No more mortgage.

ScottM said:
It has been a month since I did the pay off and I had not heard anything. That is why I was asking the PoA mafia what they thought and knew. I think the most important thing is I do have the letter from Wells Fargo telling me I am free and clear. If I had to prove something about paying it off I could.
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Oh its Wells Fargo! They are pretty good at getting the requiste stuff filed I'm sure it will happen.
 
Greg Bockelman said:
Well, you don't exactly have NO debt. You just pay it off every month. For those that do not use credit at ALL, I think their credit score would eventually go to zero.
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Can't go lower than 350 - at least with FICO. It always bugs me how Dave Ramsey says his score is zero. It doesn't start at zero.
 
The Old Man said:
In re credit scores:
We own two houses, both paid off for over 2 years. No other short term debt. Two credit cards averaging $2000/mo, both paid off each month. I bought a 2 year old car (paid cash) in March and the people doing the paperwork said they had never seen that high a credit score before.

Apparently, the old wives tales about no debt yielding low credit scores is just an old wives tale.
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Greg Bockelman said:
Well, you don't exactly have NO debt. You just pay it off every month. For those that do not use credit at ALL, I think their credit score would eventually go to zero.
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I bought a car last year, paid cash. The only debt I had was the mortgage, but like T.O.M. I use my credit card a lot and pay it off each month. Typically that payment is $2-3k/month. My credit score was well into the 800's. So maybe there is some truth to what you say Greg. I really do not understand the mystery of the credit score system.
 
Congrats, Scott! If it weren't for a few moves I'd be in the same place.
 
Areeda said:
Are there any downside to paying off the mortgage?
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The one thing I can think of and which happened to me is that, depending on the rest of your finances, you can no longer itemize.
 
Did you pay more or less tax as a result? IOW, what was the difference between your standard deduction and the remaining itemized deductions you theoretically could have taken?

Everskyward said:
The one thing I can think of and which happened to me is that, depending on the rest of your finances, you can no longer itemize.
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Everskyward said:
The one thing I can think of and which happened to me is that, depending on the rest of your finances, you can no longer itemize.
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Having a mortgage is not a requirement to itemize. Anyone can do that anytime they want. However, if your itemized deductions are less than the standard deduction then you have paid more taxes than you should off.
 
ScottM said:
Having a mortgage is not a requirement to itemize.
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I know that.

ScottM said:
However, if your itemized deductions are less than the standard deduction then you have paid more taxes than you should off.
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That was my case. Without the mortgage interest I did not meet the threshold to itemize and I took the standard deduction. Therefore I couldn't deduct things like contributions and business expenses.
 
AdamZ said:
Scott what David said was generally accurate but there can be a few twists and the process is not uniform in all states. Keep the paper that you have in a secure place you may need it. Since you referenced mortgage I'll assume its a mortage and not a Deed of Trust which they do in some states.

Following is what happens in PA as I said it may vary from state to state:

The procedure is for the Lender or the assignee of the lender (as you know mortages are transferred and sold several times over) to Send you a Satisfaction Piece. It is a release of the lein but its more than that it also indicates that the not only is the lender releaseing the lein but the mortage has also been satisfied. That document is filed in the Recorder of Deeds office or the office where land records are maintained in your jurisdiction here it is our county Recorder of Deeds. In PA the lender has 30 days from the final payment to file this document ( they often don't and we usually wait 60 days before we start to make noise)

Here it would be very unusual for the lender to send you your deed. When you purchase a property The three main documents Deed, Note ( IOU) and Mortage ( Mortage is really a security interest in your property that you give to the lender to assure that the Note is paid off so techincally you are really paying off the note not the mortgage but thats splitting hairs) so anyhow The Title company or who ever acts as closing agent takes the note and sends it to the lender they then record the Mortage and Deed and when they come back from the recorder's office ( they don't keep the orginal) the the Mortage is sent to the lender and the Deed is sent to the home owner. Here the deed is never sent to the lender because they have the Mortgage. Often times the closing agent won't send the Deed back to the home owner after recording because they just get too backed up and forget. No worries you can call them and remind they they never sent it to you after recording or if its lost get a certified copie of your deed from the recorders office. Once the Satisfaction Piece or Release of Leins is Recorded the Recorder sends it back to the home owner if they don't you can ask the recorder to send it to you or again get a certified copy. In PA it is rare for the lender to send the satisfaction piece to the home owner they usually record it directly. Other states may vary. If you have any questions speak to an Illinois Real Estate Attorney.

And congrats on the payoff. I recall my grand parents and folk having a mortage buring party when they paid off. Apparently it was something that was done when folks were a bit more fiscally responsible and didn't have 50 year mortages
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Note my signature line...which I believe you provided me a few years ago! ;) :)
 
Everskyward said:
I know that.

That was my case. Without the mortgage interest I did not meet the threshold to itemize and I took the standard deduction. Therefore I couldn't deduct things like contributions and business expenses.
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Well, you could if you made more contributions or had more medical/business expenses! What it really did was made it simpler to do your taxes!
 
Obi Heed Kenobi said:
Note my signature line...which I believe you provided me a few years ago! ;) :)
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And I have continually laughed at. :)

gprellwitz said:
Well, you could if you made more contributions or had more medical/business expenses! What it really did was made it simpler to do your taxes!
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For anyone looking to make donations to get a better tax deduction, I have some ideas. ;)
 
There is no downside - zero, zip, nada - to owning a home without having to make mortgage payments...
There is no upside to making mortgage payments once you have the ability to pay off the principal...

If you HAVE to make payments because you cannot pay down the principal up front (which is most of us when we are younger), then it makes sense for those payments to be on a house, a second home, or a boat that qualifies as a second home, where you do get an interest deduction on your taxes AND (very important) you get to deduct depreciation on the value of the property from your taxes (this is what lubricates business buildings)...

It does not make sense to carry debt for toys such as cars, airplanes, etc. which do not have tax deductions comparable to a home, etc...
So, if you have to borrow, then do it for the home and only buy toys when you can pay cash...

denny-o
 
Scott: Congrats. On commercial notes here in Texas, I usually have the escrow agent procure a lien release as a condition of closing. For residential homes its less formal. One consideration in these times is to get a release and the note marked paid from any lender. I've seen cases where a lender was taken over and a new lender tried to collect the note.

Dave
 
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Scott: Congrats. On commercial notes here in Texas, I usually have the escrow agent procure a lien release as a condition of closing. For residential homes its less formal. One consideration in these times is to get a release and the note marked paid from any ended. I've seen cases where a lender was taken over and a new lender tried to collect the note.

Dave
 
1) As others have said, check with the Recorder of Deeds in about 45days. In Maryland it took seemingly forever for them to process the payoff. Folks have been know to screw it up. On the other hand, it gets done quickly in NJ2
2) Not being able to itemize means the standard deduction is bigger than your itemized deductions. Nothing wrong with that. In fact, it saves a bit of record-keeping aggravation.
 
mikea said:
You can deduct employee business expenses on form 2106 even if you don't itemize.
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Maxed IRA? Qualify for an HSA? Charter an S-corp and start a little biz?
You'll take a liquidity hit paying off the mortgage, but if you bank the payment it's amazing how quick that recovers. Today's biggest problem is finding good investments for the free cash flow.

Good job Scott! :cheerswine:
 
EdFred said:
Nope. Because at any time you could take out a HELOC or another mortgage. Basically it's just on record that there are no liens against it.
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I'll second that.
I paid mine off 6 years ago and verified that the County has it on record, but I had to ask for a copy (of the Deed), they only send a note saying it was paid off.
 
O.k.tony! Unfortunately I don't have internet here at the beach. Come on down and we can discuss. Point is some lenders pledge notes to others. If another tries to collect it can be a real pia.
 
Everskyward said:
I know that.

That was my case. Without the mortgage interest I did not meet the threshold to itemize and I took the standard deduction. Therefore I couldn't deduct things like contributions and business expenses.
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Making my last credit card/consumer credit payment next month:cheerswine::cheerswine::cheerswine:, Just the Mortgage (7 years left) and a 401K loan left to pay off.

2 years ago I paid so little interest I did not itemize as the standard deduction was better. Last year I made some charitable contributions that made it beneficial to itemize.

Brian
 
brcase said:
401K loan left to pay off.
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YIKES! Never take a loan from your 401k unless it is a real life or death type of thing. You are paying interest on your own money plus the investment is not earning all it could. Since you already have the loan I would reccomend that you do everything possible to pay it back as fast as possible.
 
ScottM said:
YIKES! Never take a loan from your 401k unless it is a real life or death type of thing. You are paying interest on your own money plus the investment is not earning all it could. Since you already have the loan I would reccomend that you do everything possible to pay it back as fast as possible.
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But you are paying interest to yourself instead of throwing it away.

Plus, you may be paying more interest than the 401K is earning in a weak market.

Take out a loan just before the market drops and you preserve value and look like a genius.

Take out a loan at the bottom just before it takes off and you look like the maroon that you are.:dunno:
 
wait so if i took a loan out on my 401K I could buy a nicer glider???
 
Capt. Geoffrey Thorpe said:
But you are paying interest to yourself instead of throwing it away.

Plus, you may be paying more interest than the 401K is earning in a weak market.

Take out a loan just before the market drops and you preserve value and look like a genius.

Take out a loan at the bottom just before it takes off and you look like the maroon that you are.:dunno:
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And you will have to pay taxes on that interest as it is now an earnings, when you go to take the money out at retirement. That means you get to pay taxes on that money twice since you paid taxes on it once when you were paid it. Also no tax deduction like with a home equity loan.

There are a couple of upside, like no credit check to get to your money. But that is about it IMHO. That is why I would never use it unless it was a huge emergency.
 
Capt. Geoffrey Thorpe said:
But you are paying interest to yourself instead of throwing it away.

Plus, you may be paying more interest than the 401K is earning in a weak market.

Take out a loan just before the market drops and you preserve value and look like a genius.

Take out a loan at the bottom just before it takes off and you look like the maroon that you are.:dunno:
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When someone shows me how to get the market to perform significantly better than the interest I am paying on the 401K loan I will stop borrowing from it. So far I haven't figured out how to do this.

It makes little sense to pay 6% interest to a third party and earn 5% to 7% average on the 401K when I could just pay myself the 6%. Even if it goes the other way I might loose a % or two, but paying myself the interest is nearly guaranteed as opposed to the risk of the market. Although now that my consumer debt is gone I have more income available so borrowing should not be needed and if so only for short term.

Guess when I took out the loan? The market was significantly higher than it is now and I have been buying back the stock I sold at significantly reduced prices.

Third and probably the biggest selling point for borrowing from the 401K is our company meeting themes for a few years have been "don't plan on being here next year." If they decide to send me packing I can let the 401K default and pay only taxes and penalties. This is certainly not an ideal situation but certianly better than having a loan I can't pay back.

Brian
 
ScottM said:
And you will have to pay taxes on that interest as it is now an earnings, when you go to take the money out at retirement. That means you get to pay taxes on that money twice since you paid taxes on it once when you were paid it. Also no tax deduction like with a home equity loan.

<snip>quote]

That is an interesting point I had not considered.
Do have or know of any way to calculate how much this reduces the rate of return on the loan?

Brian
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brcase said:
That is an interesting point I had not considered.
Do have or know of any way to calculate how much this reduces the rate of return on the loan?
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You'd have to know how much the return on the money would have been. In the past it could have been 300% or 12% or now for a money market, 2% or less.

Or as it was in 2008, you could have lost 30% or more.
 
Congrats on paying off the mortgage. I only have another 27 1/2 years at current numbers. Downside... no one is there to escrow your taxes and insurance. Plan for the annual expense. Plus side... more disposable income.
The only one interested in getting the legal stuff done is you. The lien holder doesn't consider it a priority since you're no longer an "income producer". Remember back to when you signed those mortgage papers? A fleet of lawyers who, before the ink was even dry, were off to the local registry to "mark their territory".
If anything proves what dirty rotten scoundrels they are, it's paying off a loan. Technically, you can't do a thing with the property until they finish the paperwork.
 
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