We debated this, but for us the peace of mind of having our mortgage paid off when we retired was worth its weight in gold for us. Being debt free at retirement was a dream of mine and will make it a reality next year :)
If it is a dream or ideal for you then it makes sense that fulfillment of that ideal will be satisfying. But for me, these ideals are very ephemeral and I hold onto my 3.25% mortgage because I can afford to pay it and it doesn't fit my goals to pay it off early.
One of the issues not discussed in the video is the reduction of liquidity in one's net worth. Paying down a mortgage only saves interest since you still have to pay insurance, property taxes, and HOA dues (if applicable). Paying off the principal converts liquid interest-earning cash to an illiquid asset (i.e., real estate), subject to market losses (i.e., the housing crisis 2008) and high friction costs if you want to get that liquidity back. We have a 2.625% mortgage which includes $385 in interest payments and we take the standard deduction for taxpayers over age 65. No way I will pay $177,000 to save $385 per month (and decrease each month the mortgage is paid) and convert an interest-earning cash asset to an illiquid asset that can potentially lose money. While some may want to sleep well at night with a paid-off mortgage, this is sometimes called mental math. Unfortunately, mental math is not math. A potential issue would be if you paid off the mortgage on your house, which was damaged by an event not covered by typical homeowners insurance (e.g., flood, earthquake, sinkhole, etc.)
Makes sense. Those claiming to be greatly relieved that mortgage is payed off will always say it was always a dream of theirs to have it paid off. Getting one's dream will always be satisfying, at least as long as the dream lasts, but I really don't get it and the numbers for me say to let my 3.25% mortgage ride.
In Florida, many are paying off mortgages in order to “self-insure”. They’re sacrificing low interest rates to save on sky high insurance costs. It’s risky, but more people are doing it.
Thank you for emphasizing that just because your mortgage interest enables itemizing, it doesn’t make the net tax benefit real… you must consider how much your mortgage interest drives you OVER the standard deduction! So many channels miss this element of the analysis.
Thanks for this discussion, as I am in a similar situation as Connor. The point made about how much above the mortgage interest is - compared to the itemized deduction threshold - is a consideration I hadn't explored. But one other aspect to paying off a $300k balance is also a practical one. Maintining a home will periocially require large rplacement costs (central AC, roof, etc). While I will be able to invest the mortgage payment if I paid it off too early, I don't want to tie up too much of my funds in just "feeling good" about not having a mortgage, then having a large unexpected expense. I plan to keep my mortgage until it gets down to a more manageble amount around $150k, keeping the payoff funds in interest bearing investments.
To summarize one point, if we're not itemizing deductions (i.e. taking the standard deduction - which, by the way, is a little higher over the age of 65), mortgage interest is not deductible. Even if we are itemizing, not all of the mortgage interest may be deductible.
I am in my early 60s and retired at 53. Lots of people gave me pushback because they had difficulty grasping the concept of not working if you don’t have to. I looked at my life as stages. I earned everything I have now through a lot of hard work, but I owe it to myself to “stop and smell the roses” in my final stage of life. In my case I left the country after I retired and live in Latin America. It allowed me to get away from all the negative things happening in America while appreciating my new environment. I have yet to meet anyone who regrets retirement
We made the decision to refi in 2020 as the rate was low, we have a 2 7/8% rate. We did it and saved about $250 per month in payments. Our P&I amount is slightly less than $500 per momth, for me it doesn’t make sense to pay it off and as was said, its part of our expenses. Our property taxes are a lot more monthly than the P &I! I do think over the long run the money we didn’t use to pay off the mortgage will outpace the amount we will pay in the interest for the mortgage due to such a low rate we were able to get. If it was at 5% or more then it would be a different story.
Great video James - how about using the benefit of inflation as well if paying off a debt over 20-30 years. Over time that mortgage balance will be "lower" as you pay off the mortgage with inflated dollars.
Fantastic video. The key decision points were reviewed very carefully. A couple not mentioned: 1. The home acts to diversify the portfolio. 2. The paid-off home can be a source of liquid equity It worked this way for me. When we bought our home the rate was 7.25%. We paid that off as quick as we could manage, but kept a home equity line of credit (HELOC). 10 years later the HELOC rate was 1%, and I wanted to keep my AGI low to collect the maximum ACA PTC. and to maximize my tIRA contributions. To supplement my AGI, I borrowed money at 1%. When interest rates went up and I was no longer running after the PTC, I paid off the HELOC I don't mention this story as a strategy to copy, but to say that liquidity and diversification have significant value that are part of the decision whether to pay off a mortgage.
Great video... We're exactly in this situation. Initially I was planning on retiring when my mortgage was paid off in three years. It's a 2.75% mortgage. But things changed and we've decided now I am retiring in about 10 months. So the question for us is, do we pull from some of our retirement funds to pay off the mortgage early or not... With that interest rate, I'm not going to do that, but the sequence of returns part is what has given me a bit of pause... If the market tanks when I retire and since we still have the mortgage, that means we'd be pulling out more money from our retirement during a down market... Which isn't great... That said, that's playing the odds, and who knows for sure... And even if that happens, we will still have options. We could just spend a bit less and/or use some of our emergency funds to try to ride it out a bit... You want to plan for a possible downturn in the market, but I don't think I want to assume it will happen... My crystal ball isn't that good... ;-)
Same- retiring in about 18 months and have only about 85k left on the 2.87% Mortgage. I think I am paying it off to better insulate myself from a down market early in retirement. Good luck in retirement and enjoy it!!
In August 2022, I paid 615k with a 4.375 interest rate for my second property in San Diego. The property is currently worth $895k. I've already increased my ownership by over 30% in less than two years. There's no need for me to sell because I'm making over 90k in rental income from my two ADU studios, which pays my mortgage each month. In addition, my rate is ridiculously low, which I view as a benefit.
This is basically me. I am targeting retirement in two years at age 57 and I have a $375K 15-year fixed mortgage @ 2.49% that I am paying down biweekly along with an extra $1000 principle payment/month. I'm currently in the 35% tax bracket along with maxing out SALT deductions, so the itemized deductions are a godsend. Plus, during the early years of retirement, these itemized tax deductions will allow me to do more Roth conversions, which is another benefit of keeping a mortgage in retirement.
The mortgage, p&I is only two of 4 parts of most mortgage payments. Paying off the mortgage isn't going to eliminate the tax and insurance parts of a payment. Often, Paying off a mortgage only reduces the costs by half , plus or minus, of the payment. That's a big let down for many people.
I have a mortgage with 80K still left at %2.375. I have 10 years left on it, It doesn't make sense to pay it off right now, opportunity costs are one thing. If I paid it off I would have to pay it with IRA withdrawals that would be taxable at probably %12. so I would be paying %12 to pay off a %2.375 rate. Does not make sense. IF I get a windfall that is not taxable down the road I will pay it off probably.
Even with a low mortgage rate, if you can utilize a Mastercard credit card that has a sizable welcome bonus, and pay a 2.9% Plastiq fee to pay the mortgage, then it can make sense.
You are correct concerning using distribution from tax-deferred accounts, which would create a tax liability greater than the savings form paying off the mortgage. Again, you would decrease the liquidity of your assets by converting liquid cash for an illiquid real estate asset.
My rate is 2 1/4. I'm planning to rent the house and use that extra money to pay down the mortgage. I can't bring myself to take money out of my current income stream when that money can earn 5% in a simple savings account.
An important consideration is where the property is that's under 3%. I live in San Diego and I can already see that once high-school kids have graduated, parents are selling and moving east. In this case, paying it off makes little sense, particularly as many properties go over list in San Diego anyway.
You could lock in a set interest rate with long bonds. Use the coupon to make payments and still have principle at the end. Solves the problem of HYSA interest rates variation. Taxes are still a concern. Might find a muni to make this work if the mortgage rate is low enough. Just a thought.
Timing can have an impact as well. If he got a 30 year at 5% back a few years ago he’d be set. Now the markets in a good index fund is probably a better option. Or he could pay cash for a rental property and have that supplement his income. Lots of options with different levels of risk and income. I know a guy with a paid off house that lives in Southeast Asia and the rent completely pays for his lifestyle. He doesn’t have to even touch his social security or investments
What about: 1) Spreadsheet/MBA geeks (me) can get lost in the sheet leaves but miss the forest. If the sheet shows a gain of $5,000 over 15/30 years of one decision or the other on a $350K mortgage, then that’s not really a material difference. Then perhaps the soft factors should drive the decision. 2) What about when you are on the maturity of the mortgage amortization curve? If you’re in the last third of the mortgage, every payment is heavily biased toward paying down the balance. That is, the composition of the payment is more principal than interest, whereas in the early part of the mortgage amortization, you’re paying all interest.
Nice video but I wrote a check at closing so I never had a mortgage to begin with! I retired 12 years ago at 50 and I live off of 2 rentals that are also both paid off and a VRBO condo on Maui that we live in about 6 months each year.
Mathematically, it does not make sense to pay off a low interest mortgage however, emotionally it probably does. It is such an individualistic decision with so many key components to consider. For me with a 2.125%, 15 year mortgage there is no way I am going to pay off a $130,000 mortgage. it’s very easy for me to find a higher ROI in the market.
No chance I'll pay mine off, but I also have a 2.25% rate mortgage. Even if the HYSA rates weren't high, I still wouldn't pay it off. I will let it ride to the 30-year mark, which will be 20 years in to my retirement. Full transparency, I have a pension package that pays me 7x the mortgage payment, also inflation protected. I can be risky today and in retirement, which is what I've done and will continue to do!
Purchase (2) modest investment rentals. (I own 4.) It is a part-time hands-on business and a ticket to a comfortable retirement if you are willing to deal with the headaches. I buy clean low-mileage cars in cash and I carry no balance on credit cards. I "retired" 10 years ago and my portfolio is worth more now (inflation considered). I will not outlive my resources if I live to be 100.
Connor can purchas a spia(20 year certain)with his 332k cash.With todays favrable rates this will generate more than enough cashflo to pay the montly mortgage payment and leave a little extra in his wallet.
In our case, We'll downsize when we retire and can pay off then, so it buffers the risk of slower market in the first years of retirement. We have a sub 3% loan, so seems pretty safe to not pay extra and invest that money instead. Either way we won't have any debt when we retire.
I retired at age 53, so I am in my early 60s. Many of them resisted me because they couldn't understand the idea of not working if it wasn't necessary. I considered the phases of my life. I worked very hard to achieve what I have now, but in my last years, I owe it to myself to "stop and smell the roses." In my instance, I departed the nation after retiring and currently reside in Latin America. It made it possible for me to appreciate my new surroundings while escaping all the bad things that were going on in America. Nobody that I know of regrets retiring has done so
House is a protected asset. If your bank account is seized you wont have money to service mortgage, thus you really could lose both. Probable? Not high but not zero. Try medical bankruptcy in old age. Nursing home costs.
Forget the interest rate. What about freeing up the payment to pay off other debt and also reducing your risk. If I run into financial trouble, I’d rather own my house than have the risk of the bank taking it away
I'm 57 and I've got 10 years left on my 15yr 2.36% mortgage. I'm looking forward to not having a mortgage in retirement. I haven't itemized in years since the standard deduction went up so high. I wonder if that will go back down as the political winds change?
I would suggest you write down equations and numbers to explain these calculations. People cannot comprehend much from what you said and can get bored easily.
I've been thinking a lot about paying off my mortgage before retirement. It seems like the dream, right? No more monthly payments, and owning your home outright.
You never own your home outright. You still have to pay insurance, property taxes, etc. Don't pay property taxes and your non-mortgaged house can be put up in a county sheriff sale.
Paying off a lower int mortgage with $230k left at 2.25% doesn't make sense when I can keep that $230k and make more in the market. E.g. $230k left in market ETF or high yield savings over 5y can be easily $300k at least which is $70k profit plus better tax deduction Vs saving the $100/month or $6k over 5y. Doesn't make sense to pay off lower mortgage early at all. Reducing higher int rate mortgage might make more sense esp int only loans
I retired at 53, my house was paid off but after a while I sold the house and bought two properties that were worth triple of what I sold. Nothing is black and white when retiring. Everybody is different. When you retire doesn't mean you stop making money. People who aren't retired don't understand that.
I dont care what anyone says, you don’t want to be in your 60s with a mortgage or rent payment. We paid our 30 year mortgage off in 12 and now can invest or spend what we aren’t paying in mortgage. You cannot put a price on the peace of mind of no mortgage payment.
One important consideration is the cost of windstorm insurance if you live in a hurricane zone. It’s several thousand dollars a year even for a modest home. If you have enough saved to replace both windows & roof, you might be way better off dropping windstorm and only keeping liability insurance
Yes they have. Ari (James' partner at Root) did a very good one last month with someone from an independent firm that helps identify ACA and other plans for pre-Medicare retirees.
Your savings are only the interest component of the mortgage. Buy default you have invested the money in real estate, without the leverage factor. You could have invested the same money used to pay the mortgage off and be more liquid.
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We debated this, but for us the peace of mind of having our mortgage paid off when we retired was worth its weight in gold for us. Being debt free at retirement was a dream of mine and will make it a reality next year :)
If it is a dream or ideal for you then it makes sense that fulfillment of that ideal will be satisfying. But for me, these ideals are very ephemeral and I hold onto my 3.25% mortgage because I can afford to pay it and it doesn't fit my goals to pay it off early.
I imagine for some, whether one itemizes deductions or takes the standard deduction may also be a factor.
As much as I reject financial illiteracy that costs money, if the dream lead to heightened savings then it may have been worthwhile after all.
Can’t see paying off my 30 year, 2.5% fixed rate mortgage
Very few people itemize thier deductions. For those taking the standard deduction, there is no tax deduction benefit of having mortgage interest.
That will change in 2026 when the standard deduction returns to pre-2017 levels.
One of the issues not discussed in the video is the reduction of liquidity in one's net worth. Paying down a mortgage only saves interest since you still have to pay insurance, property taxes, and HOA dues (if applicable). Paying off the principal converts liquid interest-earning cash to an illiquid asset (i.e., real estate), subject to market losses (i.e., the housing crisis 2008) and high friction costs if you want to get that liquidity back. We have a 2.625% mortgage which includes $385 in interest payments and we take the standard deduction for taxpayers over age 65. No way I will pay $177,000 to save $385 per month (and decrease each month the mortgage is paid) and convert an interest-earning cash asset to an illiquid asset that can potentially lose money. While some may want to sleep well at night with a paid-off mortgage, this is sometimes called mental math. Unfortunately, mental math is not math.
A potential issue would be if you paid off the mortgage on your house, which was damaged by an event not covered by typical homeowners insurance (e.g., flood, earthquake, sinkhole, etc.)
Makes sense. Those claiming to be greatly relieved that mortgage is payed off will always say it was always a dream of theirs to have it paid off. Getting one's dream will always be satisfying, at least as long as the dream lasts, but I really don't get it and the numbers for me say to let my 3.25% mortgage ride.
While I agree to a point, the mental math equals risk assessment. It should not be discounted.
In Florida, many are paying off mortgages in order to “self-insure”. They’re sacrificing low interest rates to save on sky high insurance costs. It’s risky, but more people are doing it.
brilliant
Thank you for emphasizing that just because your mortgage interest enables itemizing, it doesn’t make the net tax benefit real… you must consider how much your mortgage interest drives you OVER the standard deduction!
So many channels miss this element of the analysis.
Thanks for this discussion, as I am in a similar situation as Connor. The point made about how much above the mortgage interest is - compared to the itemized deduction threshold - is a consideration I hadn't explored. But one other aspect to paying off a $300k balance is also a practical one. Maintining a home will periocially require large rplacement costs (central AC, roof, etc). While I will be able to invest the mortgage payment if I paid it off too early, I don't want to tie up too much of my funds in just "feeling good" about not having a mortgage, then having a large unexpected expense. I plan to keep my mortgage until it gets down to a more manageble amount around $150k, keeping the payoff funds in interest bearing investments.
To summarize one point, if we're not itemizing deductions (i.e. taking the standard deduction - which, by the way, is a little higher over the age of 65), mortgage interest is not deductible. Even if we are itemizing, not all of the mortgage interest may be deductible.
I am in my early 60s and retired at 53. Lots of people gave me pushback because they had difficulty grasping the concept of not working if you don’t have to. I looked at my life as stages. I earned everything I have now through a lot of hard work, but I owe it to myself to “stop and smell the roses” in my final stage of life. In my case I left the country after I retired and live in Latin America. It allowed me to get away from all the negative things happening in America while appreciating my new environment. I have yet to meet anyone who regrets retirement
Wow, such identical stories to @Sar-u6d, just with some of the ages and words rearranged a little bit. A Latin America retirement bot?
We made the decision to refi in 2020 as the rate was low, we have a 2 7/8% rate. We did it and saved about $250 per month in payments. Our P&I amount is slightly less than $500 per momth, for me it doesn’t make sense to pay it off and as was said, its part of our expenses. Our property taxes are a lot more monthly than the P &I!
I do think over the long run the money we didn’t use to pay off the mortgage will outpace the amount we will pay in the interest for the mortgage due to such a low rate we were able to get. If it was at 5% or more then it would be a different story.
Great video James - how about using the benefit of inflation as well if paying off a debt over 20-30 years. Over time that mortgage balance will be "lower" as you pay off the mortgage with inflated dollars.
Fantastic video.
The key decision points were reviewed very carefully. A couple not mentioned:
1. The home acts to diversify the portfolio.
2. The paid-off home can be a source of liquid equity
It worked this way for me. When we bought our home the rate was 7.25%. We paid that off as quick as we could manage, but kept a home equity line of credit (HELOC). 10 years later the HELOC rate was 1%, and I wanted to keep my AGI low to collect the maximum ACA PTC. and to maximize my tIRA contributions. To supplement my AGI, I borrowed money at 1%. When interest rates went up and I was no longer running after the PTC, I paid off the HELOC
I don't mention this story as a strategy to copy, but to say that liquidity and diversification have significant value that are part of the decision whether to pay off a mortgage.
Yea I get more interest from the cds I have than what I pay on my mortgage, but I really want to pay it off.
We paid off our mortgage years ago! Best decision ever!
Great video...
We're exactly in this situation. Initially I was planning on retiring when my mortgage was paid off in three years. It's a 2.75% mortgage. But things changed and we've decided now I am retiring in about 10 months. So the question for us is, do we pull from some of our retirement funds to pay off the mortgage early or not...
With that interest rate, I'm not going to do that, but the sequence of returns part is what has given me a bit of pause...
If the market tanks when I retire and since we still have the mortgage, that means we'd be pulling out more money from our retirement during a down market... Which isn't great...
That said, that's playing the odds, and who knows for sure...
And even if that happens, we will still have options. We could just spend a bit less and/or use some of our emergency funds to try to ride it out a bit... You want to plan for a possible downturn in the market, but I don't think I want to assume it will happen... My crystal ball isn't that good... ;-)
Same- retiring in about 18 months and have only about 85k left on the 2.87% Mortgage. I think I am paying it off to better insulate myself from a down market early in retirement. Good luck in retirement and enjoy it!!
In August 2022, I paid 615k with a 4.375 interest rate for my second property in San Diego. The property is currently worth $895k. I've already increased my ownership by over 30% in less than two years. There's no need for me to sell because I'm making over 90k in rental income from my two ADU studios, which pays my mortgage each month. In addition, my rate is ridiculously low, which I view as a benefit.
It’s all paper, I’ve seen crashes before multiple times in my lifetime. I’ve known people in California overpay and underwater for 10 years.
This is basically me. I am targeting retirement in two years at age 57 and I have a $375K 15-year fixed mortgage @ 2.49% that I am paying down biweekly along with an extra $1000 principle payment/month. I'm currently in the 35% tax bracket along with maxing out SALT deductions, so the itemized deductions are a godsend. Plus, during the early years of retirement, these itemized tax deductions will allow me to do more Roth conversions, which is another benefit of keeping a mortgage in retirement.
Should you not also consider the taxes that you’ll pay on the interest earned?
Excellent insight, so many variables that people need to understand.
The mortgage, p&I is only two of 4 parts of most mortgage payments. Paying off the mortgage isn't going to eliminate the tax and insurance parts of a payment. Often, Paying off a mortgage only reduces the costs by half , plus or minus, of the payment. That's a big let down for many people.
Actually, it only pays off one part (mortgage interest) but converts a liquid asset (cash) to an illiquid asset (real estate).
I have a mortgage with 80K still left at %2.375. I have 10 years left on it, It doesn't make sense to pay it off right now, opportunity costs are one thing. If I paid it off I would have to pay it with IRA withdrawals that would be taxable at probably %12. so I would be paying %12 to pay off a %2.375 rate. Does not make sense. IF I get a windfall that is not taxable down the road I will pay it off probably.
Even with a low mortgage rate, if you can utilize a Mastercard credit card that has a sizable welcome bonus, and pay a 2.9% Plastiq fee to pay the mortgage, then it can make sense.
Wise move
You are correct concerning using distribution from tax-deferred accounts, which would create a tax liability greater than the savings form paying off the mortgage. Again, you would decrease the liquidity of your assets by converting liquid cash for an illiquid real estate asset.
My rate is 2 1/4. I'm planning to rent the house and use that extra money to pay down the mortgage. I can't bring myself to take money out of my current income stream when that money can earn 5% in a simple savings account.
Thanks James for another very informative video!
An important consideration is where the property is that's under 3%. I live in San Diego and I can already see that once high-school kids have graduated, parents are selling and moving east. In this case, paying it off makes little sense, particularly as many properties go over list in San Diego anyway.
You could lock in a set interest rate with long bonds. Use the coupon to make payments and still have principle at the end. Solves the problem of HYSA interest rates variation. Taxes are still a concern. Might find a muni to make this work if the mortgage rate is low enough. Just a thought.
Timing can have an impact as well. If he got a 30 year at 5% back a few years ago he’d be set. Now the markets in a good index fund is probably a better option. Or he could pay cash for a rental property and have that supplement his income. Lots of options with different levels of risk and income.
I know a guy with a paid off house that lives in Southeast Asia and the rent completely pays for his lifestyle. He doesn’t have to even touch his social security or investments
What about:
1) Spreadsheet/MBA geeks (me) can get lost in the sheet leaves but miss the forest. If the sheet shows a gain of $5,000 over 15/30 years of one decision or the other on a $350K mortgage, then that’s not really a material difference. Then perhaps the soft factors should drive the decision.
2) What about when you are on the maturity of the mortgage amortization curve? If you’re in the last third of the mortgage, every payment is heavily biased toward paying down the balance. That is, the composition of the payment is more principal than interest, whereas in the early part of the mortgage amortization, you’re paying all interest.
James, this episode would have benefited from some on-screen graphics.
Nice video but I wrote a check at closing so I never had a mortgage to begin with! I retired 12 years ago at 50 and I live off of 2 rentals that are also both paid off and a VRBO condo on Maui that we live in about 6 months each year.
Mathematically, it does not make sense to pay off a low interest mortgage however, emotionally it probably does. It is such an individualistic decision with so many key components to consider. For me with a 2.125%, 15 year mortgage there is no way I am going to pay off a $130,000 mortgage. it’s very easy for me to find a higher ROI in the market.
making emotion decisions around money is a recipe for failure
The after-tax spread between 5% and 2.75% will not be as wide as it appears for most people.
Please show the numbers you’re discussing on the screen so we can follow along. Thanks for the great info!
No chance I'll pay mine off, but I also have a 2.25% rate mortgage. Even if the HYSA rates weren't high, I still wouldn't pay it off. I will let it ride to the 30-year mark, which will be 20 years in to my retirement.
Full transparency, I have a pension package that pays me 7x the mortgage payment, also inflation protected. I can be risky today and in retirement, which is what I've done and will continue to do!
Purchase (2) modest investment rentals. (I own 4.) It is a part-time hands-on business and a ticket to a comfortable retirement if you are willing to deal with the headaches. I buy clean low-mileage cars in cash and I carry no balance on credit cards. I "retired" 10 years ago and my portfolio is worth more now (inflation considered). I will not outlive my resources if I live to be 100.
Connor can purchas a spia(20 year certain)with his 332k cash.With todays favrable rates this will generate more than enough cashflo to pay the montly mortgage payment and leave a little extra in his wallet.
In our case, We'll downsize when we retire and can pay off then, so it buffers the risk of slower market in the first years of retirement. We have a sub 3% loan, so seems pretty safe to not pay extra and invest that money instead. Either way we won't have any debt when we retire.
I retired at age 53, so I am in my early 60s. Many of them resisted me because they couldn't understand the idea of not working if it wasn't necessary. I considered the phases of my life. I worked very hard to achieve what I have now, but in my last years, I owe it to myself to "stop and smell the roses." In my instance, I departed the nation after retiring and currently reside in Latin America. It made it possible for me to appreciate my new surroundings while escaping all the bad things that were going on in America. Nobody that I know of regrets retiring has done so
Wow, such identical verbiage and commentary to @caldwell-c1n, just with some of the words rearranged a little bit. A Latin America retirement bot?
Yeah I see this comment show up all the time on these type of videos. Not sure what the game is.
House is a protected asset. If your bank account is seized you wont have money to service mortgage, thus you really could lose both. Probable? Not high but not zero. Try medical bankruptcy in old age. Nursing home costs.
Forget the interest rate. What about freeing up the payment to pay off other debt and also reducing your risk. If I run into financial trouble, I’d rather own my house than have the risk of the bank taking it away
I'm 57 and I've got 10 years left on my 15yr 2.36% mortgage. I'm looking forward to not having a mortgage in retirement. I haven't itemized in years since the standard deduction went up so high. I wonder if that will go back down as the political winds change?
I would suggest you write down equations and numbers to explain these calculations. People cannot comprehend much from what you said and can get bored easily.
Nothing more freeing than DEBT FREE
I've been thinking a lot about paying off my mortgage before retirement. It seems like the dream, right? No more monthly payments, and owning your home outright.
You never own your home outright. You still have to pay insurance, property taxes, etc. Don't pay property taxes and your non-mortgaged house can be put up in a county sheriff sale.
Seriously? TODAY, 2020 mortgage silly to pay off early. How can you go on for 18 minutes? How many people with a 400k house itemize?
Paying off a lower int mortgage with $230k left at 2.25% doesn't make sense when I can keep that $230k and make more in the market.
E.g. $230k left in market ETF or high yield savings over 5y can be easily $300k at least which is $70k profit plus better tax deduction
Vs saving the $100/month or $6k over 5y.
Doesn't make sense to pay off lower mortgage early at all.
Reducing higher int rate mortgage might make more sense esp int only loans
I retired at 53, my house was paid off but after a while I sold the house and bought two properties that were worth triple of what I sold. Nothing is black and white when retiring. Everybody is different. When you retire doesn't mean you stop making money. People who aren't retired don't understand that.
We are retired. We have a mortgage at 2.25 %.
I dont care what anyone says, you don’t want to be in your 60s with a mortgage or rent payment. We paid our 30 year mortgage off in 12 and now can invest or spend what we aren’t paying in mortgage. You cannot put a price on the peace of mind of no mortgage payment.
One important consideration is the cost of windstorm insurance if you live in a hurricane zone. It’s several thousand dollars a year even for a modest home. If you have enough saved to replace both windows & roof, you might be way better off dropping windstorm and only keeping liability insurance
Have you prepared any shows regarding early retirement and affordable health and dental plans that people can use. Thank you
@Johnj4094 check out this video from Jame's partner ruclips.net/video/BykvoxJEWGo/видео.htmlsi=GPhkMSs21t6hUVcP
Yes they have. Ari (James' partner at Root) did a very good one last month with someone from an independent firm that helps identify ACA and other plans for pre-Medicare retirees.
Paying off my 2.375% mortgage early is not even an option. Makes no sense whatsoever financially or emotionally.
I think paying off the Mortgage ASAP is the best option because you can then invest the mortgage payment money ASAP.
bi weekly is the easiest passive way.
also rounding up.
but if you have more dollars, go for that as well
Your savings are only the interest component of the mortgage. Buy default you have invested the money in real estate, without the leverage factor. You could have invested the same money used to pay the mortgage off and be more liquid.
Pay off the mortgage!!!
Should you not also consider the taxes that you’ll pay on the interest earned?
It depends on where the interest is earned. If it is in a Roth IRA, then no taxes due. If it is in a taxable account, then you are correct.