Paying off the mortgage - wahoo!!

[JuniorTT]

Just wanted to brag for a minute to my fellow savers that our next mortgage payment will be our last! The payoff statement claims our mortgage company will square the deed with the county but I'll believe it when I see it. We're looking forward to the end of escrowed taxes and insurance.

Now all that stands between us and total debt freedom is about $9500 in student loans @ 1.625%. So we're going to need to re-direct our saving energy toward something else...here's our plan for the next few years:

Pay off the student loans by end of 2011. Probably not the best move for our bottom line but it's worth it to us to be able claim total debt freedom. Our monthly budget is going to be running a nice surplus now that the mortgage is gone so this should be pretty easy.
Put a deck on the back of our house in the summer of 2012. No idea what it will cost but we'll be getting quotes this fall.
Get a minivan in spring or summer of 2013. Rough numbers I'm thinking $25k for something pretty loaded but a year or two old. If everything goes according to schedule, this will be just in time for child #2. The dealer almost choked when I put $20k down on my current car when I was 24...can't wait to pay cash for the whole thing this time.

Wahoo!!

[disneysteve]

Great job! That is very exciting. We are still about 3-4 years from paying off the mortgage but I'm looking forward to doing it as well.

[Frugal]

You are lucky to have such a low rate on your student loans. I have federally subsidized loans, but my interest rates are fixed at much higher rates...six to eight times what you are paying.

[krantcents]

I don't understand this burning desire to pay off mortgages! Thanks to the Federal government and the IRS, it is subsidized. You could probably earn an equal or greater return somewhere else. Despite that I will have my mortgage paid off by the time I retire in 6 years.

[KTP]

Originally Posted by krantcents

I don't understand this burning desire to pay off mortgages! Thanks to the Federal government and the IRS, it is subsidized. You could probably earn an equal or greater return somewhere else. Despite that I will have my mortgage paid off by the time I retire in 6 years.

Yes, I am SO glad I did not pay off my mortgage as the bulk of my portfolio (in index funds) has earned a whopping 0.1% this year in the stock market.

[Goldy1]

mine is almost there too;no biggie, I mean it is and it isn't you know. I know it puts me ahead of most folks and I am damn proud, but I'd trade that for guaranteed healthcare (I am healthy but been thru layoffs and gone without;I don't trust individual insurance;the application is a nightmare and written just to get you to accidently omit something so they don't have to pay out if need be it seemed)

I still have to pay for a car, buy diapers,food, on and on. My mortgage is only 700 bucks before taxes(2000 squaRE FOOT NICE HIME IN SAFE NICE mICHIGAN NEIGHBORHOOD)so that might explain the lack of woohoo.

[JuniorTT]

Originally Posted by Frugal

You are lucky to have such a low rate on your student loans. I have federally subsidized loans, but my interest rates are fixed at much higher rates...six to eight times what you are paying.

Yeah, luck it is. Maybe they should base it on your GPA. Something like 10 divided by your GPA equals your rate. I suppose the kids who drop out with a GPA under 1 might not like that formula though.

Same game of luck with mortgage rates but the stakes are even higher.

[JuniorTT]

Originally Posted by krantcents

I don't understand this burning desire to pay off mortgages! Thanks to the Federal government and the IRS, it is subsidized. You could probably earn an equal or greater return somewhere else. Despite that I will have my mortgage paid off by the time I retire in 6 years.

You got me wondering. Let's go to the video tape...

The Dow closed at 10,205 the day we closed on our house (May 27, 2004). Today it closed at 11,867. That's an annual return of 2.12%. Our mortgage was 5.375%.

Granted the 5.375% is effectively a little lower once you factor in the subsidy, but the 2.12% is also a little lower once you factor in capital gains taxes owed.

P.S. - The S&P 500 was even worse at an annual return of 1.57% since our closing date.

[disneysteve]

Originally Posted by krantcents

I don't understand this burning desire to pay off mortgages! Thanks to the Federal government and the IRS, it is subsidized. You could probably earn an equal or greater return somewhere else. Despite that I will have my mortgage paid off by the time I retire in 6 years.

As I've said many times, prepaying the mortgage should be relatively low on the priority list. We could debate the order here but you get the point.

1. Maintain a 6-month emergency fund.
2. Pay off high interest debt.
3. Pay off other consumer debt.
4. Save 15% of gross for retirement.
5. Save 5% of gross for other goals.
6. Save for children's education.
7. This is possibly where prepaying the mortgage enters the picture.

[mcfroggin]

Originally Posted by KTP

Yes, I am SO glad I did not pay off my mortgage as the bulk of my portfolio (in index funds) has earned a whopping 0.1% this year in the stock market.

Interesting. My mutual funds have been banking >9% just this year.

[snafu]

JuniorTT, congratulations, paying off mortgage is a life marker and worth celebration. BTW, building a deck is a popular DIY and most big box stores hold free, deck building seminars. Even if you hire-it-out, I suggest attending a seminar to be sure it's done correctly since there are a lot of scammers/fly-by-night outfits taking advantage of the unaware.

Given the stock market mess, you might examine the possibility of an international, dividend ETF since prices are low. It may be a buying opportunity.

[nitemarecooper]

Congrats on paying off your mortgage. Also equally congrats on the super low student loan rate.

[PetMom]

What an accomplishment - congratulations!

[tripods68]

That's awesome! It's nice to see people getting out of debt.

Congrats!

[DebbieL]

For Canadians paying on the mortgage should be number 1 priority. We don't get to write anything off on mortgages here.