haters 2

I’ve been reading through the comments of the reddit post I found today.  The sister of a former coworker wrote a blog entry that appeared at the top of google for the phrase “mortgage pay off blog.”  I mentioned it, and her sister told me that it also appeared on Reddit and linked me, so that’s the reddit in the last post.

http://www.andreagstewart.com/blog/http:/www.andreagstewart.com/paying-off-a-mortgage-in-seven-years

I’ve been reading the comment section of the reddit, and broadly speaking there are two types of posts.  Encouraging, and critical.  So I thought I’d write down some of the critical ones and respond to them, because this kind of stuff is so common.  You hear people spout the same self defeating crap over and over again.

Yeah I’m not sure what the point of this post is other than to brag about having incredible good luck and good fortune thrown at them.

  • Steady secure job making well over $100k
  • Lucky enough to have a job that’s in a downtown with affordable housing nearby.
  • Living in an area with affordable housing period.
  • Oh, and $37,000 free money suddenly given to them.

So all this “scrimping” and “saving” is not that impressive to me. The more decisive factor was their good luck that the vast majority of people will never experience, not their frugality.

Well, first off, it’s not to impress you.  She doesn’t give a shit about you.  You don’t magically get $100k of income.  You work hard for it and you go after it.  You’re also not “lucky” enough to have a job down town with affordable housing nearby.  You plan that shit by applying for a job down town and then looking for affordable stuff down town.  That’s not luck, it’s just planning.  I didn’t see $37k of free money.  The $37k of settlement money is compensating them for hardship suffered.

This personally sounds horrible to me. With the low interest we have right now, it sounds like someone just spend 7 years of their life living un-necessarily. Likely 7 years while they were younger as well. No trips? No vacations? Brutal.

Then you need to read more about behavioral economics and hedonic adaptation.

Came to say the same thing. Take out a low interest mortgage and invest the 300,000 from the house. If you can borrow money at 3.5% and the interest is tax deductible and lend money at 5% you’re basically giving away over $4,500 a year by paying off the mortgage early.

Your calculation is missing the value of cash flow and risk.  Derp.

Plus mortgage interest deduction… I’d rather grow investments

Mortgage interest deduction means you are paying mortgage interest.  DERP.

Are you 15-20+ years from retirement? If so, you don’t really need to be risk averse at all. Just pull up the super long history of the S&P500, and find a 15 year period where it went down. For example, take 1997 and 2012 and calculate the difference. It will be a positive return every single time.

Wikipedia does it for you too. Look at the 15 year annualized returns column. http://en.wikipedia.org/wiki/S%26P_500

If you can ride out the waves in the market, you will be better for it in the long run!

Derp.  Ok, so this assumes that instead of putting $5k into the mortgage, you put it into index funds.  For how long?  Just for the 7 years?  For the whole 30 years?  How many people actually have the discipline to do that?

And all these people assume the index funds in the stock market are the primary way to be come wealthy, rather than decreasing your risk and then starting a business, which is how rich people actually do it.

Once you live incredibly frugally you realize how much money you were wasting on things that didn’t actually improve your happiness.

edit: many of you seem to think living frugally is akin to death. It is not. Many people simply live lives of excess full of fast food and ‘conveniences’ that simply cost you money. For me living frugally meant cooking everything, more fruits and vegetables and less eating out. Picking a cheaper apartment so I can live near work and ride a bicycle or cheap scooter to work. I don’t get starbucks often, I’d rather have friends over and play boardgames or go for a hike than go to a club and complain about how loud it is.

I challenge everyone to take a week and not spend any money on fastfood or anything outside of transportation and food. You’ll soon realize your ‘bills’ are just excessive spending.

Oh wait I actually like this comment.

What was your logic behind paying down the mortgage each month versus investing the money, and then paying off the mortgage once you reached $300,000?

I ask because you did this over the last seven years, which has included a huge bull market. Was it just the goal of wanting to own the house, or did you do any dollars to dollars analysis?

Thanks, and congrats on the milestone!

This is assuming that the market only goes up.  It doesn’t.  If you want to get the mortgage paid off early, then pay off the damn mortgage.

Mortgages have a real tax benefit and rates are super low. We prefer to let our investments earn 5% and have a 3.5% mortgage. The net rate becomes much lower. We do pay a little extra each month and should pay off our 30 year mortgage in 25.

If the interest rate spread makes sense, then paying extra on your mortgage is a dumb decision.  This person is confused about what they think.

Someone that makes 150k a years feels great because he/she bought a home in 7 years? Just trying to tell people it is possible? You have to be an idiot to not make it possible.

Well then, statistically most $150k earners are idiots.

300k house, 150k annual income… this means you spent like 1/3 of your monthly income on your house. Some people spend more than that on their rent. I’m happy for you, don’t get me wrong, but this might not be as impressive as you think it is.

The math on this is wrong.  If they paid $240k remaining mortgage and $50k interest in 7 years, that would be 42% of their take home pay at $150k/year.  Again, the point isn’t to impress you.  If the sacrifice was impressive, you’d just say it was dumb anyway.

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