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Re: Who has paid off their house? [Re: second 70] #2676321
07/10/19 02:49 PM
07/10/19 02:49 PM
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Prospect, PA
BSB67 Offline
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Sure. The point was you went off on a the tax break advise when the tax deduction is essentially non existent for most.

Re: Who has paid off their house? [Re: second 70] #2676322
07/10/19 02:54 PM
07/10/19 02:54 PM
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State of Jefferson
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Originally Posted by second 70
Originally Posted by Soopernaut
Originally Posted by second 70


To go in debt on a house loan for a tax write off is terrible advise. To be able to buy a house to live in is another story. It's simple math. The average tax payer pays less than 20% effective tax rate. So here's the math you pay a bank $10,000 a year interest to get a $2,000 tax write off for a loss of ($8,000) which is -80% return. Now instead keep the $10,000 pay the $2,000 tax and keep the $8,000 extra you didn't pay the bank. Simple Plus if you're married and don't have over $24,000 in itemized deductions ($12,000 single) you get $0 tax break.


I must have been doing it wrong all those years. I wrote off the entire amount of interest I paid, not a percentage of the total. I've been doing that for 20 years.


Not doing it wrong. You write off $10,000 which would have been taxed @ 20% so your savings in tax is $2,000 even thou you paid $10 to get it. If you're in a 15% bracket your tax savings is only $1,500. Tax law changed last year and few people will have enough to itemize.

Lets say you have no interest to write off and make $100,000 and are taxed @ 20% your tax is $20,000. Now let's take the same income minus the $10,000 interest write off. $100,000 - $10,000= $90,000 @ 20% is $18,000 tax. For a savings of $2,000. You write off the entire amount but you only save what it would be taxed at. The lower your tax bracket the lower your savings will be.


Correct, with the minor caveat that tax brackets don't work like that, though it makes the example much easier laugh2 In reality, if you're in the 20% tax bracket, only the income within that bracket is taxed at 20%. The income within the lower brackets is taxed at their own rates. I know you know this, but I just want to clarify for anyone else reading it wink

Especially in business, there are a lot of things you can write off. But, you have to spend the money first, and the tax reduction is rarely 1:1 with the amount you spent.

-------

I think our rental is ~6 years ahead of schedule to get paid off, and the main property is ~6 years into a 20 year mortgage.

We do have some friends that lived cheap for about 7 years, then bought a fixer-upper for ~$110k, in cash. eek


If you ever find yourself in a fair fight, your tactics suck.
Re: Who has paid off their house? [Re: hooziewhatsit] #2676551
07/11/19 11:12 AM
07/11/19 11:12 AM
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I came up with a method a few years back that gave me the benefits of having my house paid off while also keeping the benefits of not having it paid off. That trick worked for me but it probably doesn't apply to most people. It is something I'd recommend to others who have the cash on hand to pay off their mortgage though.

Re: Who has paid off their house? [Re: AndyF] #2676592
07/11/19 02:21 PM
07/11/19 02:21 PM
Joined: Dec 2007
Posts: 17,351
Mass
DAYCLONA Offline
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Originally Posted by AndyF
I came up with a method a few years back that gave me the benefits of having my house paid off while also keeping the benefits of not having it paid off. That trick worked for me but it probably doesn't apply to most people. It is something I'd recommend to others who have the cash on hand to pay off their mortgage though.



Do we wait for your "infommercial"?... or you already have the CD album of "Pay off your Mortgage, but keep the bennies" available for 3 easy installments of $96.49? inquiring minds are waiting smile

Re: Who has paid off their house? [Re: DAYCLONA] #2676598
07/11/19 02:39 PM
07/11/19 02:39 PM
Joined: Dec 2007
Posts: 16,666
Puttin' on the foil in Charles...
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Originally Posted by DAYCLONA
Originally Posted by AndyF
I came up with a method a few years back that gave me the benefits of having my house paid off while also keeping the benefits of not having it paid off. That trick worked for me but it probably doesn't apply to most people. It is something I'd recommend to others who have the cash on hand to pay off their mortgage though.



Do we wait for your "infommercial"?... or you already have the CD album of "Pay off your Mortgage, but keep the bennies" available for 3 easy installments of $96.49? inquiring minds are waiting smile


Inquiring minds are also waiting for you to answer the question I posed to you earlier. whistling


Earning every penny of that moderator paycheck.

DBAP
Re: Who has paid off their house? [Re: AndyF] #2676763
07/12/19 09:18 AM
07/12/19 09:18 AM
Joined: Jan 2003
Posts: 7,326
Albany, NY
67SATisfaction Offline
The member whose name is actually Art
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By having a steady income, managing a budget to keep debt under control, having the discipline to put money into a mix of retirement, college, or investment accounts, and paying off our mortgage ---> your net worth is on solid ground and should grow.

Paying off your house is a good goal, but the cost of mortgage debt is historically cheap so we don't prioritize it. Does anyone remember mortgage rates in the late 70's? Or credit card interest rates? It was crazy high compared to now, and I remember my parents really struggling.

Originally Posted by AndyF
Originally Posted by SomeCarGuy

That explains the retirement shortfall. Look at any chart of savings amounts by age. People either save nothing, or they invest in their house. A house is a nonliquid investment and is about as non diverse as it gets. Lose a big employer, neighborhood goes to pot, anything like that and you can get hurt. It’s just mind boggling how little people understand about personal finance. Lose tax breaks, lose compounding, but hey I own my house. “I don’t have debt, I’m rich”.


There are some general rules that most people agree with such as pay off high interest debt first and always take the match, but after those general rules it gets more difficult. There isn't a good answer to the question about putting funds towards debt reduction vs. using those funds for additional investments. It is a question of deleverage vs. leverage. There is no answer to that question going forward, only in hindsight.

My personal approach was to fund the retirement accounts first, add to the kids college funds next, and then apply extra funds after that to the house payment. That approach worked for me but it didn't work for others.


Usually "a plan" based on the circumstance will work well for anyone who sticks with it. I think "rich" people do care - they didn't get where they are by not caring. Financial professionals keep their jobs for a reason; they can show results.

Yes, a very important component of anyone's household financial plan is managing debt. Short term is the costliest, and perhaps the hardest habit to kick. Credit card debt will drain cash that is critical for anyone with a goal of building equity.

Our personal approach is largely the same as Andy's... with an added piece that fits our particular situation. Before putting extra cash towards the mortgage, we put some into a few investment account(s) and been doing that since before we even bought our house. The investments have a record of earning more % than the mortgage costs us. Taxation enters into the picture, but our CPA offers good advice to manage it.

- Art



Last edited by 67SATisfaction; 07/12/19 09:28 AM.

1965 Satellite hardtop 361/2bbl, console 727, open 2.76
1967 Satellite convert 383/4bbl, column 727, open 3.23
1975 Maserati Bora, US spec 4.9L DOHC hemi V8, 5-spd ZF man
1977 Maserati Khamsin, Euro spec 4.9L DOHC hemi V8, 5-spd ZF man
1982 Alfa Romeo GTV6, 2.5L SOHC hemi V6, 5-spd man transaxle
2007 Aston Martin DB9, 6.0L DOHC V12, 6spd man transaxle
Re: Who has paid off their house? [Re: AndyF] #2676764
07/12/19 09:20 AM
07/12/19 09:20 AM
Joined: Jan 2003
Posts: 7,326
Albany, NY
67SATisfaction Offline
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Originally Posted by AndyF
I came up with a method a few years back that gave me the benefits of having my house paid off while also keeping the benefits of not having it paid off. That trick worked for me but it probably doesn't apply to most people. It is something I'd recommend to others who have the cash on hand to pay off their mortgage though.


The quickest "benefit" I can think of, of having a mortgage, is the interest write-off... ? So what's the gig? We are listening.. .


1965 Satellite hardtop 361/2bbl, console 727, open 2.76
1967 Satellite convert 383/4bbl, column 727, open 3.23
1975 Maserati Bora, US spec 4.9L DOHC hemi V8, 5-spd ZF man
1977 Maserati Khamsin, Euro spec 4.9L DOHC hemi V8, 5-spd ZF man
1982 Alfa Romeo GTV6, 2.5L SOHC hemi V6, 5-spd man transaxle
2007 Aston Martin DB9, 6.0L DOHC V12, 6spd man transaxle
Re: Who has paid off their house? [Re: 67SATisfaction] #2676765
07/12/19 09:26 AM
07/12/19 09:26 AM
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Michigan
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I paid mine off as well last year. Darn nice to not be dealing with a monthly stroke anymore.

But, I am looking forward to hopefully being able to buy someone else a house or maybe multiples. Looking ahead to 2020 it appears that those of us that actually take that responsibility on should be expected (out of the goodness of our hearts) to pay for those that don't. I'm all for it...of course.


Never, ever argue with an IDIOT. They will drag you to their level and then beat you with their years of experience
Re: Who has paid off their house? [Re: oldjonny] #2676768
07/12/19 09:44 AM
07/12/19 09:44 AM
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Sac, CA
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Seems to me that it isn't as simple as comparing the mortgage interest rate with the return rate of the alternative investments. Wouldn't you have to take the increased home value into account? In other words, the extra money you put into paying down the house is worth more as the home value increases. Is this correct?

Re: Who has paid off their house? [Re: 67SATisfaction] #2676936
07/12/19 09:10 PM
07/12/19 09:10 PM
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Prospect, PA
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Originally Posted by 67SATisfaction
....... ---> your net worth is on solid ground..........


Net worth, not much more really matters.

Re: Who has paid off their house? [Re: 67SATisfaction] #2676957
07/12/19 11:21 PM
07/12/19 11:21 PM
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Oregon
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Originally Posted by 67SATisfaction
Originally Posted by AndyF
I came up with a method a few years back that gave me the benefits of having my house paid off while also keeping the benefits of not having it paid off. That trick worked for me but it probably doesn't apply to most people. It is something I'd recommend to others who have the cash on hand to pay off their mortgage though.


The quickest "benefit" I can think of, of having a mortgage, is the interest write-off... ? So what's the gig? We are listening.. .


In my case the interest write off didn't apply so that wasn't a factor. But keeping a stack of cash on hand was a benefit since a stack of cash can be used for lots of things. So if you have enough money to pay off your house it might be worthwhile to keep the cash on hand rather than use it to pay off the mortgage. That way you don't have to run to the bank and get a line of credit if you need some money.

The flip side is that paying off the house provides a measure of security. Especially to some people. Others might not care so much but some people really care a lot. So if you're one of those people who care a lot you can put the cash in a dedicated bank account. Have the mortgage payments pulled from that bank account. If it is a money market account the interest you're paid might be close to the interest you pay on the mortgage. When you do it this way you basically have the house paid for but you have the cash if you really, really need it.

The other benefit of doing this is that you have a steady stream of mortgage payments which will help your credit score. If you pay off the house and don't have any other debt then your credit score will dip a bit.

Re: Who has paid off their house? [Re: mopowers] #2676958
07/12/19 11:29 PM
07/12/19 11:29 PM
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Originally Posted by mopowers
Seems to me that it isn't as simple as comparing the mortgage interest rate with the return rate of the alternative investments. Wouldn't you have to take the increased home value into account? In other words, the extra money you put into paying down the house is worth more as the home value increases. Is this correct?


Not really, in fact it is probably the opposite of that. Paying off your house decreases your leverage so any gain in value is at a reduced percentage. If you put $10,000 down on a house that is worth $100,000 and the house goes up in value to $110,00 you just doubled your money. If you pay $100,000 for a house that is worth $100,000 and the value goes up to $110,00 then you made 10%. Obviously doubling your money is better than getting a 10% return but the leverage is brutal on the down side.

If you own the house and the value drops to $90,000 you don't really care since you still own the house. If you put $10,000 down and the value drops to $90,000 you are broke. If the value drops to $80,000 you're underwater.

Re: Who has paid off their house? [Re: AndyF] #2677595
07/15/19 11:11 AM
07/15/19 11:11 AM
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central il.
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second 70 Offline
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That only works if you sell the house and the $90,000 was a free loan. Here's a calculator that will show you how much a loan for $90,000 @ 4% for 30 years will really cost. After 5 years you would have paid $25,780.2 in total payments and still owe $81,244 of the 90 you borrowed. So the loan for only 5 years cost ($17,024.2). Total payment $154,683 $64,683 interest.

https://www.amortization-calc.com/mortgage-calculator/

Re: Who has paid off their house? [Re: nutso suave] #2729433
01/02/20 05:48 PM
01/02/20 05:48 PM
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Fort Worth, Texas
3hundred Online work
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Originally Posted by nutso suave
Who has paid off their mortgage?


wave ME! Got the "confirmation of loan payoff" letter today! boogie boogie boogie

I thought I had one more full regular payment and a partial for payoff, apparently I had enough escrow accumulated so they applied it to the mortgage. So I'm all done, be 65 in 5 months.

I hardly have anybody to share the info with anymore so you guys are elected. devil wave

Robert


'68 Fury Convertible
'69 300 Convertible
'93 Ramcharger 5.7 Hemi
'93 Ramcharger 318 sold
'01 3500 4x4 Cummins 6 speed sold
'13 300 S sold
'15 Durango 5.7 Hemi
'16 300 S Hemi
Re: Who has paid off their house? [Re: 3hundred] #2729436
01/02/20 06:01 PM
01/02/20 06:01 PM
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Kirkland, Washington
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I’m 60, retired three years ago, and have been debt free for over ten years.
If your debt is low interest...like 2-3 percent, it’s not a real big deal (still not great, but likely not a huge problem, depending on your net worth)

If it’s not low interest, pay if off........unless you are really good at playing the markets.

Re: Who has paid off their house? [Re: 3hundred] #2729497
01/02/20 09:28 PM
01/02/20 09:28 PM
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USA
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hudsonhornet7x Online content
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Originally Posted by 3hundred
Originally Posted by nutso suave
Who has paid off their mortgage?


wave ME! Got the "confirmation of loan payoff" letter today! boogie boogie boogie

I thought I had one more full regular payment and a partial for payoff, apparently I had enough escrow accumulated so they applied it to the mortgage. So I'm all done, be 65 in 5 months.

I hardly have anybody to share the info with anymore so you guys are elected. devil wave

Robert



That is awesome Robert, Congrats!

Re: Who has paid off their house? [Re: hudsonhornet7x] #2729528
01/02/20 10:59 PM
01/02/20 10:59 PM
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Posts: 8,653
Someplace you aren't
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SomeCarGuy Offline
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This post is still going? Lol

It inspired me to go out and catch the rates within 10 basis points of the lows and lock in a fresh 30 fixed rate.

Glad I did. Wife was frustrated with her job one day. I said just walk off. You can’t do that without a cushion. I’ll take financial security for the win every time. Every time.


Forever in debt to your priceless advice...
Re: Who has paid off their house? [Re: nutso suave] #2729540
01/02/20 11:43 PM
01/02/20 11:43 PM
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Blair County,PA
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Sold my first for four time what I paid for it,paid this one off the day I bought it !

Re: Who has paid off their house? [Re: SomeCarGuy] #2729557
01/03/20 06:42 AM
01/03/20 06:42 AM
Joined: Nov 2003
Posts: 5,737
Fort Worth, Texas
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Originally Posted by SomeCarGuy
This post is still going? Lol


Yep, I did it! I just had to celebrate the unexpected surprise when I got home from the first day of work of the new year and found my mortgage had retired early. I didn't even get to sign the last payment, sincerely but no longer yours". wink

Robert


'68 Fury Convertible
'69 300 Convertible
'93 Ramcharger 5.7 Hemi
'93 Ramcharger 318 sold
'01 3500 4x4 Cummins 6 speed sold
'13 300 S sold
'15 Durango 5.7 Hemi
'16 300 S Hemi
Re: Who has paid off their house? [Re: 3hundred] #2729592
01/03/20 09:10 AM
01/03/20 09:10 AM
Joined: Jan 2003
Posts: 7,326
Albany, NY
67SATisfaction Offline
The member whose name is actually Art
67SATisfaction  Offline
The member whose name is actually Art

Joined: Jan 2003
Posts: 7,326
Albany, NY
Originally Posted by 3hundred
Originally Posted by SomeCarGuy
This post is still going? Lol


Yep, I did it! I just had to celebrate the unexpected surprise when I got home from the first day of work of the new year and found my mortgage had retired early.


That's awesome - Congratulations! thumbs We have 6 years to go on a 15yr fixed rate. It doesn't seem long.
Looking forward to the end of it, and love seeing the Principal drop more rapidly as interest tapers off.
I love Net Worth.
- Art


1965 Satellite hardtop 361/2bbl, console 727, open 2.76
1967 Satellite convert 383/4bbl, column 727, open 3.23
1975 Maserati Bora, US spec 4.9L DOHC hemi V8, 5-spd ZF man
1977 Maserati Khamsin, Euro spec 4.9L DOHC hemi V8, 5-spd ZF man
1982 Alfa Romeo GTV6, 2.5L SOHC hemi V6, 5-spd man transaxle
2007 Aston Martin DB9, 6.0L DOHC V12, 6spd man transaxle
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