paying off the mortgage...

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Submitted by scaredyclassic on November 12, 2017 - 10:16am

ive generally been opposed to the idea. interest rate only 3.375%. however...

1. new,tax situation has me rethinking things.

2. could be a goal for us to tighten our belts,and save toward a goal. say, 4 years of being cheap....we have no real reason to save above 401k contributions...i feel more comfortable saving hard than just spending freely.

3. if we dont, the money may be frittered away on kitchen remodels,vacation, clothing, fencing, etc.

4. on the other hand, the mortgage payment might become relatively so low in the future. less,than half a future soc sec payment? would be cool to be old and have a laughably low house payment, if things work out that way.

5. and the dems could change any tax plan changes now, later.

6. the urgency is just giving my wife a compelling reason not to spend $ we have.

7. it would be cool to not pay interest. its about 1500 a month just interest right now. wed need to earn of about 5 perc pretax to earn a 3.375 perc return.

8. im not sure id be that much more relaxed without the mortgage. still paying taxes ins. maintenance. still a lot.

9. one is never really free.

10. life is,short, maybe it would be better to pay a price to consume now.

Submitted by cvmom on November 12, 2017 - 11:05am.

I am also a worrier, and it absolutely makes me feel better knowing the house is paid off. Maybe not the best financial decision, but definitely the best decision for my peace of mind. You never know what is around the corner for any of us...

Submitted by flu on November 12, 2017 - 9:10pm.

I've paid off my mortgages except one rental which has a $50k balance on it.

I have to say, I had my doubts earlier because I felt I could use the money better by investing in higher returns... But honestly, I'm sort of glad I did.

I didn't expect the rest of my investments to turn out as well as they did so far, and quite frankly at this point, I really don't know what else I would do with it... So I decided to clear the liabilities off my table while times are good, so that when times are bad (because there will be a day), I can live a much more carefree life.

Kinda of like my philosophy of moving jobs/careers...Move while your hot, stay when you're not.

One caveat of having virtually zero debt and still seeing a W2 package increasing, is that I can spend more time and things I enjoy doing...Even before my kid heads off to college. Because that 529k college savings plan, which has been the best performing account for the past 15 years, is now going to take care of that 4 years, and maybe part of grad school/med school.

Dont get greedy and try to maximize your returns...especially when you no longer need to. Just keep your head above inflation.

Submitted by flu on November 12, 2017 - 9:12pm.

BTW: losing the state tax deduction is probably not going to fly....

https://www.politico.com/story/2017/11/1...

Submitted by WarChestSM on November 12, 2017 - 9:47pm.

4. Would be cool to be old and have NO house payment. Even better, would be cool to be young and have NO house payment.

Submitted by The-Shoveler on November 13, 2017 - 9:37am.

Would be cool to be young LOL.

Submitted by matt on November 13, 2017 - 10:09am.

I felt a huge sense of relief when We paid off our primary home. Knowing that I just have to come up with property taxes and bills to keep a roof over my family's heads was incredibly liberating. Paid off the Airbnb In Cabo too. Now both together are generating 10k / month while I work overseas stashing more cash and looking for that next investment. Certainly a lot to be grateful for but these are choices and sacrifices we have been making for 20 years. So many expats out here are squandering their pay on fancy cars and business class tickets... only to see themselves booted without a penny to their name. I am determined not to have this happen to me.

Submitted by carlsbadworker on November 14, 2017 - 11:34am.

flu wrote:
BTW: losing the state tax deduction is probably not going to fly....

https://www.politico.com/story/2017/11/12/brady-state-local-tax-deduction-244812

The only difference between the house and the senate bill on this was whether to allow a capped property tax to exist. The state sale/income tax deduction is gone in either version. They have to pay for the corporate tax cut somehow and I think the best scenario for now is that they eliminate it in phases to get some people who are too stupid to think about long term to support it.

Submitted by carlsbadworker on November 14, 2017 - 11:37am.

flu wrote:
BTW: losing the state tax deduction is probably not going to fly....

https://www.politico.com/story/2017/11/12/brady-state-local-tax-deduction-244812

By the way, I think the complete elimination of the SALT in the senate bill existed only so that politicians in high tax states can show some "wins" in the eventual bill. They are probably the ones who begged to have in the initial bill so that they can screw the middle class at the same time claiming that they fought to get something for them.

Submitted by moneymaker on November 17, 2017 - 8:22am.

Honestly I'm glad I have not paid off my mortgage. With the new tax plan it may not make sense for me to itemize. So the mortgage interest deduction will be a mute thing for me. At 2.625% and less than 200k in the balance the write off is just not that great!

Submitted by Escoguy on November 17, 2017 - 4:47pm.

I think in the 80s or early 90s, the UK got rid of their version of the mortgage interest deduction. Had no impact on property prices, in fact, prices probably appreciated even faster than when it was in effect.

Many owners overestimate the value of the deduction.

One indirect impact, there may be less charitable giving when you can't itemize. One would need to setup something like a donor advised fund when income is high and perhaps not donate every year. Most people won't think of that.

Submitted by carlsbadworker on November 17, 2017 - 9:12pm.

Escoguy wrote:
I think in the 80s or early 90s, the UK got rid of their version of the mortgage interest deduction. Had no impact on property prices, in fact, prices probably appreciated even faster than when it was in effect.

Many owners overestimate the value of the deduction.

One indirect impact, there may be less charitable giving when you can't itemize. One would need to setup something like a donor advised fund when income is high and perhaps not donate every year. Most people won't think of that.

Sure, home price won't decline because corporations can deduct the interest and all expenses and pay only 20% on any capital gain. Home ownership is likely going to decline, as it did decline in UK since that took effect.(source: https://www.the-american-interest.com/20...)

If you are top 1%, obviously this is a fantastic law. The income inequality skyrocketed since 1974 when they removed mortgage deduction:
https://www.equalitytrust.org.uk/how-has...

Yet, it is all based on if you assumed social mobility is over-rated over the long run for the country, even though some research has proved otherwise. (https://www.oxera.com/getmedia/ea133d87-...)

Submitted by scaredyclassic on November 17, 2017 - 10:49pm.

with AMT, do you reaaly get much benefit from interest in the 3 to 500k income range?

Submitted by moneymaker on November 18, 2017 - 8:57am.

Heard AMT is going away, never used it myself anyway. All it means is you are using a really good accountant who has gotten you a lot of tax breaks. I'm not going to assume anything until it gets to the president and he signs it.

Submitted by harvey on November 18, 2017 - 9:00am.

moneymaker wrote:
Heard AMT is going away, never used it myself anyway. All it means is you are using a really good accountant who has gotten you a lot of tax breaks. I'm not going to assume anything until it gets to the president and he signs it.

If your accountant is "using" AMT on your tax filings, you may want to get a new accountant.

Submitted by SK in CV on November 18, 2017 - 9:35am.

scaredyclassic wrote:
with AMT, do you reaaly get much benefit from interest in the 3 to 500k income range?

generally, AMT isn't affected by mortgage interest. Mortgage interest is deductible in computing both regular tax and AMT.

Submitted by SK in CV on November 18, 2017 - 9:35am.

scaredyclassic wrote:
with AMT, do you reaaly get much benefit from interest in the 3 to 500k income range?

generally, AMT isn't affected by mortgage interest. Mortgage interest is deductible in computing both regular tax and AMT.

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