Currently, you can get a rate of 2. If you believe in VTSAX and believe in paying off your mortgage, you have a case of cognitive dissonance. Holding these two thoughts is inconsistent:. The bull has run : The stock market has been on an incredible run. If I could do it over again, I would have secured a year loan instead. Kinda feels like we're splitting the difference, which works for us; I'm willing to hedge our bets — because at the end of it, living indefinitely mortgage-free or selling and walking away with a giant check are two very reassuring options.
It also provides us with a handy target for FIRE in mid So long as the market averages at least 2. We just might.
The only thing holding us back is that we may be moving. We made an offer on another home on Saturday…. You made the wrong comparison. Nope, I did that comparison too. Look towards the end of the post. I put a LOT into paying down our mortgage in the first two years instead of investing. That was my risk aversion playing with all the trumpets and trombones. There are some great tools out there to track down loans with very loan rates and fees. I found a 10 year loan with a 2.
When searching for rates for shorter term mortgages I used bankrate. The Frug recently posted… The New Frugality. First off, an Acura nsx is a sweet ride. In your case, your rate is pretty damn low. But at a 30 year. Plus we neither one are considering taxes: either on the gains and dividends nor on the tax savings of the mortgage interest.
Key is not to blow the money on stupid stuff. Really, it is. They might say they can handle it. There is a freak show when we have 1. Imagine what will happen when we have a simple, and routine correction? Great point! Some members of the FIRE crowd will be caught with their pants down. There will be more recessions. I fully admit this is difficult to wrap your mind around.
Are you proactively hammering away at your biggest debt, or simply adding other debts and expenses to your life? Lets remember mortgages are tax advantaged so the rate is lower than advertised and you can rid yourself of it if need be by selling or foreclosure. With bond, you are a lender. October 16, at pm. You have the latter whether or not you are carrying the former. Going heavyweight in bonds is our compromise solution since we are not paying down the mortgage early. These phase-outs purportedly reduce the value for high earners of all of the below-the-line, itemized deductions like state income taxes, charitable contributions, and mortgage interest.
It took me a LONG time. I decided in to take the market run-up and pay mine off, figuring the end of the bull had to be near. Obviously missed out on a lot of returns since then. Curious — if you made the decision I made, would you consider taking out a mortgage now? I would take out a mortgage now.
Hell, I may be doing it in a couple of weeks when we buy a new home. Good post Carl.. I keep flipping between paying real estate debt off or investing the difference. This one took me a while to come around to. I had arguments with my one of my soon-to-be FI friends here in Wisconsin about paying off the mortgage. I had been paying a little extra, in an attempt to pay off my mortgage right around the time I hit FIRE.
beta.indy-guide.com His argument that interest rates this low mine was 3. The money is better off invested — either through much better returns, or through severely discounted stock purchases that will have great value later on.
The interest is front loaded, and anyone watching their mortgage statement can see this. Dunno if that will happen, but it could…. Yes, I felt good writing the mortgage check today for the exact amount for the second time in a row now, knowing my investments were a little bigger because of it! The monthly interest you pay on the mortgage loan is calculated on the outstanding principal amount but with the SAME rate.
What else would you do? Paying down the mortgage faster enables you to not have a monthly payment when you are FIRE. Some people are ok with having a monthly mortgage payment when they are FIRE. Both are ok, as long as you make that informed decision after considering all the factors. NWA-anon recently posted… August I actually have a question for you Carl. I have a ridiculously low interest rate at 2.
However, I have thought about refinancing to a 25 or even 30 year and using the extra money per month to invest. If you had a similar situation would you refinance to a longer loan? I am trying to divorce from my head and my heart. My heart likes the idea of mortgage free, but having extra money per month to invest would be even nicer mathematically speaking. Do you have a post about these mortgage notes you invest in?
How do you find them, vet them, etc.? Do you have a 3rd party handle payment processing or is it paid directly to you and you keep track of the interest to report for taxes? To pay off a mortgage early, live in a home you can easily afford and pay extra each month. I was pretty shocked at it only being a 10k difference if you invested each month. Maybe that 10k is worth it for the chance of stocks crashing?
We can get 1. I actually botched up the calculation because it includes interest and principal. Stay tuned for an update. New home purchase! End of September…. Longer terms in the US. UK loans are adjustable rate mortgages, usually fixed for the first 2 to 5 years, with prepayment penalties during the fixed term. The rates on a year fixed term mortgage in the US is usually higher than an adjustable-rate term. Higher down payments are usually required in the UK.
If you still have other debt, including second mortgages and home equity lines of credit, these should be tackled first.