4 ms·

I think a lot of people get into a mindset that a 25 year mortgage is meant to be paid off in 25 years, so that mindset guides their entire frame of reference f

I think a lot of people get into a mindset that a 25 year mortgage is meant to be paid off in 25 years, so that mindset guides their entire frame of reference for how large a lifestyle to adopt. I’m not saying to rush through a mortgage. Do whatever you want. But consider not getting into a situation where you’re somehow struggling even though you’re one of the lucky few who can afford to even own a home. When times get tough they’re no more secure than those who make less. I’ve seen this with many peers who have Teslas and 1.5M homes who are now struggling despite such an income.

fullshark 3y ago
Is it not meant to be paid off in 25 years?
- lotsofpulp 3y ago
  Definitely pays off to invest more than the minimum required payments over 25 years. Not going to find better non callable leverage.
  - scarface_74 3y ago
    Why? I refinanced in 2021 and my mortgage rate is 1.97% fixed.
    - lotsofpulp 3y ago
      I meant invest into other equities, such as the public stock market, not invest into paying down the home principal.
- Auracle 3y ago
  shrug It kind of depends on your mortgage rate. If your rate is low it technically makes more sense to invest your money, as that'll have a great return. If your mortgage rate is high, you might be better off paying extra each month against the principle as it'll drastically reduce how much you pay in interest over the course of the loan.
sarchertech 3y ago
Paying off your mortgage early only really makes sense when you're getting close enough to retirement that you need to move more of your money to less risky investments with a lower rate of return.
- Waterluvian 3y ago
  My point isn’t that you need to race to pay it off. But that people think “how big a home/lifestyle can I afford with this income? I’ll do that.” You could do half that, make minimum payments if you want, and invest the rest. But either way, you find yourself in such immense control. You could lose half your income and not change your lifestyle. Or retire early. Or take bigger risks. I’ve always been fascinated how people decide what kind of home and car and such they go for. It usually seems to be: as big as I can go. And then you’re not really that more secure. I guess you can sell your home and find something smaller, but that’s hard to do at any time with kids in school, let alone during bad times.
  - sarchertech 3y ago
    For sure. Being house poor is definitely a thing. My wife and I made the decision that we'd only take on as many expenses as we could afford on only one of our salaries. That's a lot easier to do when I'm an engineer and she's a doctor, but I know plenty of friends in similar situations who are still leveraged to the hilt.
zer8k 3y ago
Paying off your mortgage with an interest rate less than inflation is a mathematically verifiable horrible idea. You're short the dollar deeply. Keep that short position for as long as you can because on a long enough horizon you'll be right so long as the Fed continues to manipulate the market. That doesn't necessarily mean lever up. But it does mean take that extra X% you'd put into your mortgage and place it in some CDs/Bonds/whatever. Or even better, if inflation is still higher than the current rate you could even use it to buy an investment property and then pay that off as slow as possible as well. Let the banks hang themselves being long the dollar! Debt is only bad when you're losing. The problem is it takes a level of sophistication to understand when you're winning. Hence, the need for Ramsey-type all-or-nothing solutions.
- Waterluvian 3y ago
  How you divide up your money isn’t really interesting. Yes, do the math. What’s interesting is the idea that some people take on a lifestyle based on their income and they leave themselves no flexibility.
  - Enginerrrd 3y ago
    I agree that people generally seem to lack a decent intuitive understanding of risk. They only look at the current state of affairs, and the upside of the bell curve. They don't seem to remember or factor in the likely potential negative side of those distributions and adjust their planning for better resilience.
- xedrac 3y ago
  > Paying off your mortgage with an interest rate less than inflation is a mathematically verifiable horrible idea. This is often the case, but not always. It also doesn't account for the much better sleep I get at night, or the unshackled feeling I experience knowing I am debt free. There's an enormous psychological benefit that is not easily quantified.

fullshark 3y ago

Is it not meant to be paid off in 25 years?

lotsofpulp 3y ago
Definitely pays off to invest more than the minimum required payments over 25 years. Not going to find better non callable leverage.
- scarface_74 3y ago
  Why? I refinanced in 2021 and my mortgage rate is 1.97% fixed.
  - lotsofpulp 3y ago
    I meant invest into other equities, such as the public stock market, not invest into paying down the home principal.
Auracle 3y ago
shrug It kind of depends on your mortgage rate. If your rate is low it technically makes more sense to invest your money, as that'll have a great return. If your mortgage rate is high, you might be better off paying extra each month against the principle as it'll drastically reduce how much you pay in interest over the course of the loan.

sarchertech 3y ago

Paying off your mortgage early only really makes sense when you're getting close enough to retirement that you need to move more of your money to less risky investments with a lower rate of return.

Waterluvian 3y ago
My point isn’t that you need to race to pay it off. But that people think “how big a home/lifestyle can I afford with this income? I’ll do that.” You could do half that, make minimum payments if you want, and invest the rest. But either way, you find yourself in such immense control. You could lose half your income and not change your lifestyle. Or retire early. Or take bigger risks. I’ve always been fascinated how people decide what kind of home and car and such they go for. It usually seems to be: as big as I can go. And then you’re not really that more secure. I guess you can sell your home and find something smaller, but that’s hard to do at any time with kids in school, let alone during bad times.
- sarchertech 3y ago
  For sure. Being house poor is definitely a thing. My wife and I made the decision that we'd only take on as many expenses as we could afford on only one of our salaries. That's a lot easier to do when I'm an engineer and she's a doctor, but I know plenty of friends in similar situations who are still leveraged to the hilt.

zer8k 3y ago

Paying off your mortgage with an interest rate less than inflation is a mathematically verifiable horrible idea. You're short the dollar deeply. Keep that short position for as long as you can because on a long enough horizon you'll be right so long as the Fed continues to manipulate the market. That doesn't necessarily mean lever up. But it does mean take that extra X% you'd put into your mortgage and place it in some CDs/Bonds/whatever. Or even better, if inflation is still higher than the current rate you could even use it to buy an investment property and then pay that off as slow as possible as well. Let the banks hang themselves being long the dollar! Debt is only bad when you're losing. The problem is it takes a level of sophistication to understand when you're winning. Hence, the need for Ramsey-type all-or-nothing solutions.

Waterluvian 3y ago
How you divide up your money isn’t really interesting. Yes, do the math. What’s interesting is the idea that some people take on a lifestyle based on their income and they leave themselves no flexibility.
- Enginerrrd 3y ago
  I agree that people generally seem to lack a decent intuitive understanding of risk. They only look at the current state of affairs, and the upside of the bell curve. They don't seem to remember or factor in the likely potential negative side of those distributions and adjust their planning for better resilience.
xedrac 3y ago
> Paying off your mortgage with an interest rate less than inflation is a mathematically verifiable horrible idea. This is often the case, but not always. It also doesn't account for the much better sleep I get at night, or the unshackled feeling I experience knowing I am debt free. There's an enormous psychological benefit that is not easily quantified.