paying off mortage

[Anonymous]

i have no auto loans, nor will i have

i pay off my credit card every month

i want to pay off my mortage using funds from an inheritance  but my family suggests it may hurt my credit rating to have no debt or no regular payment history

how much will not having a mortage affect my credit rating 

[jamie123]

A couple of questions first....

How many credit cards do you have?

What are their credit lines?

How old are the credit cards?

What is your mortgage interest rate?

[Anonymous]

2 cards

$5000 each

5 years plus

3.5%

[MarineVietVet]

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@Anonymous wrote:

i have no auto loans, nor will i have

i pay off my credit card every month

i want to pay off my mortage using funds from an inheritance  but my family suggests it may hurt my credit rating to have no debt or no regular payment history

how much will not having a mortage affect my credit rating 

---

Hello and welcome.

I might be in the minority on this but in my opinion you should pay off the mortgage and don't even think about a credit score.

Being debt free is my #1 priority with credit scores a distant second.

Under the news scoring models you'll likely lose some points if this is your only open installment loan but I think having one less debt is much more important than a temporary lower score.

Just my one view.

[cem13]

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@MarineVietVet wrote:

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@Anonymous wrote:

i have no auto loans, nor will i have

i pay off my credit card every month

i want to pay off my mortage using funds from an inheritance  but my family suggests it may hurt my credit rating to have no debt or no regular payment history

how much will not having a mortage affect my credit rating 

---

Hello and welcome.

I might be in the minority on this but in my opinion you should pay off the mortgage and don't even think about a credit score.

Being debt free is my #1 priority with credit scores a distant second.

Under the news scoring models you'll likely lose some points if this is your only open installment loan but I think having one less debt is much more important than a temporary lower score.

Just my one view.

---

I will take the opposite view.  The key point is what is the financial gain 2, 5, 10 years down the road.  While I do agree that high interest credit card debt is very bad; a 3.5% mortgage is very low, almost free money.

Why would one pay him or herself 3.5% interest when that money can be used to make much more.  For example, a conservative mix of stocks (Apple, Costco, Disney) etc will increase about 10% per year.  I NEVER pay more than the minimum on the mortgage because I can make so much more in the market.  So at the end of 10 years, I will be able to pay off the mortgage AND have some serious beer money to play with.  Sure the market goes up then down then sideways, but Warren Buffett taught us that good, quality companies go up year after year.

Now if the person is not educated about the finer points of the market and would just put the money in a low-paying CD, they paying the mortgage is a much better investment.  Everyone is different and has a different risk tolerence.  I dont care if the market goes up 1000 points or down 1000 points today.  All I know is that in 2, 5, 10 years; it will be highter....much higher than 3.5%.

I have repeatedly outperformed the SP500 Average for the past 20 years in my 401K.  The difference is that I have an MBA, and I have been investing and studying the markets for that long.  

But again, everyone is different.

[MarineVietVet]

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@cem13 wrote:

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@MarineVietVet wrote:

---

@Anonymous wrote:

i have no auto loans, nor will i have

i pay off my credit card every month

i want to pay off my mortage using funds from an inheritance  but my family suggests it may hurt my credit rating to have no debt or no regular payment history

how much will not having a mortage affect my credit rating 

---

Hello and welcome.

I might be in the minority on this but in my opinion you should pay off the mortgage and don't even think about a credit score.

Being debt free is my #1 priority with credit scores a distant second.

Under the news scoring models you'll likely lose some points if this is your only open installment loan but I think having one less debt is much more important than a temporary lower score.

Just my one view.

---

I will take the opposite view.  The key point is what is the financial gain 2, 5, 10 years down the road.  While I do agree that high interest credit card debt is very bad; a 3.5% mortgage is very low, almost free money.

Why would one pay him or herself 3.5% interest when that money can be used to make much more.  For example, a conservative mix of stocks (Apple, Costco, Disney) etc will increase about 10% per year.  I NEVER pay more than the minimum on the mortgage because I can make so much more in the market.  So at the end of 10 years, I will be able to pay off the mortgage AND have some serious beer money to play with.  Sure the market goes up then down then sideways, but Warren Buffett taught us that good, quality companies go up year after year.

Now if the person is not educated about the finer points of the market and would just put the money in a low-paying CD, they paying the mortgage is a much better investment.  Everyone is different and has a different risk tolerence.  I dont care if the market goes up 1000 points or down 1000 points today.  All I know is that in 2, 5, 10 years; it will be highter....much higher than 3.5%.

I have repeatedly outperformed the SP500 Average for the past 20 years in my 401K.  The difference is that I have an MBA, and I have been investing and studying the markets for that long.  

But again, everyone is different.

---

All valid points. We'll agree to disagree in what approach to take. I don't believe there is a right or wrong answer to this.

My only remaining debt is my mortgage at 3.125% and I will strive to pay it off just as fast as I can.

Congratulations on your MBA. I received a degree from the University of South Vietnam in 1970.

[Anonymous]

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@cem13 wrote:

I will take the opposite view.  The key point is what is the financial gain 2, 5, 10 years down the road.  While I do agree that high interest credit card debt is very bad; a 3.5% mortgage is very low, almost free money.

Why would one pay him or herself 3.5% interest when that money can be used to make much more.  For example, a conservative mix of stocks (Apple, Costco, Disney) etc will increase about 10% per year.  I NEVER pay more than the minimum on the mortgage because I can make so much more in the market.  So at the end of 10 years, I will be able to pay off the mortgage AND have some serious beer money to play with.  Sure the market goes up then down then sideways, but Warren Buffett taught us that good, quality companies go up year after year.

Now if the person is not educated about the finer points of the market and would just put the money in a low-paying CD, they paying the mortgage is a much better investment.  Everyone is different and has a different risk tolerence.  I dont care if the market goes up 1000 points or down 1000 points today.  All I know is that in 2, 5, 10 years; it will be highter....much higher than 3.5%.

I have repeatedly outperformed the SP500 Average for the past 20 years in my 401K.  The difference is that I have an MBA, and I have been investing and studying the markets for that long.  

But again, everyone is different.

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 This x1000.

A mortgage rate below 4% is crazy good.  Especially if you look at our inflation rate.  Over the last few decades, we've averaged around 2.5%.  Which basically means you're paying only 1% to borrow your money.  If we get another decade like the 70s or 80s, your mortgage will literally be free money.

Investing, even in something as simple as S&P500 Index funds, will, in the long run, far beat the money you save by paying off your mortgage early.

[StartingOver10]

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@Anonymous wrote:

i have no auto loans, nor will i have

i pay off my credit card every month

i want to pay off my mortage using funds from an inheritance  but my family suggests it may hurt my credit rating to have no debt or no regular payment history

how much will not having a mortage affect my credit rating 

---

This is a risk tolerence question. I too am in the camp that says to pay off your debt as quickly as possible.  But that is a recent occurance now that I am nearing retirement age.

You will need to not only run the numbers (always a good idea), but figure out your tolerence for risk. If you are comfortable leaving your mortgage in place and investing the funds you have in legitimate investment vehicles, then go for it. If you are more comfortable paying off the mortgage and using your income to invest, then head in that direction. In short, only you can really answer this question.

[Anonymous]

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@MarineVietVet wrote:

---

@Anonymous wrote:

i have no auto loans, nor will i have

i pay off my credit card every month

i want to pay off my mortage using funds from an inheritance  but my family suggests it may hurt my credit rating to have no debt or no regular payment history

how much will not having a mortage affect my credit rating 

---

Hello and welcome.

I might be in the minority on this but in my opinion you should pay off the mortgage and don't even think about a credit score.

Being debt free is my #1 priority with credit scores a distant second.

Under the news scoring models you'll likely lose some points if this is your only open installment loan but I think having one less debt is much more important than a temporary lower score.

Just my one view.

---

Count me in the minority as well.  It has been an amazing feeling each month not having a house payment. 

[MarineVietVet]

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@StartingOver10 wrote:

---

@Anonymous wrote:

i have no auto loans, nor will i have

i pay off my credit card every month

i want to pay off my mortage using funds from an inheritance  but my family suggests it may hurt my credit rating to have no debt or no regular payment history

how much will not having a mortage affect my credit rating 

---

This is a risk tolerence question. I too am in the camp that says to pay off your debt as quickly as possible.  But that is a recent occurance now that I am nearing retirement age.

You will need to not only run the numbers (always a good idea), but figure out your tolerence for risk. If you are comfortable leaving your mortgage in place and investing the funds you have in legitimate investment vehicles, then go for it. If you are more comfortable paying off the mortgage and using your income to invest, then head in that direction. In short, only you can really answer this question.

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A very excellent point that I failed to mention.

Age might be a huge determining factor as to how you approach this. I just turned 64 so a long term investment strategy is not something I'm interested in.

If I was 21 again I suspect my priorities would be a bit different.