How much mortgage is too much?

[GGG]

Originally Posted by #-3

In the current climate I don't understand accelorating payments. Your interest rate should under 3%. There is really no insentive to try to pay anything off faster unless your amortization date is later than your target retirement date.

I'm probably 30 year from retirement I have about 20 years left on my current mortgage, my payment is low enough that I can put a bit of money into an investment account. there is no way I would offer to accelerate or pay more. if I decide to upgrade which I don't foresee, I will pay more then.

If the debt was at 7 or 8 % I would look at it differently, but if I get stuck in the future could alway liquidate my investment savings account open a heloc and pay off the mortgage before renewing, by the time my current loan matures I'll own 1/2 my house so I'll have options

If the house market suddenly drops to 50% I am better off being into my house for a little as possible, Alberta has very few laws that protect the lender if an upside down borrower walks, either way I don't see that coming.

This assumes you have the discipline to take the money not invested in the mortgage and invest elsewhere as opposed to investing in vacations.

[Mr.Coffee]

not to mention that the poster assumes that risk is equal, which it isn't. Your investment that (apparently) automatically earns >3% assumes risk, and you actually may lose money.

To the risk adverse, just throwing it on the mortgage for the guaranteed 3% may fit them better.

I would go post this next piece on the GMG thread but I'm too lazy, instead I'll throw it on here. Judgey judgersons who judge how people handle their money or what they invest in GMG's. Like any decision is stupid unless it follows the same logic and assumptions you have and use and doesn't take into account context.

Now, please tell me your guaranteed investments to earn more than 3%. Risk can't be assumed, remember.

[VladtheImpaler]

Fair enough. If you are risk averse or of an age where you have to be risk averse, investing in your mortgage at 2.59% is better than you can do in any "guaranteed" investment (I assume - Slava?) and keeps you ahead of inflation. So, it's definitely better than just giving the money to your bank.
I chose to take as much mortgage as possible at 1.99 because "other people's money".

[Slava]

Well it kind of depends on just how risk averse you are when you talk about "guarantees" also. Like you can get dividends from the banks in Canada that are over 4%. I guess that's not a complete guarantee, but those are really stable over the long term. For straight up guaranteed money though, rates aren't amazing. I guess somewhere around 2.3% for a 5 year GIC, and government bonds aren't going to be a lot brighter.

[OMG!WTF!]

I get that there is a guaranteed return when paying down your mortgage. But there is still a risk in owning the underlying asset. If you assume real estate ownership as your base risk instead of zero, then you have a wealth of investing opportunities. You can get 6-12% from first mortgage loans, some of which could have less loan to value than your own house. Your risk is not much different than owning your home.

[Slava]

There is definitely risk there, it's just different types of risks. There is a liquidity risk as compared to say a bank account, higher transaction costs and associated concerns. Plus you have the underlying asset which requires some maintenance. Some people leave out some of the risks with the idea that "you have to live somewhere".

[indes]

I accelerate my mortgage instead of investment just because I don't want to have a mortgage. If I can be 30 with no mortgage and no other outstanding debt I'll be a happy camper!

[DoubleF]

Originally Posted by indes

I accelerate my mortgage instead of investment just because I don't want to have a mortgage. If I can be 30 with no mortgage and no other outstanding debt I'll be a happy camper!

I want this, but realistically, I think I'll be in my late 30s early 40s before the mortgage is gone.

I've heard both sides of the story about accelerated payments. Take more mortgage out, invest, make more than the amount you lose on interest. Accelerate payments, reap rewards of less interest paid when interest goes back up.

Or... just not have debt in general because dislike debt if not necessary. Or those that max it believing life's too short to not enjoy it, as well as they believe they will always keep making more.

It's all preference really.

I think most of our suggestions lean towards a conservative approach to debt which offers more flexibility in more economical situations.

[mikephoen]

Originally Posted by VladtheImpaler

Fair enough. If you are risk averse or of an age where you have to be risk averse, investing in your mortgage at 2.59% is better than you can do in any "guaranteed" investment (I assume - Slava?) and keeps you ahead of inflation. So, it's definitely better than just giving the money to your bank.
I chose to take as much mortgage as possible at 1.99 because "other people's money".

My old house was completely paid off, but then a couple years ago we built our dream home and now we have a huge mortgage. I'm paying it off at an accelerated rate because I miss being able to humble brag that my house was paid off.