Comments on: How To Pay Off Your Mortgage Early

By: Personal Finance this Week in Financial Blog Articles | Personal Investment Management and Financial Planning Blog Directory

Thu, 05 Aug 2010 04:43:37 +0000

[...] Levin presents The Benefits of Paying Off Your Mortgage Early | The Greenest Dollar posted at The Greenest Dollar, saying, “Here are the pros and cons to paying off your [...]

By: Tim

Tim — Wed, 16 Jun 2010 18:11:15 +0000

I agree with the article, though I do take pause with a certain statement

“Once youâ€™ve paid off your mortgage debt, you truly own your home”

In most states, you never “own” your home. If you pay off your mortgage you have earned the right to live their at a very low rent (the rent being the state property tax). Do not believe me……pay off your mortgage and then stop paying your taxes for a few years. Tell me then how much you “own” your home as the sheriff escorts you off the property.

By: Mars

Mars — Thu, 11 Feb 2010 21:53:00 +0000

I paid off my mortgage so all I have to think about is the taxes and insurance. The amount is small enough that it makes life manageable. I live on a fixed income. I know that I can meet my other expenses each month with what I live on. Not having to worry about losing my home is a great comfort to me. I sleep better at night. And that is better than any small tax break I might get from the IRS.

By: Ohm

Ohm — Fri, 29 Jan 2010 04:59:23 +0000

I am a 34 year old male that has a home paid off (GREAT FEELING)!
As a self-financial guru, I believe paying off your home or buying a home for cash is a great deal of accomplishment! If you are able to save the reserves to do so, you should be able to save another nest-egg into your retirement. Now I know some people are at or near the retirement age and yes paying off your home (if it is a large amount example
40% or more), would not be a great idea. But if you are not remotely close to retirement, by all means pay it off! The interest you pay on a 30 year note will double or triple depending on your rates! Think about it, you spend $200,000 on a home and after all the interest paid, you would have nearly $450,000 into a home that you hope appreciates! After you have paid your home ,still Pay the monthly mortgages for 30 years, but put the money into CD’s, not interest to the bank! Accumulate 4% + interest on your behalf and tell me where you stand in 30 years!
Paying off a mortgage early is a dream come true for most people, and there is a reason for that. Think about why the banks are into alot of trouble these days, it’s not about auto or consumer loans, it’s mortgage loans! Why do you think financial guru’s tell you to keep mortgage loans, so they have jobs!

By: Alfred

Alfred — Mon, 04 Jan 2010 19:09:10 +0000

If Family Income is big enough to make substantial extra mortgage payments, then great…. Pay off your mortgage and become debt free fast. The overwhelming majority of Home Owners, however, have little money left to save as an emergency fund. Many simply live Pay Check to Pay Check. If you are in that category, then you pay three times for the mortgage. This is because the average Home Owner really knows too little about interest and especially compound interest. The big benefit of paying the mortgage fast is the savings not just from interest charges, but also the savings from many years of mortgage payments you did not have to pay .

It is possible to use Loans, Investment Loans to help to pay down the mortgage. We counsel willing Home Owners with similar strategies. Most Consumers, including professional Financial Planners cannot wrap their heads around this idea. In fact it is often treated like heresy to suggest it. Another myth about mortgage payments that is spread by Accountants, Loan Officers, Financial Planners and the University Professors who taught them is the return on that $1000.00 of extra mortgage payment. If the Mortgage Interest is written at 5%, returns on the $1000 is much more than the 5% returns that current scholarship assigns it. My Math is not good enough to calculate the exact returns. My educated guess is that those returns are closer to 100%, maybe 200% than to 5%.

The 5% figure fails to recognize the fact that your $1000.00 early payment has an impact on every other one of your mortgage payments afterward. Following your early payment of the $1000.00, the Principal share of all of your payments following could increase by an additional $20.00, $25.00, $30.00 or more, (depending on the mortgage balance and how early you are in the amortization table). Your mortgage gets repaid months faster because of even one single extra $1000.00 prepayment early in your mortgage payment years.

I have published articles on this subject that show the benefits of fast paying a mortgage to the Consumer. These articles can be found in the “articles” page of the Mortgage-Freedom.com website. The real truths about mortgage payments are hidden, dark secrets, filled with myths almost like witchcraft and sorcery were mixed up with religion in the Dark Ages of History. People, including the so-called academics and Professionals are basically ignorant on how mortgage payments really work to favor the ordinary Consumer. This is because we are afraid of debt. You see debt usually favors the Lender or Banks. In fact, Wealthy People become wealthy because they know how to harness the power of debt as the road to riches.

By: denhay

denhay — Thu, 17 Dec 2009 01:32:13 +0000

Hello, Heather. I just came upon your post today. You wrote it a year ago and I am wondering if you were able to reach your goal. If so, congratulations!!!

My husband and I also paid off our home a while back. We have 2 young children, and I am a stay-at-home mom. Like you said, we have the psychological benefit of security– our home cannot be taken away from us!

I’ve recently discovered another psychological benefit that comes from full ownership of a house: contentment. I can’t tell you how many other mothers I meet who complain that their homes (usually bigger than mine) are too small for their families and that they “need” something larger, usually something that includes a play room, hobby room, family room, etc.

If I looked at bigger as being better, then I probably would also dive right into buying a home with more square footage. But to me, the security in fully owning a home benefits my children far greater than providing them with extra living space. I don’t want another house. I have so much pride in our home…it’s OURS…fully! I can now focus on the other dreams in my family’s lives–travel, the kids’ college savings, a decent cushion for retirement. Sometimes I see a big, pretty house and think, “Oh that would be nice to live in”, but then I remember that I would have to clean all the places that my children would find to make messes in (ugh), that we would have to pay much higher utilities (there goes a lot of discretionary income), that my children might not benefit if they were to expect a certain material lifestyle for themselves when they start out on their own lives years from now,…but the biggest reason I don’t want to get a bigger home at this point is because, in order to do so, I would have to be in DEBT (No thanks–not ever making anybody else rich by borrowing their money). I don’t care what any financial planner says. Paying off a mortgage is worth it!

By: Steve

Steve — Wed, 18 Nov 2009 18:28:59 +0000

I believe one of the key factor the author missed is the inflation. Sure CD now yields only 2% compared to mortgage rate of 5%. Keeping the extra cash in hand costs you 3% or effectively 2% after about 33% tax savings (federal+state+township). However, as we all know the inflation is due sooner than later with much “stimulus” money printed every seconds, the interest rates will go higher and higher while your mortgage rate is fixed. For me, with two kids going to college in the next 3-8 years with small chance of getting financial aids, I will keep a large sum of cash+bond on hand. Stock market is another way to go but not for me at this moment, I already put maximum 401K 100% in stock market. $100 now may worth only $20 20 even 10 years from now. In short, cash is king if you have the need in next a few years like in my case I am planning for future loans for my kid’s education. If you really have extra money, go for real estate, as long as you can break even there. My key point is: the inflation beast is coming.

By: mom-to-4!

mom-to-4! — Mon, 16 Nov 2009 00:01:04 +0000

Thank you so much for your views on this! My husband and I are paying off our mortgage early. I thought maybe I could share how we are doing it – it might help others come up with a plan. We have four children and live on my husbands salary – I stay at home. My husband is payed every two weeks – therefore, there are 26 paychecks in one year. We have chosen to live on 24 paychecks; two each month. (It makes budgeting so much easier.) The extra two paychecks then are used to save, invest, or pay down debt. We just payed off our car, and except for our house, are debt free. We contribute to his company-matched 401k up to the match, and we already have 7-8 months of emergency savings for our expenses should the need arise. Having those things in place before focusing on the mortgage we felt was essential. We realized that by paying it off early, we can save over $70k in interest. I’m a saver as it is, so this plan feels natural to me. I can’t understand why anyone would want to pay more for something than they have to – interest can double the cost of your home if you stay in it for the life of the loan.
If someone else were to use this plan, and they brought home $1500 per pay period, for most people, I think, that is close to the amount of a mortgage payment. So, this person could pay $3000 extra principle each year on their house (which is more than two extra payments) and not even miss the money. On a $200,000 30-yr loan at 6%, that shaves 11 years off the loan, and saves over $90k in interest.
By the way, our “car payment” is now going monthly to our mortgage principle, as well. A $200 “car payment” each month could take an additonal 4 years and $32k in interest off this fictional loan. Every little bit adds up! Good luck to everyone finding a plan that works for you!

By: Bill

Bill — Fri, 09 Oct 2009 15:14:47 +0000

Hi all, this is my 2 cents on the whole paying off argument: I look at like this, why give the bank all your money and help them get rich, help yourself get rich. I agree with the previous posts, that you do need to have a cash emergency fund and should also have an IRA funded and hopefully contributing to a matched 401K before considering paying off your mortgage. The tax deduction argument makes absolutely no sense at all, does it really make sense to save .30 for every dollar spent? The getting a higher return by investing only makes sense providing you do ACTUALLY make that higher return. Just because historically the market has returned between 8 & 10% does not mean that trend will continue, just ask someone who invested 10 years ago. As of today, the economy does not look like it will be very strong for quite some time. I think for some the psychological benefit may outway any slight monetary gain anyway. I think the goal is to be debt free so you are the master of your own universe other then being a slave to someone else who holds your debts. Be free!

By: jeremy.b.bowers@gmail.com

jeremy.b.bowers@gmail.com — Thu, 01 Oct 2009 18:24:44 +0000

Hey guys,
I’m 23 and I just bought my first home, I’m a slow starter on this, I had dreamed of buying one when I was 18 but I didn’t have the income to support the cause back then I am asking for advice on paying the house off quickly, from what I understand I can make “Principle Only” payments on Bank of Americas online banking, this in short would decrease the amount of interest that follows each additional month on my regular automatic payments. My goal is to pay the principle down every month with left over money thats sitting in my checking account. I think I can do this for a year or so with high payment because I’m on a deployment for a year, how do I know how much my interest is paid off, is there a calculator for this? I also wanted to know your inputs about selling the house after 3-5years and buying another outright with the profit earned, I heard this can be done over and over again with foreclosures because they have equity built into them. Thanks for the help, feel free to email me with your responses.

V/R,
Jeremy B Bowers