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  • #61
    Isn't it grand to have to choose between two good options?

    1. Pay off mortgage. Debt free. Peace of mind.
    2. Invest instead. Higher rate of return.

    I'm with everyone who is with White Beard. At least I was. After maxing 401k, we paid extra towards both mortgage and taxable.

    However, the house is half paid off after 6 years and we are in the process of finishing refinancing at a 2.25% rate. I really liked the peace of mind concept of paying off the house. This was tied in with a belief that we are in a bit of a stock bubble right now, which made throwing money at the house sound just as appealing as throwing it in the market. Yet, it is harder to justify paying down such a low interest rate loan. The plan now is to invest more, but still put some extra towards the house.

    We are likely more disciplined on this forum and have higher incomes than the average homeowner. If someone is not disciplined with their money, and would otherwise spend it instead of investing it, paying off their house is a good option if they can at least discipline themselves to do that. Being less liquid to them can be a good thing because it prevents them from frivolously spending the liquid assets.

    Both are great choices.



    *Debt free = aside from taxes. Although, you have to pay taxes in some manner regardless of whether you own a house.

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    • #62
      Originally posted by Zaphod View Post

      Often we forget we also have the money built up. The mortgage is simply a price.

      I have a student loan at something like 1.4%, its 100k. Total interest if I follow the schedule is 1300 bucks or something. I could pay 2k extra and be rid of it in 2yr, or save that as efund or invest. So for the price of 1.3k I have 24k extra in liquid savings or compounding for a lifetime. Pretty pretty cheap.

      For a mortgage this is before inflation, etc..etc...which makes paying it down much worse. Basically its the worst thing you could do with your money.
      I made the mistake of paying off my mortgage. For me it was a behavioural error. Then I had to go get a mortgage again. What a waste of energy.

      Optimising you’re debt/leverage Vs your risk tolerance is low hanging fruit. Most people leave a lot on the table, but then it’s less risky.

      For those with a large mortgage it makes a difference. I have a 2.5M mortgage. I could pay that off tomorrow or invest the 2.5M and hopefully it will be 5M in 7-8 years time.

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      • #63
        I guess we are better off now then in 1984
         

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        • #64
          Originally posted by Dont_know_mind View Post

          I made the mistake of paying off my mortgage. For me it was a behavioural error. Then I had to go get a mortgage again. What a waste of energy.

          Optimising you’re debt/leverage Vs your risk tolerance is low hanging fruit. Most people leave a lot on the table, but then it’s less risky.

          For those with a large mortgage it makes a difference. I have a 2.5M mortgage. I could pay that off tomorrow or invest the 2.5M and hopefully it will be 5M in 7-8 years time.
          I think the comfort level with a mortgage varies a lot with one's life stage. When I was young (30-early 40s) mortgage debt did not bother me. Now at 63 I find it unacceptable and paid cash for my new house. I understand the argument but once your human capital is exhausted I think tolerance for debt disappears.

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          • #65
            This is why no one can tell another person the right thing to do. Everyone has different tolerances for debt, investing strategies, risk tolerance to hold through bear markets and ability to stay the course, time to retirement, time left on earth/mars, how much they want to leave behind, debt to income ratio, assets, family, responsibilities, job/salary security, all different in a case by case basis.

            Personal finance is personal and the right answer for someone isn't the right answer for someone else. Historically and mathematically/statistically, money invested beats paying off low interest debt in the long run. But that's just a piece of the personal puzzle for the individual to figure out their own personal 'right' answer.

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            • #66
              Originally posted by EntrepreneurMD View Post
              Welcome to your senses.

              I have more in my tax advantaged retirement accounts and taxable cash/investment accounts than anyone I know at my age.

              If Peds was correct, why do the wealthy prefer to live debt free and pay cash?
              How do you know you have more ?

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              • #67
                Originally posted by STATscans View Post

                How do you know you have more ?
                Many millionaire interviews with breakdown online out there, physician or otherwise.

                My focus on certain sectors for many years now have led to significant outperformance to the ubiquitous SP index investing in tax advantaged account. For example, my overall tax advantaged retirement account returns last 12 months are nearly 50% (with my largest holding >100%) and I don't do bonds, whereas by SP performance that is more like 12% and often lower with bond allocation. Over time that is a significant compounding disparity.

                Most people have noted here my $2M EF is a whopper.

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                • #68
                  Originally posted by EntrepreneurMD View Post

                  Many millionaire interviews with breakdown online out there, physician or otherwise.

                  My focus on certain sectors for many years now have led to significant outperformance to the ubiquitous SP index investing in tax advantaged account. For example, my overall tax advantaged retirement account returns last 12 months are nearly 50% (with my largest holding >100%) and I don't do bonds, whereas by SP performance that is more like 12% and often lower with bond allocation. Over time that is a significant compounding disparity.

                  Most people have noted here my $2M EF is a whopper.
                  https://dqydj.com/net-worth-by-age-c...united-states/ you can also use this for your percentile. they have net worth and income calculators, separate by age or household

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                  • #69
                    Originally posted by Hatton View Post

                    I think the comfort level with a mortgage varies a lot with one's life stage. When I was young (30-early 40s) mortgage debt did not bother me. Now at 63 I find it unacceptable and paid cash for my new house. I understand the argument but once your human capital is exhausted I think tolerance for debt disappears.
                    I don’t want any debt in retirement either.
                    But depending on interest rates, I might be able to justify “just a little bit”. Which is probably a slippery slide. I haven’t figured that out yet.

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                    • #70
                      Originally posted by Dont_know_mind View Post

                      I made the mistake of paying off my mortgage. For me it was a behavioural error. Then I had to go get a mortgage again. What a waste of energy.

                      Optimising you’re debt/leverage Vs your risk tolerance is low hanging fruit. Most people leave a lot on the table, but then it’s less risky.

                      For those with a large mortgage it makes a difference. I have a 2.5M mortgage. I could pay that off tomorrow or invest the 2.5M and hopefully it will be 5M in 7-8 years time.
                      Why was paying off your mortgage a mistake?

                      Why did you have to go get another mortgage?

                      2.5 million mortgage?!?!?

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                      • #71
                        Originally posted by Hatton View Post

                        I think the comfort level with a mortgage varies a lot with one's life stage. When I was young (30-early 40s) mortgage debt did not bother me. Now at 63 I find it unacceptable and paid cash for my new house. I understand the argument but once your human capital is exhausted I think tolerance for debt disappears.
                        Debt = risk.

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                        • #72
                          Originally posted by Dont_know_mind View Post

                          I made the mistake of paying off my mortgage. For me it was a behavioural error. Then I had to go get a mortgage again. What a waste of energy.

                          Optimising you’re debt/leverage Vs your risk tolerance is low hanging fruit. Most people leave a lot on the table, but then it’s less risky.

                          For those with a large mortgage it makes a difference. I have a 2.5M mortgage. I could pay that off tomorrow or invest the 2.5M and hopefully it will be 5M in 7-8 years time.
                          In 7-8 years it could be anything, even negative.
                          Debt = Risk
                          Everyone has a different tolerance.
                          If borrowing 2.5 is good, why not 5, 10, or 100.
                          At some point the bank will say no, because at some point risk becomes “real”
                          I don’t buy the argument that the math always says borrowing to invest is wise if the rate is less than 3-5%.
                          Hatton, maybe i am just gettin’ old.
                          Everybody is free to do it their way.
                          I did not need to take much risk to win.
                          I also hate dealing with banks and mortgage companies. You will have a hard time convincing me to borrow and take out a mortgage to invest, when i already have “enough”.

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                          • #73
                            Originally posted by endo4jc View Post

                            Why was paying off your mortgage a mistake?
                            Tangler opinion: it was not.

                            Why did you have to go get another mortgage?
                            Tangler opinion: No one “has” to

                            2.5 million mortgage?!?!?
                            why not 5, 10, 50, 100?
                            Debt = risk. At some point rare consequences are relevant. Pascal’s wager. This is why we buy life insurance until we can self insure.
                            Life has a fat tail.

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                            • #74
                              Originally posted by endo4jc View Post

                              Why was paying off your mortgage a mistake?

                              Why did you have to go get another mortgage?

                              2.5 million mortgage?!?!?
                              After I paid off my mortgage, I was happy for about a year. Then I realised I didn’t have enough index funds and I wanted to get into debt again.

                              The mortgage was a simplification for non-callable debt. The potential mortgage on the house I live in is about 2M and the other noncallable debt facilities 1-2M (on other real estate investments).

                              I discharged some debt facilities in January 2020 and regretted it when the pandemic came. It was difficult to get those non-callable loan facilities back again in early April.

                              I tend to think now that this was a behavioural error. If you have non-callable debt facilities that you may use in the future, and it costs very little to keep it going, it could be a mistake to discharge it. I thought I would not need the debt facilities in the future, but then things changed.

                              Someone with a different investment strategy or preferences may have a different view or experience.

                              My experience after paying off the mortgage was: I felt I didn’t have enough of another asset class I wanted Which had become cheaper with the pandemic. I also suddenly realised that debt is not as burdensome as I thought.

                              Maybe I’m rationalising my own behaviour.
                              We all talk our own book.
                              I’ve been on both sides and they have both been compelling at different times in my life.

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                              • #75
                                Originally posted by Dont_know_mind View Post

                                After I paid off my mortgage, I was happy for about a year. Then I realised I didn’t have enough index funds and I wanted to get into debt again.

                                The mortgage was a simplification for non-callable debt. The potential mortgage on the house I live in is about 2M and the other noncallable debt facilities 1-2M (on other real estate investments).

                                I discharged some debt facilities in January 2020 and regretted it when the pandemic came. It was difficult to get those non-callable loan facilities back again in early April.

                                I tend to think now that this was a behavioural error. If you have non-callable debt facilities that you may use in the future, and it costs very little to keep it going, it could be a mistake to discharge it. I thought I would not need the debt facilities in the future, but then things changed.

                                Someone with a different investment strategy or preferences may have a different view or experience.

                                My experience after paying off the mortgage was: I felt I didn’t have enough of another asset class I wanted Which had become cheaper with the pandemic. I also suddenly realised that debt is not as burdensome as I thought.

                                Maybe I’m rationalising my own behaviour.
                                We all talk our own book.
                                I’ve been on both sides and they have both been compelling at different times in my life.
                                You regret it because of the 20/20 hindsight, which none of us had at the time. We also don't have the foresight for what's next. While the last 6-7 months have worked out fine, none of us know if this is just a bear trap or truly a new bull cycle, we just all incorrectly assume we know. The Country is not in a good place, and there is a lot of danger of corporate earnings contractions over the next year or two. If we get another 2008, you'll forget all those regrets right away. You're letting the emotion get the best of you. It's a learning experience for the next opportunity, but discharging your debt means you took risk of the table which was not such a bad idea in February. I too am itching to introduce a few million to the markets, but to this date I don't believe March was the opportunity for that. My emotions may have made me pull the trigger, but my mind is still saying lower PE's and markets ahead of us for truly optimal long term investing, in the same way Buffett is holding back. That's why I recently sold. I may re-deploy based on market fundamental and chart technical rebound, but the big bucks are waiting for an opportunity that I'm sure will be bot better and safer.

                                I could have regretted the $6M in RE I've paid off to date, but I know that once we get the traditional prolonged major recession/depression that will be when I am comfortable leveraging against that RE because I have factored in the risk with much lower contracted PE's than these still historically bloated ones in a high unemployment deteriorating business environment.

                                You can always re-tap the equity in the non-callable debt facilities that you discharged without paying all that interest in the meantime. March was a short window of opportunity. There will be greater opportunities with greater windows in the future, March was not all that IMO. Most here do not seem to understand the concept of dry gunpowder too well anyway, and thus didn't really have the resources to materially take advantage - their returns are more like the standard YTD SP returns, not all that great.

                                Look at the view from 37 thousand feet, not from the ground in the midst of the chattering masses. Think big picture. There will always be an opportunity somewhere but the associated risk must be outweighed. Unlike those who have lost their jobs, business, house, assets...and even their lives - no reason for us to regret. I always keep an eye on that perspective.

                                Different roads can lead to the same place.

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