Effects of paying off a mortgage

For just about anything you want to get off your chest about credit cards.
9 posts
Callmedory
Gold Member
Gold Member
 
Posts: 44
Joined: Wed Dec 25, 2013 7:35 pm
Location: California

Effects of paying off a mortgage

Postby Callmedory » Wed Mar 11, 2015 4:18 pm

We took some of an inheritance to pay down a mortgage. We’ve been paying extra for a while. It should be paid off by the middle or end of 2016. By the calculators, we’ve saved $40K-$50K in interest. No tax deduction is going to beat that.

Yes, we have 401k’s, IRAs, long-term care (no kids), etc. All maxed; no tax deductions, really. We’ve tried to plan things out. We have quite a few cards, but all are paid in full each month, some not being used for a bit (score some points/miles).

CK and USAA have our scores just over 830.

What will be the effect of paying off the mortgage and losing that “form of credit”? Will our scores do down? I realize that it doesn’t *really* matter, but still curious.


jcarte29
Centurion Member
Centurion Member
 
Posts: 184
Joined: Fri Jan 30, 2015 1:29 pm
Location: Charlotte, NC

Postby jcarte29 » Wed Mar 11, 2015 5:20 pm

Screw it. You already said you're north of 800 and you have done everything right.

No mortgage > the worry of how my credit is affected

All jokes aside, my condolences if this is from a family member no longer with you, but I bet he/she/they will be smilin from above knowing you're using the inheritence to enrich your own lives and cement financial stability.
Portfolio:
CITI Diamond Preferred $7,000 [06-16]
AMEX Platinum (Charge) [11-16]
AMEX EDay $12,000 [11-14]
Lowes Store $15,000 [4-14]
CSP VISA $6,000 [7-14]
GM MC $9,000 [9-14]
AAdvantage Red MC $10,350 [10-14]
Discover IT $4,500 [03-15]
Chase Marriott VISA $5,000 [04-15]
Cap One Quick $2,600[4-10]

Callmedory
Gold Member
Gold Member
 
Posts: 44
Joined: Wed Dec 25, 2013 7:35 pm
Location: California

Postby Callmedory » Wed Mar 11, 2015 6:32 pm

Thanks for your kind thoughts. It was my grandmother--but she was a very difficult woman, not really liking anyone, pretty sad, as she could have had a lot of love on her life, but chose to be difficult. She was good with what money she had, though, and my mom disclaimed the house in favor of myself and my siblings.

What's sad is that my grandmother never really wanted to be close to her only child or three grandchildren. She's remembered but not really missed as a person. I think that is very sad. I do acknowledge that it was her carefulness that made this possible and would be grateful to her if it were possible. I honk my siblings are more willing to forget the source. I think that's kinda sad, too.

User avatar
CarefulBuilder14
Centurion Member
Centurion Member
 
Posts: 3934
Joined: Thu May 08, 2014 7:42 pm
Location: United States

Postby CarefulBuilder14 » Wed Mar 11, 2015 7:57 pm

As to your question: From what I've read, once you pay off the mortgage early, your FICOs will probably fall. This is because your open account mix will be less varied. You'll get some value from having the paid-off mortgage on your report, but because it will be a closed account, it won't have the same weight. It won't be treated as 'current experience' with a variety of forms of debt.

Now, when you're at 830, anything bad can drag down your FICOs quickly in terms of an absolute number of points. The drop could possible seem big. However, you'll still have excellent credit - just maybe not super-excellent credit.

If you were in the final years of a mortgage, making normal scheduled payments (mostly paying principal and only a tiny bit of interest) then other options like investing the money could make sense. But since low-risk investments are earning very little in interest and you're in the middle of the mortgage (when extra payments save a lot in interest), then it sounds like paying it off is the way to go.

My condolences for your loss. Did your grandmother have an estate plan in which she decided to leave her property to your mother? Or her property simply passed to your mother as next of kin? People can respond differently to an inheritance they know the decedent intended to give, as opposed to one that was just the result of state law.
Keeping indefinitely: IHG, SchwabPlat, CSP, Discover, Freedom, ED, BCE, Hyatt
May close or PC: Prestige, Arrival, BrooksBros
AA Platinum converting into Costco

Might add: Proper business card, CSR, Ritz, Delta Gold, First Tech
Letting new accounts cool off since May

Callmedory
Gold Member
Gold Member
 
Posts: 44
Joined: Wed Dec 25, 2013 7:35 pm
Location: California

Postby Callmedory » Wed Mar 11, 2015 8:20 pm

Thank you.

My grandmother passed a few years ago. I really wish that I could miss her more, but she made it pretty clear that she was not fond of...just about anyone. Family only at the funeral (mostly present for my mom), and it was the oddest thing. The officiant couldn’t come up with a lot to say about her. That’s what’s sad--she could have had more in her life.

Anyway, mom was an only child. My grandmother had a trust, leaving all to mom, and her grandchildren equally if mom predeceased her. Mom disclaimed her interest in the house, so it came to us. Mom could have kept the house, sold it, and gifted each of us money, but between the gift taxes and it doing more good in a larger amount to each of us, she decided to disclaim. My siblings have historically been poor with money: my sister has NO retirement beyond what was automatic with her job (teacher); my brother used part of this inheritance to begin funding his retirement, at age 53. I’m the cautious one. Ironically, like my grandmother.

1hardworker
 
Posts: 1
Joined: Wed Mar 11, 2015 11:28 pm
Location: georgia

Postby 1hardworker » Wed Mar 11, 2015 11:45 pm

I had three mortgages for three properties. I was under the impression that paying one of the mortgages off would show an increase in "available credit" and boost my score. I was wrong....I paid off one of the mortgages and the account was immediately closed. None of my reports showed the paid off acct as available credit.

For example, if you have 500k in mortgages and pay off one of them for 200k. I would expect the ratio to be at 40% at least. Nope....that didn't happen it only shows open mortgage balances .

Did nothing at all for my score...as hard as mortgages are to obtain I would've thought more credit was given when you successfully pay one off,

takeshi
Centurion Member
Centurion Member
 
Posts: 1733
Joined: Wed Jun 05, 2013 3:12 pm
Location: US

Postby takeshi » Thu Mar 12, 2015 8:07 am

Callmedory wrote:CK and USAA have our scores just over 830.

Assuming that means anything with regard to your FICO's (and it doesn't) then you really don't have much to worry about. As stated above, you'll see a bit of a dip from paying off the mortgage but scores should should take a backseat to your overall financial health which sounds pretty good to begin with form what you'd posted. Best terms are generally offered at 740-760+ so you have plenty of headroom.

User avatar
CarefulBuilder14
Centurion Member
Centurion Member
 
Posts: 3934
Joined: Thu May 08, 2014 7:42 pm
Location: United States

Postby CarefulBuilder14 » Thu Mar 12, 2015 3:37 pm

Callmedory wrote:Anyway, mom was an only child. My grandmother had a trust, leaving all to mom, and her grandchildren equally if mom predeceased her. Mom disclaimed her interest in the house, so it came to us. Mom could have kept the house, sold it, and gifted each of us money, but between the gift taxes and it doing more good in a larger amount to each of us, she decided to disclaim. My siblings have historically been poor with money: my sister has NO retirement beyond what was automatic with her job (teacher); my brother used part of this inheritance to begin funding his retirement, at age 53. I’m the cautious one. Ironically, like my grandmother.


Since she had a trust, she went out of her want to make a plan for her property. While alive, it sounds like she was very unpleasant. In death, it sounds like she was generous. I can see how that would leave you with very mixed feelings. So it seems right that you should be somewhat grateful, and yet not really miss her as you'd miss a relative with whom you were closer.

If she had no financial planning at all, it might be a different story. She might have had the attitude of "Why make a will or trust? Once I'm gone, it will be their problem, not mine. Let them deal with the legal mess." If that had been the case, then your siblings' lack of gratitude could be very natural.

Maybe over time, they just went from seeing her as a relative they should try to love, to a source of a future inheritance (and a retirement fund) that they just had to avoid angering? Is it possible that they feel they had to 'earn' the inheritance by putting up with her for so long? It's not a good way to view a family member, but I can understand why they'd feel that way.

Your grandmother could have been really cruel to them by hinting at an inheritance, then changing the trust to benefit someone outside the family.

I know someone whose neighbor did that. The story I heard was that the neighbor didn't like his children and/or thought they should be self-sufficient. Nearing death, he changed his will and trust to leave much of his property (which included a $2M-ish house) to his gardener - partly out of thanks and friendship, and partly just to spite his family.
Keeping indefinitely: IHG, SchwabPlat, CSP, Discover, Freedom, ED, BCE, Hyatt
May close or PC: Prestige, Arrival, BrooksBros
AA Platinum converting into Costco

Might add: Proper business card, CSR, Ritz, Delta Gold, First Tech
Letting new accounts cool off since May

Callmedory
Gold Member
Gold Member
 
Posts: 44
Joined: Wed Dec 25, 2013 7:35 pm
Location: California

Postby Callmedory » Thu Mar 12, 2015 4:54 pm

I've heard of those scenarios you're mentioning.

We (my siblings and I) knew that everything was to go to mom. It was mom, on her own with input/advice/comments from her tax guy and financial advisors (for the pros and cons of doing so), who disclaimed the house. As for my grandmother, she had a trust made up because her brother, who had a much bigger estate, told his lawyer to draw up a will/trust as needed and put the costs on his own retainer. The main asset was the house, because it was in LA (Los Angeles). Before 2008, it was a $1M teardown. In 2012, it was a $750K teardown.

My mom, in her 70s, would drive into LA at least twice a week to check on her mother, drive her for errands, and literally be yelled at in public by her. Yeah. I'm not in the area, else I would have tried to help. I did call mom at least once a day to make sure she was okay, physically and emotionally. Mom tried to "honor thy mother" despite her mother.

Eh. It happens. Some people have been through worse, so I can't really complain. I just think that all of her constant negatives really blew out the few positives she had. I try to keep a few of those in mind, partially because I've benefitted from her efforts.

Mom used to be good enough with money. Then she got into bingo. While she does win more than some, she has blown thousands of dollars a year, easily $1000/mo. THAT drives me nuts! Her money is starting to get a bit tight--she'd rather owe $20K on a card than reduce her bingo and pay the damn thing off. All that money going to interest!!! This is why I am the way I am--I refuse to be that way (but I still spend to enjoy life, just not like this and not at that level).

Funny how family can make one go in the opposite direction.



Return to “General Credit Card Talk”

Who is online

Users browsing this forum: No registered users and 2 guests