Interesting discussion because we’ve been asking this very question. We have a ridiculously low mortgage rate of 2.6%, and we owe slightly over 100K. Our financial advisor tells us to not pay it off early because it’s such a great rate and we can get a better return on the money elsewhere. But I still want to pay it off by the time we retire because I absolutely hate being in debt. I do think the psychological factor counts.
After years of indecision, we decided last Dec to pay off the mortgage (2 years early, under $15K). But… we keep procrastinating for various non-financial reasons - vacations, tax bill schedule etc. Now that DH is settling into retirement, I think he will research it all more intensely. The main thing is to make sure we do the paperwork right for continued property tax and real estate payment.
We have a smallish mortgage ($150K with property value of probably $1.8 MM). Overall, we have returns higher than the mortgage rate. So, in principle, we should keep the mortgage. We pay automatically, so it is not particularly inconvenient. But, due to both inaction and other things, we always seem to have $$ in money market funds. So, I’m thinking we should pay off the mortgage.
Maybe I’d think differently if we planned to stay in our present house, but we don’t. It’s just too much house for us now that the kids are gone and my MIL, who lived with us the last 10 years of her life, is no longer with us. We’ll downsize in the next 3-4 years, at which point I’ll be fully retired. So for us, whether to pay off the mortgage is just a straight financial calculation. We could move money from elsewhere to pay off the mortgage, but what would be the point? Our net worth wouldn’t change in the short term, but we’d be moving money from more liquid investments to a less liquid one (the house), and losing out in the medium term because the interest rate on our mortgage is lower than the rate of return we’re getting on our other investments. So no, we won’t be paying off the mortgage until we sell the house.
@bclintonk we are in the same position. Our plan includes us selling the house in the next few years and downsizing. Except, we did some remodeling that made the house more livable and now DH is not so sure. Our advisor says we’re still ok if we don’t move, but we will have a mortgage until the investments generate less.
Looking at some of the suggested plans to tax financial transactions, and thinking that if anything like that was implemented, it would slam our 401K’s, both via taxation and market drop. Wondering if we are too heavily invested in stock funds, yet we still are planning for the long term (no withdrawals for as long as possible), so I don’t know. We found a high interest rate savings account at one of the credit unions we utilize, about 2%, and you can access your money much easier than a CD. Anyone else found something better? I did see higher interest rate savings accounts with some online banks, but I’ve never heard of them, and they sound a little shady…
“We found a high interest rate savings account at one of the credit unions we utilize, about 2%, and you can access your money much easier than a CD. Anyone else found something better? I did see higher interest rate savings accounts with some online banks, but I’ve never heard of them, and they sound a little shady…”
I’ve seen some around the 2.5% range, banks and credit unions. I wouldn’t shy away from online banks. The lower overhead helps them offer better rates. I don’t need brick and mortar branches. Just federal insurance.
@busdriver11 – Only 35 basis points…but Marcus has a 13 month no-penalty CD paying 2.35%. Ally’s 11 month no-penalty pays 2.3%, but requires $25K minimum deposit to earn that interest rate. These two go back & forth with the ‘better’ offer from time to time.
You cannot add to the account once it is funded, but you can withdraw your money at any time without penalty. Marcus is owned by Goldman Sachs, and Ally has been around for quite a while. Both are FDIC insured. They are both offering 2.5% on 12 month CDs now, but again, Marcus pays that rate with $500 minimum deposit.
Back when interest rates were zero I parked some cash in “Duke Energy PremierNotes”, which is like commercial paper, NOT FDIC insured, not a bank deposit, but I was comfortable with the risk. They were paying 1.25% - 1.5% when bank and market rates were very close to zero. Then when rates went up they were slow to raise their rate, I got annoyed and found better alternatives (tbills) and closed my account. I just checked, and their current rates are:
Amount Rate Yield
Under $10,000 2.45% 2.48%
$10,000 to $49,999 2.50% 2.53%
$50K and over 2.65% 2.69%
I no longer have significant excess cash, so I am not going back. 
Big banks were not really interested in raising the rates on deposits when the Fed was on the upward move because people were still bringing money in. There was no incentive to pay more… banks that were competing to get more deposits would do so by luring customers in with better rates. We get mailings from Wells Fargo for checking accounts paying 2.1%. No way in hell I would park my money at that sleazy bank.
Thanks for the info, all. Sounds like some better options out there. My local Bank of America manager said that he could go over 2%, matching others, with a 2 month CD. Decided having ready access was easier than constantly renewing a 2 month CD.
Forgot to post the link:
@BunsenBurner
and others- I just went to the Citibank website and their high interest accelerate rate is NOT available in Calif! grrrr.
I am getting 2% on my savings at PenFed. It’s not a CD, so immediately available, for example to help kiddo buy a place.
Yes, PenFed is the high yield savings account I have also. Easy and acccessible, though it sounds like there may be better deals out there. I guess it depends upon whether it’s worth the effort to reshuffle for a small gain.
Citizens Access bank, 2.20%, FDIC insured saving s account. $5000 minimum deposit.
https://www.citizensaccess.com/home.html
As an aside, USAA announced that in a year they are selling off their brokerage accounts/investment accounts to Charles Schwab. Not sure how I feel about that.
I bought and am buying laddering CDs. I want at least 100K in easily available money, in case stock market tanks. Our defined benefit pensions and (hopefully) future SS benefits give us safe monthly income stream, and all else is in ROTH accounts-mostly index funds w/some bond funds for good measure, apart from an inherited IRA which gives us yearly RMDs. We paid off the house several years ago, in spite of favorable rates, due to us being moved to a HORRIBLE, outrageous servicing company (GREENTREE), which lost our first two payments, called us daily, threatened foreclosure - even though we had 3-way conversations between Bank of America and GreenTree, where BOA provided the transaction number/date/time/amount of payments and still GreenTree refused to stop hounding us. Best thing we ever did. Well, that and the solar panels on the roof. The peace of mind is incredible.
AND - 5 more weeks until I retire, and only 20 days of work or so.
Even before this switch to Schwab, USAA takes a lot of heat on Bogleheads etc., for their high expenses. Most recommend Vanguard and Fidelity instead.
^^I’ve been a USAA member since the dark ages, used their funds/banks for a few years, but moved on as their fees were just never competitive. Schwab is excellent, as are Vanguard and Fidelity.