Petrino1 said:
JDCAG (NOT Colin) said:
infinity ag said:
Pepper Brooks said:
My guess is most will tell you that the right answer is to keep paying the minimum and put that money to work somewhere that earns >2.5% interest.
However, the value of that feeling of being debt free, owning your home outright, and hitting your milestone is incalculable. I personally think you're justified either way.
Edit: IB4 "you never truly own a home in TX due to property taxes". Blah blah.
Exactly right.
I had a low rate mortgage for a house I bought in 2010 and put down 20%. I aggressively paid off and completed all payments in 2018. Debt free completely, no loans since. Feels SO GOOD. Especially since I got laid off multiple times since and am even now looking for a job.
The feeling of being debt free is great. Yes, maybe I could put the money in the market and made x%. But that doesn't make me debt free. It is a mental thing. But whatever makes the OP happy. I have friends who pay minimum on all loans and invest everything. Sometimes they make losses and are on the hook for the debt and the losses.
It's always fascinating to me how different folks can view the same things in such different ways.
To me, the idea that you may get laid off soon does not equate to me wanting to have a mortgage free home. That makes me want to have liquidity. Let's say you can pay off $50k of a mortgage that is running you $1,500/month. Recouping that $50k via the lack of $1,500 per month in payments is going to take you several years. If an emergency hits and you try to extract that value out of your home, you're likely doing so at a much higher interest rate than what you gave up when you paid it off.
Perhaps I'm missing something, but this is why I've always struggled when people point to future unexpected trials (job loss, major emergency expense, etc.) as a reason to be happy their home is paid off. I totally get why it makes sense to have $X in cash with your house paid off vs $X in cash with a house payment, but I don't think I've seen an explanation where giving up a good chunk of cash to pay off a mortgage has led to being more able to weather a situation that comes in the future (assuming we're talking about an environment where mortgage rate is lower or on par with basic FDIC insured accounts).
That said, I understand there is emotional value to people in seeing the number go away.
Its not so black and white, a lot of folks have plenty of cash savings and taxable investments where they can weather a layoff or an unexpected emergency. A monthly mortgage/rent is typically a person's largest monthly expense. If you can eliminate your largest monthly expense, you will be in a much better position if you ever get laid off or have an expected emergency because your monthly expenses are lower. I would rather not have to pay a $2-3k per month mortgage if I get laid off.
Although, I do see your point. As always, it depends on a person's financial situation. For some it might be better to put the money to work, for others it might make more sense to pay off the mortgage. With that said, being debt free is never a bad thing.
I guess where I get lost is these arguments seem to ignore the fact that you have a boatload of cash going away when you pay off the mortgage. Put another way, I'd rather pay $2-3k/month while having $50k in the bank than pay $0/month (for mortgage) while having $5k in the bank.
Who is better prepared to withstand a 3 month job hunt?
Person A: $1,500/month mortgage, $50k cash
Person B: $0/month mortgage, $0 cash
Since we're simply talking about whether the person pays off their mortgage, you can assume things like rainy day funds are all equal. At absolute worst, they're in "equal" positions (if they have enough cash to where it doesn't matter either way). But the person with the cash can handle several years worth of mortgage payments sitting in cash.
Every argument I see for clearing the mortgage putting you in "better position" seems to be acting as if there is no cost to doing so - i.e. they act like the person
with the mortgage doesn't still have that same cash sitting aside.
Now, if the argument is pay off your mortgage or go spend the money on trips, cars, house projects, etc. then I totally understand.
But I guess that is why I think this is mostly an emotional decision, cause I just don't see a situation where financially it puts you in "safer" or "better" position. Just that it takes some emotional weight off of your shoulders - totally valid and fine if that is what somebody is after.
Even more so because if you opt to payoff your mortgage, it's done. If you opt to sit tight, you can always make the move tomorrow if financial conditions make it more advantageous.
