talks about putting money into your house as an investment. The problem is that, when you sell your house, let's say you got $10,000 more than what you paid. That $10,000 is yours, regardless of whether you own 0% of your home or 100% of your home. That's what my mortgage broker told me - when you pay down your mortgage early, you're not "making a return" - you're just saving interest.

That said, I like to pay my mortgage down early. Yes, it's possible that I could be making a better return somewhere else, but once I have my mortgage paid off, that's like a $1500 a month annuity. That's what I'm buying by paying down my mortgage - the earlier I pay it down, the earlier I get the annuity.

Not everyone. :cool: This brings up my main issue with the proposition of investment vs. paying off the house...EVERYONE's situation is DIFFERENT. You cannot make the sweeping, general statements that this way is better than that. You have to look at your individual situation and the state of the market (and your crystal ball :D ) during some window of time, and decide what's best for you. Cost / benefit tradeoff. Run some scenarios and see what makes the most sense. Consider your risks (investments, job security, etc.) and what you're comfortable with. To many people, owning their home outright provides a huge level of security, regardless of its investment value. That's my 2 or 3 cents. :)

I've known a lot of people who have paid off their mortgage (myself included), and I don't know one who has ever regretted it, or who has ever had any money problems.

But I've also never known anyone who has returned 25% to 40% every year on their stock investments. Except here in PPOT, where it is the norm.

Happens all the time. ;)

3 more years and I own it. I don't think I'll have any regrets and as noted, a $1600 monthly annuity coming my way sans taxes. Won't go there. :mad:

87 blk coupe

I bought my current house in 1998. I put every extra dollar, bonuses, etc, then refi'd to a 15/15 @ 4 5/8%. I paid it off two years ago at 42. IT can be done - even in So Cal.

Many advised against it. However, the peace of mind I have now that the market is in the tank is priceless. W/ 3 kids in private school, one of whom will start college in two years, I cannot tell you the relief I gained from paying it off. Maybe that's emotional, but it's the truth!

Some are confused. Sure, not having any debt is ideal (actually it negatively effects you credit rating, but thats another topic). But in comparison to many other expenses, (credit card, car payments, school loans, taxes, etc,) it is the last one you need to tackle. Some just can't get over this thought. If you have zero finances other then you mortgage, sure pay it off. I think Wayne is trying to point out that there are more useful (Emergency funds) and profitable ways to spend your money. To each his own.

Is that a little bit of ketchup in column 2?

Gotta watch those late night hot dogs, Wayne-o. ;)

Here!! Here!!

No better feeling in the world to have the house paid off for all the above reasons.

I bought my house before the market went nuts and it was paid off in no time, I will never regret that move.

I barely trust Consumer Reports to help me pick a dishwasher much less manage my finances. I'm guessing they didn't compare the period in the market between 1965 and 1980. Flat. COMPLETELY FLAT. But hey... no capital gains taxes to worry about.

At the risk of wearing a tin foil hat, the system doesn't want you to pay down your mortgage. Why is mortgage interest on huge f'ing loans (unless AMT gets you) deductable? I can see wanting folks to 'own', but it doest inspire that. It inspires 'loan ownership', not home ownership.

Invest in mutual funds says the Financial Planner.
Refinance says the mortgage broker.
Upsize your house says the Realtor(TM).

Who's the advocate for needing less?
Less worries about debt?
Less worries about todays drop your portfolio?
Less stress?

I'm not saying that you wouldnt come out better, but what defines 'better'? I would argue that its not simply 'Net Worth' as typically defined.

My guess would be that 99% of people who have the personality, income and discipline to pay off their mortgage significantly early also do not have credit card debt, car payments, school loans, or any other significant debt.

Most of the fools that took mortgages in the last 5-8 years can't afford to overpay them anyway, so what's the problem? ;) One upside to over-extending oneself and "allocating" 60% of gross income to housing I guess. . .

I normally overpay EVERYTHING. It helps to kill interest payments, which are just legalized extortion, IMHO. Obviously paying cash is a good thing if possible (but most people can't afford to do that with houses). In lieu of that, anything one can do to kill interest payments and maximize Principal pay-down is a good thing.

However in a recession economy, I think the better play is to make lower (closer to the minimum) payments and stuff the difference into savings just in case of a layoff or other emergency. Obviously this takes discipline, but it's something I'm doing (it isn't all THAT hard. . .)

It would suck royally to be over-paying one's mortgage by 200% per payment and then get laid off with no cushion in the bank. In that case, the "overpayments" you made aren't going to do a damn thing for you - you'll still be foreclosed on in four months. At least by making the minimum and putting the difference into emergency savings, in the same scenario you can last for a few more months and maybe save your credit, your house and your sanity.

So from that token, the suggestion of the article is not a bad idea. But most of the idiots out there aren't nearly disciplined enough to do it.

Not to worry though, I'm sure the government will ride in to penalize the responsible/disciplined and bail out/reward the fools soon enough.

I have always agreed with that, Wayne. It is clearly obvious. In general terms, it is easy to explain why real property is the most common and effective way to build wealth. Where else can you enjoy appreciation on a high-value asset by laying down just 20%?

So, when you're done paying off your first home you can use the newly freed income to save up your next 20%.

Yep...

How in the world do you get to have no school loans? I think that's more of a function of being from wealthy parents than anything else. I had very good grades in high school and actually did have a scholarship, but it didn't come anywhere CLOSE to paying my college for me. Not by a longshot. It helped, but I still owe quite a bit on that.

I think for most people, it's a virtual impossibility to expect to enter the workforce without owing at least that. And those numbers can be staggering (in my case it's almost $80,000).

I'm 47 (college was CHEAP by comparison back then), and all the "loans of my youth" were long gone before I purchased my first house.

I got out of school owing about $100k for school and soon there after opening my office to the tune of another $100k, so I was in the hole before 30 $200 large. I didn't even own a home until I was in my mid 30's because I couldn't even consider it. Not everyone that owes money on other items is neither irresponsible or spendthrift. I've learned to manage debt and payoff every loan I have taken out. (The parents could not contribute at all). Every case is different.

Where is this thread about people who are just entering the workforce? I would not think that someone just entering the workforce is going to be considering whether to pay off their mortgage anytime soon.

My guess would be that anyone considering or coming close to paying off their mortgage is at least 10-15 years out of school (depending on where they live).

At that point, you don't have outstanding student loans anymore because you've paid them off over the past decade and a half.

You go to a state school. You live in a rooming house at $70 a week. You eat a diet that consists of cereal, milk, bread, generic cookies, peanut butter, cheese and water-added ham product (sandwiches) and generic mac and cheese. You work 30 hours a week and so you take five years to graduate. You don't go on spring break, you don't buy an expensive car, and you stay home most nights.

It's not pleasant but it can be done.

This is clearly the best post in this thread. Totally nailed it! :)