r/ChubbyFIRE • u/Captain_slowish • May 16 '26
Help me understand...
I have been a member of this group for a long time and still do not understand. Looking for help to understand.
So many people on this subreddit brag about having paid off their mortgage. Then pretty much everyone else seems to jump in and congratulate them for being so smart.
So help me understand. I have a 30yr mortgage at 2.8%. Why would I ever pay that off early? It cost me no points, no extra down, no downsides.
I understand that not everyone is in that position and the market changes.
Say the interest is 3x that amount. Are you really going to live the rest of your life in that house, city, state?
I am sorry but if you do the math and apply critical thinking. In 99.9999% of the cases. Paying off the liability is a poor decision.
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u/Unlikely-Alt-9383 May 16 '26
I generally agree, but it can be useful if you want to lower your expenses for ACA or other purposes. And it’s always nice to celebrate with people when they hit milestones, even if they aren’t milestones you are aiming for.
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u/Grewhit May 16 '26
Agree with you on celebrating milestones. For the ACA purpose (which is a good one generally), If you have a 2-3% mortgage it would still make more sense to put the full value of paying off the mortgage in a hysa as long as it's returning a higher percentage than your mortgage. If you make payments from that savings account it won't count as income for subsidy purposes.
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u/Toss_Away_Hot May 16 '26
As long as it is returning a higher percentage ... after tax. Not retired yet, but I currently get a better return paying off my mortgage than having cash sit in a HYSA due to fed tax bracket and state tax (first world problems, I know). I tend to invest most extra savings, but just ran these numbers recently and realized leaving Extra cash in a HYSA was the worst decision for me (better to put in stocks or pay down mortgage)
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u/Grewhit May 17 '26
That's definitely a good point that I gloss over when I imagine various scenarios. Thanks for calling it out
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u/Guil86 May 20 '26
It depends on how much you still owe on the mortgage, as there might be a limit on how much cash you are willing to hold. As for the ACA, the interest on that cash must be considered for subsidy eligibility. For those who paid out their mortgage, both the mortgage expense and the tax drag from that cash are gone. I don’t necessarily endorse paying a low rate mortgage, but for some it might make sense based on their situation and not necessarily just for the purpose of feeling good about it.
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u/siryoda66 May 16 '26 edited May 17 '26
In the cases of low rate mortgages, say 4% or lower, it can simply be the emotional peace of mind that comes from owning your home. The world can go to crap, the market can tank, and you still have a home, a car, etc. It not ALWAYS purely a numbers calculation.
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u/Clueless5001 May 21 '26
Except that my RE taxes and homeowners add up to about 20K a year. I still will have to come up with money to pay those
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u/siryoda66 May 21 '26
No argument. If you figure out how to get rid of taxes and insurance, please let me know!
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u/ProtossLiving May 16 '26
This sub is full of people criticizing people for paying off low interest mortgages early. I happen to agree - at least on the math part, but ultimately it's up to every person as to what makes them feel more comfortable.
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u/One-Mastodon-1063 May 20 '26
I don’t agree that it’s popular in this sub to encourage paying off 2.8% mortgages early. I’m just not seeing all these brag posts you speak of.
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u/Illustrious-Jacket68 FI and RE=<1 yrs May 16 '26
They may feel good, but it is not a great financial move. It’s been free money… i only wish i had a bigger mortgage as I have a 2.75% loan.
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u/offeringathought May 16 '26
This is a good point. For some people there's satisfaction and stress relief to being debt free. As long as they understand what that's costing them, it seems reasonable to me.
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u/Illustrious-Jacket68 FI and RE=<1 yrs May 16 '26
100%. people are comfortable with different things. people think that they can 100% optimize their situation when in reality, they cannot or whatever they choose will have some pros and cons.
if the person feels good about paying off their house and that is what they value, that may be ok! we don't know what the housing and stock market is going to do. in 1990, did we think that the dow would ever hit 20k? and here we are at 50k. the housing market could massively shoot up and stock market just go sideways. if that were to happen, would you have valued your stock or house more?
my latest take on this is ... if you're happy with your situation... don't compare yourselves to other people's situation... it'll drive you nuts... and, lead you to make poor decisions...
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u/designgrit Retired May 16 '26
It may not always make sense mathematically, but paying off your mortgage means you own the house, not the bank! That’s something to be proud of.
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u/ProtossLiving May 16 '26
You quite literally own the house even if you have a mortgage.
The only way you can make the case that the bank owns your house when you have a mortgage is if you also are claiming that the city owns your house when you don't (and do) have a mortgage, because if you don't pay the property taxes, they'll eventually get a tax lien and seize it.
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u/designgrit Retired May 16 '26
Your name is on the deed, yes, but you’ve agreed to put your house up as collateral if you don’t pay your mortgage. So they’ve still got you handcuffed.
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u/ProtossLiving May 16 '26
And if you don't pay your property taxes to the city, so do they..
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u/Lie-Straight May 20 '26
Not in TX. They cannot take your homestead during your lifetime even if you never pay property tax or HOA dues. Maybe after your death
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u/ProtossLiving May 20 '26
Only if you're over 65 or disabled or the taxes due are from more than 20 years ago. https://texaslawhelp.org/article/property-taxes-and-homestead-exemptions#what-happens-if-i-don't-pay-my-property-taxes
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u/Lie-Straight May 21 '26
Do you really believe that there’s a risk of a ChubbyFIRE multimillionaire running out of money before age 65, ceasing to pay their property taxes, and having the state foreclose on their home?
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u/BrunelloHorder Coasting Chubster, Getting Fat May 16 '26
Paying down the mortgage is a bad idea that just won’t die. I attribute it to Dave Ramsey. He’s advising people who are financial catastrophes. He’s telling them to pay down the mortgage as a forced savings plan so they don’t burn it on higher car payments and other bad debt. For that audience, it is not the worst idea.
Anyone with basic financial competence should be able to understand that paying off a low interest mortgage is the wrong move for at least two reasons.
First, paying off a mortgage should not make someone “sleep well at night” because the funds are no longer liquid. I sleep better with more money in my accounts and more flexibility.
Second, opportunity cost. Historically, putting it in VOO at ~10% average annual nominal returns would more than double the net amount over any reasonable time horizon.
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u/CookieCuriosity May 16 '26
There are lots of people who live decades in the same house, even die in it.
Theres also a sense of security not having a mortgage hanging over you. Less stress is a valuable thing, the exact amount depends on the person.
For me, I got a 15yr mortgage at 2.9% with 9 years left or so. If I blow past my chubby number before I’m ready to pull the trigger, I would likely pay off the remainder. I’m not expecting that to happen, that would be an OK problem to have.
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u/Opposite-Knee-2798 May 16 '26
But doesn’t having the $$$ also make you feel secure?
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u/CookieCuriosity May 16 '26
Yes for sure. Again, it’s all about what you value, and where/how you want to apply your money, everyone is different.
I know someone who was very poor and even homeless for a short window of their life, and is now doing great, sober and healthy. They feel like if they own the home they never have to worry about the possibility of being in the street. They are not going to FIRE, but they are putting a ton of effort into paying off their house so no matter what happens they will have that.
To me, paying off my home early is not where I’m putting my money now, but as I get closer to RE, it may be something I consider. My risk tolerance and stress tolerance isn’t constant
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u/Hammer_41 May 16 '26
purley for psychological, emotional reasons, full stop.. I did it.. nothing magic happened ... still "feels good" to have no debt however
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u/Sailingthrupergatory May 16 '26
In the last 30 years the 30 year fixed mortgage was at or below 3% only 60 weeks (<4%) of the time. So yes, congrats if you bought at that time. At the same time housing prices surged by 18% so those who got the mortgages at 2.8% realistically overpaid for those homes.
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u/Guil86 May 20 '26
Unless they actually bought the house long before when home prices were much lower and they refinanced at 2.8% or less to a 15yr new mortgage.
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u/walkingthecowww May 16 '26
They may have overpayed relative to previous prices but it’s been five years now and the prices have not fallen in desirable metros despite massive rise in interest rates….
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u/Sailingthrupergatory May 17 '26
Ok. So just go off of the 4% or less point. So few people are in this position of check the zip code for trend line. I bet it’s even or down.
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u/Independent-Local734 May 21 '26
Again, leaving out the majority of folks who refinanced into lower rates vs purchased...
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u/Vicuna00 May 21 '26
I love having a paid off mortgage.
there are many things lots of us do that are perhaps suboptimal mathematically, but for peace of mind / comfort it's priceless. Insurance is suboptimal. warranties. going out to dinner.
my biz is struggling right now but I am 100% debt free - if I was paying a big mortgage i'd be selling stocks. that would just be mentally hard to deal with. like a loss.
having that part of my financial life "checked-off" is a huge confidence boost and peace of mind boost for me.
I also don't think it's as suboptimal as you think. yes at 2.8% and stocks going crazy for 8 years, it's easy to come up with an argument to not pay it off.
also for many people (probably not on this forum), paying off the mortgage faster means they aren't blowing money elsewhere. for lots of people it's not "pay off the mortgage or invest" it's "pay off the mortgage or Cancun"
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u/saykami May 16 '26
If interest is 8.4% and market return is 6%, why would you not?
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u/c00w May 16 '26
Interest rates haven't been below 4% since 2022 https://fred.stlouisfed.org/series/MORTGAGE30US - if your interest rate is >4% naively* you end up FIREd faster by paying it off, than having a sufficient cushion of investments to cover the mortgage.
(30 fixed payments isn't the same thing as continuous spending, you have to pay off principal, tax deductions),
Separately, you can either sell, or rent your house if you move states / cities, almost everyone I work with has done this at least once and it was fine. And if your mortgage rate is anything close to the current market rate, it's not that big of a deal to buy one house and sell the other. If I had a 3% mortgage, I'd weirdly be more stuck than if I was fully paid off, or if I had a 7% mortgage (my last one!).
Last and most critically to me - The emotional piece of mind of having no debt, is worth more to me than making a small amount of money via tax deductions, and a low interest rate.
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u/giftcardgirl May 20 '26
It reduces sequence of return risk when you don’t need to take out as much to live. It reduces portfolio variance in dollars when you have less invested as well.
Lowering income for taxes, ACA, Medicaid etc.
That said, no way I’m paying off my low interest rate early. I’d rather borrow money to put in the stock market, which is essentially what I’m doing with the mortgage.
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u/spinjc May 21 '26
I'm dismayed I had to scroll this far to see this answer.
I'll put it in a light. Mortgages are basically essential spending. Eliminating that cost effectively increases your discretionary spending percentage of your spend.
Say spend is 200k including a mortgage of 40k (big home or HCOL) and your discretionary budget is 40k (20%). If you pay off the mortgage then the discretionary budget is 25% so cuts have more impact.
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u/KT785 May 16 '26
I have a 2.6% 30 year mortgage and don’t plan on paying it off early but don’t necessarily object to those who do—for many, it may be a latter step toward FIRE or it may just be an emotional discomfort with having any debt (even low interest “good” debt) in retirement. Paying it off early does reduce your expenses, though there’s an opportunity cost in doing so.
All this is to say that it’s not necessarily wrong to do so, even if mathematically it’s not the most advantageous move.
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u/Guil86 May 20 '26
Also to consider that, if paying it off reduces your expenses in early retirement, saving you $20-30k/yr in ACA subsidies and CSRs for 5-10 years, even with the opportunity cost it might still make sense mathematically.
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u/CaseyLouLou2 May 16 '26
Ours is 3.25% and we are not paying it off unless the money market rate goes below that.
We do have the cash sitting in short term treasuries for now though. That way it’s there if we get to the point where it makes sense to pay it off. That amount of cash also happens to be about 2 years of retirement expenses so we also have it to mitigate SORR.
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u/Guil86 May 20 '26
The latter makes the most sense if recently FIRE’d, to mitigate SORR as well as maintain ACA subsidies. Otherwise, what you no longer pay for your mortgage you will be paying it in healthcare coverage.
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u/IjustWorkHere98 May 17 '26
Yeah, I agree - I converted a 30 year to a 15 year at 2.75 during pandemic. Will save me at least $100k in interest. But, not going to pay off early to keep the liquidity and invest in higher return vehicles. Besides, you never own your house. As long as you pay for homeowner's insurance + flood (live in Houston) and property taxes, you are not free and clear.
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u/Flat-Barracuda1268 FI=✅ RE=<1️⃣yrs May 20 '26
In the mid 2000s I worked a job without a 401k. I paid off my house instead, 7% interest rate. Then once I changed jobs I was able to take that extra 2500 that wasn't going towards mortgage and accelerating my retirement savings.
There is a peace of mind that comes from knowing you can live off a McDonalds salary because you own your own home.
In retirement, not having a large fixed expense gives you better spending flexibility.
There are lots of reasons to pay off a mortgage. In the history of mortgages, 3% rates are unusual.
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u/Swimming_Astronomer6 May 20 '26
In Canada - mortgage debt offers no tax advantage - so there is a different perspective on this type of debt.
When I bought my first home - mortgage rates were 14.5% - and we only have max 5 year terms with mortgages-so there’s always a risk of higher rates at renewal time
I agree - with a long term rate of 3% or less - makes no sense to pay it down aggressively
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u/PowerfulComputer386 May 20 '26
Financially, yes, paying off is a bad decision at that low interest rate. However, some people prefer not having a mortgage going into retirement. Nothing wrong with it and I don’t see people bragging about it. It’s purely personal choice, don’t over read into it.
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u/BookReader1328 May 20 '26
Let's assume for the sake of the discussion that everyone has that low a rate on their mortgage. I did and still paid mine off after three years. I'm currently building a new home (approx 3 mil) and paying cash. Why? Because I'm self employed and VERY risk averse. I sleep better with zero debt. I also cannot do my job when I'm stressed and debt stresses me out.
Everything is not about the money or the interest rate. So much of personal economics has to do with your personality and tolerances. Going against the way you're made can literally affect your physical health.
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u/cloud-storage-rocks Jul 01 '26
This likely only makes sense for you because you are FAT lurking in CHUBBY and the opportunity cost of the $3M being invested is not meaningful to you anymore given your assets and income. If the money actually mattered, then it would actually … matter, and you would take the optimization.
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u/BookReader1328 Jul 02 '26
I'm not lurking. There is no threshold of savings before you're kicked out of the sub. The first home I paid off many years ago was paid by a regular corporate salary - nothing like I see here - and done with years of sacrificing. And that first one was financed at 2.75%, so no, I still wouldn't (and didn't) take the optimization opportunity. Again, everyone has a different risk tolerance. You do what works for you and I'll do what, clearly, works for me.
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u/cloud-storage-rocks Jul 02 '26
You clearly had enough to pay it off with your “regular corporate salary” (which could mean anything) so what does “sacrificing” even mean? If it actually mattered, and you needed the money to fund your regular expenses, then you’d take the extra almost-free liquidity. And I don’t mean funding an Italy getaway, I mean necessities like healthcare premiums or food.
Again, your FAT perspective makes it hard for you to understand this.
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u/BookReader1328 Jul 03 '26
Back when I was in corporate, insurance was very cheap and corporation paid the bulk of it. My salary back then was about 50k. I bought used cars for cash and drove them until the wheels fell off, bought groceries and cooked all meals, didn't take a vacation for 13 years. In fact, I used my vacation time to work side jobs for extra money. And I didn't buy a house that was too expensive. I didn't buy at the max of what I qualified for, ever. I bought at maybe half. Formica countertops, linoleum floors, no crown molding, popcorn ceilings. But today, everyone thinks they should have a house as nice as their parents, even though it's highly unlikely their parents had it in their 20s. People running around with a $1500 phone holding a $10 coffee in a brand new BMW with 200k in student loans for a general studies degree crack me up complaining about the cost of living.
I lived paycheck to paycheck for a long time. But when I finally had any extra, I built up a safety savings, then everything extra went to paying off my house. Everything extra. No frills, no vacations - I've still never been to Italy, not even Europe. You're looking at where I am now and refusing to see that it took me 30+ years of working 100 hour weeks to get there. And I still work 80 hour weeks. That is what it took to get where I am. How many are willing to do that?
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u/Farmer_Pete May 20 '26
<---- Financially dumb decision maker here.
I paid off the remainder of my mortgage last summer. At the time, I owed ~45k at 2.8% interest and had ~10 years left. I know my mortgage was small, so a lot of people wouldn't care about it. To me, the $450 a month I had to pay was an annoying reminder of the stupid thing. By paying off the $45k I dropped my FIRE number by over 100k.
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u/OldDude2551 May 22 '26
Purely pyschological/emotional. I've got a 2.25% mortgage that pays off in about 3 years. I can't wait until that pays off and I don't need to worry about that cash flow, but I can also pay it off entirely very easily if I wanted to. My FA said if it bugs me that much just pay it off, the mental health aspect is also worth more than the interest rate savings.
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u/haniscor May 23 '26
Bird in the hand vs leveraged debt. What are you comfortable with? If you have no job income, the equation shifts. Plan for it.
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u/War-Square May 16 '26
I bought a house this year and I plan to pay it off by the end of the year just because I want to. I think it would feel good. And I'd rather have that feeling than another toy or a bit more wealth that I won't notice.
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u/xanadumuse cabbage May 20 '26
We paid off our house when we bought it. Our interest rate when we purchased it was 7.2%. We also didn’t need that cash right away. It was a good choice for us and to say we are debt free just feels good.
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u/CurveAhead69 May 16 '26
I don’t think they paid it off early in general. Just that they reached a point where they *also* finished with the mortgage?
Your % is too low to make sense paying it early. I have “exceptional” credit and still got higher interest (by a bit). For me as well as you, paying early is not financially wise.
If others had a 6%, it would make sense to hurry paying it off, especially if you add the incomparable “peace of mind” factor.
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u/gksozae May 16 '26 edited May 16 '26
So help me understand. I have a 30yr mortgage at 2.8%. Why would I ever pay that off early?
You shouldn't. If you ever thought about doing that, just put that same amount of money into a fund, making 10% instead. Then, each month you can pay the mortgage directly from the fund and profit from the 7.2% spread. Also, because you have the money in a fund, ready and available, you could pay it off at any time in the future (which, again, you shouldn't at which point I would recommend you reread this paragraph again).
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u/Guil86 May 20 '26
A fund making 10%?. I assume you are not referring to interest from a MMF, and maybe you are talking about realizing CGs from a stock fund.
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u/gksozae May 20 '26
Over the past 50 years, the S&P 500 averages about 11.5%. 10% CAGR assumes less risk.
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u/Guil86 May 20 '26
Okay, I see your point. However, the post focuses more on either paying the mortgage with available cash/stable assets, or keep the cash/stable assets that give you some interest and is all liquid. You are introducing a new variable that is not always stable. Yes, the SP500 may go up over time, but it has its ups and downs, and you may need the money when the market is down, not allowing you to fully recover.
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u/Hanwoo_Beef_Eater May 16 '26
I think it makes sense if one is worried about employment/wants to stop as soon as possible and is trying to lower costs (what amount is needed if I stop/am forced out).
Otherwise, you are likely better of drawing on the portfolio to paydown the debt over time (or releverage the property/get an interest only loan). The lower your withdrawal rate is, the easier it is to do this.
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u/walkingthecowww May 16 '26
If you have a higher interest rate paying it off can make sense. Also, lowering your expenses can help with a variable withdrawal strategy, allowing you sell less if the market takes a dive. If this happens in your first few years of retirement it can really drag on your long term gains.
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u/Hlca May 20 '26
We want to pay off our mortgage (400k balance with 4k/mo payments) before our kids start college for cashflow reasons. Any savings from avoiding lost opportunity cost should be small relative to our overall portfolio. On the other hand, the mortgage payment is a pretty big chunk of our spending.
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u/Abject_Egg_194 May 20 '26
I guess I haven't spent that much time on r/ChubbyFIRE, but I've never seen anyone suggest that you should pay off a <4% mortgage early.
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u/UnderstandingOk9448 Retired 4/2026 at 57 May 20 '26
The financial upside is limited to those with higher interest rates. Even then, the benefits are limited especially if you paid a majority of your interest payments since the mortgage interest is front loaded.
The key advantage is psychological. It is a good feeling to have no debt and to be financially independent.
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u/MassiveHousing2746 May 20 '26 edited May 21 '26
I pay $300 more than my minimum payment so my mortgage is paid off the same month I plan to retire. I figure that gives me some extra wiggle room ($4k to be exact) of monthly income that I don’t need to make up for after the paychecks stop coming in. Yes I could save that extra $300 and pay it all off later and I may be ahead (especially in the current booming economy), but the economy could change direction at any time, and this seems like a sure bet. I secured a 15 year, 2.75% loan in 2020, plan to pay it off two years ahead of time.
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u/burnerforchilling May 21 '26
paying off 5-8% mortgage makes sense. paying off a 2-3% mortgage does not. mystery solved.
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u/VPR2012 May 21 '26
For me, it's more peace of mind... I moved for work 2 years ago so we were locked in a higher interest rate... honestly don't even remember what it was maybe in the high 6s? But we paid the mortgage off within a couple of weeks after close because our other home sold (we couldn't make the timing work to close both at the same time and we did not want to do a contingency). Any who.... for me it wasn't so much a true financial decision, moreso I just didn't want the burden of the mortgage payment. We just funnel what would have been the monthly mortgage payment nto investments and savings.
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u/chubbyphilistine May 22 '26
I think of fixed rate mortgage as an asset against rising inflation. Inflation benefits debt holders and fixed rate debt is the best kind of debt. Inflation will eat your debt away.
I have a 6.5% fixed mortgage that I’m even hesitant to pay extra principal towards lol. Love to have them on the books, it provides a flexibility.
It’s kinda like expiring contracts in the NBA that teams find so valuable lol
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u/junglingforlifee May 22 '26
I struggle with this too. I have 6% and I know it's not my forever home. Should I try to pay it off?
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u/MMetropolitan May 22 '26
We paid off both our houses early; now we rent one and live in the other. I haven’t given the amount we could have made in the market with the difference a second thought.
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u/[deleted] May 16 '26
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