Retiring early March 1 of 2019 .Pay off house or continue house payments?

[Aunt Bea]

Loving this thread because I would bet that the majority of us have grappled with or are still grappling with these two different schools of thought. Yes, each person's situation and financial picture is unique and has to be looked at as such, but still, regardless of how much you made during your life, how much you stashed away, how much you've put into your mortgage, etc. there is STILL going to be the struggle of what to do with however small or large your existing and future income is. I'm there right now. And since I've got an interest rate of 3.8% on the mortgage it makes sense for me to keep my money in my 401K and IRA's and pay the monthly mortgage rather than pay off the house. Still wonder if that's the RIGHT thing to do - I think it is, but such a major life decision always comes with a certain amount of fear and apprehension. Good luck to us all!
Sue

That's what I would do if I was in your situation!

These days I would also consider setting up a GoFundMe account! layful:nthego:

Enjoy your retirement!

 

[Camper6]

That is the most intelligent post I have ever seen. That is all that matters.

Sorry. When it comes to finances, the gut feeling isn't always the best option.

In retirement money isn't everything, it's the only thing.

It's funny. People have no problem owing money on a car but they have a problem owing money on a house?

 

[Camper6]

Loving this thread because I would bet that the majority of us have grappled with or are still grappling with these two different schools of thought. Yes, each person's situation and financial picture is unique and has to be looked at as such, but still, regardless of how much you made during your life, how much you stashed away, how much you've put into your mortgage, etc. there is STILL going to be the struggle of what to do with however small or large your existing and future income is. I'm there right now. And since I've got an interest rate of 3.8% on the mortgage it makes sense for me to keep my money in my 401K and IRA's and pay the monthly mortgage rather than pay off the house. Still wonder if that's the RIGHT thing to do - I think it is, but such a major life decision always comes with a certain amount of fear and apprehension. Good luck to us all!
Sue

You can't be too far off with that decision. It's the health issue really that is the problem. I know many seniors who ended up having to sell the house and move into an assisted living home.

 

[mathjak107]

Sorry. When it comes to finances, the gut feeling isn't always the best option.

In retirement money isn't everything, it's the only thing.

It's funny. People have no problem owing money on a car but they have a problem owing money on a house?

They also don’t calculate properly and don’t realize they are not saving the mortgage payment ... they only save some interest on the loan balance ...it is not even all the interest either since if they itemize they can get a portion back ...the closer to the end of the mortgage the less it pays to acccelerate the payments

 

[Sue777]

You can't be too far off with that decision. It's the health issue really that is the problem. I know many seniors who ended up having to sell the house and move into an assisted living home.

Yes, I'm fairly comfortable with continuing to pay the mortgage - it's a fixed rate so there are no surprises. Health issues? Ugh. The great unknown. I have a couple of chronic, yet non-life threatening ones that will keep me on medications for the rest of my life, but God only knows what the future holds in store for me and my husband. Since there is no way to know that, we can only hope for the best.
Sue

 

[mathjak107]

If all the investments are fully funded then depending how far in to the mortgage you are dumping excess cash in to it may or may not be a good idea...a house is a one way trip.. the money goes in but it can’t come out without taking loans and yes a reverse mortgage is a loan ..

there Can be a lot more security in liquid cash when times are tough then sitting inaccessible in the house....you can’t spend the living room unfortunately

 

[Butterfly]

If all the investments are fully funded then depending how far in to the mortgage you are dumping excess cash in to it may or may not be a good idea...a house is a one way trip.. the money goes in but it can’t come out without taking loans and yes a reverse mortgage is a loan ..

there Can be a lot more security in liquid cash when times are tough then sitting inaccessible in the house....you can’t spend the living room unfortunately

AND I know plenty of people who have been trying to sell their house for months without success, and a couple of others who have been forced to sell at a loss because they had to have the money.

People forget that no matter what they've put into a house, the house is only worth what someone is willing to pay you for it.

 

[mathjak107]

AND I know plenty of people who have been trying to sell their house for months without success, and a couple of others who have been forced to sell at a loss because they had to have the money.

People forget that no matter what they've put into a house, the house is only worth what someone is willing to pay you for it.

Many people run on myth ,poor math and poor record keeping .... interest alone can cause the price of the house to cost 2 to 3x the purchase price .

you have so many who don’t realize that housings costs whether you rent or own are one issue ,,, how the money does as an investment is another issue .....you can rent and depending where you live have lower costs living in a one bedroom apartment in a building vs someone supporting a 4 bedroom house with 5 digit taxes so the costs renting can certainly be lower than owning .... they can also deploy that money in other investments which return 2 to 3x what the house did ..

so NOOOOOOO , renting may very well not be throwing money away , it may very well allow creating far more wealth ...

what clouds the issue is renters are a mixed bag from the very poor to the very wealthy ... if you have no money to buy and no money to invest you have no choice .... if you are just starting out buying is always better then renting if your only choice is paying rent in one area or buying in a cheaper area ..

but for those with accumulated assets to invest or buy it is a different picture and renting may allow far greater wealth creation even after accounting for housing costs .. all cash sales account for 30-40% of all residential sales , so there is lots of people with lots of resources out there who can certainly have choices .

 

[mathjak107]

Ok, then I'll pose a question. I have a mortgage of $1870 per month, and I have $20K left on the mortgage principle, which is about 1.4 years of payments. I have $20K in hand. What can I invest in with that 20K which will pay me $1800 per month of growth during that 1.4 years?

so you never replied back about your great mis-calculation here

 

[TriMoot]

Ugh...That sounds like exactly what will happen to us. We have a large house and plan on selling it this spring and downsizing...however, we will most likely wind up with a MUCH smaller house for about the same price we're selling it for!! It's crazy! The hope was to sell now, and after all the work and improvements we made, we were 'hoping' we could buy the retirement home in cash and have no mortgage! But it seems like we're either going to have a REALLY tiny home and in a area that we really aren't happy with, or get a decent home and have a small mortgage...sigh. NOT how I thought it would be.

We have talked about selling, living in our RV, continue to work until my wife gets closer to retirement and/or healthier (heart issues) and THEN hope the housing market has gone down and buy the smaller retirement house. But..I can't imagine living in the RV in the WINTER here in Spokane, WA. NO THANKS! No if I could only talk my boss into letting me work "REMOTE" and then coming in once a month or every two months, then that could work.

So difficult to know what to do. But I'll keep reading and watching these post in hopes that something clicks and I have an ahHAH moment!

The first financial advisors we spoke with gave us very bad financial advice. To be generous, they may not have been able to fully understand our then-current financial situation or our retirement goals. We passed on them and found a more helpful advisor. When you speak with financial advisors, be SURE that you fully understand and agree with their way of thinking.

We sold our three story house, which was far too large for us, and were able to use our equity to pay cash for a comfortable, smaller home offering one-floor living in our location of choice. That was the right decision for us. We have sufficient income and long term savings to see us through our remaining years.

What was a surprise was the cost of medical insurance. Medicare B costs around $135 per month for each of us and doesn't cover all that much, so we needed a gap policy. We essentially traded our old mortgage payment for total health insurance costs of around $1000 per month. Exasperating!

As noted above, the best plan for you depends on your own situation. Be sure you have a detailed budget for retirement that factors in ALL expenses and allows for reasonable contingencies.

Best of luck to you in your retirement.

 

[Phantom]

I bought my new home when I was retrenched
Paid cash Not a single cent on interest !!

Started up investing but after a couple years was losing money including paying our financial adviser
Pulled it all out and in bank for long deposit

 

[mathjak107]

Why would you think that investments are short term deals going in ?

 

[retiredtraveler]

.......but for those with accumulated assets to invest or buy it is a different picture and renting may allow far greater wealth creation even after accounting for housing costs .. all cash sales account for 30-40% of all residential sales , so there is lots of people with lots of resources out there who can certainly have choices .

Do you know where you got that number? I've read this:

"....The share of cash sales to residential sales continued to trend down, to 21 percent in 2017[1], down from 23 percent in 2016, according to the December 2017 REALTORS® Confidence Index Survey.[2] From 2011 through 2013, the share of cash sales hovered at 31 percent.

There are fewer cash buyers in the market, with fewer distressed properties for sale and less interest from investor buyers as home prices have ramped up steeply since 2012 (61 percent increase in the median home price of existing homes sold since 2012).....".

Of course, those numbers may well vary by region.

 

[mathjak107]

[FONT=&quot]According to CoreLogic’s report, cash sales made up 32.1% of all home sales in 2016, falling 2.2% from 2015’s total. That’s the lowest annual cash sales share since 2007, when cash sales accounted for 27% of all sales..

i think the 2017 numbers were lower and i have not seen 2018 yet ..

but throughout history cash sales represent a healthy portion of transactions [/FONT]

 

[ronaldj]

Let’s say you owe on the house andhave enough retirement coming in to pay along as you enjoy life. YOU get sickall your money goes to doctoring and nothing is left to pay house, bank takes houseyou have no place to live..... House paid off, you give doctors what you can andlive in house-no one can take house if no one is owed on house.

 

[mathjak107]

Let’s say you owe on the house andhave enough retirement coming in to pay along as you enjoy life. YOU get sickall your money goes to doctoring and nothing is left to pay house, bank takes houseyou have no place to live..... House paid off, you give doctors what you can andlive in house-no one can take house if no one is owed on house.

no , wrong logic ... you still need to afford the house ... you would have just that more in cash if it wasn't buried in the house ..you are trying to make up a situation that really does not have much logic ...you still need money to cover all those expenses .. in fact the longer you own the house the less likely a paid off mortgage may even be a factor compared to all the other expenses over time ..

our first homes in the 70's were 30-35k .. today that paid off mortgage does not represent the utility bills in size. taxes may be 8-15k on that paid off house 35k ... so there really is little logic in what you are saying ...there are always expenses that go with a house and over time those expenses can eclipse the mortgage , and don't pay the taxes and see how long it stays yours

 

[Don M.]

Mortgage payments....and Any kind of debt...in retirement, can be a real drag on life in retirement, IMO. A person needs to recognize, when they are young and working, that they, too, will one day get old and retire. Knowing that, those who are wise begin to save and invest at an early age. One of the Very Few things our government has done for Seniors is the IRA/401K plans, which if utilized when young, can substantially enhance a retiree's lifestyle. Social Security barely keeps a person above the poverty levels, and fewer companies, every year, are offering decent pensions....so it is becoming more and more important for individuals to try to prepare themselves for their elder years. People who wait until they are nearing retirement age before they start saving will probably be in for some disappointment.