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Who here makes extra payments on his mortgage? Or has a paid-off house?
I make extra payments, and looking through my amortization table just now I was incensed to learn that a full 75% of all of the reduction in our loan balance is solely due to our extra principal payments! What in the scam? (Edit: I guess I have to clarify that I am not retarded and do not believe that a 30-year mortgage is literally swindling me through nefarious trickery.)
Further, to say nothing of the compounded benefits, we have a present-day benefit in the form of $2,000 of saved interest, and we're still very near the beginning of our loan term! It's obvious when placed next to an amortization schedule that assumes we only make necessary payments.
(2/1/2026 Loan Balance)minimum payments - (2/1/2026 Loan Balance)extra principal - (sum of extra principal paid) = ~$2,000
I realized when I read through the mortgage documents that the full 30 year term would have me paying double what I borrowed for the house, so resolved to pay it off as fast as possible.
I probably lost out paying down the mortgage vs putting the money in an index fund, but I don't really regret it. If all goes well everything will be paid off by next year, and I'm looking forward to not having a mortgage.
In US now I think there are laws now in many states that require the loaners to tell you how much you will be paying in interest (and therefore overall) at least at some point of the process, and have you sign on that. So theoretically it shouldn't be a surprise, but practically of course not all people read that anyway.
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I think it is underestimated that for a certain type of person, the mental peace of owing nobody else any money (which gives them a piece of leverage over you) and having a decent amount of savings squirreled away GENUINELY outweighs an extra 2-3% of gains from keeping things in the market.
Best way to describe it is that debt = fragility. If you get behind on payments, the interest rate marches on. The creditor can call in the funds under certain circumstances, whether you have the money or not. You get behind and it can be a struggle to catch up, and it inhibits you in other ways. And bankruptcy is an option but you have to be in dire straits to pull that lever.
And it can also make it harder to take on new debt even when that would be advisable.
I'm not one of those "ursury is evillllllll" guys, but I am one of those "I pay every debt on time and as owed" guys so the mental stress of knowing I gotta keep up with payments is annoying.
Me, I like short term, secured loans as my go-to. Seen too many people get screwed over by personally guaranteeing debt for things that weren't productive enough to justify it.
Maybe, but let me put it like this. In 2021 when I bought my house, I sunk about 20% of my net worth into the down payment. I'm talking everything btw, crypto, 401k, brokerage, cds, gold, savings, etc. Now theoretically, and inadvisably, I could have cleaned out everything and just bought the house outright. I mean, lets pretend for a moment that I wouldn't have paid massive penalties on my 401k.
Well, 5 years later my investments have more than doubled. The value of my house has not. Also I "benefit" from the value of my house regardless of whether I've paid off my mortgage or not. I put benefit in quotes because mostly it means I just pay more taxes and insurance. To access any of that "wealth" I'd have to either take out a home equity line of credit, or sell the house, putting me back at square one. Also, now I could far more easily pay off my mortgage in full, and have 70% of my net worth left over, versus essentially resetting had I paid in full in 2021.
Also, as someone who was recently jobless, having 10 years of living expenses in assorted accounts was an enormous relief. Now I'm assuming with a paid off house, and resetting from 0, I would have probably saved up a good amount having no mortgage. But my napkin math says probably 20-30% what I actually have today. And I'd have suffered an enormous opportunity cost with my investing to boot.
All that said, rates change everything. With rates over 6% I often consider whether I would just pay in full for my next home. I likely could. But I'll cross that bridge when I get to it.
I mean, I liquidated almost my entire crypto holdings to get the funds for my house/holdover for extra expenses.
And I don't regret it, because the crypto world went FULL retard after I bought the house, and while the house value increased a lot, the mere fact of "I can live here and not be bothered by increasing rents or volatile crypto markets" was a source of peace. Decent interest rate too.
I've had some investments perform better, but none that were as directly beneficial to me in the interim period.
Buying a house you intend to reside in for the long term is an easier play than buying one you might or might not be staying in five years later.
But that's very dependent on the labor market. Can't stay somewhere if there's no decent-paying jobs.
There was a point in time where I held two whole Bitcoin. Now I hold functionally zero. Can't live in a Bitcoin, can't store my stuff in one, can't invite friends over to hang out in one, and BTC hasn't provided me with minor projects to work on outside that significantly help with my mental health.
I dunno. I could spend my days tracking the market's ups and downs... or I could tend my garden, do small repairs around the house, sleep in a bed that I cannot be removed from absent an act of God.
Its not so bad.
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Your last sentence is 100% correct. You should really not use financing to purchase anything that will not provide a yield in excess of the loan's rate.
Houses don't actually qualify given that criterion, but we're all so confident the price will go up that we look the other way.
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There’s a fantasy sequence from the sitcom Everybody Hates Chris in which the father declares they don’t owe anybody a single penny, and I remember thinking, “Whoa could you imagine.”
Congrats on approaching what many consider a fantasy!
I have to say each time I see that $0 in the "non-recurring debts" in my financial dashboard I feel that little warm fuzzy feeling inside. I realize that not all debts are bad debts, rationally, but some part of my brain just insists "neither a borrower nor a lender be" and I can not fully deny it.
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Easy to do for us rentoids.
You'd be surprised. Most people I know are addicted to their car notes and are never without one.
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