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  • #31
    Originally posted by JBME View Post

    Can you explain here? If there is no mortgage to pay then the cash can be used for something else, and thus more cash flow. Unless I’m using the term cash flow inappropriately
    Because you cant pay mortgage unless you already have the cash. Thus, you're "freeing" nothing up, you just moved it from place 1 to place 2. In the mean time you're decreasing your liquidity.

    "Its an illusion Michael".

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    • #32
      Originally posted by Zaphod View Post

      Because you cant pay mortgage unless you already have the cash. Thus, you're "freeing" nothing up, you just moved it from place 1 to place 2. In the mean time you're decreasing your liquidity.

      "Its an illusion Michael".
      So you have to already have the money, it cant be created by paying it down. So, you already have it

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      • #33
        okay, I get your point but don't fully agree. A mortgage is due no matter what. In the present, I free up nothing by paying down the mortgage. You're right-I moved it from place A to place B and did decrease my liquidity. But future me now has more options thanks to present me. I can re-direct the now non-existent mortgage payment to anything else or I can choose to cut back on my work because I don't need the cash because I don't have a mortgage payment due anymore. I can build up liquidity much faster in the future-present (ha, hopefully that makes sense) because I don't have a mortgage payment now.

        Like I said, I get that the math favors investing over paying down a mortgage, especially if the mortgage interest rate is low. The lower the rate is the more the math favors investing. I tried to present a behavioral/qualitative case for why you'd pay down a mortgage faster. Maybe a good compromise is to try to do both....invest and pay down the mortgage. This is actually what we're doing. Even with our "aggressive" paydown we'll have a mortgage for 18-20 years of our lives.

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        • #34
          Originally posted by JBME View Post
          okay, I get your point but don't fully agree. A mortgage is due no matter what. In the present, I free up nothing by paying down the mortgage. You're right-I moved it from place A to place B and did decrease my liquidity. But future me now has more options thanks to present me. I can re-direct the now non-existent mortgage payment to anything else or I can choose to cut back on my work because I don't need the cash because I don't have a mortgage payment due anymore. I can build up liquidity much faster in the future-present (ha, hopefully that makes sense) because I don't have a mortgage payment now.

          Like I said, I get that the math favors investing over paying down a mortgage, especially if the mortgage interest rate is low. The lower the rate is the more the math favors investing. I tried to present a behavioral/qualitative case for why you'd pay down a mortgage faster. Maybe a good compromise is to try to do both....invest and pay down the mortgage. This is actually what we're doing. Even with our "aggressive" paydown we'll have a mortgage for 18-20 years of our lives.
          How is any of what you said different than if you just put all the money in a taxable account instead of pre-paying the mortgage though? The money will still be there, and you’ll probably have more of it. Just because you’re paying it then, or selling it to create “cash flow” then doesn’t mean that you have more liquidity. And in order to get there you’ll have significantly less liquidity along the way.

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          • #35
            Yea I mean it seems like you are just advocating for an annuity

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