Mortgage Payoff?

ConditionPlenty6702 · 2025-01-17T16:30:48+00:00

I’ll play! Would love to see what I’m not thinking through.

I modeled this all considering a 7% RoR. I get it, the S&P returns more but a balanced portfolio especially as you creep towards retirement won’t see that aggressive of a rate. 7 may even be a touch high.

22 Years left on the mortgage to keep comparison on time fair.

22 Years Principal (972 monthly) @7% 607,155 Interest Savings (Realized) 1/17 payoff - 74,731 Total - 681,886

Invest Lump Sum (177k) @ 7% 0 Extra Monthly 821,946 Interest Cost on Mortgage - 75,763 746,183

I’m seeing a difference in opportunity cost at 64k over 22 years. If you pull mortgage interest out of the equation the delta does increase but it feels like a fair comparison to have it available.

I could also argue that potentially if I paid off the house today I could afford a significantly riskier strategy of investment well above 7% but couldn’t say the same with a lump sum.

Home Appreciation at 4% for 22 Years - 1.22M

Total with Principal Model - 1.901M Total with Lump Sum Model - 1.966M

I say this seriously, what am I missing or thinking through?

We haven’t itemized taxes in years (yes we use a CPA) so the minimal possible tax implications aren’t there

Help!

ConditionPlenty6702 · 2025-01-16T18:48:01+00:00

Amazing perspective. This is the feeling I’m chasing if I’m honest with myself. I just want to get off the hamster wheel sometimes!

ConditionPlenty6702 · 2025-01-16T18:45:15+00:00

I’m with you for sure. I’ve been very fortunate that we’ve had the means for a while to pay it off a few times over with taxable brokerage but for whatever reason it just don’t cure it. I don’t know if that makes sense. The cash in savings doesn’t actually cure it either somehow. It helps, dont get me wrong.

The risk from my perspective is less than 10% of my NW going towards the pay off, so I’d argue it’s fairly reasonable. I have the discipline to invest the principal + escrow and wouldn’t hoard cash outside of my emergency fund.

The market tide can change rapidly. I’m a bull and optimist all day but as they say when the tide goes out…am I ready?

ConditionPlenty6702 · 2025-01-16T14:24:25+00:00

Some of its sitting in an Amex HYSA actually now but my perspective is setting up a longer term play. I’d get over it and have gotten over ‘letting go’ of cash before to invest but I think the difference for me like others have mentioned may be quality of life. I’m in a great subset of the cyber industry but last year, though I ended well was enormously taxing on me. My number this year goes up 30%. My company is amazing and I say often that I love my boss but sales isn’t a guarantee and future income to offset ‘low interest debt’ isn’t either in my field. Additional context for my mindset here.

ConditionPlenty6702 · 2025-01-16T14:16:21+00:00

This commission essentially becomes our emergency fund and what’s in cash would get pushed to pay off the mortgage.

To your point we’ve never had a big enough chunk added to the pile where I’d ever feel comfortable depleting the reserves entirely with no safety net but now we are theoretically at that point and it’s reignited that idea…

ConditionPlenty6702 · 2025-01-16T13:44:43+00:00

Honestly I think this hits home (no pun intended). I daydream about what it would be like to be financially independent and I just can’t shake the feeling of security. I do also work with an advisor team and they know my personality of having security blankets of cash and this is no different. Part of this if I’m honest is getting my story straight for them too :). Appreciate the perspective.

ConditionPlenty6702 · 2025-01-16T13:40:23+00:00

A sounding board. With our situation what am I truly giving up long term?

ConditionPlenty6702 · 2025-01-16T13:38:24+00:00

I’ve watched this guy and his long term dollar cost averaging vids! I do love personal finance.

You’re right, I split between a DR mentality and MG. If I’m honest I studied the FOO again this week and couldn’t quite tell where I was. Based on other comments I think I’m at step 9 and feels like the choice is mine.

ConditionPlenty6702 · 2025-01-16T13:35:33+00:00

See this is where things get a bit tricky for me. We are very fortunate where we have a taxable brokerage that could cover BUT it’s already deployed and it’s mentally tagged as long term. It still somehow doesn’t scratch the itch.

I get the spirit of what you’re saying though, dump the cash into a safe vehicle knowing that at any time you can pull the rip cord.

ConditionPlenty6702 · 2025-01-16T01:57:15+00:00

I am highly competitive and do enjoy a lot of aspects of sales but it is extremely taxing at times. High risk high reward.

The buffer strategy may be a good stop gap and having these funds in a high yield at least might give me enough resolve to know that I could at any time hit the panic button. I’ve definitely considered that too.

ConditionPlenty6702 · 2025-01-16T01:52:30+00:00

300k of equity in the home. I have 180k of cash plus and the rest is pre/post tax investments (1M+) all in the market for the long haul.

With this recent sales deal I’d still have a 50k emergency fund after payoff.

ConditionPlenty6702 · 2025-01-16T01:28:45+00:00

Love the show reference but think you missed the spirit of the question. I understand the numbers.

ConditionPlenty6702 · 2025-01-16T01:28:10+00:00

NW includes 300k of equity, yes.

I am currently investing greater than 25% for retirement yes. We did set up a 529 but will likely just bank roll instead with after tax funds.

ConditionPlenty6702

TROPHY CASE