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Pay off mortgage?

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  • #1

    Pay off mortgage?

    I'm debt-free except for mortgage (wife has a school loan that's her's to pay).
    401k, EF, and brokerage investments all in good shape. My tax guy gave me the idea to pay off the mortgage earlier this year- not really a recommendation, but to think about it.

    The mortgage has 14 years remaining, fixed 5 5/8%, owe about 89k. House is worth 350-375k, NJ taxes close to 6k/yr. Payment is very comfortable but I'd save $800/month if paid off. Right now I'd have to sell about 40k in stocks to have the payoff cash. Between winners and losers, I could probably make the sales tax neutral.

    So, I could hope for the market to come up and then pay it off, or figure things won't get that much better soon and an early mortgage pay-off is a better investment. Thoughts?
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  • #2
    Yes, I'd pay it off if the following are true:

    You still have an adequate emergency fund
    You are aware that you won't have an interest tax deduction any longer (may not be to your advantage anyway)
    You aren't planning to move in the near future (less than 5 years)

    If all are true...I would do it! Good luck.
    My other blog is Your Organized Friend.

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    • #3
      I can't get beyond the idea that you consider your wife to have debt while you don't other than the mortgage. You are married. To me that means that you (both collectively) have a student loan to repay and otherwise you (again collectively) don't have any other debt except for the mortgage.

      I suggest that you and your wife first tackle your school loan debt, then you decide together how to tackle your mortgage.

      Comment

      • #4
        Originally posted by happygirl View Post
        I can't get beyond the idea that you consider your wife to have debt while you don't other than the mortgage. You are married. To me that means that you (both collectively) have a student loan to repay and otherwise you (again collectively) don't have any other debt except for the mortgage.

        I suggest that you and your wife first tackle your school loan debt, then you decide together how to tackle your mortgage.
        I agree with happygirl. Before saying whether or not I think you should pay off the mortgage, I'd want to know about the student loan. What is the balance and interest rate? Do you get any tax deduction for the student loan interest paid?

        I would put available money toward whichever one, student loan or mortgage, has the higher rate (after accounting for any tax deductions).
        Steve

        * Despite the high cost of living, it remains very popular.
        * Why should I pay for my daughter's education when she already knows everything?
        * There are no shortcuts to anywhere worth going.

        Comment

        • #5
          Hmmmm. Interesting. EEinNJ didn't give too many details... but assuming that the education debt was incurred pre-marriage; and "his" mortgage debt is also on a house held in his name only... his feelings can make sense.

          In reality, education debts are not-transferrable. In other words, if anything happens, he will not be held accountable for "her" education debt.

          On the other hand, if she's earning money and if any portion of those earnings are contributing to the "ability" to pay off the mortgage, then the house could also be considered common law property at least for a certain period of time.

          So many things depends on location and the state laws.

          However, EEinNJ has worded his question in very distinct terms.... "My mortgage," "her debt".

          Is there a pre-nupt agreement in place? How long have you been married?

          Comment

          • #6
            The other side is selling 40k in stocks. Means you have 50k in savings.

            Which has the higher return?

            I too, would want to know the numbers.

            Comment

            • #7
              Originally posted by Seeker View Post
              However, EEinNJ has worded his question in very distinct terms.... "My mortgage," "her debt".

              Is there a pre-nupt agreement in place? How long have you been married?
              I didn't think about a pre-nup. If there is some legal arrangement designating who is responsible for each debt, that would be different, of course. Short of that, I would consider everything to be joint. When my wife and I got married, I had a ton of school debt. She had a car loan. We worked together to pay them all off, directing extra cash at whichever loan made the most sense at that point.
              Steve

              * Despite the high cost of living, it remains very popular.
              * Why should I pay for my daughter's education when she already knows everything?
              * There are no shortcuts to anywhere worth going.

              Comment

              • #8
                Just to answer the stock market side of the question, I see a down market in the shorterm and the mid to longterm is up for grabs.

                Historically, longterm you would be better off keeping the money in stocks.

                Personally, I have pulled 70% of my portfolio out of stocks for time being. I see further bumps in the road and do not want to ride another wave down. But I am not sure that paying off your mortgage is a longterm advantage. I might do it as an conservative/feel good move though.

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                • #9
                  I wouldn't cash out the stocks to pay off the mortgage-do you have extra money each money that you can throw at the mortgage instead.

                  Comment

                  • #10
                    Interesting that most of the comments so far skirted my question about the mortgage and instead focused on something I mentioned parenthetically, my spouse's student loan. It's off-topic, but the short story on that is, she went back to school in her 30's, graduated long before we were a couple and now has 2-3 years left to pay it off. Getting married later in life (re-married for me) when you're coming from different situations financially sometimes raises questions of what is an individual vs. shared responsibility.

                    The usual argument against a mortgage pay-off is you can get a better return on your money by investing it. Maybe in a bull market, but in reality the overall returns of the market in the last 10-15 years do not bear that out. Interest rates and equity returns for the next few years are likely to remain pretty low as well.

                    Comment

                    • #11
                      My concern would be more cash oriented. While having a paid for house is a great thing...if something would happen that you would need a sizeable amount of cash, quickly could you handle it? It's much easier to quickly sell stocks than it is to sell your house (unless you have a LOC available for this purpose).

                      Comment

                      • #12
                        Originally posted by EEinNJ View Post
                        Interesting that most of the comments so far skirted my question about the mortgage
                        I don't think I skirted the question. I just don't feel I can give a complete answer without all the details. If we pretend the student loan doesn't exist, I would say not to sell stock to pay off the mortgage. Your mortgage rate is low, especially when you look at the true rate after taxes. You will do better over time to keep that money invested.
                        Steve

                        * Despite the high cost of living, it remains very popular.
                        * Why should I pay for my daughter's education when she already knows everything?
                        * There are no shortcuts to anywhere worth going.

                        Comment

                        • #13
                          Originally posted by EEinNJ View Post
                          Interesting that most of the comments so far skirted my question about the mortgage and instead focused on something I mentioned parenthetically, my spouse's student loan. It's off-topic, but the short story on that is, she went back to school in her 30's, graduated long before we were a couple and now has 2-3 years left to pay it off. Getting married later in life (re-married for me) when you're coming from different situations financially sometimes raises questions of what is an individual vs. shared responsibility.

                          The usual argument against a mortgage pay-off is you can get a better return on your money by investing it. Maybe in a bull market, but in reality the overall returns of the market in the last 10-15 years do not bear that out. Interest rates and equity returns for the next few years are likely to remain pretty low as well.

                          EE your "tax guy" came up with the suggestion....

                          Do you not get any tax deductions for your home as it stands currently? You must therefore be close to "payoff" anyway?

                          If the answer is "no", then I too would consider paying off early. But, the numbers need to make sense (which you didn't exactly provide many numbers)...

                          If the "savings" are $800/month, how many months?

                          You'd "lose" the interest from current savings (have you other financial savings if you were to lose your job?)

                          You'd "lose" (or gain) whatever your stock were to do in the period of time between "payoff" and the remaining payoff period (if you were to keep the stock holdings).

                          You need to look at all the financial numbers. And even the esoteric non-financial issues (to not have any debt standing over your heads is a pretty good feeling).

                          Comment

                          • #14
                            paying off mortgage

                            We just paid ours off, but our balance was relatively low and the interest deduction had been long gone on for use on our taxes. It does leave a nice feeling behind.

                            BUT, many experts will tell you to keep the money out of the house. Pay the payments as they stay stagnate and will be 'relatively lower' over time because of inflation. ie. my future inlaws were paying the last of their $90 a month house payments in 1980 when husband and I were just getting together. Ours? $600 a month at that time. Invest other dollars for growth to outpace inflation.

                            Your call.

                            For me personally the security of owning my own home sets well! Or so it seems. We just did this YESTERDAY!

                            IT IS FINISHED! We are T.D.F.: Lux Living Frugalis

                            Comment

                            • #15
                              I agree Lux. I paid my home off in 1976 when my payments were a whopping $125 a month. It has felt good to be mortgage free for all those years and not pay any more interest. We have moved up in house twice since then and stayed mortgage free. My current homes value is about
                              500, 000.

                              Comment

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