[Chaz]

Hey all,
I was starting to wonder about the idea of paying down a mortgage on a house, or even totally paying it off, and the various factors to consider. It seems that number one thing is whether the return on that money to be used for the loan payoff is better or worse than the mortgage rate (of 5.875% in my case). As of the last nine months, most of the cash that would be used for this has been invested in stock in Apple, and the return on that stock has been awesome during this time. So... no way would I sell that stock today to pay down the mortgage, but in a year or two, who knows...? I mean, Apple stock can't kick ass forever. (Or can it?) Anyway, just trying to get some idea of what you guys would think about paying off a mortgage early and what criteria you'd use to make your decision. Thanks!

[Jim Kirk]

@ 5.85 you could probably refin now for 4.8 - but with interest rates so low and your tax deduction for mortgage interest which would be high for you for the first couple of years in the house - the actual out of pocket cost to carry the debt is almost nothing right now.

If things go bad for you financially - in most parts of this coutnry you could probably get 12 to 16 months in the house without paying a dime on the loan before the bank can have a Marshall actually seize the place. Plus - I think real estate values will generally continue to go down acoss the BOard - dont put money into a house that - of the value goes down you cant get out via a Home Equity Line of Credit.

Short answer - dont. Very few but the independantly wealthy should pay off a mortgage at the rates out there now.

[gringoed]

I'm not an expert on stocks so I can't tell you whether to buy or sell. However, I'm a pretty firm believer in not paying down your mortgage. Remember that you get to write off the interest from your taxes, plus there's a lot of cool stuff you can do with cash, such as buy more real estate. It's harder than ever to turn equity into cash so as soon as you pay down your mortgage, assume that the access to cash is gone for a while.

[Chaz]

Thanks guys for the replies! I think you are right that it makes more sense NOT to pay it down faster, or to pay it off early. I was troubled by a couple of things. One, is it the financially sensible thing to do, or not? (Answer: not necessarily) Also, I was concerned that doing so really shows a lack of imagination! (Not saying that having the cash invested in Apple stock is all that imaginative, though!) Maybe I'll brainstorm a bit more, like that group living in the posh pad on Bali...

[Kona]

For financial reasons I guess paying off early is bad...

I got mortgages on places I rent to people but I don't really care about them. Worst case scenario I'll just let the damn bank take them. Let them deal with the iceheads that got another excuse every month not to pay. Or the slut that just so happens to be stepping out of the shower in a towel every time I go to say where's my money. Those places I just let the rent pay for.

For personal reasons though, there's no better feeling than waking up on land that belongs to you and you alone. I'll never feel like a slave to some bank jackasses again.

Own your shit and you'll feel better.

Aloha!

[Chaz]

Mahalo Kona,
Thanks for the words of wisdom. What you mentioned is what got me thinking in the first place: the psychological comfort of owning the shit free and clear, and the related benefits of asset protection.

Aloha!