Comments for FinancialMentor.Com

Comment on Pay Off Mortgage Early Or Invest- The Complete Guide by Financialmentor

Financialmentor — Fri, 11 May 2012 04:22:20 +0000

@spruce815 You’re heading into the area of personalized financial advice which I can’t give on these pages. I also chose to sidestep the issues involved in strategic defaults (as stated in the article) because the issues are unique to each situation and do lend themselves to an article designed to serve every person’s needs. In short, the answers to your questions can’t be correctly addressed in a comment. It is the wrong venue and would require personalized financial advice. Hope that helps.

Comment on Pay Off Mortgage Early Or Invest- The Complete Guide by spruce815

spruce815 — Fri, 11 May 2012 04:12:46 +0000

Regarding this topic, this is by far, the most informative article I have read. Thank you!

Everyone’s situation is unique, and I’d like your thoughts on mine. I’ll try to be brief.

In 2009, I was on the verge of collapse – over $65,000 in revolving debt, mortgage at 250% LTV, and a job which only helped me get by. Luckily, I was promoted at the end of 2009 to a job paying nearly double. I have since paid off all of my revolving debt, established a 6 month cash emergency fund, have maxed out my 401K in 2010, 2011, and 2012 (yes, I’m already maxed out for this year), and have established an investment account with equities and mutual funds totaling approximately $60,000. I have no children, and I’ve worked at the same company for 14 years.

I put together a plan last month for paying off my mortgage. I have slowly reduced the principal over the past few years, but I haven’t gone “all in.” I wanted to take care of the above mentioned items first prior to taking on the task of the mortgage payoff.

Under my most aggressive plan, which requires tremendous personal austerity along with very little additional investing with the exception of my 401K, I can have my $144,000 mortgage paid off by November 30, 2013. My house is currently worth approximately half that.

Since my time horizon for payoff is more short-term than your examples, and by paying it off, I not only achieve the emotional financial security, but I also put myself in a position where I can actually move, do you think this idea is wise? I have battled back and forth for over a year, but I made a commitment last month to do this. I have the means to do so, and once completed, I can easily get an additional $800-$1000 rental income on this property when I move to a new house. I’m 32 years old, so the long term benefits of the projected rental income and increase in property value outweigh the short term benefits of doing a short sale – at least in my analysis.

I look forward to your comments, and your article was fantastic! Thank you again.

Comment on What Big Wall Rock Climbing Can Teach Us About Wealth Building by DarrowK

DarrowK — Thu, 10 May 2012 20:59:22 +0000

@JeannaGabellini Thanks Jeanna! I really enjoyed writing this, and it reminded me too of what an important factor commitment is in any difficult undertaking. There is always room to bump it up a notch, and we can draw on our past successes for confidence and inspiration!

Comment on What Big Wall Rock Climbing Can Teach Us About Wealth Building by JeannaGabellini

JeannaGabellini — Thu, 10 May 2012 19:53:00 +0000

GREAT article. It got me thinking how commited I was to my financial goals. It’s time to bump it up a notch!

Comment on What Big Wall Rock Climbing Can Teach Us About Wealth Building by Financialmentor

Financialmentor — Thu, 10 May 2012 17:05:27 +0000

Thanks Darrow! I love reading these pieces where people share insights they’ve gained into the wealth building process through other adventures in life. I hope this kicks off some reader comments about other insights people have gained in other arenas.

What have you learned? What insights have you gained? Please share them here…

I want to hear!

Comment on Pay Off Mortgage Early Or Invest- The Complete Guide by rbeck

rbeck — Wed, 09 May 2012 19:32:59 +0000

@stannius The definition of ROI you are using is also called “return on invested capital”, and is typically used, as I understand it, to compute ROI for internal business investments in capital assets which are wasting assets, or ones that lose most of their value over the course of the investment period. I am curious about how you would calculate the ROI on a 5 year bond with an $81,000 face value, purchased at par, which pays $18.000 a year in coupon payments?

Comment on Pay Off Mortgage Early Or Invest- The Complete Guide by stannius

stannius — Wed, 09 May 2012 15:26:45 +0000

@rbeck ROI is defined as “(return – investment)/investment.” So paying it off in year 10 gives a return of (90k – 81k)/81k = 11%. And that’s ignoring the time value of money.

Comment on Pay Off Mortgage Early Or Invest- The Complete Guide by rbeck

rbeck — Tue, 08 May 2012 23:49:32 +0000

@stannius Ok, I’m all ears. I can’t wait for you to explain how 100 times 12 is not 1200. The flaw in your logic is that its impossible to repeat the process 365 days. A person can only pay off their mortgage once.

Comment on Pay Off Mortgage Early Or Invest- The Complete Guide by stannius

stannius — Tue, 08 May 2012 21:59:34 +0000

@rbeck Wow, annualized that’s 1200%! And imagine if you paid your final mortgage payment 1 day early? Then you earn 100% in one day – a.k.a. 36,500% annualized!

On the other hand, perhaps there’s some flaw in your logic…

Comment on Pay Off Mortgage Early Or Invest- The Complete Guide by rbeck

rbeck — Tue, 01 May 2012 20:06:42 +0000

@stannius Good question. I figured we would get to that eventually. If say 15k is owed the last year, then the homeowner is trading 15k of cash for $1500 a month for 12 months. That’s 10% a month. Its obscene because of the way mortgages are structured (to give a level monthly payment for the term). With one payment remaining the owner invests $1500 1 month early into the home, and 1 month later saves $1500 by not paying the last payment, so its a 100% return for 1 month. Again, this all assumes the money invested in the home can be recovered in a sale, which is the equivalent of getting principle returned, like with a bond that matures.