Thread: Pay Off The Mortgage ?

I just got my annual letter from the county assessor, telling me that my condo in LA is worth 5% less this year than it was last year. This has been going on since the worm turned in 2008. I've owned the place since 2004, and have a tenant/friend paying me almost as much in rent as I pay in mortgage and HOA each month. So I'm not in too much of a bind. I never looked at the place as a long term investment - thought I'd sell it within 5 years. I guess as long as my friend is renting the place, I'll sit pat.

Any reason anyone can think of to pay down the principal early? I don't have a lot of expendable income - pretty much investing what I don't spend each month in TSP, stocks, and education savings accounts for my two kids. I could probably throw an extra hundred a month at the principal, but would I really see a difference in the long run, or would that extra Benjamin serve me better DCA'ing into dividend stocks?

Hey Sensei,
$100 a month doesn't sound like it would do much, but over the life of the loan it would put a sizeable dent in the amount of interest you paid over the life of the loan. All depending on how much you owe, interest rate, etc. of course.

I have been considering refinancing my home and found an awesome calculator that you can apply an additional principal payment each month, one time, or annually. It will show how much you paid in imterest, and breaks it down month by month. Check it out and play with the numbers.
Www.bankrate.com

Originally Posted by PessOptimist

Once you have been given permission to pay it [mortgage] off, you have to ask for a new title deed from the mortgage company and file it with your county or other local entity.

Failure to apply to pay off the mortgage may lead to forclosure. Failure to get a clear title deed may lead to not being able to sell the place.

My parents did the traditional "burn the mortgage" thing when they paid the house off. Later when Dad went to sell it turned out he didn't own the place, the bank still did. It took several months to get that straightened out. Fees did apply.

Hi PO, mortgage company filed release of mortgage lien with the county after I received permission to pay off and paid filing fees to mortgage company.

Mortgage company didn't say anything about me needing to have them send me new title deed to file with county to show my full clear title to property. What steps did your dad have to take to get new title deed from the mortgage company?

heres a question i have been asking myself but can't come up with good reasons only bad. should i after i pay off my current TSP o

Originally Posted by goforit

heres a question i have been asking myself but can't come up with good reasons only bad. should i after i pay off my current TSP o

ok try this again i have 60k left on 4.75% loan retire 55 house paid off 54 i am 48 now. i have 300k +/- 25k in TSP my payment on loan is 1300. lo9ans today interest from TSP 1.75-2% my mind is thinking of cash flow in as oppose to out. and when i retire IF the loan is not paid off i can always call it a lump sum. what do you think

Is the 4.75 fixed or ARM? If it is fixed, I would be inclined to pay it off according to schedule. That is pretty cheap money, and leaves your investments free to beat that rate pretty easily. In any case, you seem to be doing pretty well, and the enemy of "Good" is often "Perfection"...

Originally Posted by SkyPilot

Is the 4.75 fixed or ARM? If it is fixed, I would be inclined to pay it off according to schedule. That is pretty cheap money, and leaves your investments free to beat that rate pretty easily. In any case, you seem to be doing pretty well, and the enemy of "Good" is often "Perfection"...

Remember your principal on the loan is what your paying most of now. If you can, get a schedule to see how your payments are balanced. You get a tax break on all interest. But less money working or your retirement to pay off your house doesn't really add up. Even if you have only eight years left, you could double your TSP in that time rather than just dealing with a fixed asset, which probably is underwater or close to value.

Originally Posted by Sensei

I just got my annual letter from the county assessor, telling me that my condo in LA is worth 5% less this year than it was last year. This has been going on since the worm turned in 2008. I've owned the place since 2004, and have a tenant/friend paying me almost as much in rent as I pay in mortgage and HOA each month. So I'm not in too much of a bind. I never looked at the place as a long term investment - thought I'd sell it within 5 years. I guess as long as my friend is renting the place, I'll sit pat.

Any reason anyone can think of to pay down the principal early? I don't have a lot of expendable income - pretty much investing what I don't spend each month in TSP, stocks, and education savings accounts for my two kids. I could probably throw an extra hundred a month at the principal, but would I really see a difference in the long run, or would that extra Benjamin serve me better DCA'ing into dividend stocks?

OK, I'll weigh in....

DCA it!!! If the costs of the place are being covered by rent...let it ride. LA prices will eventually recover and it will pay you well.

On the other side, stocks are cheap now. They may still go lower, or may already be rebounding, but if you are DCA'ing it doesn't matter. In the long run you will make out very well.

So this is a Win-Win. Go for it!!

Originally Posted by goforit

ok try this again i have 60k left on 4.75% loan retire 55 house paid off 54 i am 48 now. i have 300k +/- 25k in TSP my payment on loan is 1300. lo9ans today interest from TSP 1.75-2% my mind is thinking of cash flow in as oppose to out. and when i retire IF the loan is not paid off i can always call it a lump sum. what do you think

Hmmmm....interesting question ! My "first thoughts" :

Essentially, you'd be "refinancing" down to the TSP loan rate, without all the closing cost BS and paperwork. Instead, you'd have the TSP loan BS and paperwork

OTOH...your TSP loan repayment comes out of your paycheck contribution/deduction. Is your current contribution more than the loan repayment amount ? If not, then you've effectively frozen your TSP account balance where it's at, ~ 7 years before you retire...of course, that doesn't take into consideration the Agency contribution or match...

I agree with Frixxx on this one...let it ride as is !

Stoplight...

Stoplight I have asked myself 100 times, should I pay off the note? Best I can see, for me it is a wash. It would halve my balance but eliminate two-thirds of the draw on the account, so it sounds like a good deal. Over the next 20 years the account would grow back to where it is now. However if I just let things go, so long as the account can withstand the draws and not diminish in size, then in 20 years it too will be where it is now.

See what I mean? Either way in 20 years my loan is paid off and my account is unchanged from today. Therefore I choose to hold on to the money. But remember if you DO pay off the loan, the money is not 'spent.' It is just re-invested in property instead of equities. You'll get it back when you sell.

Are you perhaps forgetting about the value of your mortgage deduction - it's one of the few areas where you get a benefit. If you have an income stream you might want to keep the mortgage.