# When will you, or have you already, paid off your mortgage



## billymach4 (Mar 31, 2013)

So I am age 50, and within striking distance of paying off my mortgage. I can make a lump sum payment and be done with it, or make the monthly payments and wait till 2018. 

My mind says pay it off, and I will most likely do that. 

How old were you when you paid off your mortgage, or how old do you expect to be when you will pay it off totally. 

I had a refi about 11 yrs ago from a 30yr fixed at 6.85% to a 15yr 4.25%. I really thought this day would never arrive. This is a great feeling.

Sorry about the type in the thread title. If an admin see's this please correct mortgate to mortgage. Thanks!


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## glypnirsgirl (Mar 31, 2013)

I have paid off two mortgages (on two different homes - the first one at 38 and second at 44) and now I am on my third. We recently refinanced to a 15 year --- so it will be awhile. Our payments are low enough now that we will be able to afford to make our house payments after retirement. I am not looking to pay this one off early. I will be 73 when we complete the payments. 

The really low interest rate that we have on this house makes a huge difference. 

The first home that I paid off, I bought in 1979 --- the interest rate was 16%!!! I was highly motivated to make additional principal payments each month. My current payment is $400 less than that first mortgage payment. 

Amazing difference.

elaine


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## stmartinfan (Mar 31, 2013)

Our interest rate is low enough that we prefer to keep our cash invested right now rather than paying off the loan, even though our balance is pretty small.


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## DaveNV (Mar 31, 2013)

Billy, if you click Edit on your original post, then click Go Advanced, you can edit the thread title yourself.  Just an FYI.  

Dave


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## Elan (Mar 31, 2013)

Currently in the process of a 10yr refi with APR=APY=2.85% (i.e. no closing costs).  I'm not in any hurry to pay it off given those terms.  In fact, I was really tempted to pull cash out.............


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## Hophop4 (Mar 31, 2013)

We refinanced several years ago down to a 15 yr mortgage so it would be paid off when we turned 65.  Well we almost made it we were 66.  So it's been paid off now almost 4 years.  And we can really feel the difference not having that payment and using that money to pay off the cars. .....and more vacations!!


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## Patri (Mar 31, 2013)

Elan said:


> Currently in the process of a 10yr refi with APR=APY=2.85% (i.e. no closing costs).  I'm not in any hurry to pay it off given those terms.  In fact, I was really tempted to pull cash out.............



Who did you refinance with, to have no closing costs? We are doing that now, but there is a fee.


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## Elan (Mar 31, 2013)

Patri said:


> Who did you refinance with, to have no closing costs? We are doing that now, but there is a fee.



A local credit union. They were advertising 3.0% with no closing costs, but by the time I applied rates had dropped, so I got 2.85.


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## Passepartout (Mar 31, 2013)

Our mortgage was paid off as planned at our age 63ish. Like the OP, we could have written a check and paid it off anytime in the last few years. It wasn't that we were getting much interest deduction from our taxes- that comes off early in the loan. We just continued to pay it down until it was within a payment or two and called the mortgage co for payoff info and wrote the check. It still took some months to get the note marked 'Paid in Full' from Countrywide and the clear deed.

It feels good, but not the 'weight-off-the-shoulders' feeling you anticipate.


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## GrayFal (Mar 31, 2013)

Just asked DH (who you know) and his professional opinion is pay it off now 


billymach4 said:


> So I am age 50, and within striking distance of paying off my mortgage. I can make a lump sum payment and be done with it, or make the monthly payments and wait till 2018.
> 
> My mind says pay it off, and I will most likely do that.
> 
> ...


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## x3 skier (Mar 31, 2013)

Made extra payments and paid it off in 27 v 30 years. Two years after retiring from FT work @ 55 and long before fully retiring. 

The equity comes in handy for various things via a line of credit with our Credit Union. We use it when it is inefficient to cash out investments.

Cheers


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## pacodemountainside (Mar 31, 2013)

billymach4 said:


> So I am age 50, and within striking distance of paying off my mortgage. I can make a lump sum payment and be done with it, or make the monthly payments and wait till 2018.
> 
> My mind says pay it off, and I will most likely do that.
> 
> ...



When getting about zippo on savings account it  would appear to make sense to get rid of  4.25% mortgage!

The pregnant question  is,   can one  do better in stock market?

I paid my mortgage off about a year before I retired at age 55!


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## Elan (Mar 31, 2013)

Passepartout said:


> It feels good, but not the 'weight-off-the-shoulders' feeling you anticipate.


 
That's part of why I haven't paid mine off. My taxes and insurance (which are significant) will still need to be paid, so I don't think there will be any great feeling of relief in just getting rid of the P&I.


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## vacationhopeful (Mar 31, 2013)

Took out 15 year loans YEARs ago ... hence, most are paid off. But still have about $265K I owe ... 

It is all relative.


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## billymach4 (Mar 31, 2013)

BMWguynw said:


> Billy, if you click Edit on your original post, then click Go Advanced, you can edit the thread title yourself.  Just an FYI.
> 
> Dave



Thanks,

Done


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## billymach4 (Mar 31, 2013)

pacodemountainside said:


> When getting about zippo on savings account it  would appear to make sense to get rid of  4.25% mortgage!
> 
> The pregnant question  is,   can one  do better in stock market?
> 
> I paid my mortgage off about a year before I retired at age 55!



Having a some more confidence in the market lately, since the S&P is at record territory. I am just so tired of lackluster returns in the bank. Going to slowly start to invest in my DRIP portfolio (Dividend Reinvestment Portfolio). Last I remember it was about 2K to 4K and I totally forgot about it. It has been about 10 years now, and it is 11K. 

I plan to work at least till 65 or 67. So I better start to get my act together now.


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## billymach4 (Mar 31, 2013)

GrayFal said:


> Just asked DH (who you know) and his professional opinion is pay it off now



Thanks Pat. Great Professional advice!


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## Luanne (Mar 31, 2013)

Most likely never.

At ages 62 and 67 just bought a "new" house since we moved.  I don't see getting it paid off.


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## billymach4 (Mar 31, 2013)

Luanne said:


> Most likely never.
> 
> At ages 62 and 67 just bought a "new" house since we moved.  I don't see getting it paid off.



Interesting concept. I don't want to get too personal but are both of you employed or planning to retire soon?


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## SmithOp (Mar 31, 2013)

Luanne said:


> Most likely never.
> 
> At ages 62 and 67 just bought a "new" house since we moved.  I don't see getting it paid off.



We agree, not ready to settle in one place at 59/58, both retired.  Did a 15 yr refi several years ago to 3.75%, retirement income covers all the bills (mortgage, utilities, and one credit card), not concerned.


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## csxjohn (Mar 31, 2013)

We put as much extra money as we could early on and paid off a 30 yr note in 22 yrs.  You save a bundle by paying early in the loan.  

Too late for the OP but probably still makes financial sense to pay it off now.


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## Luanne (Mar 31, 2013)

billymach4 said:


> Interesting concept. I don't want to get too personal but are both of you employed or planning to retire soon?



We just retired. Sat down with our financial advisors prior to retirement, and relocating.  We're in good shape thanks. 

Also, my father, the accountant, felt it was good to keep a home loan just for the right off on your income tax.


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## pacodemountainside (Mar 31, 2013)

Luanne said:


> We just retired. Sat down with our financial advisors prior to retirement, and relocating.  We're in good shape thanks.
> 
> Also, my father, the accountant, felt it was good to keep a home loan just for the right off on your income tax.




Good point!

If one has say $7K in interest and in 40%  federal and state  tax bracket tax write off is major consideration.

If $4K-$5K and taking   standard deduction  big difference!


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## billymach4 (Mar 31, 2013)

csxjohn said:


> We put as much extra money as we could early on and paid off a 30 yr note in 22 yrs.  You save a bundle by paying early in the loan.
> 
> Too late for the OP but probably still makes financial sense to pay it off now.




Not really too late at all. In May we will be here 15 years. We were a few years in when we refi 'd to 15 yrs. The monthly payment went up about $15 per month. At the time rolled in the points as well. I was angry at the banks lawyer as well, because I lost out on the 60 day lock in of 4.15%


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## momeason (Mar 31, 2013)

We are about to close on a 15 yr mortgage refi at 2.75%..so 15 years. If we paid it off now, we would have to start drawing from our IRA earlier. Our IRA is earning a much better return than 2.75%...so we will keep the mortgage.
Unfortunately our bad call was in 2007. We could have exercised stock options and paid for the house in 2007. The stock fell from $63 to a few bucks in 2008.
Missed opportunity...worthless options now. Win some..lose some.


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## Talent312 (Mar 31, 2013)

There's two reasons not to pay off a mortgage:
1. You'd earn more on investments than you'd would save in interest.
2. There's a good chance that you'll need the $$ for expenses instead.

In our case, we're doing far better in the market than our 3 1/8% interest.
Also, we're soon to be retired and need a new roof, so better to keep the $$.

_Actually, we have ome more reason to wait..._
When we refi'ed last March, our CU covered our closing costs.
But the costs are subject to recapture if we pay-off again within 3 years.
.


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## pacodemountainside (Mar 31, 2013)

momeason said:


> We are about to close on a 15 yr mortgage refi at 2.75%..so 15 years. If we paid it off now, we would have to start drawing from our IRA earlier. Our IRA is earning a much better return than 2.75%...so we will keep the mortgage.
> Unfortunately our bad call was in 2007. We could have exercised stock options and paid for the house in 2007. The stock fell from $63 to a few bucks in 2008.
> Missed opportunity...worthless options now. Win some..lose some.



In stock market some one has to sell and some one buy so  always a loser at some  time!!

Like red or black in casino!


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## Mosca (Mar 31, 2013)

I'm 58, Mrs is 56. Our mortgage will be over in July.


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## talkamotta (Mar 31, 2013)

Im 59.  I have 2 rental properties both have paid off for about 10 years.  My main residence was paid off last year when I retired.   Now Im going to get married and we are going to buy another house.  His residence is paid off.  

We are putting down 35% and a 15 year mortgage and we are getting 2.62% interest.  Im thinking we shouldn't pay that one off.  Can make more money putting our other money into something else. 

The interest rates are amazing.


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## brigechols (Mar 31, 2013)

billymach4 said:


> How old were you when you paid off your mortgage, or how old do you expect to be when you will pay it off totally.



48. Exercised stock options and paid off a 15 year mortgage  in 8 years. It is a great feeling


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## am1 (Mar 31, 2013)

Paid in cash last year.  Put about 15% of the purchase price into upgrades.  I doubt many people on here live in a cheaper house.  We have plans to build a house down the street in 4-5 years.  We will have to wait to see if a mortgage is needed.  A lot will depend on inflation.


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## Htoo0 (Mar 31, 2013)

Our interest rate for our 2nd home was 7.5% and by the time rates dropped and everyone was knocking on our door attempting to get us to refinance, we had it paid down with extra payments to the point that the refinance costs weren't worth it. We paid it off not long after at 54. The market at the time was way down so it seemed the thing to do. The extra money goes to savings and/or keeping us from paying interest for other purchases. It's great not sending that payment in each month. However, had we been able to earn more from investments than the interest rate we were paying it would have been a different story. We did have an advisor check the tax implications, BTW.


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## cgeidl (Mar 31, 2013)

*Getting a new mortgage soon*

Just received a quote for a VA mortgage at 3.25% for 30 years and having averaged 8% on investments the last 10 years,I feel comfortable investing the money instead of buying a home for cash. I invested $2000 in an IRA in 1983 30 years ago and it is now worth $36,000 0r 18 times the money. Averaged a little better than 10% per year. if this were to occur again with our Roth IRAs on the $400,000 we would have over seven million dollars and the paid off loan  total payments would be just over $626,000. Sure you take a risk but look at the worst 30 years in the stock market since 1900 and you will see the house is much in your favor. We will borrow as much as we can but always have enough assets available to pay off the loans. and in thirty years the home will probably be at least 10 times what you pay today. Your cash keeps earning and accumulating tax free.You get a write off on the loan and there is a likely possibility of home appreciation. Even at 5% per year in thirty years appreciation would be four or five times the initial price on a home.
Yet I can well understand the pride and the security of others who choose to be safe.We have been fortunate to be in the right place at the right time. We are now in AZ and will move back to CA full time again to be near the grandchildren. Our AZ home since we purchased in 2004 is up about 20% while where we are buying in CA the prices are down 50 to 60 percent.


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## am1 (Mar 31, 2013)

Anyone else see the problem with stocks possibly offering a much higher return  than paying down a mortgage?


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## chriskre (Apr 1, 2013)

I paid off my first home and still own it about 5 years ago.
Mom lives there now with Auntie.

I still have my second home that I am making payments on.  Unfortunately I doubt I'll ever pay it off since it's got 20 years left on it and it's probably not going to be the home I retire in.
I'm 48 now so was 43 when I paid off the first one.

The way I look at it is that I've already got one to go to if all hell breaks loose in my life.  Hopefully that will never happen.   In the meantime I'm renting from the bank.   

I used to think that having my home paid off was the goal but now that I'm older, I'm not so sure.  Do we really ever own it anyway?  Still gotta pay the taxes and insurance and last I checked nobody leaves earth with the deed in hand anyway.   And since I like condo living, renting isn't such a bad option as many rental communities are nicer than I could ever afford to own anyway.


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## Corman (Apr 1, 2013)

paid off our mortgage in 18 years.  I was mortgage free by 44 years old


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## SmithOp (Apr 1, 2013)

am1 said:


> Anyone else see the problem with stocks possibly offering a much higher return  than paying down a mortgage?



Break even point is making 1% more than your mortgage rate on a new 30 yr, which is easy to do in the current market. 

http://www.mymoneydesign.com/person...our-mortgage-or-investing-the-money-–-part-2/


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## Deb from NC (Apr 1, 2013)

We paid ours off when DH was 55 and I 53.  What a great feeling!  We have no plans to move (we've now been in the house 25 years) and the peace of mind it has given us is worth a fortune to us!


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## flexible (Apr 1, 2013)

Passepartout said:


> *It still took some months to get the note marked 'Paid in Full' from Countrywide and the clear deed.*
> 
> It feels good, but not the 'weight-off-the-shoulders' feeling you anticipate.



I might not have gotten a note marked "Paid in Full" from Countrywide or BofA.
Should it have been recorded at our courthouse? Is it easy to request the paperwork if I can't find it?

I paid off a 2nd mortgage with Countrywide in 2007 and the 1st mortgage (same property) about September/October 2008.
http://en.wikipedia.org/wiki/Bank_of_America_Home_Loans states Bank of America's acquisition of Countrywide was completed in July 2008. They were challenging to deal with during that time.


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## csxjohn (Apr 1, 2013)

Luanne said:


> ...Also, my father, the accountant, felt it was good to keep a home loan just for the right off on your income tax.





pacodemountainside said:


> Good point!
> 
> If one has say $7K in interest and in 40%  federal and state  tax bracket tax write off is major consideration.
> 
> If $4K-$5K and taking   standard deduction  big difference!



I never understood accountant's advice that it's good to keep a mortgage to get the write-off.

In the example above, a $7,000 interest payment would reduce Federal income tax by $2,800, still having you throw away $4,700 in interest payments.

Without the mortgage you would still get a generous Standard Minimum Deduction from the feds, even if you have no otherwise deductible expenses.

Seems to me that the  loss is $4,700 in that year by keeping the mortgage.

With savings earnings so low today it seems to be better to not be paying the $7,000 in interest.


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## Passepartout (Apr 1, 2013)

flexible said:


> I might not have gotten a note marked "Paid in Full" from Countrywide or BofA.
> Should it have been recorded at our courthouse? Is it easy to request the paperwork if I can't find it?
> 
> Bank of America's acquisition of Countrywide was completed in July 2008. They were challenging to deal with during that time.



With those clowns (Countrywide/BofA), anything- or nothing- is possible. DW (as bankruptcy atty) found with several of her clients that Countrywide couldn't prove they even had the note, so couldn't prove the client even owed them for the mortgage. She managed to have some 2nd's dismissed due to lack of proof.

You should be able to see what your county has on your property. It's public record. Might cost a few bux for the search and copies.


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## normab (Apr 1, 2013)

*Alternative minimum tax killed our mortgage deduction*

We paid ours off several years ago.  Our real estate and state taxes are so high in  NJ that we started to hit the limit for the alternative minimum taxes about 7-8 years ago.  So even if we had 20K in legitimate additional deductions for charity, medical and interest paid, it wouldn't matter, we would pay taxes and not get the deduction.  We had already been closing in the end by accelerating payments, but that was when we decided to take some savings and pay the rest off.

I wonder how many folks are in the same boat but still are keeping the mortgage for deduction purposes.  Hopefully there aren't too many!  Unfortunately our tax code is difficult to comprehend, and most people who don't do their own returns may not understand all the implications.

I really wish Congress would reconfigure the tax tables for the alternative minimum taxes to 2013 incomes.  It was designed to hit the rich, but it kicks in at 50K earnings which is not "rich" in 2013--at least not in NJ.


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## Icc5 (Apr 1, 2013)

*3rd house*

Bought my first house at 26 and paid it off by 36.  Got married at 38 and bought 2nd house which we paid off by age 50 and 2nd house cost 10 times the amount of first house.  The house we are in now is paid off and worth 1.5 times as much as second house.  This house we will stay in (my wife grew up in this house which we bought from parents estate).  Great feeling having now house payments but miss the write-offs which were huge with the second house.  In our case things worked out good because in California with prop. 13 our taxes are almost nothing on the house (of course no write off) but we know it is ours free and clear forever then the kids get it.
Bart


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## geekette (Apr 1, 2013)

Patri said:


> Who did you refinance with, to have no closing costs? We are doing that now, but there is a fee.



My credit union.  

I am refi-ing now and expect to be paid off 5-10 years before retirement.

Also agree that it doesn't make sense to owe somebody in order to get the deduction.  It's preferable to not owe anybody vs getting a break on the interest I pay them.


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## akp (Apr 1, 2013)

I have been seriously considering whether we should pay off our mortgage early as well.  

Normab, thanks for the comment about the Alternative Minimum Tax considerations.  That could well be an advantage for us.  

Anita


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## Clemson Fan (Apr 1, 2013)

Probably never and I'm fine with that.  In fact, I just refinanced to a 100% equity 30 year VA loan in the low 3's and I pulled out every last dime out of the home.  With interest rates this low the arbitrage is significant.  Also the interest is income tax deductible.  If the rates were higher and there was less of an arbitrage, then i can see it being ok.  As it is now, though, it makes no sense to me to have any of my money tied up in the home.  I can, and have, found much better ways to invest the money.

I also have another reason to keep my home in debt.  You see I'm a physician and in the US, there's a 80% chance I'm going to face at least one medical malpractice case during my career and a greater then 50% chance there will be more then one.  I have never been sued yet, but the statistics say I will most likely have that pleasure sometime in my career.  In the unlikely event that there's a judgement against me above my medical malpractice insurance limits (80% of medical malpractice cases that go to trial are won by the physician, but a few are won with lottery number type judgements), then any equity in my home will be a prime target.  By having no equity in my home it provides a good debt shield.  So as a physician I have to at least think about asset protection as well.


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## GregT (Apr 1, 2013)

I'm another one that recently refinanced and pulled out the maximum cash available, so not sure when (if) I will get the home actually paid off.

I used the proceeds to buy another property, because I believe significant inflation is coming to the United States, and real estate will appreciate.   My mortgage payment on my home remained the same (because I lowered the rate), and I put sufficient money into the new property that it will be cash flow positive, although only modestly so.   I can depreciate the new property against other passive income that I have, so it is a terrific tax shield too.  

I believe this is an excellent investment in its own right, but wont know for sure until well down the road.  I'll likely work at least 15 more years anyway -- and then these properties better be strongly cash flow positive to pay for vacations!  We will see....

I'm very sympathetic with Clemson Fan, it is amazing how some of our financing/investment decisions represent a combination of legal and tax risk mitigation, not just a traditional business decision.

Best,

Greg


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## billymach4 (Apr 1, 2013)

*Nice objective response so far.*

I for one do not totally agree with the interest write off vs the tax payments. 

Either you pay the bank in interest and get a deduction on your income tax. Then there is the AMT penalty implication. Or you just pay the treasury if you have no interest deduction. 

When I was younger and not earning as much then I did look forward to the Interest deduction, since I got a refund. But that only lasted a few years. I began to earn more salary, and the interest payments went down as I paid more principal. 

Clemson Fan , Greg T offer up some valid reasons to carry a mortgage and that makes sense to me. 

Keep the opinions and rationale coming. 

Thanks,


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## Zac495 (Apr 1, 2013)

Don't forget that you pay less interest the closer you get to paying it off. Ours will be paid off in August. I could easily pay it now, but I pay almost no interest anymore. 

Your early payments are almost all interest.
Your payments toward the end are almost all principle.

Just another thought.


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## Kel (Apr 1, 2013)

*No Loans *

I’m 55 and my husband is 56.  Last year we sold our large home and downsized.  With the sale of our large home we bought a smaller home and a rental property for cash.  We also have another rental property that has no loan.  We are 100% loan free.  No home or car loans.  It feels great!  

I retired at the end of 2012 and my husband is self employed and semi-retired.  Our travel calendar is filling up.  Cheers!


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## billymach4 (Apr 1, 2013)

normab said:


> We paid ours off several years ago.  Our real estate and state taxes are so high in  NJ that we started to hit the limit for the alternative minimum taxes about 7-8 years ago.  So even if we had 20K in legitimate additional deductions for charity, medical and interest paid, it wouldn't matter, we would pay taxes and not get the deduction.  We had already been closing in the end by accelerating payments, but that was when we decided to take some savings and pay the rest off.
> 
> I wonder how many folks are in the same boat but still are keeping the mortgage for deduction purposes.  Hopefully there aren't too many!  Unfortunately our tax code is difficult to comprehend, and most people who don't do their own returns may not understand all the implications.
> 
> I really wish Congress would reconfigure the tax tables for the alternative minimum taxes to 2013 incomes.  It was designed to hit the rich, but it kicks in at 50K earnings which is not "rich" in 2013--at least not in NJ.



Agree. I did not see your response until now. We have the same mindset.


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## billymach4 (Apr 1, 2013)

Kel said:


> I’m 55 and my husband is 56.  Last year we sold our large home and downsized.  With the sale of our large home we bought a smaller home and a rental property for cash.  We also have another rental property that has no loan.  We are 100% loan free.  No home or car loans.  It feels great!
> 
> I retired at the end of 2012 and my husband is self employed and semi-retired.  Our travel calendar is filling up.  Cheers!



That's what I like to hear! I hate debt! Call me crazy but it really bothers me that my son has student loans.


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## billymach4 (Apr 1, 2013)

csxjohn said:


> I never understood accountant's advice that it's good to keep a mortgage to get the write-off.
> 
> In the example above, a $7,000 interest payment would reduce Federal income tax by $2,800, still having you throw away $4,700 in interest payments.
> 
> ...



Another vote of agreement here. I would need a good reason to leverage the equity in my real estate to mortgage again. Some folks have already illustrated that here, other real estate investments, shelter your exposure to outside risk, inflation... and that sounds reasonable. But just for the tax deduction does not really make sense. 

In this interest marketplace with the banks paying less than 1%, even if you get a 2.5% rate on a mortgage you are paying more in interest. 

I am willing to listen and learn.


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## csxjohn (Apr 1, 2013)

billymach4 said:


> ...Either you pay the bank in interest and get a deduction on your income tax. Then there is the AMT penalty implication. Or you just pay the treasury if you have no interest deduction.
> 
> ...,



What many fail to realize is that if you have 0 deductible expenses the feds still allow you to deduct the Standard Minimum Deduction.

If your mortgage is the only deductible expense you have, you are losing the free deduction they would give you.

Often times people have other deductible expenses such as charitable donations and others. You add them in with the interest on your home as deductible.

If you take the SMD you can't itemize these so the SMDs effect is lessened.

If the mortgage is the major deductible expense, you're better off without it because of the other 60% and more you are losing to the mortgage holder.

Of course most of us have to take out a loan to buy a house so we have no choice but to pay the interest and then deduct it and at least get a small portion of it back.


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## SMHarman (Apr 1, 2013)

csxjohn said:


> I never understood accountant's advice that it's good to keep a mortgage to get the write-off.
> 
> In the example above, a $7,000 interest payment would reduce Federal income tax by $2,800, still having you throw away $4,700 in interest payments.
> 
> ...


You need to add the other side of that math. 
So assume you have this spare cash to put to the mortgage. 
Instead you now pot it to the 401k. That's another reduction in your AGI and tax free return. 
That should grow at more than the mortgage interest rate. 
So the leverage is enhancing the return on your property value. Enhancing your contribution to your 401k and getting you a interest tax write of. 
S


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## Dori (Apr 1, 2013)

We bought our home when we were in our mid-twenties, with a 5-year mortgage @ 11%. Five years later, with a baby, DH out of work for 7 weeks due to a strike and me going half-time teaching, our mortgage came due @ 21%! We vowed then and there to pay it off as soon as possible. Six years later, we were mortgage-free. Lots of Kraft dinner during those years, but we did it and never regretted it.

Dori


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## csxjohn (Apr 1, 2013)

SMHarman said:


> You need to add the other side of that math.
> So assume you have this spare cash to put to the mortgage.
> Instead you now pot it to the 401k. That's another reduction in your AGI and tax free return.
> That should grow at more than the mortgage interest rate.
> ...



You are right, there is a lot to consider when making these kinds of choices.

I maxed my 401K contributions the last 2 years before I retired in 2007.  You know how sick I was when it dropped 40% soon after that.  I never looked at it again until last year.  I'm OK again but that was a shock.


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## SMHarman (Apr 1, 2013)

csxjohn said:


> You are right, there is a lot to consider when making these kinds of choices.
> 
> I maxed my 401K contributions the last 2 years before I retired in 2007.  You know how sick I was when it dropped 40% soon after that.  I never looked at it again until last year.  I'm OK again but that was a shock.


then your asset allocation was probably too aggressive for someone so close to retirement. As you get closer to retirement you should be more in cash and fixed income investments like treasuries. Not in equities and the equity part should be fortune 500, FTSE 100 companies not smaller cos.


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## Clemson Fan (Apr 2, 2013)

Dori said:


> We bought our home when we were in our mid-twenties, with a 5-year mortgage @ 11%. Five years later, with a baby, DH out of work for 7 weeks due to a strike and me going half-time teaching, our mortgage came due @ 21%! We vowed then and there to pay it off as soon as possible. Six years later, we were mortgage-free. Lots of Kraft dinner during those years, but we did it and never regretted it.
> 
> Dori



With those interest rates you are completely right by wanting to get that paid off ASAP, tax deductible or not.

With today's record low rates (rates that you can lock in for 30 years), the situation is 180 degrees different.  With the tax deductibility and depending on your tax bracket, the effective interest rate is around 2-2.5%.  It's not too hard to find investments, even principle protected investments, that pay more then 2.5% and provide a positive arbitrage.  

If you have the discipline to make your money and leverage provided work for you in a positive way then it can be a great wealth building opportunity.  The problem lies with most people not having discipline and they would blow that equity on stupid stuff like cars and timeshares.


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## Clemson Fan (Apr 2, 2013)

billymach4 said:


> In this interest marketplace with the banks paying less than 1%, even if you get a 2.5% rate on a mortgage you are paying more in interest.
> 
> I am willing to listen and learn.



If you're relying on a bank savings account as your main investment, then yes I would agree that it makes no sense to carry a mortgage.

Just as a quick example of something that is completely principle protected, I have whole life insurance policies for my wife and I with the Army & Air Force Mutual Aid Association (I know not everybody has access to this) that has paid between 6-7% every year (even during the really bad stock market years) for the past 14 years I've had them.  After the cost of insurance is figured in the effective rate is still 5.5-6%.  I used a good portion of the money I pulled out of my home to maximally fund those policies.  The money is 100% principle protected and grows tax deferred and I have a positive 3-4% arbitrage.  That's a no brainer for me.

http://www.aafmaa.com/Portals/0/Newsletters/AAFMAA_nltrMay09F.pdf

http://www.aafmaa.com/LifeInsurance/ValueAddedWholeLife.aspx

http://www.aafmaa.com/LifeInsurance/ANNUITYLife.aspx


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## dougp26364 (Apr 2, 2013)

billymach4 said:


> So I am age 50, and within striking distance of paying off my mortgage. I can make a lump sum payment and be done with it, or make the monthly payments and wait till 2018.
> 
> My mind says pay it off, and I will most likely do that.
> 
> ...



We're like you but not quite within striking distance of paying it off in a lump sum. We refinanced several years ago at a then low rate of 5.25% from a 30 year to a 15 year mortage. I believe we have another 5 years to go. We had some special taxes on our home that should be paid off in January that will drop our payment another $75/month. 

I'm afraid when our home is paid off we won't feel any real relief from payments. We made a large down payment and the excrow payment amounts to a little more than half of the total payment. It will still be nice to have it paid off.


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## Tia (Apr 2, 2013)

csxjohn said:


> You are right, there is a lot to consider when making these kinds of choices.
> 
> I maxed my 401K contributions the last 2 years before I retired in 2007.  You know how sick I was when it dropped 40% soon after that.  I never looked at it again until last year.  I'm OK again but that was a shock.



Ya the market to me is too close to a casino anymore , and add the debt situation the country/world is in... well scary


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## Magic1962 (Apr 2, 2013)

I turned 50 last June and we paid off 50,000+ still owed on our mortgage 3 years ago.... Just didnt want the payments. Just bought a new 2013 Ford Escape in Jan. and now that is the only payment we have..... We will pay that off early also... Dave


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## billymach4 (Apr 2, 2013)

This is also called the Inside Build up.

inside buildup
The cash value increases in a life insurance policy. Inside buildup is free of income taxation during the period of buildup, thus making cash-value insurance a more desirable investment vehicle for people in high income-tax brackets.

I am a Veteran , however I am not sure if I am sure if I can become a member of this organization. 

Hon discharge in 1984, as an enlisted Air Force Grade E4. New York State resident. Going to call them now. 


Just a side not regarding Life Insurance companies in this current low interest rate environment. 

Yes your rates are indeed Guaranteed, and I have no doubt that the vast majority of companies will meet those promises. 

However, it is not widely publicized that all Life Ins companies are struggling to find investment options to fund those guarantees even at 4%. Life Ins companies must keep a majority of their investment portfolio in conservative, long term corporate bonds. They can't risk too much on stocks and equities in their reserves. They also need to keep a percentage in cash type investments. 

In this ultra low interest rate environment Life Insurance companies are not making a return good return on their cash investments just like the rest of us. They are cutting staff, salaries and reorganizing to attempt to make up the difference. They keep this news out of the public eye.





Clemson Fan said:


> If you're relying on a bank savings account as your main investment, then yes I would agree that it makes no sense to carry a mortgage.
> 
> Just as a quick example of something that is completely principle protected, I have whole life insurance policies for my wife and I with the Army & Air Force Mutual Aid Association (I know not everybody has access to this) that has paid between 6-7% every year (even during the really bad stock market years) for the past 14 years I've had them.  After the cost of insurance is figured in the effective rate is still 5.5-6%.  I used a good portion of the money I pulled out of my home to maximally fund those policies.  The money is 100% principle protected and grows tax deferred and I have a positive 3-4% arbitrage.  That's a no brainer for me.
> 
> ...


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## littlestar (Apr 2, 2013)

I'm thinking about paying ours off early, too - within the next year.  Just for the relief of not owing anybody one red cent. I hate paying interest.  I want to earn interest, not pay it. Even though our interest rate is only 3.625 - I'm still paying interest out instead of earning it.  I need to call the tax assessor's office and find out what kind of a property tax hit we'll suffer without the mortgage exemption. 

I think of the stock market as a casino, too. I also worry about the national debt.  I know we're the reserve currency and they keep printing money, but it makes me wonder how long the party is going to last.


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## Passepartout (Apr 2, 2013)

littlestar said:


> I need to call the tax assessor's office and find out what kind of a property tax hit we'll suffer without the mortgage exemption.



It must work differently where you live than where I do. The homeowners' property tax reduction doesn't matter whether we have a mortgage or not. In fact, how does the assessor even know if there is a mortgage on the property? The tax reduction comes with the property being owner occupied, as opposed to it being income property.


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## littlestar (Apr 2, 2013)

Passepartout said:


> It must work differently where you live than where I do. The homeowners' property tax reduction doesn't matter whether we have a mortgage or not. In fact, how does the assessor even know if there is a mortgage on the property? The tax reduction comes with the property being owner occupied, as opposed to it being income property.



Indiana has a homestead credit and a mortgage exemption. We get the homestead credit for the house being owner-occupied.  The mortgage exemption is filed to get the credit.  If you refinance, you have to refile the mortgage exemption.

*Update*:  I called my assessor's office and the mortgage exemption only amounts to $3,000 a year and the credit is 1% percent of that.  So we're paying more interest on our loan than $30 a year.   The assessor's office said the Homestead credit is the big one for the discount/savings.


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## geekette (Apr 2, 2013)

SMHarman said:


> then your asset allocation was probably too aggressive for someone so close to retirement. As you get closer to retirement you should be more in cash and fixed income investments like treasuries. Not in equities and the equity part should be fortune 500, FTSE 100 companies not smaller cos.



that's personal opinion.  

I will not be dumping my solid dividend payers near or in retirement (possibly Never) and they will always make up the bulk of my assets because they keep on paying me and I keep on reinvesting, not rebalancing out of them.  The Aristrocrats will pay me more each quarter whereas in retirement there will be no other raises.

My account values dropped, like everyones, in the downturn, but I didn't sell low and those 50 or however many shares of company x were still 50 or however many PLUS the divs (more shares @ lower prices).

that said, if a person can't sleep at night when 'the market is down', and would be at risk of selling low due to anxiety or whatever, then, sure, go with cash or treasuries.  

Just don't assume that all Rules Of Thumb apply to your situation.  Darned few apply to me, but I'm not trying to Be Okay in retirement, I'm attempting to finance a life into my 90s.  cash and treasuries will not cut it for me, I would be out of money.


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## heathpack (Apr 2, 2013)

I find people's negative attitude towards debt intriguing.  I am not particularly concerned about having certain kinds of debt.  When I was in college, I _was_ paranoid about avoiding debt.  But my older brother was a very successful Wall St guy with his own trading company on the stock exchange.  He really pushed the idea that within reason debt should be actively pursued- if someone will lend you money and you can put it to good purpose and manage it well, by all means avail yourself of the opportunity.  His theory was that it is all about the leverage- leverage somebody else's money into something useful for yourself.

Thus, his lesson to me was student loan debt=good, home mortgage=good, business loan=good, credit card or personal debt=bad- as long as you keep it all at sustainable levels, of course.  So right now I have a large dollar amount of debt- home loan, business loan and student loan (although the student loan is currently a negligible amount).  And also something like $130,000 in available credit on credit cards- but zero credit card balances.  

Now it is a little different for me than for some of you- I am in my peak earning years, trying to sock away as much as I can into retirement accounts.  I also have a job with a marketable skill but one that is very unique, which means if I lose my job, I will undertake a national job search, flying in and out of many job interviews.  I will almost certainly have to sell my house and move.  So yes, I am very employable but the process of starting somewhere new would take 3-8 months.  Therefore I also try to keep fairly large cash reserves on hand, enough to live on and pay living expenses (including loan payments) for the time it would take me to obtain a new job.  My TOP priorities: One year's living expenses in cash in the bank and the rest into retirement accounts. 

Maybe if my retirement savings were done and I were nearing retirement, I would be thinking of deleveraging as a priority, but I am 15-20 years away from retirement.  So for now, I carry debt and don't worry that much about it.  Im not sure if my thinking is correct but I do sleep pretty well at night.

H


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## vacationhopeful (Apr 2, 2013)

heathpack said:


> ....  But my older brother was a very successful Wall St guy with his own trading company on the stock exchange.  He really pushed the idea that within reason debt should be actively pursued- if someone will lend you money and you can put it to good purpose and manage it well, by all means avail yourself of the opportunity.  His theory was that it is all about the leverage- leverage somebody else's money into something useful for yourself.
> ...H



H - well said. 

Some debt is NOT bad. It is all relative - ROI on the loan balance. Fixed asset against inflation (a really ugly word 20-25 years ago; and it may return shortly). Multipler for income generation. And a few other financial terms which say "leverage YOUR CASH to maximize your ROI".


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## SMHarman (Apr 2, 2013)

heathpack said:


> I find people's negative attitude towards debt intriguing.  I am not particularly concerned about having certain kinds of debt.  When I was in college, I _was_ paranoid about avoiding debt.  But my older brother was a very successful Wall St guy with his own trading company on the stock exchange.  He really pushed the idea that within reason debt should be actively pursued- if someone will lend you money and you can put it to good purpose and manage it well, by all means avail yourself of the opportunity.  His theory was that it is all about the leverage- leverage somebody else's money into something useful for yourself.


The reason most people make a healthy return on buying their house is leverage.  With 20% down you have entered into a 5:1 leveraged purchase.  The bank only wants interest, not a share of the upside but has lent you 80% of the money to invest for that upside.
So say if you could with no mortgage buy a $200,000 house.  That house after 10 years had gone up 20% so $40k is your gain on that unleveraged transaction.
If you bought a $1m house with $200k down and an 800k mortgage (yes I know this is above federal limits but this is a round number example) then you also gain 20% that is $200k gain.  A doubling of your original $200k down because of leverage.

Similarly in an inflationary environment debt is better to have than cash as the cash earns below inflation interest rates.  Your $1 today buys lb of carrots, your $1.01 next year will buy you .9lb of carrots.  If you had $1 of debt then you still have $1 of debt but inflation has reduced the true value.

Taking that into the mortgage example.  That $800k you borrowed when your earnings were I dunno $100k, that's 8x your earnings.  Now 10 years later you earn $150k, wage inflation has deflated the debt to 5.3x earnings.

So yes, your brother and correct leverage and inflation are all good things for debt.


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## pacodemountainside (Apr 2, 2013)

I am with last posters on leveraging and  ROI.

I am 74 and if I talked with  FA he would say I am whacked out.

The only saving account I have is  $100  which got me a  1/4% reduction on mortgage rate  and about $.50 interest last year and no bonds.  100% stock  and mutual funds   But not stupid, can pull a couple thousand on HE loan in about 5 minutes  and   many thousands on margin account in 24 hours plus have MA Heath Insurance!

I have been investing in stock market  since age  20  circa 1960 and later  rental condos  real estate. RE is very profitable  but clogged toilets and lock outs   don't work with lots of vacationing!

Needless to say I retired at age 55 some 18+ years  ago with no inheritance  nor winning lottery.


Guarantee investing from get go  wisely, maximizing  employer matching programs, stick with no commission no load  cheap MF   mutual funds  will  put one in cat bird seat over  30+ year  time frame. While stock market will  fluctuate, dollar cost averaging is a proven winner.


Clearly my   100% stock approach would not work for majority of people and  would strongly urge to consult a fee paid  financial  planner. Like most situations one size does not fit all.

While one must consider taxes, they should not   blindly drive ones decisions especially since can be changed  tomorrow.

Think about the Donald, over leveraging almost did  him in but modified  put him on Forbes list! Monitoring is mandatory!


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## SMHarman (Apr 2, 2013)

geekette said:


> that's personal opinion.
> 
> I will not be dumping my solid dividend payers near or in retirement (possibly Never) and they will always make up the bulk of my assets because they keep on paying me and I keep on reinvesting, not rebalancing out of them.  The Aristrocrats will pay me more each quarter whereas in retirement there will be no other raises.
> 
> ...


as I said. Probably. 
The fact you look at portfolio balance and consider the dividend payments clearly says many positive things about your investment strategy.  My concern is more for those chasing the next Moon shot share in their 70s. The downside is too great. 
S


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## Fern Modena (Apr 2, 2013)

Well, I'm different than most of you.  I still have a mortgage, and will till I die, unless I live to be in my nineties.  And that's OK with me.  I have plenty of equity if I need it, and my interest rate is low.  I don't have children to inherit my house. If I die before my sister, she'll inherit my stuff, if not then it goes to charity (and yes, it is spelled out)

I have enough income that a house note is not a problem for me and never will be.  I worked for an agency which had a defined benefit plan (pension) and I also paid into Social Security.  I also get 50% of Jerry's pension, although that is frozen at what he was getting.  I'd rather have him here, but that isn't going to happen.

Am I rich?  No.  But I feel that I'm "comfortable" with what I have.

Fern


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## billymach4 (Apr 2, 2013)

*Update on my Mortgage*

Went to the bank teller and made a lump sum payment towards my principal. About $200 and change left towards the principal now, I will let it settle and deal with the closure on my next statement. 

When I called the bank for payoff info, I got the run around. "You need to make out a certified check, or cashiers check by xyz date, blah , blah, blah... you need to speak to the tri state office, since the property in NY .... yada , yada, .... Do you nee the bank to send a lawyer..." All I want to do is send you a check. I am not refi, or closing , good grief! I was not going to pay for a cashiers check.

Then one lady mentioned additional fees? When I asked her about the fees she mentioned recording fees. I guess she was referring to the deed.


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## billymach4 (Apr 2, 2013)

*Using Debt for Leverage*

Appreciate the rationale for using debt to leverage a profitable investment. You folks have given me something to possibly consider. However I would like to enjoy the mortgage free lifestyle for a little while before I go out and mortgage again.


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## geekette (Apr 2, 2013)

SMHarman said:


> as I said. Probably.
> The fact you look at portfolio balance and consider the dividend payments clearly says many positive things about your investment strategy.  My concern is more for those chasing the next Moon shot share in their 70s. The downside is too great.
> S



I got scared of being old and poor while I was young and poor, figured it would suck much worse.  I wasn't going to rely on anyone else but myself to craft a strategy.    

It's unfortunate that it's just now that 401k plan administrators can provide a dollop of advice to the Sudden Investors.  It's 20 years too late for many, but I'm glad that auto-enrollment is dragging in the fearful.   

And certainly, one should be prudent with all of their investments both in the accumulation and draw down phases.  Best to learn the lessons earlier, even if that lesson is that you need someone to advise.  As you say, the downside is too great.


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## geekette (Apr 2, 2013)

billymach4 said:


> Went to the bank teller and made a lump sum payment towards my principal. About $200 and change left towards the principal now, I will let it settle and deal with the closure on my next statement.
> 
> When I called the bank for payoff info, I got the run around. "You need to make out a certified check, or cashiers check by xyz date, blah , blah, blah... you need to speak to the tri state office, since the property in NY .... yada , yada, .... Do you nee the bank to send a lawyer..." All I want to do is send you a check. I am not refi, or closing , good grief! I was not going to pay for a cashiers check.
> 
> Then one lady mentioned additional fees? When I asked her about the fees she mentioned recording fees. I guess she was referring to the deed.



Wow, glad you will be done with them!   

I would expect it is deed recording fees, and therefore small.


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## Jennie (Apr 3, 2013)

We began with a 30 year mortgage and made extra payments almost every month after the first year. It was paid in full in 14 years. By then our house was appraised at 5 times the original price we had paid. 

Since then we have had a HELOC at prime minus 1/4 % which we have accessed from time to time to do renovations (and purchase too many timeshares ). It's been a good way to avoid credit card debt and not have to liquidate investments or dip into savings to cover other expenses. 

We pay less now on a monthly basis for real estate taxes, home heating, air conditioning, cable tv, water, electricity, cell phones, landscaping, and repairs combined than most people in our area pay to rent a tiny furnished room or studio apartment.


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## KauaiMark (Apr 3, 2013)

*Paid off at 50 but still owe...*



billymach4 said:


> So I am age 50, and within striking distance of paying off my mortgage. I can make a lump sum payment and be done with



We bought in 1976 with a 30yr mortgage paid it off in 1998 at age 50. Got a home equity loan for improvements that is now is running a loan balance of about 1.5x what we originally paid for the place.

..Mark


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