Hi graywings, I started reading this thread without noting the dates the posts were written. Dave, I don't want to put you on the spot, but I am wondering how the accounts you spoke of in 2007, the 72c Guaranteed Savings accounts (equity-indexed fixed life contract, or annuity contract) have weathered over the last three years. Heh... you can "put me on the spot" in this regard *ANY* time ;~) Both the equity indexed life & annuity products have *VERY* strongly outperformed the unprotected stock index markets over the same periods of time (since 2007. In fact, going back from today to almost as far as you'd like.) Their design is that they capture & credit any annual upside (to a maximum gain,) and lock that amount permanently to your credit. On any years with a downside, your account sits tight with no losses at all (guaranteed by the insured backings of the company reserves and the state's guarantee association (each state's equivalent of a regional "FDIC" in essence.) If you put $100,000 in the S&P 500 for the last decade, you'd actually be holding a bit LESS than $100,000 today (not deducting the tax or management fees that may also be applied.) The same $100,000 in an insured indexing account would be approximately $211,768, net of everything (taxes & fees,) *OR* about an average annual tax-free rate of return of 7.06% Alternatively, those folks who decided to take their working capital OUT of growth, and put it into their real estate equity, have been double-stung; Not only have they gained nothing toward retirement, their equity values have decayed from 10-30% (depending on the area.) The clients who've been with us the last 3-5 years have been rather relieved, ecstatic, and pleasantly bored, all at the same time. Its a very nice financial reality to provide. Cheers, Dave Donhoff Leverage Planner (PS. to re-paraphrase celticmoon; When everyone else's retirement nest-egg is drowning deep underwater... its kinda nice to be riding on the back of a "duck" ;~)

I have such a love hate relationship with the sorts of articles such as "Never pay off your Mortgage" etc. The benefit is that it gets people thinking, the bad thing is that it paints a narrow, ill conceived, rosy picture that doesn't hold up too well under scrutiny. Life is never so black or white. Several potential fallacies: #1. The assumption that everyone will have other debt in their life. #2. I'd like to find a bank that will give you a 95% 30FRM (as per his example) with out requiring an 80/15, or PMI, etc., all costs which he neglects to account for. #3. If his rosy fellow Ed is out of a job, he'll have no earned income. It's tough to make a deduction from that, so his "after taxes payment" will be readjusted back to original, meaning his $40K will last a much shorter time than this article (which also fails to account for basic costs of living beyond housing) accounts for. Fact is that if either of them are out of work for any amount of time, they're screwed. I'm not sure yet if we'll pay our mortgage of early or not. As per the article's example, our income has increased so that it's not the drain on us that it was 2 years ago. If we do prepay, we'll do it in a lump sum capacity after the point at which it is not longer a beneficial tax deduction to us. Right now we're investing the money that would go to extra payments. -meg

Hi Sparksals, Some clarifications, if I may... If you're going to pay the mortgage off in 12-15 years, why not get a 15 year mortage? I'd say: Because getting a 15 year term puts your feet to the fire and locks you OUT of any safety management of your own equity. It removes your ability to plan and adjust to life. PLUS in actuality it ends up costing you more in real cash, in the end. You will save a considerable amount of interest and the rate will be a bit lower than the 30 year fixed rate. Actually, if you run the numbers, and apply ONLY the potential earning rate of conservative CD savings interest to the additional amount of principal trapped in a 15 year term versus a 30 year term, you pay far less with a 30 year mortgage. Ignoring the very real loss of savings interest income from the money you may be trapping into the real estate equity on an accelerated basis can be hazardous to your wealth ;~) That is an option if you think you can afford the 15 year payment. If you're taking out a 30 year mortgage for the security of a lower payment in case one of you lose your job, then adding to the principal will have the same effect of reducing interest, but you'll still pay a higher interest rate. THIS is true... which is why it is both safer, and smarter, to accelerate the elimination of your mortgage by sending all your free money into a seperate, liquid, savings-based "Mortgage Freedom Account" than to actually dribble it into the mortgage bank prematurely. The most important thing to check with your conventional mortgage is that there are no prepayment penalities. Actually... prepayment penalties on residential financing are so extremely tame, and offer the potential of strong savings (often reduced rates are offered in return for PPP periods,) that it is really something to look at favorably. By law, PPP can never be applied to accelerated payments less than 20% of the original balance... that's 1/5th of the entire loan amount... so if you WERE determined to dribble away your cash to the mortgage company, that is a LOT of dribbling you can get away with and still get the lower interest rates. In addition, there are SOFT PPP which apply only to payoffs greater than 20% due to refinancing only (not sales,) and HARD PPP which apply to both refinances and sales. Taking the rate discounts for a SOFT PPP when available can be a real win... and anyone paying a premium for a 30 year fixed, but avoiding a rate discount with a PPP, is simply conflicting their own financial values. WEIGH the options carefully, and KEEP ALL THE VARIABLES IN MIND! Eliminate ALL of your debt as fast as possible... HOWEVER, not a DAY EARLIER than it has completely served you! Cheers, Dave Donhoff Strategic Equity & Mortgage Planner

"This may be common knowledge, but I just found this out and it has been bugging me ever since. I'm paying $500/month extra principal payments on my mortgage. If I paid the $6000/year once each year, it would have saved me 5 months at the end of my mortgage." If all you are concerned with is paying off the mortgage faster, paying $500 a month will be faster than saving up till the end of the year and making a single payment of $6000. Interest is computed EVERY MONTH on the balance of the mortgage. Each payment is than applied to the interest, and the remainder goes to the principal. If you pay $500 extra, the next months balance will be $500 less, resulting in more money going to principal the next month. One simple way to envision this is to look at an amortization schedule. If you made an extra principal payment of the NEXT months principal, you would 'skip' ahead one month on the amortization table, and shorten the loan by 1 month. If you make a $500 payment to principal you can add up the monthly principal portions on the amortization table until you get to $500 (or as close as you can without going over). This will be the number of months the mortgage is shortened by. It is easy in the first years to shorten the mortgage, but gets harder in the latter years since the portion f the payment allocated to principal is rising as the balance decreases.