Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

When to Pay Off Your Mortgage

Housing-Market / Mortgages Dec 20, 2012 - 04:36 AM GMT

By: Casey_Research

Housing-Market

My good friend Rob recently paraphrased Warren Buffett as saying, “If he knew where he was going to live for the next decade, he’d buy a house with a long-term mortgage.” Buffett thought a mortgage was a good hedge against inflation, because the homeowner would pay off the mortgage with cheaper dollars down the road.


My own mortgage caused great conflict between the emotional and logical sides of my brain. When I was contemplating paying it off, I spoke with a financial counselor and explained that I was self-employed and my mortgage was my largest monthly payment. I suggested paying it off to eliminate stress. He pooh-poohed that idea, and insisted that I could easily earn more after taxes than the cost of a first mortgage.

I asked if his mortgage was paid off. He looked at me and said, “Oh hell yes!” I was flabbergasted. How could he advise me to do one thing when he’d done the exact opposite? He explained that his wife was from Germany – the old school where you pay your bills and keep out of debt. Were it not for her, he’d gladly have a mortgage.

When my son purchased a new home, I suggested he ask the lender for an amortization schedule, a report showing what portion of each payment will go toward the principal and what portion is interest. He was shocked to realize well over 90% of his payment was going toward interest. It wasn’t until the last five years of his mortgage that the bulk would be applied to the principal. Everyone with a mortgage should pick up – and read – an amortization schedule from the lender so one knows exactly what portion of each monthly house payment actually reduces one’s mortgage.

Paying off your mortgage does change your life. You sleep better, and I imagine my blood pressure dropped ten points. I’ve never met anyone who regretted paying off his mortgage. Once we made the decision, we never looked back.

However, I readily admit that my emotions prevailed in my decision to pay off our mortgage. In an effort to give both sides of the argument, Vedran Vuk, lead analyst for Miller’s Money Forever, has shared his thoughts on when it makes solid financial sense to invest elsewhere and not pay it off. He makes some excellent points…

When Not to Pay Off the Mortgage

By Vedran Vuk

Dennis’ financial counselor gave him standard mortgage advice, but he left out some important factors. If investors can earn a greater after-tax return elsewhere with minimal risk, they should do it rather than paying off their mortgage. Over the last 30 years or so, you could safely expect 10% annual returns on the stock market, and at worst, market crashes were short-lived and stocks recovered in no time.

Unfortunately, we don’t live in that world anymore. Investing is now filled with worry and anxiety. Next year, the market could rise 10%, or it might drop 40% and stay there. Paying off your mortgage is a guaranteed way to save money. Putting money into the stock market is not.

Since the market is still shaky and bonds are paying close to nothing, it makes sense to make a few additional mortgage payments. But suppose the clouds over Europe and the rest of the world economy disappear – then it might be wise to put a little more money into the market.

However, another scenario is much more likely: rising interest rates. If interest rates rise in the next few years, paying off your mortgage would be a mistake. If you can earn 6% or 7% on US Treasuries or AAA-rated corporate bonds, paying off a mortgage locked-in at 3.25% is clearly not a rational decision, because these investments carry minimal risk.

If you can earn a higher return than your mortgage rate with limited risk, don’t pay off your mortgage. But if bond yields are pitiful and market risk doesn’t justify the return, stick to enjoying the emotional comforts of paying down your mortgage.

Whether you’re considering paying off your mortgage or not you’ll want to make sure this works within your retirement plan objectives. Click here to heck out my short letter on how to start your plan or just get a “second opinion” on your current plan

© 2012 Copyright Casey Research - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Casey Research Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules