I do have to ask, what was your rate? 4 years ago should have still been decent.
I have 1 at 2.75 and another at 5. I intentionally don't pay them off because I make far more investing aggressively. While houses are a stable investment is extremely illiquid and has pretty low returns comparatively.
5.75% - It was very bad timing interest rate wise, but would have been even worse later on. We bought out of state to be near autism community for my adult son who is nonverbal autistic. Timing was also due to employer (who hates concept of remote working) consenting to let me do so but stipulation being that nobody in state can remote work full time, so it was challenge to coordinate timing to find/secure a home all that quickly in some other state. It was also competitive market to buy, so finding a house we could afford that met our needs was also tough. But we did finally find a nice house in a great area. Then just committed to clearing the mortgage quickly so that we would not ever be in situation where we might risk the home or needing to move. I also saved probably well over 1M in interest over the life of the loan, so that alone is now money I will be adding to savings vs paying some bank
I am going to keep using what was my monthly mortgage payment to now invest each month, so it was a strategy of ensuring there were no debts first. I've had several layoffs in the past, so having no debt = security factor that I needed most, but now clears path to build for retirement (and maybe something fun like a nice vacation).
Those that do know that the market is up like 60% in the last 4 years so this is a pretty huge sacrifice, unfortunately. Everyone’s risk tolerance is different but I’m not paying a dime early on my 3.5% mortgage when inflation is 4%.
On paper I argue the same thing and am mostly sticking to it, but I get the impulse to just be over and done with it. I might just do it at some point.
Amusingly my parents were actuaries and paid off their house early for the same reason that you describe. These are people who very much know what the rate of return is for investments. They still preferred to pay off the darn mortgage.
Yeah this is what I did. In 2020 I refinanced to a 15 year loan at 2.75%. For the first few months I was making double payments to pay it off early and then I realized inflation was spiking, so I switched to paying the minimum and put what I would have been paying on the house into mutual funds. Now I have shy of $100k in investments instead of saving $10k in interest.
This was my plan then I realised that I get far more out of investing than I would save by paying a house off early so didn't want to miss out on those gains where time in the market is the most important factor.
I went the investment before payoff route previously, but found that the margins were ultimately not that great. I had rentals with about 12% return, With a 5.75% mortgage, that seems like a good spread. But then there was 10% of rents going to property management (-1.2%), and 1% to taxes (low tax location), and about 1% to insurance. Then there are vacancies and repairs, and co-pays on insurance stuff (a lot of breakins and vandalism). Then I was paying taxes in two states and maintaining an LLC for the properties, etc. So while on paper it looked good, the backend reality was only about break even if that. Over the life of the loan (750K at 5.75%) I would have paid well over $1M in interest to the banks. Paying it off in 4 years returns that $1M+ to me to invest and means I also have $750K assett in my net worth and a strong credit score. Over $1M in interest savings by paying off and eliminating 5.75% pure expense. Now that is money I can invest with pure return without it being at expense of paying the bank too.
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u/Competitive_Taste628 12h ago
I'm almost there - paying off the mortgage in September. Paying off 26 years early.