I take a philosophical approach closer to that of Dave Ramsey when it comes to debt. It's less stressful to be debt free.
Mr. Preston's weekly podcast is pretty good, and you can get it on i-tunes for free.
“If you were to take that $100 per month and put it into an investment that had a more comparable level of risk and volatility such as a a CD, the interest earned on that CD would likely be much less than you would pay in mortgage interest.”
completely agree, and that is BEFORE taxes on said interest.. only possible area of interest to me would be inflation so great that it inflated one’s wages far beyond whatever future earnings value you expected compared to mtg payments, but even given a gross devaluation of the dollar, hard to see wages inflating that fast.
You should borrow on your house if you need to fund a Roth IRA. Frankly, if you can borrow at 7%, at the 30% tax bracket, you only need 4.9% return to break even on an after tax basis. Frankly, you can even lose money pretax and make money after tax.
Did I mention that the IRS and US tax code is idiotic and stupid ?
Even better would be if someone started a Roth bank which would only have one line of business. You could get a loan at 10% if you maintained a roth ira cd at the same bank for the same amount which also paid 10%. The bank has zero risk, zero profit, but all the “depositors” make 3% after tax and risk free.
Did I mention that the IRS and US tax code stinks ?
If you don't have the discipline to stay on schedule, then I would go with the 15 year plan. So many people take the 30 year plan so they can get more toys. Spending the extra money on a bigger truck or a boat or something just means you could have paid your house off sooner, but you felt it was more important to have a $30k boat, or a $50k truck. That would be about the interest difference you would pay for the extra 15 years.
The previous house my wife and I owned we bought in the late 80’s. We paid it off in about 15 years. We sold it last July after the housing market had already taken a dive and in spite of that, all said and done, we lived in the house for free for nearly 20 years including all payments, taxes, and maintenance. Everything we put into it we got back and then some.
You get more than just savings on interest which is considerable. You get the appreciation of the asset while you live in it. And last by not least, there’s a big weight lifted off your mind when you are debt free and are not constantly under the gun.
Unfortunately I'm in debt again... A new home that we built the way we wanted... So now I'm working on paying it off all over again only this time about 2/3rds is already paid off...
You mention Ramsey. One of his reasons for advocating home payoff is if something happens like eternal job loss or extreme illness, they can’t take your home because it’s paid for. Once paid for your only expense is taxes and upkeep and if wise insurance. For most, a significantly lower cost than if you add in principal and interest. It also encourages you to use the KISS method in your life. The simpler, the easier to stay out of trouble.
no debt is good debt
we paid off years ago -
WTF is “prepaying your mortgage”?
Is that the same as BUYING?
I got a better idea. Sell the house, get a much smaller one with a lesser mortgage and pay that off in double time. Better still, get a house with no mortgage and stay away from debt thereafter.
It beats a Posturepedic!
Peace of Mind bump.
It’s pretty straightforward calculating. You KNOW what your mortgage interest rate is - - say 6%. Now can you GUARANTEE an investment every year for 30 years of 6%????
The Fed is in full panic. Their efforts have had no effect to reverse what is rampant DEFLATION of the money supply, ie no new debt (money) is being created. The fiat money machine is now running in reverse and will soon reset to zero.
Cash is king. A very foreign concept to a debt ridden society. And did I mention that it is dangerous to be in debt up to your eyeballs when cash is gaining in value after a 25 year period of inflationary expectations ?
....hard times are coming folks and you can’t live in a stock certificate....you can never really retire until you own your home.
Take the extra principal and save, invest or spend it. If you buy a rental property and have any negative cash flow, it will usually cover it. RE is a better investment over the long haul because of leverage. Why pay off a 300,000 house when you can buy two more houses and make twice as much over time?
Example, if I can borrow equity for 6% and I'm in a 25% tax bracket, the actual cost of the money is 4.5%. If I can make 6.5% tax free (universal indexed life). I will make money each year. If I can't sleep without paying down the house, I can use the gain to pay it off or not, as I choose.
Tax savings and redirection of current retirement investment counters the loan payment. If the loan is on a rental, future rent increases can help. Positive cash flow also.
I say pay it off! The thing that convinced me was paying $100K in interest on a house in ten years while our principal barely budged.
Last time we refinanced, it was for 15 years and we’re trying to pay it off in nine or ten. You’ll save a ton on interest doing that.
The reason to put your extra money into a liquid fund and not a “lack of debt” is that if you lose your job or have a health emergency you can’t spend a “lack of debt.” And without a job, you will be unqualified for the home loan you now need.
I want to prepay my property taxes - a lump sum in advance and then no more, ever. Think the government will go for it? ;)