Is it ok to pay off my mortgage $4,000 a month?

[Texas6023]

Jurisdiction

Texas

I am basically putting everything I can save up to pay off my mortgage. Will this be frowned upon? Will it raise a flag for any reason? I just never believe in paying interest and my loan amount is for quarter million so if I stick to the minimum monthly payment I'll be paying out the wazoo in interest.

 

[adjusterjack]

I am basically putting everything I can save up to pay off my mortgage. Will this be frowned upon?

Not by anybody who's opinion counts.

Will it raise a flag for any reason?

No, not a bit.

Just read your loan contract and make sure that there aren't any Pre-Payment penalties. If there aren't, go for it. Even if there are, it might still be worth it.

I just never believe in paying interest and my loan amount is for quarter million so if I stick to the minimum monthly payment I'll be paying out the wazoo in interest.

That's right.

A $250,000 mortgage at 6% for 30 years is about $1500 P and I and will cost you about $290,000 in interest.

If you pay $4000 P and I you will pay off the loan in 6 years and 3 months and the total interest will be about $50,000.

After that, when your house is paid for, you start putting that $4000 per month in a retirement plan and you will be able to retire very comfortably.

If your interest rate is different than the example you can use the following amortization calculator:

Mortgage/Loan Calculator with Amortization Schedule

Now, some people may scoff at the idea and tell you that you lose your tax deduction if you pay off your house. That's true but here's how I look at it.

Using the above example, the first year interest is about $14000. If you are in the 25% tax bracket you reduce your taxes by $3500. That's $3500 in your pocket and $11500 down the toilet.

If you had no mortgage payment and no interest to deduct you would pay $3500 on that $14000 part of your income and put $11500 in your pocket.

Which would you rather have in your pocket? $3500 or $11500?

(I know what my answer is.)

I have been without a mortgage for almost 18 years and was able to retire at the age of 59 with a ton of money in my retirement fund and bank account.

In addition to the financial advantage of not having a mortgage there's also a psychological advantage. It was a wonderful feeling making my final mortgage payment. But you know what was even better? Opening my checkbook the following month and realizing that I didn't have to send all that money to the vultures at the mortgage company. It was positively euphoric. Even to this day, the euphoria of not having a mortgage persists.

Getting your house paid off as quickly as you can is the best thing you can ever do for your financial and emotional well being.

 

[Texas6023]

Thank you adjuster jack. Put very well. Interest is actually 3.55 and I will use the amortization calculator. I had more money I had saved for down payment and I didn't put it all down so I could use it for repairs. I haven't had any loans until this purchase which actually came with a few acres. I won't be as aggressive on my mortgage loan when I can get the interest down to a reasonable amount.

But thanks for the answer. I just get looked at by everyone when I pay extra on my principle. And the teller always asks if I want to put it towards my escrow which doesn't make any sense to me? Why would anyone want to make an extra payment towards escrow?

 

[adjusterjack]

I just get looked at by everyone when I pay extra on my principle.

That's because they can't do it and they are envious of someone who can.

the teller always asks if I want to put it towards my escrow which doesn't make any sense to me?

Doesn't make sense to me either.

Why would anyone want to make an extra payment towards escrow?

There shouldn't be any need to. The escrow is based on how much the insurance and property taxes are each year and is easy to figure out what the monthly impound is.

But that brings up another issue. You can't do much about your property taxes unless you want to appeal your valuation and try to get it reduced but you can do something about your insurance costs by shopping for insurance every year and seeing what companies are offering competitive rates.

The Texas Department of Insurance publishes annual rate comparisons for auto and homeowners insurance. Check them out at:

Publications for Consumers

I have saved a lot of money by keeping my insurance costs down by using the AZ Dept of Ins rate comparisons.

 

[Texas6023]

Excellent info adjuster jack. Starting to like this site more and more.

Funny thing is that the house needed some repair so the insurance company put me on builders insurance which I understand the difference is it won't cover contents but I'm ok with that since I don't have anything inside until I complete repairs. They aren't too many but the insurance did want me to paint trims and I was going to paint the whole house just for the different look and will look nicer. Then I'll go back and change my insurance to cover contents and raise deductible so I can get cheaper premium.

One question I must ask. Does painting a home going to cause the appraisers to increase value of my home? I know it shouldn't but let's just be honest here

 

[adjusterjack]

One question I must ask. Does painting a home going to cause the appraisers to increase value of my home? I know it shouldn't but let's just be honest here

One way I think it could happen is if a former owner got his assessment reduced due to the condition of the home and you got a building permit for the rehab. Otherwise (and I can only speak to my AZ experience) assessors use computer programs to analyze and adjust assessments every year or two and rarely, if ever, actually inspect a property, although these days with aerial and street view maps updated every year or two, they don't have to come out.

I'm fortunate that my assessor's website allows me to monitor my subdivision's comps every year online.

If yours does, you should be able to get your property's annual assessments going back as far as you want or check your current assessment against comparable properties in your area.

My own assessments here have levelled off to a reasonable amount and have even come down a bit in the last few years. But that's not the whole story as the amount of my property tax has gone up because the tax rates have risen to offset the reduction in assessed value. The get you coming and going.

Oh, one thing about the insurance. If you are leaving valuable equipment and tools at the house during the repairs ask your agent for a Scheduled Equipment Floater Policy (that's what it's called) where you can list specific items with a value and a catchall for miscellaneous. The big concern, of course, is theft so a policy like that could cost you a couple of hundred for a couple of thousand worth of tools and equipment. A necessity if you leave stuff there unattended at any time, not just overnight.

 

[Texas6023]

Yes we have access to appraisal district values and I have gotten my property value reduced in the past and I told flat out that there are other properties around me much larger and more up to date and they are valued at less then mine.. The appraiser response was because they had a fascia board rotten. And another person because they had a tarp on there roof because it leaked. So my response was so if that depreciates there home value why would it increase mine if those houses are eye soars that should devalue my house alone. Isn't that what someone shopping for a house is going to think? But the appraiser didn't see it that way.. I guess I'm just the crazy one?

And I take expensive tools with me in my older truck. I also have a game camera set up and I keep it illuminated by keeping electricity in my name active. And I make daily rounds at surprise hours.

 

[adjusterjack]

the appraiser didn't see it that way.. I guess I'm just the crazy one?

No, you aren't. But what you have to understand is that "talking" to the appraiser is useless. You have to follow the official appeal process and provide evidence to justify the requested reduction. You might have to go through several levels of appeal. If you've been successful in the past then you have a good idea on how to do if you are still within the appeal deadline of your current appraisal. If not, you'll have to wait until the next appraisal.

 

[Texas6023]

Ok thanks. I did go through appeal process. Appraiser came out to talk to me so I could prove my argument. Next would have been to take it in front of a group. But she did reduce so I left it alone.

That doesn't mean they don't recoop the following year because I think they do even though they say they don't.

 

[adjusterjack]

That doesn't mean they don't recoop the following year because I think they do even though they say they don't.

Of course they do. They did it here, too. I had properties back in the 1980s and 1990s that I had to file appeals on every year.

Our assessor has been doing better for the last two decades. In the 17 years I've had this house I only had to appeal 3 times. The first time was when I bought the house for considerably less than the existing appraisal so that was a slam dunk. Then again in 2007 and 2008 after the real estate crash when the assessor couldn't keep up with the falling home prices.

 

[Texas6023]

I'd have to look at mine again. I mean I understand it goin up because of tax increase but how do you really know if they making up for prior year or just a small tax increase? This year I have a little rotten fascia board. Which I will leave to devalue my home.. It won't hurt anything where it is at but for a 7 dollar board I can save a couple hundred dollars.

No brainer to me.

 

[adjusterjack]

I'd have to look at mine again. I mean I understand it goin up because of tax increase but how do you really know if they making up for prior year or just a small tax increase?

You don't. I don't. It's just one of those bureaucratic evils that we all have to live with.

This year I have a little rotten fascia board. Which I will leave to devalue my home.. It won't hurt anything where it is at but for a 7 dollar board I can save a couple hundred dollars.

I find it really bizarre that a rotten fascia board would make a difference in a property assessment.

Are you in a small community where "the good ole boys" are in control? Like Boss Hogg and Sheriff Rosco P Coltrane?

 

[Texas6023]

I sure am. 10,000 is approximate population.. I try not to get to crazy because I seen the way things work around here. Again I have another story I was witness to with lawyers and judge.. Worked in my behalf so I wasn't stressing it