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  • #16



    Just put your assets and liabilities on paper and then compute your net worth. Move stuff around enough times until you feel it in your bones that its all the same no matter where the money is (net worth wise), but the trade offs arent. Very little to be had in having your house paid off so early if retirement isnt already maxed, and about 1000x worse if not maxing them out.


    First ask yourself a couple questions. What is the reasoning behind paying off mortgage so fast? Is this actually the best way to achieve it?


    Unless your answers are you’re looking to put the most valuable dollars you’ll ever own into a highly illiquid asset with high transaction costs to access that money, have inflation work against you on both ends and avoid utilizing the tax code to your benefit then maybe its not the best plan.


    Click to expand...



    ok, ok, I'm convinced :-) I know it seems so stupid when you put it like that. It's totally psychological . . . My parents constantly fought about debt when I was a kid, I hated it so so so much. So I just have a lot of negative emotions surrounding any kind of debt. This has generally served me well, but in this case not so much. To be a little fair to myself though, I thought we had more like 100k in equity, the 230k was a surprise. We got the house appraised because we were paying PMI and we'd paid down enough on the mortgage along with a suspected increase in value of the house that I wanted PMI taken off. Turns out I probably could have stopped paying PMI 18 months ago. Anyway, this whole thing has been quite a learning experience.

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    • #17



      My $0.02:


      1. Put the extra 12K per year into retirement.


      2. Save $3-5 K per year (on the front end) in taxes


      3. Put that $3-5 K towards mortgage


      4. Smile because you are killing it!


       


      Click to expand...



      That's a good idea. That way we still continue shaving time off the mortgage, but not at such a fast pace.

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      • #18



        Max retirement before prepaying house at this early stage of your career!  Weren’t you talking about going to New Zealand in a recent post?  So, why the rush to prepay the mortgage?  Best wishes.


        Click to expand...



        yes, NZ is still on the table, but not this coming year, for a number of reasons. Maybe in 2019 . . . we'll see. But even if we go, my husband really wants to keep the house. We're pretty attached to our street so I don't see us moving. But even so, you are right, our net worth should be more heavily weighted towards tax deferred retirement funds at this point.

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        • #19

          Other than ditching the PMI as you mention, I don't see why the equity has any bearing whatsoever on your plans or calculations -- it's just fooling you into thinking you are more wealthy than you are.  Unless you are planning to move and now don't need to save as much of a downpayment for the next home, as you can spin the equity from the sale into the new home.


          Equity in a primary home seems to be the most illusory of all assets -- it's completely meaningless unless you are willing and able to sell.  It's primary value is in having a place that you control, not in using it to leverage for more loans.

          An alt-brown look at medicine, money, faith, & family
          www.RogueDadMD.com

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          • #20

            It all depends on your comfort level. There's no right or wrong answer here. It's different for everyone.


            Paying a house off can give some peace of mind. Though, there will always be taxes and insurance. Do the calculation to see if it's worth it, in your situation. 


            Taking the extra money and putting it into something else is another option, if you're interested in growing it. Again, it all comes down to comfort level. 


            Good luck!   

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            • #21



              Other than ditching the PMI as you mention, I don’t see why the equity has any bearing whatsoever on your plans or calculations — it’s just fooling you into thinking you are more wealthy than you are.  


              Click to expand...



              I completely agree, and it is why I leave it out of any net worth calculations, even though, strictly speaking, it is an asset. For the foreseeable future, it will be tied up in a home, not provide income, no provide (real) capital appreciation, and if I move, will likely get rolled in to the next money pit, er, house. Maybe when I am 90 and get moved into a nursing home, the equity will get rolled out, and likely someone else will get it— heirs or the nursing home. It’s just not likely to be money that you or I ever get to see (unless there is a financial catastrophe).

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              • #22
                You should consider home equity as part of your net worth, but I wouldn’t consider it for retirement planning as it is illiquid. If your home equity is a majority of your net worth (and likely more than 25%), you are probably doing it wrong.

                There is no need to pay off your mortgage aggressively if you plan to have a long career earning a high wage. Any pay down should certainly come after filling tax-advantaged retirement buckets as others have said. In the end, mortgage pay down with your excess savings after filling tax-advantaged buckets as opposed to investing in taxable won’t hurt you that much, but it is suboptimal.

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                • #23


                  I completely agree, and it is why I leave it out of any net worth calculations, even though, strictly speaking, it is an asset. For the foreseeable future, it will be tied up in a home, not provide income, no provide (real) capital appreciation, and if I move, will likely get rolled in to the next money pit, er, house. Maybe when I am 90 and get moved into a nursing home, the equity will get rolled out, and likely someone else will get it— heirs or the nursing home. It’s just not likely to be money that you or I ever get to see (unless there is a financial catastrophe).
                  Click to expand...



                  Yeah -- I sorta track my equity but I don't really consider it meaningful.  Shoot, we bought our "attending" home summer last year.  Per Zillow the value went up about 5% not long after the purchase, but it now says it has fallen to ~10% below my purchase price.  


                  If I had used a doctor's loan with 0-5% down (though I'm not actually sure that's allowed on a jumbo) I would be underwater on the mortgage using the Zillow valuation.  Imagine how easy it would be to be freaked out if I was in that scenario, despite it having no impact on my life as I can afford the payment, have  no plans to move, and have a stable job situation.  


                  So no reason to suddenly think I've got a tons of money to play with if the value had stayed over purchase price.

                  An alt-brown look at medicine, money, faith, & family
                  www.RogueDadMD.com

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