Additional payment to mortgage

dculberson said:

Curtis said:

My bank does offer an escrow account thing for after closing a mortgage, but I think the fees are a little excessive.

Our county offers auto-drafts of the property tax, and you can set it up to come out every month as 1/12 of the total bills. Look into it; I bet yours does too unless it's really rural and behind the times.

In my experience, local taxes really are - local - and how they accept payments is a crap-shoot.  I have 4 local tax bills for my township. All four are handled differently. One I can pay online (it's withdrawn from my paycheck), one I mail in a check once a year, one I pay in person at the township office once a year, and the school taxes I pay in person at the school offices once ay ear as well. And I live in a densely populated Philly suburb. It's kinda nuts, but whatever.  I'm used to it at this point and paying in person isn't a big inconvenience for me.

Sometimes I think I missed my calling to be an accountant as I actually get excited when bills show up in the mail and I go through the process of entering them into my personal spreadsheet and schedule the online payment from my bank. My electric bill arrived today and paying it was the first thing I did when got home.

dculberson said:

At Curtis’s income level I would recommend a Roth IRA which has no penalty and no taxes for early withdrawals of principal. Which you should never do but I recognize life has challenges. 

DING!

Ian F said:

dculberson said:

Curtis said:

My bank does offer an escrow account thing for after closing a mortgage, but I think the fees are a little excessive.

Our county offers auto-drafts of the property tax, and you can set it up to come out every month as 1/12 of the total bills. Look into it; I bet yours does too unless it's really rural and behind the times.

In my experience, local taxes really are - local - and how they accept payments is a crap-shoot.  I have 4 local tax bills for my township. All four are handled differently. One I can pay online (it's withdrawn from my paycheck), one I mail in a check once a year, one I pay in person at the township office once a year, and the school taxes I pay in person at the school offices once ay ear as well. And I live in a densely populated Philly suburb. It's kinda nuts, but whatever.  I'm used to it at this point and paying in person isn't a big inconvenience for me.

Sometimes I think I missed my calling to be an accountant as I actually get excited when bills show up in the mail and I go through the process of entering them into my personal spreadsheet and schedule the online payment from my bank. My electric bill arrived today and paying it was the first thing I did when got home.

We are direct opposites in that regard. I hate accounting, paying bills, doing a budget.  When looking for a wife that’s very high on my priorities.  Once I find that I like her and that she’s a good person, I look for someone that does like that sort of thing.  Looks,personality, figure, income, etc. are all way down the list.  

Seems to work, my last wife lasted over 35 years, until she died ( but you can’t hold that against her).  This one I’ve been with almost 5 years now and we’re getting married in  August.  She seems ready for the long haul.  

dculberson said:

At Curtis’s income level I would recommend a Roth IRA which has no penalty and no taxes for early withdrawals of principal. Which you should never do but I recognize life has challenges. 

That is my whole point, life happens and not all of it is good. 

You should never empty a retirement account especially in a down market. But life isn’t good at market timing.  I was reading about market fluctuations and it seems that 6 times a year on average the market drops 5%  and every 6 years it drops 20% or more. 

All the prediction charts I’ve seen look at the big picture.   As if the market follows a straight line. 

Well it doesn’t and if the need for a big chunk of money happens fate can be extremely cruel.  

I put money into the market starting about 1978, a modest 5% a year.  In about 1984 a stock broker friend looked at my portfolio and suggested  I be more aggressive with a portion of my account. He was doing highly leveraged investing  and the returns were astonishing.  

I started small and month in and month out, good market or bad the returns exceeded my wildest expectations.  I’m sorry, I got greedy, more and more went in until I was all in.  

In July of 1987 I had all the money needed ( plus a little) to tear this house down and build a fantastic place.  Oh and pay off my tiny mortgage. 

Nope,  the compounding was so compelling.  Most months I made more in the market than I did working.  

You know or should know what happened that Fall.  I was busy working and didn’t hear about the market plunge until late morning. By that time it was all gone. 

My fault,  my friend had repeatedly warned me. 

You know what happened in 2008  and if you invested at the wrong time and had to take it out at the wrong time you’re in the same spot I am.  

They say you shouldn’t time the market. Just put money in and let it sit!  Life isn’t like that.  That serious illness,  a family emergency,  all those disasters happen to real people.  

Yes some win in the stock market.  Some even win the lottery in spite of the awful odds.  

frenchyd said:

Life isn’t like that.  That serious illness,  a family emergency,  all those disasters happen to real people.  

And when life happens like this, the money still has to come from somewhere. If not depleting cash reserves and a diminished by the hard falling market stock/retirement investment portfolio, then where and how?  Remember, you're also talking about a situation where the housing market is massively down (along with the stock market) and lending has all but come to a halt.  If somebody had been putting all of their extra funds into their mortgage rather than investing in the stock market, and assuming it has been enough to keep them from actually going negative on equity, getting that money back out of the house would quite likely have required similarly selling it at a considerable overall loss just to salvage whatever cash they could get back in their pocket...Losing both their home and the roof over their head, in addition to the financial hit, all in one fell swoop. The idea of paying off the mortgage early makes people feel good about not owing somebody else money, but the reality is it does not necessarily make their home substantially more 'safe' from being lost due to unexpected financial distress.

In reply to Driven5 :

There is nothing that is 100% safe from financial pressure.  However. Reducing the unpaid principle by 1/3 ( in the case of the OP ) would dramatically change your options.  

The courts will demand you liquidate any cash reserves immediately. 

However a home is granted special protection.  It requires protection that can dramatically extend your reserves. It cannot be touched until the 90’th unpaid  day which is the earliest a bank or lending institution can file a notice of foreclosure.  Because foreclosed homes will cost the lending institution at least 10% they may grant extensions,  wavers, and loan modifications. Very readily at that time.  It’s even treated different on the banks books.  

So in addition to the 90 days. An additional 45 days for the loan modification is almost a certainty. Even if not it needs to be put on the court calendar and a judgement  made followed by a sheriff’s sale. Which has it’s own legal posting requirements.  

Once the sheriffs sale occurs you have 6 months before you vacate.   At the earliest!! 6 months of free living!  So approximately a year goes by before you need to leave a house.  

That’s a year rent or payment free The stock market doesn’t grant that. 

Oh and those returns everyone talks about?  What if your timing is off?  What if you buy on an up market and sell during a recession?  

Remember about 6 times a year on average  the market is down 5% or more. And once every 6 years  on average the market drops 20% or more.  

In reply to frenchyd :

Dollar cost averaging. 

Good investing has nothing to do with buying a lump at one time, and selling it at another. It has to do with developing good habits of investing regularly. 

$100 invested monthly will ride the market fluctuations, not suffer from them. So, if the product is $10 per share in January, you buy 10 shares. If the price raises to $15 in February, you only buy 6.67 shares (still $100). In March the bottom drops out and the price drops to $5 per share. DO NOT GET SCARED AND SELL. Buy 20 shares because they are on sale, and deeply discounted (still $100). And in April the prices skyrocket to $20. You spend your $100 and buy only 5 shares, because they are seriously overpriced right now. 

By spending the same dollar amount regularly, you average the gains, and buy limited quantities when the price is high, while doubling down when there are bargains available. 

...and for the record, it's just as easy to lose money in real estate by timing the market badly. I know. I just lost $50,000 on the sale of my house. 

Sure glad it was financed so most of that loss was someone else's problem. 

frenchyd said:

That’s a year rent or payment free The stock market doesn’t grant that. 

The stock market doesn't have to do that, because the house will still provide that same 'protection' for you either way. 

As I tried to explain, the idea is that more liquid of assets/investments (vs more home equity) does more in an emergency to reduce the probability of having to sell the house and possibly prevents the house entering foreclosure in the first place. If the available reasonably liquid funds will cover the bills without selling the house or going into foreclosure, you get to keep the house.  And if the amount of total funds (your net worth) is insufficient to cover the bills, then it doesn't much matter whether they are relatively available or tied up in the house, either way the house will go through the same process.

Also if going down the rabbit hole of financial planning exclusively for the lowest probability worst case scenarios, note that retirement accounts are generally exempt from bankruptcy proceedings. Where as the more equity that is in your house, the more likely it is to get liquidated in bankruptcy.

SVreX said:

In reply to frenchyd :

Dollar cost averaging. 

Good investing has nothing to do with buying a lump at one time, and selling it at another. It has to do with developing good habits of investing regularly. 

$100 invested monthly will ride the market fluctuations, not suffer from them. So, if the product is $10 per share in January, you buy 10 shares. If the price raises to $15 in February, you only buy 6.67 shares (still $100). In March the bottom drops out and the price drops to $5 per share. DO NOT GET SCARED AND SELL. Buy 20 shares because they are on sale, and deeply discounted (still $100). And in April the prices skyrocket to $20. You spend your $100 and buy only 5 shares, because they are seriously overpriced right now. 

By spending the same dollar amount regularly, you average the gains, and buy limited quantities when the price is high, while doubling down when there are bargains available. 

On paper regular investments does beat market fluctuations.  That makes the assumption that there is always surplus money.  

Too bad for those who’s income varies.  I spent my working lifetime as a commission based salesman.   I averaged a solid 6 figure plus income back when that sort of income was rare.  But there might be 3 or 4 months of stellar income where debts were paid completely and there was a surplus to invest.  There might be 3-4 months where income was insufficient to meet obligations. And the rest of the year just squeak by.   Some years there might be 6-9 straight months of less than required  or barely meeting needed income.  

Not only salesmen but business owners,  Farmers,  those who live on tourism, and seasonal workers. Heck even CEO’s bank presidents and the top 1% have incomes that fluctuate. 

In fact, I dare say more people have fluctuating income than those with steady income.  

I haven’t even started on those who’s obligations fluctuate. Such as high summer utility bills, or winter utility bills.  Parents with Children who’s daycare costs soar during summer, or school breaks.  Might I remind you that daycare costs often exceed mortgage payments?  Health care costs  will always be high at the start of the year when deductibles haven’t been met.   That is particularly punishing with young school age children  who are cooped up indoors due to the onset of winter weather with thousand of Petri dishes errr classmates returning from winter ( Christmas ) break, who’s travel plans cover the globe. 

Not only parents with children but the aged and infirm.  Who’s income will nosedive in their final working years just as the finish line to retirement happens.  

Finally unemployment.  7 times in my working life I went through more than 3 months of unemployment.   Every single time I was either on top of the income board or next to the top.  In most companies good salesmen are the second most costly employees next to the Owner or boss.  Since the sales department is a companies prime income source, it’s manager is always under extreme scrutiny. Turnover is extremely high.  

Salesmanagers look to having a sales staff loyal to them not the previous manager and those at the top of the leader board go first.  

So how do you invest when you are unemployed? 

Let’s see that plan!!! 

SVreX said:

...and for the record, it's just as easy to lose money in real estate by timing the market badly. I know. I just lost $50,000 on the sale of my house. 

Sure glad it was financed so most of that loss was someone else's problem. 

Was that real estate your home or an investment?   If your home, you did not lose money but had a higher living cost.  If an investment clearly it was not a long term investment because on average real estate has a nearly 8 year steady increase in appreciation.  

If a short term investment ( a flip) real estate is the same as any other speculation including the stock market.  Timing is critical.  

To counter your event my soon to be daughter-in-law  sold her house in two days after listing it. She made over $100,000 since buying it in 2014.  I’m not sure how much of that is profit since the renter of her Mother-in-law apartment brought in an addition $600 a month  so there is going to be capitol gains obligations.  

Driven5 said:

frenchyd said:

That’s a year rent or payment free The stock market doesn’t grant that. 

The stock market doesn't have to do that, because the house will still provide that same 'protection' for you either way. 

As I tried to explain, the idea is that more liquid of assets/investments (vs more home equity) does more in an emergency to reduce the probability of having to sell the house and possibly prevents the house entering foreclosure in the first place. If the available reasonably liquid funds will cover the bills without selling the house or going into foreclosure, you get to keep the house.  And if the amount of total funds (your net worth) is insufficient to cover the bills, then it doesn't much matter whether they are relatively available or tied up in the house, either way the house will go through the same process.

Also if going down the rabbit hole of financial planning exclusively for the lowest probability worst case scenarios, note that retirement accounts are generally exempt from bankruptcy proceedings. Where as the more equity that is in your house, the more likely it is to get liquidated in bankruptcy.

Ahhh the cash is King argument.  Except cash in a bank doesn’t keep up with inflation.  Even now APRs  are less than 50%  of inflation.  

And to get even near inflation returns the cash is tied up for longer periods than instant access. 

OK Gold, diamonds, stock market?  What?  All of those have timing issues!!! Potentially returning much lower than even banking returns.  

Cash is King also implies not reporting income which had it’s own risk.  Yes I understand the OP’s situation which may exclude those risks. 

The only return in this modest situation may be to lower living costs. With only the amount your willing to lose to inflation exposed to the cost of saving. 

In reply to frenchyd :

Is there any limit to how long you will argue about stuff?

Give it a rest. This is tiring as hell. 

SVreX said:

In reply to frenchyd :

Is there any limit to how long you will argue about stuff?

Give it a rest. This is tiring as hell. 

If I give  You  the last word will you be satisfied? 

In reply to SVreX :

And yet people still reply to him. It's like he finds a new victim every three days or so. I don't even read his post anymore, I'm almost certainly able to guess the content without reading a word. 

Driven5 said:

going down the rabbit hole of financial planning exclusively for the lowest probability worst case scenarios...

Sadly, this is how many plan.

I always try to educate my co-workers that most of the time, planning for 99.99% of cases is the same.  And you will still be best prepared for that 0.01% case, unless you planned exclusively for it.  Plan the best you can.  1 in 10,000 times, you'll have bad luck, and need to deal with it.

This comes up a lot when discussing the 'have 6 months living expenses in your savings account' rule, which I think is incredibly stupid.

ProDarwin said:

This comes up a lot when discussing the 'have 6 months living expenses in your savings account' rule, which I think is incredibly stupid.

Do you think that is too conservative? (As in, too much in the way of non-productive liquid assets?)

dculberson said:

ProDarwin said:

This comes up a lot when discussing the 'have 6 months living expenses in your savings account' rule, which I think is incredibly stupid.

Do you think that is too conservative? (As in, too much in the way of non-productive liquid assets?)

Absolutely.  especially once you are well established with home equity, a roth principal, etc. to draw from in the case of an emergency.

By the way, if one had invested all their money in September of 1987, right before the big crash that year, just as the market was peaking...

They'd have been back to even 2 years later, if they didn't touch the money.  Not including dividends.  

Yawn.

frenchyd said:

OK Gold, diamonds, stock market?  What?  All of those have timing issues!!! Potentially returning much lower than even banking returns.  

Yet you just participated in an example yourself, which explicitly demonstrates that real estate (including your home) is fundamentally no different. Time it well and reap the rewards. Time it poorly and suffer the wrath. The only real difference is that getting the money back out of other investment cannot result in losing the roof over your head. So please do tell, what other yet unmentioned completely safe from all risk of loss at any given point in time investment that also beats inflation do you recommend?

In reply to Driven5 :

Classic Jaguars.  Clearly.  

In reply to volvoclearinghouse :

Brilliant!...How did I not see it sooner?

As Scott Adams said:

Why can't we 3D-print a block-chain and HTML it into a bitcoin???

DUH!

yupididit said:

And yet people still reply to him. 

Debating with mental gymnasts keeps the mind limber and prevents terminal boredom. Each additional reply is like the gift that keeps on giving. 

ProDarwin said:

Absolutely.  especially once you are well established with home equity, a roth principal, etc. to draw from in the case of an emergency.

I agree with you there. I need to work on my wife and move what cash savings we have into investments. It's not a big % of our total but it's still something and it's not earning us anything.