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Did you regret paying your mortgage off early

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  • Did you regret paying your mortgage off early

    The topic of paying a home mortgage off early versus investing gets discussed often and mathematically there are some reasonable directions on how to go about deciding this. I am curious to know if anyone has ignored/ignoring conventional wisdom and payed off their low interest mortgage (<5%) early? How has your finances changed since you did that? Did you regret it? Was the feeling after being mortgage free what you expected?

  • #2
    This is kind of a get what you ask for question. People that are well off enough and so debt averse to pay off an inflation/tax advantaged debt very early will by this nature have a strong overall financial picture. Lots of them on the forum.

    It would be rare for many decisions, large or small for someone to truly regret it. It happens but human default is to find all the reasons why our choices were correct first and foremost, not find out what could have been. Its a great exercise to do the opposite of course to try and keep a facade of objectivity.

    Most find there is no big moment after paying off something like that or at least its not what they thought. Remember even in crazy fast situations it still takes years and at some point you see the progress and where its headed, so you get used to so to speak.

    Basically, you can really only decide for yourself, run the math, check your priorities, etc...make sure you're going to maybe live their for the rest of your life (this is extremely rare).

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    • #3
      @PhysicianonFire featured a guest blog on this topic yesterday, and there were lots of comments and feedback for the post:

      https://www.physicianonfire.com/paying-off-mortgage-mistake/

      And yes, I paid off my mortgage “early” after 11 years with no regrets and no fanfare.

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      • #4

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        • #5
          I’ve owned six houses and never paid off any early. I’m now three years into my doctor house and trying to decide what to do. The mortgage is less than fifty percent of house value.

          I’m pretty sure worrying about it is not worth it either way. I’m thinking of paying it off just so I can see if I feel any better like you guys, but I doubt it will change anything for me. Wife says she doesn’t care and doesn’t worry about the payments. I just won’t be able to get the mortgage rate back.

          I understand the concept of freedom from debt relief but theoretically you should have some psychological benefit from having a big fat wad of money invested. Much more liquid. Plus theoretical benefit of paying mortgage woth inflation valued dollars.

          I should caveat that only three of the homes were in areas of rapid appreciation. Three are in areas where you ar lucky to get back what you put in. I’m not sure if that is a consideration in the process for most.

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          • #6
            Yeah, I honestly cant wrap my head around the "psychological" benefits part. If the 'debt' is that bad and keeping you up at night, you should sell, not pay it off. Mortgage debt isnt like other debt in that it can be discharged for some +/-% to par. Not possible with real debt. Hearing people say that I just hear pts saying, "I know its a virus, but I'd feel better with antibiotics". Theres lots of things that feel better that just arent. This isnt one of them, its doesnt really matter.

            If you have 5M in the bank account but 200k in mortgage, you're not really in debt, your money is simply in different accounts/vehicles. If I were being really honest, I dont get the idea that you should pay it off early if you're going to FIRE, this doesnt make good math or planning sense at all. Having a mortgage (or selling) gives you less of a sequence of returns risk as you'd have been shoveling even more into the investment side all along and gives you more liquidity day to day, etc...

            In the end, you dont have to have a mortgage at all. My two are at 3.25 and 3.625, those are already at least 100 bps below todays prevailing 30 year rates without accounting for tax effects. Let inflation and time do the heavy lifting. If rates go down some day I can refinance, if they go up I bask in the imputed rent gains.

            Go back on zillow and look at prices 20 years ago and the payment and think about if now you'd be worried paying that drastically crazy cheap mortgage, or wish you could go back in time and pay it off. The thread where someone was doing the mortgage payment the first payment and getting like 6x 'return' on the money was a pretty great illustration of that, even though it wasnt framed as such.

            I also cant see myself in the same place for 30 years, so I dont want to throw a bunch of money into a vehicle that has such hefty transaction costs on it. Very inefficient.

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            • #7
              With the natural upward bias in the Market, investing your "pay-off" money almost always results in a better outcome mathematically. Your HELOC/ mortgage gives you options. By investing these funds over time you will likely buildup capital gains which come off at very low rates. Then, pay off your mortgage if and when rates  are favorable to you. The Bank can't do a darn thing.

              With a paid off mortgage could you save money by decreasing your disability insurance?

              If you believe that mortgage pay off "protects" the asset, try not paying your property taxes for a couple years.

              https://www.edelmanfinancial.com/.../11-great-reasons-to-carry-a-big-long-mortgage

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              • #8
                The philosophy is That the benefits of forced savings with paying off the mortgage helps insure a cushion for retirement.  That does apply for to the vast majority of America.  — not the top 5% earners which includes even the most academic debt loaded physician in this forum.

                In the current environment, if you’re in the market for home ownership for all the right reasons, lock in a 30 year.  You’ll never find a cheaper leaveraged loan.  Maintain fiscal responsibility and invest conservatively balanced the continued savings to balance out the “need” to be pay off that debt when/if one wants.  I think of it as my covered call mortgage fund and it is much much conservative than my regular retirement accounts heavily in TE bonds since in Cali taxable account.

                 

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                • #9




                   

                  If you believe that mortgage pay off “protects” the asset, try not paying your property taxes for a couple years.

                  https://www.edelmanfinancial.com/…/11-great-reasons-to-carry-a-big-long-mortgage
                  Click to expand...


                  I think this part is important and probably part of why I feel the way I do besides the math. What you really have is a lease hold not an ownership. Eminent domain or some misfortune could come and take it all away, and as you say not paying your holding costs will show you just how much it isnt yours anyway.

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                  • #10
                    I paid off early and then immediately cut my hours to 28/wk.  I would certainly have a higher net worth if I hadn't paid it off early but am loving my part time work life.  I'd do it again

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                    • #11
                      There is regret, and there is REGRET. Paying off my house early might mean that some future nest egg will be a slice smaller than it would have been had I taken all of the excess money and invested into VTSAX instead. At my death bed, hopefully far into the future, this regret will not even be remembered- in fact, I never think about this issue except when it comes up on a blog or forum discussion. I will truly REGRET missing my then four year old son's first soccer goal which occurred while I was at the Hospital declotting a dialysis graft, not joining a friend years back for a Grand Canyon Rim-Rim-Rim run which I am now too old and rickety to consider, losing touch with my best friend from med school for failing to return a call (we have since reconciled), and not attending a boyhood friend's wedding because I was "too busy" at work and then losing touch with him (and he has since passed away).

                      These regrets which require a spreadsheet to calculate are meaningless, and the reality is that anyone who can afford to pay off his/her home early:

                      1) Will generally be fine financially

                      2) Is probably of a cautious nature and this will probably manifest elsewhere in the financial realm (it’s not an isolated behavior, it’s a pattern)

                      3) Might be responding to inputs and concerns in his/her life, at the moment, that are not universal and cannot be known to those observing (ie. concern for job loss)

                       

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                      • #12
                        Finished my mortgage in Dec.  Bought expensive whisky in Jan while on expensive vaca and later a little extra stocks with the pullback.  I take Januaries off, so no income with Feb payroll.  A couple big (unexpected) bills in Feb/Mar in addition to expected large credit card bill.  Able to cash flow all of it without going into Efund primarily because I have an extra 3k/mo lower spending.

                        As others have asked, in the many other threads about this, why don't more people take out a home equity loan to invest?

                        I don't disagree with Zaphod: you will get what you ask in terms of responses to your question, and I can run the math well enough that the above scenario also doesn't depend on that cashflow.  But it sure feels nice.

                        And let's not forget, ultimately I'm still a serf to The Man with that pesky little property tax.

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                        • #13
                          I think that the decision has more to do with where you are financially than it does the math.  Either decision is fine.

                          Mathematically, it's better to keep the mortgage and invest, since at current rates, you should theoretically earn more investing than you would paying off the mortgage.

                          However, if you are at a point financially where the 50k or 100k that you owe on your mortgage is more of an annoyance than a significant part of your net worth, you'll prefer to pay it off.

                          I paid off my mortgage.  It's one less bill to pay.  It makes my life a bit simpler.

                          I'm sure Warren Buffet can do the math just as well as I can, but I'll be that he didn't take out a new mortgage on his house in order to invest an extra $300,000 in Berkshire-Hathaway.    As for me, I have significantly less money than Warren Buffet, but enough so that I too don't want to bother getting a new mortgage on my house.

                          Also, I probably wouldn't take a 0% loan for a car, all else being equal.  I don't accept "zero percent for 18 months" offers on my credit card.   I just don't want to have to think about another bill or deadline.

                          That said, I think it makes no sense to invest in treasury bonds at 2.5% while paying 3.5% or 4% on a mortgage.

                           

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                          • #14
                            I feel like I tend to add a less sophisticated/more simplistic take on some of these topics but wouldn't regretting paying off your mortgage early a) be kind of irrational and b) be based on a retrospective assessment of how you could have done in the market during the payoff period? We can all look back over the last 10 years and say we wish we had been invested more aggressively.

                            If I got a windfall tomorrow in the amount of my mortgage I would pay it off before the end of the day except for whatever it would cost me to get a unopened bottle of Pappy Van Winkle's special reserve on the black market. I would wake up with a massive hangover in my paid for house, or maybe in the gutter not sure.

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                            • #15
                              "Black market" sounds so nefarious! $2.5k for the 23 year old if you're patient, $3.5-4k if you need it right away....

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