wow seems like you did a great job paying off your mortgage. I wanted to be done paying interest. Or we could downsize and pay cash for another house (with the equity) at that time. Thanks for the comment,Peter, and congratulations on decimating that mortgage! While chipping away at my student loan debt, I added a half-million dollar construction loan. Eventually, though, we realized we were holding on to the past which was making life in the present more difficult and potentially jeopardizing our future as we were basically hemorrhaging money. What I Learned From Five Years of Writing and Editing for The Billfold, How a Program Assistant Dealing With a New Paycheck System Does Money, Classic Billfold: What I Wanted From My Move to Portland and What I Got, Classic Billfold: Four Business Practices I Will Adopt From My Fourth-Grade Self…, Throwback Thursday: Goodbye, Little Green Couch. The mortgage ‘deduction’ was irrelevant. We also became free. Then I saw you’re blog and started the FIRE path. And I would argue that real inflation calculations (shadowstats or chapwood) show it to be far higher than what financial advisors use. Love your thought process. Guilty as charged, I’m a radiologist. We go back and forth on the issue. Article 45.01 (E) - Employees with Less than One Year’s Service by July 1st Cut-Off 1. Assuming you have a 20% down payment ($9,000), your total mortgage on a $45,000 home would be $36,000.For a 30-year fixed mortgage with a 3.5% interest rate, you would be looking at a $162 monthly payment. It aired on March 4th, 2016, along with the rest of season 4. My son who’s 19 and works as a server contributes to groceries. You cannot compare it to stocks because they are different risk profiles. Going rates could be double or triple in 7 years. While I likely would have come out ahead if I had drawn out my student loan payments, taken out a mortgage on our current home, and invested the difference, I don’t really care. Since then, you’ve paid off $900,000 of the mortgage but the value of the home has dropped to $100,000 . It's now been ten years since we've had a mortgage. As I wind down my clinical work and regular paychecks over the next several years, I do plan to pay off my debt. ET 4. Credit Card Debt. Similar to your choice, it was a personal decision to get rid of the obligation of paying the mortgage, which substantially decreased our monthly living expenses. By paying off the mortgage, you guaranteed a rate of return of 5% since you are not paying it to the bank. Their mortgage costs $1,800 a month—a whopping 45% of their take-home pay. Some of the stores I frequent were on the list, so I bought a few things and the card deposited the rewards to my account. By making consistent regular payments toward debt service you will eventually pay off your loan. Are you related to YoungMC? Out of a $488 monthly mortgage payment, only $100 is going to the principal. We happened to need a garden shed, so I ordered the one my husband wanted and used the card. The investment side only works if you actually invest (and keep) that money in the market. Image of architecture, bank, property - 139061695 Nothing more. Within five years, we had the house completely paid off. That is the LAST thing I would ever do. Thank you for the intelligent insight, Steve. Not bad, considering we needed the shed anyway. The best way to pay off your house early — besides inheriting a lot of money — is to pay extra on your mortgage each month. If you’re under the 43% DTI and have a good credit history, you might consider working with a … The S&P has been on a tear so I would have made more money had I kept the funds in the stock market. Property values, over the long haul, don’t tend to fare much better than keeping up with inflation. Do you choose to use your low interest loans as leverage to invest in the markets? It’s such a low mortgage to begin with, and my $488 monthly payment is extremely reasonable for a 1,500 square foot, three bedroom two bath house in a small city. We actually moved a couple of times and bought a couple more homes. Great question, drg! I am giving it 5 years to see how much progress I make on the mortgage, how big our family becomes, etc. You bring up an excellent point. Both my wife and I are physicians and understand the risk of malpractice exceeding the malpractice coverage is very low. Is the interest tax deductible and are you in a high tax bracket? Most people never assume inflation will come back, but surely when a bankrupt country faces reality the currency takes the biggest hit. But I agree it is a personal decision and probably better decided by temperament than reason and numbers. All kinds of experts tell me I was wrong and stupid to not have debt. You’re young and I bet you’ll have that house paid off by the time you’re 45. Could I prepay my mortgage little by little? While you might do better in the stock market, the returns on paying down loans are guaranteed. You made the last payment – now wait. Then started jumping by $100 increments to $1400 then $1500. It’s good to know where you’re at with deductions. Glad to hear you listened to your DNA and conquered all debts early on. Great food for thought! The math is simple. In fact we’re a single income family of 6. Good point about the AMT, Big ERN. So we made some hard sacrifices to make it happen, but we just didn’t feel right knowing that the mortgage company truly owned our home – and therefore had a stake in our future. I like the idea of keeping all the rent money each month, rather then sending most of it on to the mortgage company. Like you I figured after tax deductions etc I was going to save a little over 3% effective interest by paying off mortgage. and then may decide to down size. I ran the numbers and read the blogs like we all did. I’ve finally paid off my mortgage after 30 years. And why am I listening to them anyway? Use our link to Join and you'll also be entered into a drawing for an additional $250 to be awarded to one new registrant referred by Physician on FIRE this month. You'll likely receive: A statement indicating that the loan's balance has been paid in full The industry standard for a down payment on a conventional loan is 20% of the purchase price. Payment $1248 payment made was $1300. Surveys show that those who pay off their mortgage retire earlier than those that don’t. Not yet at least. Published: May 2, 2020 at 12:50 p.m. Help us continue to do our work by making a monthly pledge on Patreon or a one-time-only contribution through PayPal. I started out with a 30 acre ranch still in residency (can’t get much dumber)….. no cattle. Here’s a word of caution. In fact, our first house was very modest. We continue to maintain our mortgage despite being able to pay it off at any time. 10? I have the freedom to do what I love and not worry about anything. We (my wife and I) have started to put money towards paying off our loans on our business and home mortgage. Please keep in mind that the exact cost and monthly payment for your mortgage will vary, depending its length and terms. Having a mortgage is actually a safe, long term, non callable put on inflation. If your answer would be no, then why are you ok with your mortgage now? Next step: where would I find the extra money? Paid cash, it has subsequently double in value, but being debt free and having cash/liquidity to act when opportunities arise with any investment or life event has served me well. Since then, you’ve paid off $900,000 of the mortgage but the value of the home has dropped to $100,000 . The numbers might suggest you leave it alone, but you will feel richer when your largest expense suddenly drops to zero. Track your investments for free with Personal Capital. We only know this in hindsight. Use this calculator to determine how much longer you will need to make these regular payments in order to eventually eliminate the debt obligation and pay off your loan. It only took 12 years because I was listening to the common belief of not to pay off your mortgage. By following these 6 nerdy money guy rules, we'd be completely debt and mortgage free by the time we turned 36 years old. Get a 1% yield bump on your first investment in commercial real estate, Earn easy 1099 income with quick surveys for healthcare professionals with InCrowd. The first piece of land we purchased 4 years ago is now under contract to sell to a developer at a hefty profit. I had consolidated my student loans to a low interest rate, but chose to pay them off with a lump sum that came in the form of a signing bonus a few years shy of my fortieth birthday. I found this recent podcast at Doctor Money Matters interesting, and the guest has a website with dozens of posts on the subject. We are deep in the AMT and for us, the full mortgage interest payment is deductible at our marginal tax rate. I wrestle with this decision almost daily…and if I bring it up again my wife may kill me…. It’s impressive how much you can still spend on housing even after you’ve paid off the mortgage. This decimation is of course the exact mirror image of the retirees’ devastated investments. It may not be worth the extra volatility. I hope this motivates others to follow suit! Not to brag or anything, but my wife “retired” at 24 when we exchanged vows. If you added to your contributions the extra $900 from your paid-off mortgage, your interest earnings would be $173,599 after 15 years. Lastly, any temptation to take out a new loan on your now-paid-for house and invest it in the stock market? For the most part, I ignored the math, although I knew in my head what the consequences of mortgage payoff would be. I attacked the student loans first and then the mortgage which I ended up paying completely off at year 10 of the loan. I was a young doc and felt it was my time to shine. Consider it a back to the future. We'll finally pay it off when we're 80 and 88, LOL. All that extra cash flow will then go towards building up an after tax brokerage account until i feel like I can retire. However, one issue that hasn’t been discussed much is risk of malpractice. Little Money, few expenses – one type of freedom. What this means is that let’s say a doc with a paid off house and a 2-3 m portfolio will find his net worth divided by 2 or 3 and her cost of living increasing at 10%/year. At a doctor income, your investment tax rate will be at least 23.8%. On the one hand, I would love to be out of debt ASAP because I figure we could then live off of 50 to 80 k per year depending on lifestyle preferences (our part time would still likely be much more than this). We also have a few rental properties and plans to buy at least two more once we save up more cash after our house is paid off. Sure, we’ll get some of that money back when we sell, but definitely not all. If you pay $1,820 per month instead of $1,520, you pay almost $80,000 less in interest and pay off your loan in 21 years and six months. Thank you for your thoughtful post and congratulations!! I can go part time (if I choose – fortunately, I LOVE what I do) whenever since we have managed ‘lifestyle’ creep and spend well below our income. I won’t do that to you, but here are a few: Ultimately, the answer depends on a number of factors. Where ever I have looked, rents are less than that, sometimes much less than that e.g. When I said debt-free, I didn’t mean having a zero or positive net worth with assets equal or greater than debts. It’s possible, but if I start to see that trend I can Refi again at a locked rate for either 15 or 30 years. But there was also a possibility I could have lost more depending on cycle of the market. I am only planning to work 7 more years, but that could change if I could modify the work environment, drop call, etc.. You can pay it down aggressively and plan to be debt free by 40, rather than pay it all off in the next couple years.