Paying off the mortgage. Good idea?

[mrpaseo]

I think it would be terrific to own a home free and clear I think it would lower stress levels for all that live in the house. Obviously you will still get tax assessments, etc. but still to not have to come up with $1200 monthly is a freeing thing. It gives you the ability to tell the boss to shove it if needed. It gives you a chance to go volunteer somewhere without worrying about the mortgage. We are below $80K owing at this point and I can hardly wait until it is gone and half my SSD isn't going to pay off the place.

To me it isn't even a math problem but a life problem. Do you want to be making housing payments for who knows how long or do you want to be free of them and thus free to look at your life in a different way. And by the way, congratulations on having the money saved to be able to do this!!!!

Yes, there is a local and state tax so truthfully, we never really own our home, we rent is very cheap from the city/state (Our taxes amount to about $125 a month). Not having rent/mortgage has allowed me to not work at the age of 40. The average home in our neighborhood is about $150k, we paid the least for our house since when we bought, it was the second house on the street, now there is over 20.

As for paying it off, we realized we could do it when we paid off our 2007 RAV4 in 18 months (About $32,000). When we made our final payment, we were like... that was easy... what if we did that to the house. 12 months later we paid off the final $54,000.

As for life problem... When talking to my parents (They refinanced their house this month to a 15 year loan at a lower %) they say something to the fact of, "It doesn't matter to me, the way I see it, we will always have rent or mortgage". They are happy that I have mine paid off and they do have a plan to pay it off in 5 years now. When I started talking to them about my finances, it provoked them to button down on theirs and pay everything off. They have only the house left and a new 5 year plan. Sadly, Dad will be 70 when he pays their house off.

How I did it... I decided at the age of 23 that I did not want to work my life away, I entered the Army at 19 and decided to retire (At age 39). Our plan was to have everything payed off before retirement so at that point we would have the option to now work. We almost made it (Only one loan left but the house is paid off ). Thankfully my wife is a manager and loves her job so we are able to continue to save and better prepare our future (Along with my retirement income).

Best.

[mrpaseo]

Some other considerations:

Cashing out the entire $200K in mutual funds will eliminate the compounding interest factor of your investments. In essence, you will be "starting over" and won't allow your high balance to work in your favor. It could take a relatively long time to get your funds back to these levels even if funded aggressively.

Since mortgage interest is tax deductible, the effective interest rate on your mortgage will be significantly lower than the perceived 3.5% if you itemize your deductions. Given current rates and tax laws, a mortgage can be viewed as being fairly close to "free money."

This is true, but I never in my life made enough to itemize, we always took standard deductions. Easier that way.

[Gailete]

The average home in our neighborhood is about $150k, we paid the least for our house since when we bought, it was the second house on the street, now there is over 20.

We ran into an interesting problem since hubby built our home with some help from friends and family at times. He recycled all sorts of things including marble from his and my sons' old elementary school, wooden doors from the same school, more wooden doors from a church remodel, old Steinway piano legs (worth about $2K each) for the stair banister, etc. So we live in a house that costs around $100K to build (when Katrina happened we realized the price of building supplies would skyrocket so the next day took advantage of a $1000 off coupon and bought many of the remaining supplies we needed). Then we had to call the insurance company when it was done to get home insurance. That recycled marble, etc. pushed the replacement value up and over anything that we would ever pay for a home. This past year we did managed to get it lowered a bit, but it is still in the $350K replacement range at this point. Of course the tax assessor saw it the same way and we have huge property taxes to pay. But in the meantime in around 11-12 years it should be completely paid off and was within our budget for a mortgage. We actually pay less per month for this house than my mortgage that I had had on my own home that was three times smaller. I guess this is why talking about when to buy, how to buy, etc. is so individual. Everyone's lifestyle and attitudes towards money is different. It is important to us to have this and a rental property paid off as soon as possible so we aren't carrying those bills into retirement. We live in a large house that was built to our needs including my disability and it also serves as home base for two businesses of ours. With a smaller place we couldn't run our businesses. It all goes around in a circle. I know if I was handed the money to pay off the mortgage today or save it, the mortgage would be paid off. To lose our home would mean losing our income as well.

[parafly]

This is true, but I never in my life made enough to itemize, we always took standard deductions. Easier that way.

It's not about how much you make, it's about what you are eligible to deduct. Someone paying $10K+ in mortgage interest every year should have no problem itemizing their deductions. There are many other deductions a person can take as well, but mortgage interest is a big one for the typical person.

[Gailete]

There are many other deductions a person can take as well

I can tell you for sure that the one deduction you don't want to have to get is the medical one! I hate adding up those bills each year and seeing we have usually spent $8000 in unreimbursed medical expenses. We get that deduction every year.

[Jennifer Williams]

I think is not a good idea

[snafu]

First, what are the income tax consequences of cashing out your investment portfolio? 2nd, a house is a different item not easily quantified since it provides shelter for the family chock full of emotional benefits but far less liquid an asset than MFs. On the information given, I'd pay out the mortgage and while you will need to continue the property taxes and non mortgage expenses, use the actual mortgage sum to continue the portfolio plan - whatever it was.

[scfr]

First, what are the income tax consequences of cashing out your investment portfolio? 2nd, a house is a different item not easily quantified since it provides shelter for the family chock full of emotional benefits but far less liquid an asset than MFs. On the information given, I'd pay out the mortgage and while you will need to continue the property taxes and non mortgage expenses, use the actual mortgage sum to continue the portfolio plan - whatever it was.

Agree. Paying cash for the house sounds like a reasonable idea, as long as there won't be penalties for cashing out the MFs. Snafu's suggestion of putting the mortgage payment equivalent back in to investments is great.

I understand your thinking about the sense of freedom that comes from being mortgage-free. We have never regretted paying off the mortgage on our old house early, and purchasing our current house in cash.

When we purchased our house we also asked ourselves how much of our total net worth we wanted to have tied up in our home (or all illiquid assets such as house and vehicles). We did not want to be "house poor."