Money in Savings Acct OR Pay off Mortgage?

EVERYONE, and I mean EVERYONE who buys a home should plan on paying their mortgage off in 15 years or less. If you cannot, you bought more house than you can afford. 30 year mortgages are for chumps and suckers.

Every cent you put on principal saves you at least one cent on interest on the back end of a mortgage that has over 15 years to maturity.

If you are in your fifties and still have a mortgage, forget the savings plan and pay off the mortgage. It will return WAY MORE than savings now.

If you are in danger of losing your job and don't have a years disposable income in the bank, ask yourself why you bought all that junk?

Paying off your mortgage and saving are your number one financial priorities.

Should one pay off a loan with dollars or IMF currency?

http://news.yahoo.com/s/afp/financeeconomyg20forexuschina

I feel it greatly depends on your situation.

I'm young, just bought my first house 2.5 years ago. My goals are to pay off the house as soon as I can. I am currently refianancing- probably reducing to 15years and reducing the costs . I have been doubling the principle on the loan payment or more, what ever I can spare. My goal is to use the house as my savings then for equity to build the house I want in the next 10-15 years. At that point I should be able to afford it assuming my carreer path stays consistent (I have a stable career in nuclear engineering so I have reasonable confidence that this is possible)

I don't have a years savings, and it is unrealistic since I've only been out of college a few years. I have built up a few months worth but there is only so much money to save.

I'm all for using someone elses money. Over the long term it makes sense. The best strategy for someone like myself and someone at the end of their career are completely different.

I also look at it from a different view too, just to keep it real. I would rather have what I want now and worry about it later, I could die any day, and every day I live my chances of seeing tomorrow are reduced. I''m an engineer so I naturaly look at it from a statistical point of view. I weigh the cost of intrest as opposed to the enjoyment and need to have the product now. It can be a very complicated balance.

oros35 wrote: I'm all for using someone elses money.

I would rather have what I want now and worry about it later, I could die any day, and every day I live my chances of seeing tomorrow are reduced. I''m an engineer so I naturaly look at it from a statistical point of view. I weigh the cost of intrest as opposed to the enjoyment and need to have the product now. It can be a very complicated balance.

Given your solid career and your plans to pay down your debt in a reasonable time frame and save as a cushion for calamity and for other purposes, you are on the proper track.

The only problem I see, and this is not in regard to you personally, is that society has taken the same attitude you have stated above but doesn't have the income or plans to back it. When the actual "plan" turns sour, i.e. the debts cannot be paid, it damages what others have built prudently.

We must always be within our means.

Black_And_Blue wrote:Should one pay off a loan with dollars or IMF currency?

http://news.yahoo.com/s/afp/financeeconomyg20forexuschina

Use the dollars to pay off debt. Get rid of them. Buy land, gold, foreign currency. Put them in things that hold their value.

Pay down and refi with shorter terms if you can afford it. Otherwise go with the longer term and make payments toward the principal if you have the extra$$$$.

Black_And_Blue wrote:Oh yeah, forgot this link, this should cheer you up :

http://www.dailymail.co.uk/home/moslive/article-1212013/Revealed-The-ghost-fleet-recession.html

The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination - and is why your Christmas stocking may be on the light side this year.

I have been to Singapore. There is always a large number of ships anchored in the harbor. You can see them from the airplane. Manila and Hong Kong are the same way. As for my mortgage, I Am waiting for inflation to really get going. I can pay if needed. My balance ts that of a car payment so all the interest is payed all that is left is principal.

It all depends on where we are in life. Before I had kids, I lived in a small house and was paying down the mortgage with a 15yr loan. Then my wife became pregnant with twins and we had to buy a bigger house. (That's why I'm heating with coal). But now I'm on a 30yr mortgage. I don't think I'm a chump. A 30yr mortgage with smaller payments allows my wife to stay home and raise the kids, take family vacations (been to Disney World), pay tuition for nursery school ($2500), and put gifts under the Christmas tree. I am grateful for this quality of life. Yes, I could take all that away to pay off a mortgage quickly. And then what? The kids are grown, fewer memorable moments, and live in a small house packed to the gills with toys and stuff to be miserable. No thanks, I'll pass.

It doesn't matter to me unless it becomes my problem. When Washington decided to let the banks run amok and let people take 30 year and even more generous terms like no money down and interest only payments, then they created a bubble that allowed people who "felt" they deserved a better place to live and could "make the payments" (as if that were the essential criterion to good financial management) to get themselves in over their heads.

The bursting of this bubble has caused me hardship from two perspectives. First, the bailout of stupid banks and stupid home buyers devalued the dollar causing irreparable harm to the savings of those who were prudent. Second the destruction of the economy first through a false promise and second through the failure of that false economy caused a destruction of equity wealth among the prudent. Third, the bailout of mortgages and homeowners has generated a moral hazard that destroys trust in government among the most productive in our society.

Just so you know, if your mortgage was for 100k at 5% over 30 versus 15 years, you spent an additional $51,000 in order to buy trinkets. Your monthly payment differed by 254.00. Even if your mortgage was for 200k, somehow I find it hard to believe that 508/mo could be the difference between "suffering" and having all the junk you want while also allowing your wife to be a stay-at-home mom.

It was your brand of thinking, taken to the extreme, coupled with Washington's Santa Claus mentality that has the US screwed, glued and tattooed. BTW, I am not picking on you. This debacle is an epic failure of society yet most people cannot see it nor can they understand why.

Hey Jerk! I am living within my means. I make my timely mortgage payments and I have no credit card debt. If I lose my job, it doesn't matter if I have a 30yr mortgage or a 15yr mortgage...I could only make a few mortgage payments before I get into trouble. What's more important, paying down your mortgage? Or having your wife raise your kids instead of somebody else? I don't have junk in my house. I have no cell phone, no IPod, no blackberry, basic cable, no premium channels, and the kids have mostly used toys. Raising a family is expensive. Christ, I heat with coal! If that doesn't give you insight into my thriftyness, nothing will. When the kids get bigger and move off to college, can't I just sell the house--take the equity--and buy a smaller house?

BTW, I'm 38 and have around $150K in my 401K. I am not going to throw myself at your feet when I'm older asking you to support me. You can have a 30yr mortgage, live life fully, have a financial plan, and hopefully have a healthy and fruitfull retirement. But go ahead and save, payoff your mortgage, be a stranger to your own kids, and die alone in your paid off house. I'm sure everybody will care and miss you. I won't.

mikeandgerry wrote:... EVERYONE who buys a home should plan on paying their mortgage off in 15 years or less ... 30 year mortgages are for chumps and suckers.

You can take a 30-year mortgage, but do the calculations, pay extra each month so it will be paid off in 15 years. That way if you have financial troubles you have the option of lower payments, then go back to the higher amount as soon as you can.

leowis1 wrote:Hey Jerk! I am living within my means. I make my timely mortgage payments and I have no credit card debt. If I lose my job, it doesn't matter if I have a 30yr mortgage or a 15yr mortgage...I could only make a few mortgage payments before I get into trouble. What's more important, paying down your mortgage? Or having your wife raise your kids instead of somebody else? I don't have junk in my house. I have no cell phone, no IPod, no blackberry, basic cable, no premium channels, and the kids have mostly used toys. Raising a family is expensive. Christ, I heat with coal! If that doesn't give you insight into my thriftyness, nothing will. When the kids get bigger and move off to college, can't I just sell the house--take the equity--and buy a smaller house?

BTW, I'm 38 and have around $150K in my 401K. I am not going to throw myself at your feet when I'm older asking you to support me. You can have a 30yr mortgage, live life fully, have a financial plan, and hopefully have a healthy and fruitfull retirement. But go ahead and save, payoff your mortgage, be a stranger to your own kids, and die alone in your paid off house. I'm sure everybody will care and miss you. I won't.

Temper, temper. I didn't say you were living outside your means. I also said that I wasn't picking on YOU. I said that your "brand of thinking", meaning "I'm gonna get mine now", is a problem for those who cannot manage their finances. Obviously you do manage your finances and your life well. I commend you for your temperance.

However, it is still more fiscally prudent to put your money in your mortgage first and 401k second. Any financial adviser will tell you that. If you had done that, your house would be paid off, you would have no debt, you'd be putting your payments in your savings and you wouldn't have lost 100k in 401k money in the stock market last year!

rberq wrote:

mikeandgerry wrote:... EVERYONE who buys a home should plan on paying their mortgage off in 15 years or less ... 30 year mortgages are for chumps and suckers.

You can take a 30-year mortgage, but do the calculations, pay extra each month so it will be paid off in 15 years. That way if you have financial troubles you have the option of lower payments, then go back to the higher amount as soon as you can.

Good advice. I actually did just that but paid it off in 11 years. My intent wasn't to say that having a 30 year mortgage was inherently bad unless the intent is to pay it off over the full 30 year term.

Here's why I get my panties in a bunch over the mortgage debacle in this country. We will be feeling the effects for thirty years:

http://dailybail.com/home/there-are-no- ... rt-ii.html


For me it's not the Fed oversight that is the issue, it's the societal attitude that lead us to this mess. The numbers are staggering. Off-books accounting is itself a moral hazard. QSPE trusts are shell games. "No principle due" loans to insatiable consumers facilitated the entire debacle as much as CEO greed.

The infuriating fact of the matter is that the innocent, and their decendants will be hamstrung nearly as much or more than the greedy morons who caused the real estate/mortgage bubble. The value of the dollar will be blown to hell in the global market. Meanwhile, the banks, who receive their license from the federal and state governments, are back to their old tricks.

Whether you should pay off your mortgage or not is a matter of your persoanl goals.

If you pay off your mortgage and the realestate market continues to fall, you cut your downside. In otherwords you are falat from an investment persepctive with a paid for house. Your losses are just dollar for dollar if values continue to fall. If you have an 80% financing then for every dollar of value that your house loses, you lose a multiple of that dollar because the bank does ot cut your balance on your mortgage. We paid off the house 5 years ago. While we have been heavily hit we do not have mortgage payments, are not paying interest and are not taking as heavy a loss as if we owed a mortgage. On the flip side if values rise we only gain dollar for dollar. If we had a mortgage we would realize gains for multiples of our money. So for instance if the house is worth $100,000 and we have 20% equity and the house value falls to $80,000 we would lose all of our money DOWNPAYMENT/EQUITY. If the value falls to $70,000 we not only lose our equity/downpayment but owe $70,000 with a mortgage but without a mortgage we only lose paper value until we sell, and one is not paying hundreds of dollars each month towards a front end loaded interest payment. Sure you split the interest in taxes with the government, but you come out with more in your pocket with no mortgage, especially in a declining market. If your house is paid in full, in a declining market, you limit the reverse leverage losses.

On the other hand if you are in a rising market then if you have a mortgage you can use the principle of leverage. In the same scenario if the house value increases by 20%, you have doubled your investment of $20,000 (your downpayment/equity). That is why there was so much spectulation in the recent past. However, if you own your house free and clear, you will only gain dollar for dollar. To sum up in the first example you increase your equity by 100% with a mortgage whereas in the second example you only increase your investment (the paid for value of your house) by 20%.