I'd appreciate the feeling of having it paid off but mathematically it doesn't make sense right now with a 3.1% rate and itemized deductions. Maybe different one day but better off for me to invest that money elsewhere.

permabull said:

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I don't really understand the whole "security" of having the mortgage paid off. I am already paying more in property tax and insurance than I am towards the mortgage and when I factor in utilities and repairs, the actual mortgage is probably only 30% of my real housing expense. I'll still lose my house if I don't pay taxes or if I cancel my insurance and the house burns down, having the mortgage paid off doesn't really give me any extra security.

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especially confusing in a homestead state like texas.

permabull said:

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I don't really understand the whole "security" of having the mortgage paid off. I am already paying more in property tax and insurance than I am towards the mortgage and when I factor in utilities and repairs, the actual mortgage is probably only 30% of my real housing expense. I'll still lose my house if I don't pay taxes or if I cancel my insurance and the house burns down, having the mortgage paid off doesn't really give me any extra security.

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Because that's not the norm. The property is appraised based on market value that starts at what you purchase it for. With the real estate market the last 20 years you would have to have a loan almost at the end of it life (or refinanced out) and never have protested your taxes.

Based on your scenario not paying $300 a year and fighting your property taxes cost you exponentially more. Ask my dad how I know this.

He bought his home in 2000 and paid X. I bought a slightly larger home 4 blocks over in 2015 for 5X. We pay the same amount in property taxes because I fought mine every year while he never did. He should be paying half what I am based on the 10% max rate increase. He about puked when I showed him the cumulative amount of money (year over year since I bought my house) he lost by not paying attention.

AgLA06 said:

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permabull said:

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I don't really understand the whole "security" of having the mortgage paid off. I am already paying more in property tax and insurance than I am towards the mortgage and when I factor in utilities and repairs, the actual mortgage is probably only 30% of my real housing expense. I'll still lose my house if I don't pay taxes or if I cancel my insurance and the house burns down, having the mortgage paid off doesn't really give me any extra security.

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Because that's not the norm. The property is appraised based on market value that starts at what you purchase it for. With the real estate market the last 20 years you would have to have a loan almost at the end of it life (or refinanced out) and never have protested your taxes.

Based on your scenario not paying $300 a year and fighting your property taxes cost you exponentially more.

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I am not sure how you reached your conclusions. First, if you've owned a home in a reasonable location in Texas for 10 years or more, this is certainly the norm. I am in the same boat. A low-interest loan, coupled with rising taxes and insurance, along with Father Time almost assures most will end up here.

Second, did he say he didn't protest his taxes? I didn't see that (sorry if I missed it). You can protest all you want, but you won't always win - property tax burdens in Texas have increased significantly as tax assessor valuations (and market values) have increased. So, it is quite possible (even probable?) that taxes and insurance can outsize principal and interest (they do by quite a bit for me, too).

I'm still not sure what your point is? You didn't tie back to the concept of "added security" from paying off your mortgage. I'd say this varies significantly by person, and for people with significant non-home assets, it's not a big impact on overall risk. For people where their home is their primary asset, I'd argue that paying it off and negatively impacting ability to grow other financial assets actually reduces security (and increases real estate value fluctuation risk), in most cases.

You're right. I didn't consider having a home cheaper than the median home price. Having a cheaper house (and mortgage) would definitely contribute to property taxes and insurance costing more than the home. I just don't know anyone in that scenario.

But that could be a different discussion on variable costs impacting the decision on how one could have used the once cheap interest rates to their advantage.

AgLA06 said:

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You're right. I didn't consider having a home cheaper than the median home price. Having a cheaper house (and mortgage) would definitely contribute to property taxes and insurance costing more than the home. I just don't know anyone in that scenario.

But that could be a different discussion on variable costs impacting the decision on how one could have used the once cheap interest rates to their advantage.

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Ummm, you do realize that the median home price has nothing to do with it, right? I will say that my home is a bit above the median home price. Both property taxes and insurance go up roughy in line with the underlying home valuation. In fact, this effect can be much more common for higher-priced homes, due to "wearing off" of the homestead exemption (percentage-wise), and insurance requirements being more beefed up for luxury homes (ask any California homeowner in a wildfire-prone area).

Make sense, now?

No.

My loan amount was $450kish after the down payment. Internet rate 2.5%.

Mortgage payment is $2,400.
Taxes and insurance $1k

AgLA06 said:

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No.

My loan amount was $450kish after the down payment. Internet rate 2.5%.

Mortgage payment is $2,400.
Taxes and insurance $1k

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OK - let's say that was in 2010. Fast forward to today, your home value might realistically be $1.2 million. Taxes would be triple what they were, and insurance might well be, too. Your mortgage stays the same. Therefore $3000 > $2400.

I can see the comfort in paying off the mortgage.

My principal and interest is 62% of my mortgage that includes taxes and insurance. And that total is 27% of our total must have living expenses.


If myself or my wife lost a job
we could make up most of the remainder by a pausing the remaining 401K, 529 and savings account and only be short a few thousand a year that we could pull from savings for a while if needed. It would mean no restaurants, no going out or doing much of anything but doable.

I get the premise. I'm telling that's not the case. That's why I gave real numbers. The property values have gone up too much for the capped taxes to be able to keep up.

i purchased in 2017 and refinanced in 2021 and my taxes + insurance are already ~44% of my total payment. it won't be long til its over 50%.

I bought in 2021 at 2.7% and my taxes + insurance are more than my P&I.

It's very quickly becoming the norm in north Texas.

If yall are wondering about my numbers I did refinance several years back for a 15 yr, 2.0%

AgLA06 said:

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No.

My loan amount was $450kish after the down payment. Internet rate 2.5%.

Mortgage payment is $2,400.
Taxes and insurance $1k

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I've been in my home for 10 years, 200k but i put 20% so about a $700 mortgage. Tax is $5500 a year and insurance is about $2000 so a little over $600 a month for those two. Electric, lawn etc is $300 a month and it seems like every year I have to spend $1500 to trim the trees back on top of everything else it takes to keep a house up. So no I won't be resting any easier once that $700 payment goes away.

I don't know how you are paying only $1000 a month in insurance and tax on a $600k+ house.

permabull said:

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AgLA06 said:

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No.

My loan amount was $450kish after the down payment. Internet rate 2.5%.

Mortgage payment is $2,400.
Taxes and insurance $1k

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I've been in my home for 10 years, 200k but i put 20% so about a $700 mortgage. Tax is $5500 a year and insurance is about $2000 so a little over $600 a month for those two. Electric, lawn etc is $300 a month and it seems like every year I have to spend $1500 to trim the trees back on top of everything else it takes to keep a house up. So no I won't be resting any easier once that $700 payment goes away.

I don't know how you are paying only $1000 a month in insurance and tax on a $600k+ house.

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That's right at what I pay for about the same


I think smaller/older houses have more of the value tied up in land. Newer houses are on tiny lots