Pay off house early?

[alaskanseminole]

I would look into funding a Roth IRA

I am. I have a Roth 401K plus another one with TDA. I have a Roth and a Trad with TDA (currently unfunded monthly), a non-tax shelter portfolio and my wife's Trad IRA. I stopped funding my personal retirement accounts when I took the pay cut to go govie civilian for 2 years. Now I'm rolling 2 years worth of FERS (pension) and TSP into my Trad IRA and taking advantage of AT&T's 6% matching 401k.

 

[LuteHawk]

Tradition owns a mansion in Florida. He calls it The
Tradition Manor. He would like to refinance it and
have it paid for by his 65th birthday. Do you have
any financial advice for him?

 

[ConvenientParking]

That last point is something else to consider. You'd hate to be too aggressive paying down debt now and then Texas secedes and no longer recognizes liens of American financial institutions.

 

[joelbc1]

I'll have enough $$ in one of my IRAs to pay off my house when I'm 55 (54 if I cross my fingers). Pay it off early, take the 10% penalty and retire OR retire and pay off the house at 59 1/2 and save penalty.

Whatcha got HROT millionaires? What would you do if you were a lowly working-class peasant?

Rate = 2.75 fixed
Age = 47
Other debt = 0

Why would you cash out an IRA ( borrow from your retirement) to pay off something you can afford with cheap money? What do your financial guys tell you? You are at the age where you should probably have financial guys ...you can really start nesting the retirement cash away now at your age.,

 

[alaskanseminole]

Why would you cash out an IRA ( borrow from your retirement) to pay off something you can afford with cheap money? What do your financial guys tell you? You are at the age where you should probably have financial guys ...you can really start nesting the retirement cash away now at your age.,

I have a financial team. They told me not to do it. I just looked at the POP on my contract, and compared it to where I'll be when I'm ready to retire and noticed I'd have enough money (in the wrong place) to pay off the house at 55 instead of 58 1/2. So, IF I needed to, I could pay off the house and retire early. Nothing more. My wife's IRA isn't factored into our investment for retirement. It's literally ear-marked as a mortgage pay-off. Anything left over after that is just a bonus.

 

[scruffyhawk]

I have a financial team. They told me not to do it. I just looked at the POP on my contract, and compared it to where I'll be when I'm ready to retire and noticed I'd have enough money (in the wrong place) to pay off the house at 55 instead of 58 1/2. So, IF I needed to, I could pay off the house and retire early. Nothing more. My wife's IRA isn't factored into our investment for retirement. It's literally ear-marked as a mortgage pay-off. Anything left over after that is just a bonus.

You still are better off putting the extra mortgage payment you propose into the IRA and just set up an auto withdraw/payment between the mortgage and IRA once it is tax free eligible until the original 15 year term is completed. Just look at the IRA as a job instead of a piggy bank. Your return on the IRA balance is going to be higher than the mortgage rate in hopefully every year of your current mortgage. Make your money work for you so you don't have to.

 

[Greenway4Prez]

These interest rates are so incredible that it has me considering renting my house when it’s time to move (we’ll need more space in a few years) as opposed to selling it. We could rent our place out for nearly double what we’re paying for it.

If interest rates go up considerably though, we’ll of course have to reconsider.

 

[SoDakHawk]

There’s one psychological thing about paying off your mortgage I think is interesting. Anyone who’s done it knows exactly how much your property tax and your homeowners insurance will be and that it’s your responsibility going forward. But man, it hits you square in the nuts with a dose of reality when they’re no longer buried into your monthly payment via your escrow and you get the actual bill. When you’ve just paid your mortgage so long, it just seems kind of hidden. Again, it’s obviously not something someone who’s financially literate isn’t planning for, it’s just a little bit of a downer when you think FREEDOM! The chains of the mortgage are off! And then you start saving the size of the rent payment you used to make for your two bedroom apartment each month to cover them.

I mean, if you want to take the risk you don't HAVE to carry homeowners insurance but there is still RE taxes. You come to realize you don't actually own anything. You might think you own real estate when in actuality you are just renting it from the ultimate landlord, the government.

 

[86Hawkeye]

I'll have enough $$ in one of my IRAs to pay off my house when I'm 55 (54 if I cross my fingers). Pay it off early, take the 10% penalty and retire OR retire and pay off the house at 59 1/2 and save penalty.

Whatcha got HROT millionaires? What would you do if you were a lowly working-class peasant?

Rate = 2.75 fixed
Age = 47
Other debt = 0

No way. At that low rate of interest you can invest your money and make a lot more than 2.75% over the same timeframe.

Leave it alone. Don't let your obsession with being debt free get in the way of a smart decision.

 

[Hawki97]

I mean, if you want to take the risk you don't HAVE to carry homeowners insurance but there is still RE taxes. You come to realize you don't actually own anything. You might think you own real estate when in actuality you are just renting it from the ultimate landlord, the government.

I wish the homeowner's insurance was the small bit! Welcome to Johnson County, Iowa ICCSD school district!

 

[86Hawkeye]

Since the standard deduction was raised, my itemization hasn't been enough counter it.

It' simply a matter of freedom. No house payment = I don't need to work. It's not about it being a smart financial decision--I know that it isn't mathematically. Regardless, I'll just make extra payments from now until I'm 58 1/2, and draw from that particular IRA to pay off the remainder and just retire then penalty free. Working an extra 4 years likely isn't a big deal. It was just a thought.

I would still invest what you would pay in extra payments and not pay down the note early. When you do retire, you'll likely have what you need from that (after-tax) investment to keep paying your monthly mortgage bill.

Again, at 2.75%, you can likely make a higher rate of return, even using after-tax money and considering capital gains taxes later. The 2.75% is pretty much free money in real terms.

 

[Tenacious E]

I mean, if you want to take the risk you don't HAVE to carry homeowners insurance but there is still RE taxes. You come to realize you don't actually own anything. You might think you own real estate when in actuality you are just renting it from the ultimate landlord, the government.

I know you were making an extreme statement but not carrying homeowner's insurance for a couple of grand a year is batshit crazy.

 

[Tenacious E]

I would still invest what you would pay in extra payments and not pay down the note early. When you do retire, you'll likely have what you need from that (after-tax) investment to keep paying your monthly mortgage bill.

Again, at 2.75%, you can likely make a higher rate of return, even using after-tax money and considering capital gains taxes later. The 2.75% is pretty much free money in real terms.

I agree completely, unless one believes the market is going to collapse (which I don't). Put that money to work and let that shit compound baby!

 

[Rudolph]

@Rudolph just got smashed by Lute. Great start to the weekend

Imagine a trailer just randomly placed in an historic urban core neighborhood. Wood habitat that ass fasho.

 

[ConvenientParking]

Imagine a trailer just randomly placed in an historic urban core neighborhood. Wood habitat that ass fasho.

That's literally every 5th block on the south/southeast side of Des Moines

 

[joelbc1]

I’m puzzled by anyone who would not choose to retire early if they are able. Wealth and assets are meaningless... especially accumulating them at age 60 with little chance to do anything with them; enjoy the time to go live while you still can in good health.

And I would think the “empty nest” years would be great to work as you can really sock some serious money away into retirement accounts...Personally, I know the last few years I worked before 65 allowed me to retire more comfortably.

 

[joelbc1]

I have a financial team. They told me not to do it. I just looked at the POP on my contract, and compared it to where I'll be when I'm ready to retire and noticed I'd have enough money (in the wrong place) to pay off the house at 55 instead of 58 1/2. So, IF I needed to, I could pay off the house and retire early. Nothing more. My wife's IRA isn't factored into our investment for retirement. It's literally ear-marked as a mortgage pay-off. Anything left over after that is just a bonus.

Then do it. But I don’t think there is a “ one size fits all” for everyone. Smartest thing we ever did after the age of 40 was to hire a “financial guy”...it certainly made our lives easier.

 

[TexSkills]

I'll have enough $$ in one of my IRAs to pay off my house when I'm 55 (54 if I cross my fingers). Pay it off early, take the 10% penalty and retire OR retire and pay off the house at 59 1/2 and save penalty.

Whatcha got HROT millionaires? What would you do if you were a lowly working-class peasant?

Rate = 2.75 fixed
Age = 47
Other debt = 0

I make bi-weekly payments on mine to cut the interest but I've held off on refinancing because I know we'll probably move in the next 5 years.

The only problem I have is that my wife wants a bigger house. She doesn't seem to grasp that this isn't the market to do that in. The house down the street from us got 20 offers in one weekend and a cash buyer from New York paid $50K over asking. The resale market is dry in NE Florida and I'm not building a house when lumber and material costs are 30% above normal because of COVID.

Our house is 2600 square feet and I have between a 1/4 and 1/3 of an acre lot. Not at a point where I need to move.

 

[SoDakHawk]

I know you were making an extreme statement but not carrying homeowner's insurance for a couple of grand a year is batshit crazy.

Yes, I was more commenting about how none of us own anything, we're just renting from the government. Don't pay your rent (taxes) and they'll auction off your property.

 

[2winCitiesHawk]

There’s a couple ways to avoid the 10% early withdrawal penalty. Check out SEPP.

TLDR:

With a SEPP plan, funds are withdrawn penalty-free through specified annual distributions for a period of five years or until the account-holder turns 59½, whichever comes later. Income tax must still be paid on the withdrawals.