Pay Off Mortgage (STILL) In This Economy???

[heydude]

OK....so.....my student loans are going to be completely paid off very soon! YIPPIE!

They have a lower interest rate than my mortgage, BUT, I did decide to pay them off because 1)They are with you forever (you can get rid of other debt in bankrupcy, etc. ---I never would have considered this factor before the economy went so far south and all of a sudden ANYTHING became possible) and 2)they are less money total than the mort so it encourages the "snow ball" effect for paying off debt.

So.....I am really excited to start throwing all my money at my mortgage soon.

IS THIS STILL A GOOD IDEA?

Sure, my loan is more than the condo is worth, but who cares about that if it is totally paid for in the end? I do not plan on moving anytime soon.

Sure, the condo association coudl blow up and the neighborhood could go completely south, but I figure.....I take how much total I will end up paying and I divide that by how much rent would be here and that gives me the amount of years I'd have to stay living here. It would be about 10 years. But I figure, even if I get half of what I paid for, that would make it 5 years that I would have to stay living in HELL HOLE (if it turned in to a hell hole) before I'd break even from "accidently" paying it all off.

Any other thoughts?

I do have emergency fund of 6 months.

[razz]

The peace of mind of being mortgage-free is worth it to me.

[Dragline]

Really depend on the interest rate and your excess income. Whatever it is, that's a guaranteed return that's hard to beat by investing the money somewhere else. I would view extra mortgage payments as a savings account or a CD. If you are not sure what else to invest in, this is the best bet.

[Madsen]

On the one hand your portfolio will be much less diversified, but on the other hand you will have much less of a monthly nut to cover once it is paid off. That opens up lots of possibilities for flexible work opportunities that you might not be otherwise able to explore.

[ctg492]

Good Luck in your choice, do what ever you feel is best for you. For us a paid off home is worth every penny.

[chrissieq]

We paid off the mortgage a few years ago and put that amount into our IRAs which we were not funding regularly. It is great to know we own our house outright.

[eleighj]

Pay it off as soon as soon possible; it is liberating things you can do!;););)

Ed

[flowerseverywhere]

congratulations on your student loans.
Have you thought about taking the money and splitting it in half? Half towards condo payoff and half towards emergency fund? At any time you could take a chunk from the EF and pay off even more?

[chanterelle]

I paid off my house 12 years ago and that was a big catalyst to my early retirement, even with the 35% drop in housing prices in this area my house is worth twice what I paid for it.... however I'm not sure what I would do today in this economic environment. Dodging the layoff bullet every 6 months was a big reason for my going FI but the job market was alot better than it is now and my skills were
very varied and much in demand.

12 years ago a 6 months income in a savings account was excellent, but these days friends and neighors, even people on this board are out of work for 1 to 2 years.... i would bump this up considerably.

What are your skills, how secure is your job at the moment, are you putting anything into a 401k or other plan? What interest is your loan and what percent of your present income do you spend for housing... how high would your income % have to go towards early repayment?
How would this play out with the overall quality of your life? If you lost yor job would you still want to remain in the same area? Do you think that your neighorhood is really going to deteriorate...do you see any signs of that now?

Paying off a mortgage is very freeing but needs to be part of a larger life plan. While you are thinking why not put it all into savings and make a cogent plan for 2, 5 , and 10 years down the line. As was mentioned, you can always dump a chunk towards the mortgage at a later date.

[jennipurrr]

We are still gung ho into trying to payoff the mortgage despite rumors of higher interest rates/inflation. Theoretically debt at low interest rates comes out ahead with inflation as it takes "less" money to pay off the debt. But, I don't agree entirely. First, your salary has to go up. That's a big if in this economy whether or nor there is inflation. Everyone I know in real life and on this message board has not regretted paying off a mortgage irrespective of economic conditions.

If you don't ever plan on defaulting on your mortgage I say pay it off IMO.

[daisy]

We didn't start really paying down the mortgage until we had a six month emergency fund established. After seeing so many friends struggle through layoffs, we decided that the emergency fund came first and the mortgage payoff came second. (We were otherwise debt-free at the time.)

[Spartana]

I paid off my house 12 years ago and that was a big catalyst to my early retirement

Ditto for me. I found that having a paid for place meant that I could live on very little money each month - like $500/month with low taxes and low everything! It was very freeing to me and something I felt well worth it. As long as you have a paid roof over your head, most other things can be reduced to a very low level if need be. It allowed me to retire at 42 (had free/low cost medical coverage). What I did was to make big lifestyle changes. After I had an emergency fund set up I did whatever I could to pay down the house asap. Got roommates, worked extra job or OT, got rid of all luxuries like cable TV and home internet access, drove an old car, no debt for anything, and ate rice and beans, beans and rice (ala Dave Ramsey), etc... and put nearly every cent beyond my maxed out IRA and 457 investments (like a 401K for gooberment workers) towards the house payment. Once it was paid off (took 4 years) I felt a huge sense of relief and freedom. I ended up needing such a small amount of money to live on each month that I was actually able to quit work at 42 and live off savings until I reached an age where I could start collecting (greatly reduced) retirement funds (50). I eventually sold my place (before the housing boom alas!) and moved to a MUCH less expensive area, bought an inexpensive paid for house and had cash left over to suppliment my savings/pension. That was 12 years ago today! YAY!

[shadowmoss]

I think I remember that transition. So, it can't have been 12 years! How long ago was the old board that was just one long line of threads, no categories? Nope, not 12 years ago. (LALALALALALA I can't hear you!)

[Spartana]

I think I remember that transition. So, it can't have been 12 years! How long ago was the old board that was just one long line of threads, no categories? Nope, not 12 years ago. (LALALALALALA I can't hear you!)

And I'm STILL only 42!!! Or is that 24? Getting hard to remember at my age :-)! I know, I'm shocked when I think of it myself. I actually had quit my job before I found the old SLN boards but it was "THE" site that had me make the changes to turn my planned 5 year sabbatical into permanent retirement. If it wasn't for the ideas and inspiration I got there (and from all you folks) I'd be back living with 5 roommates in my Crappy Flop House and flipping burgers at Micky D's!

[TVRodriguez]

We're still working to pay off our mortgage, and we bought in 2005--when prices were twice what they are now. Our home was appraised last year for almost 50% of our purchase price, and it's likely worth less now. We actually have some equity only because of the immense amount we have put towards principal, and thanks to that equity, we are in the process of refinancing for a lower rate (we'll still plan to pay off early, but this lower rate will help that happen quicker). Our house is okay, not the greatest or biggest or best (~1200 sq ft, older, solidly working class neighborhood with a few families and a few professionals thrown in), but it's enough for us (although I daydream often about getting a nicer, bigger, better house in a better neighborhood often). I figure we can always rent it out even if we move, and a lower mortgage due to refinancing (or no mortgage due to flat out ownership) can only help in the rental situation. And DH and I both really dislike debt. Really.

Our neighbors a block down, however, are choosing to seek a short sale. They bought in 2006, paid $135,000 more than we did for a similar house, and have no equity whatsoever. They also have a more portable job situation, whereas we are fairly rooted with our jobs here. In fact, the husband there was forced out of a local job and is traveling weekly to work in another region of the country, essentially only being home weekends. Luckily, his job pays for all the travel, but it's a hard way to live, so I understand their desire to leave and seek a short sale.

[The Storyteller]

I'm not sure this has been asked (maybe I missed it) but...

Do you currently owe more than the home's value? If so, how much is the difference?

If you owe less than it's current value, then it's a no brainer... pay it down and off. If the opposite, I suppose it depends on your comfort level and how secure your job is.

[stuboyle]

Does it really matter how much your house it worth? You still owe the bank regardless. If you are upside down then you can't refinance to get a lower rate. Pay it down so you can refinance if you can get a lower rate. Pay as much extra as you dare. If you manage to pay-off your house (as I have), you will be in a tremendously better position if you do get laid-off down the road. If you get a program like Quicken or even just a spreadsheet, you can see how much your interest payments are declining as you make additional payments on your mortgage.

[heydude]

Oh yah, in fact, right now, any extra payment takes off like a year or two in future payment. LOL

[JaneV2.0]

Isn't there some brand-new plan that enables faithful mortgagors to refinance to lower rates? If so, that might help you pay it off faster.

[Zoebird]

I would do it. :)

and congrats on your student loans!

[heydude]

The loan has to be through the government (Freddie Mac, etc.) because Obama needs Congress in order to get all the other banks to do it.

[Packratona!]

The freedom is worth it. Pay it off. Then start saving so you can be debt-free forever.