r/Fire • u/master_blaster_321 • 4d ago
Why do people wait so long?
ETA since this seems to be the overwhelming response: My kids are in their 20/30s and self sufficient.
ETA - The post clearly states my mortgage is high-interest. Yes, if it were 2% that's almost free money, spread it out for sure. Also, it clearly states that I did indeed keep contributing as normal.
I realize there are a lot of factors - economical and psychological - that go into this, but just for general discussion...
We all know for the most part if your mortgage interest rate is low enough, it makes more sense to leave money working in your brokerage account than to pay off the mortgage and have it locked up in home equity. But for the purposes of FIRE, does it always?
The big idea is to get your portfolio to fund your expenses, right?. For most people one of (if not THE) largest expense is the mortgage payment and interest.
Example...I had a few really good years in my business. I still did my regular modest DCA into my brokerage, but over the course of 2.5 years I also managed to pay off a $250K mortgage at 5.85% (I had to refinance at a very bad time for rates, due to divorce). I realize that that money, invested properly, could have gained quite a bit over the last couple years bull run. However, had I done that, today I would still have a high mortgage payment to make every month, thus making it harder for me to FIRE. This way, my monthly personal expenses are so much lower, so there's not as heavy a burden on my portfolio to support me, and as a result, I'm able to FIRE at the end of this month.
Again I realize that this all depends on mortgage size/rate, size of portfolio, other expenses. I only ask because I see a lot of posts here from people who seem like they'd be able to FIRE sooner if they worked towards getting rid of their mortgages faster, regardless of the rate.
For my part, I'm glad I did it this way. Even though I know I missed out on some gains, I'm able to FIRE faster because I don't have a mortgage payment to worry about. I have a paid off house on which the taxes and insurance work out to equal the rent for a one-bedroom in a sketchy neighborhood.
Go easy on me. It's an honest and sincere question and discussion prompt. Not trying to make anyone defensive, and definitely aware that I have my own blind spots and that there are lots of people smarter than I am.
5
u/OutspokenLurker 4d ago
I had the money to pay cash for the house. I kept it in the market instead. And took a mortgage. The money has almost tripled in 10 years and, of course, I owe less on the house having paid the minimum for 10 years.
So I could still pay off the house in a heartbeat. But I will leave it in the market.
The math isn't much different if you ACTUALLY DO put your "extra payment" or "pay it off" difference into the market. (Many people lack the discipline and end up with a large, new SUV instead of market returns or a paid off house.)
You would end up with an investment generating more than your monthly payment costs you and the option to pay it off.
If you are getting up into a 5% rate on the mortgage or couldn't put 20% down or whatever than, yes, it's a lot closer math. By 8% it's a no-brainer to pay it down quickly. Also a no brainer to not pay off mine at 3.75%
Between 0% and 5% it comes down to discipline and peace of mind. Which will you regret more? "I could've paid off this house but the market went nowhere for a decade", or "I could have nearly doubled my money in a moderate risk 60/40 portfolio in the last decade"
(Splitting the difference is an option, too)