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Hi All, Today I've resigned and my LOD is 2 Sept. Can anyone please let me know for these 90 days salary would be credited only after FnF. Or June'22 salary will be credited as usual, however, July and September salary would be credited during FnF. Please confirm or suggest.
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Does the advisor charge a percent of AUM? If so, you paying off your mortgage directly impacts their fee
Assets under management, the total value of the assets you have which you pay them to manage for you (generally an investment account of yours which they manage how to invest on your behalf).
Some charge a fee based on AUM (say 1% of the AUM per year), and others charge a flat fee or different fee schedule, regardless of the AUM. As it relates to this thread, if you were to pay off your mortgage faster instead of throwing that money at investments and they charged a fee based on AUM, you’d have fewer assets invested for them to make money on.
I got 6.125% 4 years ago. At that time I didn’t want to be above a certain amount of $ interest paid over the life of the loan but that required me to budget monthly extra payments that were a bit on the high side so I settled for 500 extra month which would save me 8 years and over 200k in interest. Recently, I have started using my annual tax returns to pay off extra principal and hopefully shave off another few years. I wish I was making partner /md salary which could potentially allow me to pay off much sooner. 500 extra a month allows me to sleep better that I’m not paying the bank an extra 200k and that I will at least pay off 8 years before full term. And also at the same time have enough liquid funds to invest, however small.
About 2500/ month into taxable investments and other vehicles.
I lost my job earlier this year and plan to have my mortgage paid off by the time my severance runs out. Luckily, we were already within a year of paying it off anyway so it's just a nine month escalation. Since I haven't had any luck finding another job, knowing that our largest debt will no longer be hanging over our heads is huge to me, even though we have a low interest rate. Not having a large monthly financial obligation is more important to me than investing my money elsewhere right now. I can't wait to send in that final payment in a few months! Plus. our mortgage interest was so low that we couldn't even get the advantage of itemizing it on our taxes anymore so why continue to carry debt that we don't have to carry?
When it comes to your credit score, a mortgage paid timely every month has the greatest positive impact on your score. There are also the tax benefits of mortgage interest which this year made zero difference for me. These are mostly why. If you are prioritizing paying off debt start with the one withbthe highest interest rate. If the mortgage is all thats left and you want to pay it and are not interested in more debt, then pay it off if you want to.
Why do advisors recommend to not pay off the mortgage? It is because the law of compounding numbers works against early pay off vs. investment. Example: a $200K mortgage at 7.3% you will pay about $293,610 over 30 years. If you have $200K invested and receive an average of 7.3% return/year (same as the mortgage) you would gain ~$1.455m in interest. A $1.1M gain. However; as many have stated it is also personal. I have a 2.875% mortgage and yes I pay extra. Why it is personal choice. I want to be debt free when I go into retirement and yes, I do plan to invest my mortgage payment once I pay it off.
Subject Expert
The math here is wrong.
paid my home off in 10 years and it had a 112% increase in value in the time. sure I could have invested that money, but now i’m in a position where I have much more cash in hand each month because of no morgage payment. I can invest it if I want, I can do whatever I want with that money without waiting for things to grow or any sort of rules or stipulations. very freeing and even tho my interest rate was quite low at 3%. id do the whole thing again in a heart beat. I actually would have started paying it off early even sooner if given the chance.
The calculation includes taxes, inflation, and what you might have made investing those funds in something else.
F
Because they would rather invest your money themselves
It really is more of an emotional decision in your situation. At 7.3%, that is a pretty decent rate of return compared to a 70/30 portfolio. Some will say, historical returns over time say the market will out pace that but what if we go into a bear market like the lost decade starting in '08? It sounds like it is a piece of mind thing for you so that should carry significant weight. If you do pay it off, immediately apply for a HELOC so you have cheap access to the equity in an emergency. It costs you almost nothing and if you never tap it, no harm, no foul.
Your mortgage interest can be a tax write off.
But you only recoup your tax bracket rate x the interest in dollars.
e.g. You pay 1,000 in interest. Your tax rate is 25%.
You would reduce your taxes by $250.
Meanwhile you still pay $750 in interest.
The tax write off is usually only a factor when calculating the viability of an investment property.
Being free of personal debt will free up that $1,000 (plus the rest of your mortgage payment) for real investments with the possibility of actual earnings.
I do itemize so it does help me. But it deceases and caps out ofer time. So not applicable over the life of the loan, sadly.
They are wrong. Paying it off is the same as earning 7.3%, which is significantly higher than the rate on a CD account. If your rate were much lower, that would not be true. Of course, you start by paying off whatever debt that has a higher rate first.
Subject Expert
But is the OP's marginal investment a CD?
What I was told in the past was you want to keep a mortgage, as your property tax is rolled into it. This makes it smaller, broken up month-over-month and easy to manage. The pitfall for some people with no mortgage is that they don’t always plan for it and get a huge property tax bill that they can’t pay. Take it for what it’s worth.
if your home is paid off and you’re not planning for a tax bill meanwhile you have no mortgage each month. that’s a skill issue lol