this conversation is mostly dead, but i wanted to sound my two bits. my credentials, i am a financial planner. first i hope you did not sink you money into the stock market. i have been in cash for almost a year now and i am no market genius (those who are still in have been shorting the market and making millions all year). it is shocking how many "planners" and brokers urged their clients to "invest for the long term" and hold in the market. if your planner or broker has been saying this this last year, you should fire them. the stock market is not a long term investment. in needs to be watched daily and adjusted daily. money is never lost in the market. it only changes hands. if you lose somebody else won. the winners are those who know what is going on and adjusting their strategy daily. if this is not something you can do, hire somebody who can, get out, or suffer the cost of ignorance as those who know (major investors and fund managers) take your money. Second, i hope you did not bury your cash in a coffee can in the back yard�"in other words, pay cash and hold no mortgage. paying cash is a very expensive way to own a house. the reason being you are burying you money. you will realize appreciation but that is pointless from the standpoint of cash flow and you have to sell to get it. this money could have easily generated more than the cost of holding the mortgage. there are also tax savings on the mortgage debt if you pay it off. this is know as a lost opportunity cost. it is as real of a figure to be calculated just as an fees or interest paid. example: if i pay no interest i loose nothing. right? wrong. i loose out on what i could have done. if i could have made 8% and it cost me 6% for the mortgage i made 2% plus tax savings. FYI i am a lazy investor with most my money managed by others and i make (yeild not average) 24% with no loss of principle risks. with effort you can do better. for me to have this money in my house would be a compounding loss of 18% plus the loss of my mortgage right off. cost of money is important, but is just part of the equation, not the answer to it. the spread or the margin in the number that matters, not the cost. paying off a mortgage can cost you your retirement. the most important part of any financial plan is time. if you spend the first half of you career paying down a mortgage rather than investing, you are shorting yourself. paying down your mortgage faster is almost as bad. mortgage interest is front loaded. you only get the promised rate if you go the term. pay it of faster and the percent paid is higher. what i would recommend people do in such a situation is pay it cash and forgo all the fees associated with financed closings. then immediately after, open a HELOC for the maximum amount possible and start looking for ways to reinvest and grow that capital all the while controlling the real estate. there is no cost to have the HELOC and usually no fee to open it. you can go in and out as much as you want and use it like a private bank. leave non working mey in the realestate, but have access to it to use for opportunities. you only pay interest on what is out and are only required an interest only payment. my house equity actually pays for the house debt and then some because it is working. right now would be a great time to have access to those funds. real estate and stock investment are all on fire sale. if you don't understand the market find someone who does. if you don't understand real estate, read some books and attend some seminars. if you are lazy, look into hard money lending or payday lending for 18-36% interest. buy some rental properties and cash flow them (rents are on the rise) and reap even more tax advantages. there are so many great places to earn money on your money rather than "burying" it. I would recommend the same with permanent life insurance and even investing some funds in it. just do something, actually do lots of different things. risky? i think keeping the money out of the banks control is the best way to minimize risk. give it up to the financial institutions and they will happily follow the the model i am recommending only they won't be sharing the profit with you. to most, this sounds like terrible advice. well most people in this country are not wealthy and have no idea how to become such. learn to act like a rich person, not by spending like one per se, but by understanding that money is not math, it is a commodity and needs to be treated as such. you cannot park it nor can you settle for small returns. personal financial models are worthless. you need to learn business finance principles and apply them to you personal finances. this is then main difference between the wealthy and the non. it is not the amount of money the have (net worth) it is about how much they have to spend (cashflow). many rich people are terribly poor on the books but have plenty to spend. why is that? they understand money and the laws that govern it. your first dollar should be spent on education. build a network of advisers and mentors and for goodness sake don't listen to the talking heads and radio "gurus". if they are so good at making money, why are they working for a radio station and who is paying the bills (banks and investment houses who want your money buying ads). all that said. this opinion is based on the person applying these principles being trustworthy with money. if you can't discipline yourself, pay off the house and invest in a 401k. if you are disciplined, stay away from both. books i would recommend, eye openers all of them: rich dad poor dad (kiosaki) who took my money (kiosaki) LEAP (castiglione) killing sacred cows (gunderson) sorry for the rant and the poor spelling. some of the philosophies presented, even by those with letters after their name were disturbing to me. such advice has cost millions of people billions of dollars this year. any wanting a larger book list or wanting to discuss any of this "crazy" advice further, feel free to contact me off forum or invite me into another discussion. i love this topic and love to offer my opinions. the fee i charge for personal planning advice is zero. one of my personal beliefs is that you don't pay for financial advice. i do what i do because somebody once taught me and i am paying it forward. so you can dismiss any hidden agendas. my opinions are what i personally believe and practice but by no means the only way to the goal. great discussion all-even those i disagree with. thanks for the thread and the interest in helping each other. kendal.liddle@gmail.com

Greetings son o' poly, I'm a foreigner, so some of my assumptions may be erroneous. In the early years of your mortgage, as the outstanding loan is large, the proportion of your regular payment that must be paid monthly in order to pay the interest on that loan is large ... which leaves only a pittance to pay toward principal. In those years, if you can make one extra payment annually, going entirely to pay down principal, you may reduce the amount of principal owing by as much or more than was accomplished by all of those small payments through that year. That means that the principal amount being smaller as you enter the next period, the proportion of the regular payment that needs to be used to pay the interest on the current principal owing is smaller ... which means that more is left over each month to pay down principal, retiring it more in that next year. Which leads many to feel that paying down mortgage on occasion like that makes sense. I assume that you can deduct you mortgage interest. That means that, on about $100,000. loan at 8%, you'll have to pay about $8,000. interest and if your marginal tax rate (i.e. tax rate on your highest level of income) is 25%, that means that your real cost is $8,000. minus tax saving of $2,000. leaves a net cost to you of $6,000. If marginal tax rate 20%, $8,000. less $1,600. leaves net cost to you of $6,400. Here's a very serious question ... if you don't make those extra payments on the mortgage, will you without fail invest every one of those dollars? Or will some, even most of them, get frittered away? Suppose you do invest every one of those dollars, without fail. What kind of investment will you choose? If you put it into the bank, even if you could earn 8%, you'll have to pay tax on that income, so you'll have the same amounts in hand as mentioned earlier regarding after-tax deduction. I think that your possibility of earning 8% on a bank account, these days, is rather remote. If you buy a stock directly, or via a mutual fund, some pay a modest amount annually ... in the case of a stock, it's a dividend. You'll have to pay tax on that income ... I don't know whether such income in your hands would be tax-advantaged, or at top marginal rate. I like that kind of income on local stocks in Canada, for the tax rate was lower and recently became lower yet. In the case of an equity-based (i.e. stock market based) mutual fund, usually part of it is in dividends and part may be interest or capital gain that they earned on stock sold for a profit/(loss). In a number of years, there may be some growth in value of the stocks that are still held, whether in the mutual fund or that you own yourself. That increase in value that was developed as of the end of the year, but not realized, does not need to be reported for income tax. In Canada, you don't have to answer to the income tax people for that until either you or the mutual fund manager sells those stocks, for a profit or loss, which is added to or deducted from that kind of income, for tax-reporting purposes. Do you have funds on hand to use for emergencies? Suppose your car blows up and you need to buy a new one ... can you handle that? Or your furnace quits and isn't repairable ... or a cyclone blows part of your roof off? Suppose you get laid off (whether temporarily or permanently) ... do you have enough reasonably liquidateable assets on hand to be still operational after three months? Six months? A year? Do you have balances owing on credit cards that you don't pay off in full each month? Do you have any idea what rate of interest that you're paying on those unpaid balances? For regular cards, it's usually 15 - 20% and on store-issued cards, it's often up around 25 - 28%. That means that you'd be wiser to pay off those balances rather than paying down your mortgage principal! I'm nearly 80, and I don't have such a cushion on hand quite a bit of the time. Why not? I receive 3 pensions, which are almost guaranteed income, for all that I must do in order to continue to receive them is stay alive. Also, a payment from a tax-deferred retirement account, from which I am required to withdraw an increasing percentage of its total value annually. I have about 80% of my assets (which do not include a home) in stocks or equity-based mutual funds. Why such large proportion of total assets? I do not expect to need to liquidate more than 20% of my assets over a period of 5 - 10 years. And have felt that I should plan to fund my life's expenses till age 100, as I prefer to run out of life before I run out of money rather than the other way around. I have had a number of the stock and mutual fund certificates issued, which I have used as collateral at my bank to set up a fully secured Line of Credit, which cost no set-up fees (no evaluation of a home, title search, lawyer's fees, etc.) which I use on occasion, but much of the time sits there unused ... with no inactivity fees to pay. I use my credit card for (infrequent) emergency use, then draw on the line of credit to pay off the full credit card balance owing when I receive the account. Interest paid is not deductible. So I have set up a separate fully-secured Line of Credit that I may use to purchase more stocks, when I feel it justified and lack savings on hand to use. Interest paid on such loans is deductible. Also ... it's been my experience that, after a couple of years of dropping stock markets, usually they advance quite rapidly for the first couple of years of recovery. Were I to need emergency money when I felt that markets were much too low, I'd probably draw on my emergency line of credit for ongoing living costs for a year or so rather than selling stocks at distressed prices, trusting that after recovery I could probably sell them for probably 50% (or even 100%) more than now. Hope all of this is helpful. If some of it wasn't understood, please ask for further explanation. ole joyful ... enjoying good health at advanced age

Berniek is right: Much of the blame here falls upon the shoulders of the politicians (led by then-President Clinton), who forced banks to begin some rather foolish lending practices. Alan Greenspan certainly did his share to push this concept of "everyone can borrow" during his time as Fed chairman. Between creative financing, no money down offers, and other such options, the government has given people plenty of rope with which to hang themselves. We Americans haven't proven ourselves to be particularly strong in the moderation and self-discipline categories over the last 30-40 years. Also, remember the climate that existed in the 90s, when I bought my first house: Spurred on by the soaring housing prices, people were convinced that buying "as much house as you can afford" was a good move. Housing was considered an investment that couldn't fail. Yes, the experts began preaching about "the housing bubble" long before it hit, but the masses couldn't grasp how this sure-thing could ever fall. And there's always been a (faulty) basic belief that "If I couldn't afford it, the bank wouldn't lend it to me." I fully agree with those who say that Real Estate agents will push buyers to their upper limits and beyond, and banks will lend what they can -- it's all about profits for them. Yet, the home owner DOES also bear the brunt of personal responsibility. After all, who cares most about whether I can afford my mortgage -- and still buy groceries and other things I need? Clearly, it's ME! I reap the rewards or punishments of my decisions, so I should do the math and know whether I can comfortably afford a house (or anything else) before I buy it. However, we've sort of left that thinking behind in today's buy-now-pay-later society. We're constantly told that "we deserve" this or that thing. That if we're going to finance it, we deserve to have exactly what we want. That "everyone" has debt. We've got to get past that.

Elmer just so you know I actually look at our states legislative session and what bills are proposed and voted on. It keeps me current at least on that. Occasionally there will be legal decisions that the Attorney General will release to the media. One of the last ones was a scam that involved this exact topic. Edited to add that I hope you realize that some things almost always have local variations and while there may be federal laws there will also be state laws that pertain to things that the federal laws do not cover.