You are still forgetting about taxes… 
To get a 3% return, folks who still work need a 3.5-4% CD. These are hard to come by today. If you see one of these, I’d love to know.
“We have a small mortgage remaining. I’m fine with it. I can invest in CDs (safe, little to no risk) if I wanted and still come out ahead given my very low mortgage rate.”
MY situation, @BunsenBurner. I pay very minimal taxes if at all. My mortgage rate is 2.625%. I can still find CDs rates, if I wished too, higher than that, even around 3%. Other people like you - your circumstances might vary. Perhaps your tax bill is too high or your mortgage rate is higher. This thread is in the context of retiring. It is possible to structure one’s investments to minimize taxes. Seems like you’re not in retirement mode so sounds like it doesn’t apply to your current financial picture. Personally, I can take a little risk and get returns even higher than CDs without taking on gobs of risk beyond my comfort level. Point is, there are options that make sense for those of us not worried about carrying low interest (read cheap money) debt and not worrying about sleeping at night. You don’t need to swing for the fences risk-wise to beat many mortgage rates that people have locked in.
And as far as folks mentioning HELOCs, I doubt those rates will compare to locked in mortgage rates, will they?
Sure thing. What I am saying that one needs to consider everything. Some folks posting here might be retired but have a working spouse or income over a taxable threshold.
I don’t think we are in disagreement that each individual’s circumstances will lead to different paths. Just providing an example of why one wouldn’t worry about paying off a mortgage, even in retirement. As I stated previously, “As far as deciding whether to pay off a mortgage or not depends on individual factors - one’s risk tolerance, one’s mortgage rate, one’s amount of assets to name a few.”
“As far as deciding whether to pay off a mortgage or not depends on individual factors - one’s risk tolerance, one’s mortgage rate, one’s amount of assets to name a few.”
Just completing the list with the elephant in the room. And your tax bracket! We always talk about taxable income in the context of Medicare premiums etc. Need to mention it here as well. In all seriousness, I’d love to have recs for a 3.5% CD. 5 years or less.
Putting “best CD rates” in a web search brings up a bunch of lists. But they currently show best rates in the 2.x% range, not 3.x% range.
a 2.6% mortgage rate sounds really low. Go you. Where is it from? Is there a big balance?
Chase. I last refinanced directly with Chase about maybe 6-7 years ago, no points nor closing costs. My balance is less than $60K right now.
2.625% might be a little low but I assume many have lowish mortgages in the 2.75% camp? Maybe not.
Rates will vary by region and/or zip codes. Also, is that a 15-year or 30-year rate?
Our mortgage has been paid off for years. We have lived in our house since 1986 & had a 20 year mortgage. Our taxes are low, our house is fine for us, and we don’t see any need to take on house debt. It never crossed our minds that we should not pay off the mortgage. We prefer to be debt-free. We will never be rich, but I consider us comfortable. We have enough savings that we should be okay in retirement. If we encounter unforeseen problems, we can weather them. To me, that is all I really need.
And a whole host of other things like credit score, loan size, etc. As I said, this was back awhile but there have been several periods in the last 15 years when one could find sub 3% and sub 2.75% mortgage rates even back just a few years. In my circle, it seems like everyone was refinancing.
It was a 15 year fixed converted to a 10 year fixed because although I have no qualms playing the arbitrage I also didn’t want to continue extending out the life of the loan. The bank was easy to work with on loan terms. At that point, frankly I think they didn’t want to lose me as a customer as I have excellent payment history and for me it made sense to refinance directly with them because we were no longer working and therefore had little income. Even with assets, mortgage lenders like income which has always struck me as odd because income streams can disappear just as easily as assets.
I would not bother with making payments on a $60k mortgage… more hassle than paying it off.
Zero hassle. Auto payments. Paying it off would actually involve more effort. And all this time I’m earning more than I’m paying. To each their own, @BunsenBurner. My financial strategy is working just fine for me. You do you.
And you do you. Still waiting for your recommendations of a 3%+ CD - in all seriousness.
Our mortgage was 5%. I had nothing at the time which would guarantee a net 5% gain so we just paid off the mortgage by prepaying most months for the last 5 or so years we had the mortgage. No regrets here. After paying the mortgage and kids’ ed expenses we felt like we had a huge raise when H retired.
Maybe you should have locked in last week. Google is your friend. You can find rates approaching 3% still. Never promised you the 3.5% you claim to be looking for. It’s all about timing, when to refinance, when to lock in or not.
Now, why don’t you describe for me why being in CDs is bad in an environment when interest rates are dropping? Seems like you might have benefitted.
Did you refinance your mortgage to take advantage of historically low rates?
At 5%, I’d do the same, especially given the short remaining window on your loan making it not very worthwhile to refinance.
Navy Federal Credit Union, if you qualify for membership. 3.5% 5 year CD currently. Also a 3.0% 18 month CD.
“Now, why don’t you describe for me why being in CDs is bad in an environment when interest rates are dropping? Seems like you might have benefitted.”
I never said that. Yes, locking in a fixed rate savings rate makes sense when rates keep dropping (just like locking a mortgage rate makes sense when rates go up). What I said is for folks who are beginning to look at CDs as their current mortgage alternative now, the rates have dropped to the point where it makes no sense to park money in a CD compared to paying off the debt.
I’ve used DepositAccounts.com (and its predecessor Bank Deals Blog) for a decade now when laddering CDs – a great source of rates. Back in June I got 3.35% in a five-year CD. Looks like the highest now in a widely available certificate is only 3.05%.