Comments on: Pay Off Mortgage Early?

By: Mike

Mike — Mon, 09 Nov 2009 21:42:48 +0000

Ryan – guess you got all the answers. Mortgage rates are tied to the 10 yr, not longer duration. Pay off the double-wide if you think it’s a smart move, no big deal.

By: Ryan

Ryan — Sat, 07 Nov 2009 12:53:21 +0000

If there are really all these munis that are a better deal at current interest rates than mortgage prepayment, then why are the banks still lending fixed rate mortgages? Why wouldn’t they just buy the muni bonds themselves?

Obviously something doesn’t equate in the risk/return matchup.

By: Chris

Chris — Sat, 07 Nov 2009 06:00:04 +0000

I believe the best reason for paying off your mortgage is you never know what the future holds. You don’t know if you’ll be sick, loose your job, etc; therefore much better off to owe nothing on the place you live in to protect against such circumstances and the stress it creates in your life.

By: Mike

Mike — Sat, 07 Nov 2009 01:49:44 +0000

Mark and Dad -since I broached the arbitrage subject — Ive gone back and forth on this subject — aside from peace of mind, I cannot come up with a logical argument for paying off a mortgage in this interest rate environment. Arbitrage, opportunity cost, whatever you want to call it – money can be invested elsewhere for better gains – even a long term muni will make you more than you’re paying in current mtg rates. Also inflation argument, paying off your home in yesterday’s dollars for the next thirty years seems to make sense. Peace of mind = emotion….emotion can be a portfolio wrecker.

By: Mark

Mark — Thu, 05 Nov 2009 17:43:09 +0000

Simpleton was not a nice word either. I was only making the point that if ssfer/simpler was always better, we would not own any stocks/funds at all – only CDs/Treasuries/Cash.

By: Frugal Dad

Frugal Dad — Thu, 05 Nov 2009 16:14:02 +0000

@Mark: You make a solid point. Thanks for responding. I took no offense to the simpleton label…maybe it was my response that sounded defensive. Sometimes things are lost in the written word, ya know?!

This is a subject I’ve battled with for some time, and like most things, my own personal experiences have molded my opinions.

My grandfather helped raise me, and was a product of the Great Depression. He has never owned a stock. Says investing in the market is only slightly less risky than gambling in Vegas. Of course, I don’t feel quite that strongly about investing, and own a few stocks myself (mostly in mutual funds), but I’m conservative with all my investments.

I also love the idea of owning my home free and clear, and once I’ve done that, I plan to invest in even more mutual funds to build wealth.

By: Mark

Mark — Thu, 05 Nov 2009 15:53:13 +0000

@Frugal Dad: Nothing wrong with being a simpleton. My statement may have come off wrong. Peace of mind and less time spent worrying about how to invest are both benefits. Simpletons of the world unite!

However, “arbitrage” is perhaps a misleading word as stated above, but the age-old conventional wisdom of have a low interest, deduction eligible mortgage and investing the debt into sound diversified stocks/bonds/mutual funds, etc. is historically a sound way to have a more secure retirement – while acknowledging there is more risk than paying off the mortgage as soon as you can.

By: Frugal Dad

Frugal Dad — Thu, 05 Nov 2009 15:40:21 +0000

@Mark: I am a simpleton – and proud. I also strongly dislike risk. And none of the scenarios presented by those who point to arbitrage as a way to make money like the big boys factor risk. To each his own.

By: Mark

Mark — Thu, 05 Nov 2009 14:40:21 +0000

Mike – you are right but this site is for simpletons that need a non-brain required strategy. Pay off mortgage good – stocks that have gone and may go down – bad.

By: Mike

Mike — Sat, 17 Oct 2009 00:06:34 +0000

Pay off the cars, credit cards, etc. Keep the mortgage – invest all you can with much care to allocation (cash, bonds, equities). Refinance to 5% in this low interest rate environment – in 3 to 5 years when the 10 year is at 8 percent, you’ll be making money the way the big boys do — arbitrage.