Sunday, November 17, 2013

Paying Off The Mortgage - Good or Bad Decision?


          Just a couple of days after I learned I was going to get laid off, I began to weigh the pros and cons of paying off the remainder of my mortgage. It was something I already thought of months ago when we got hints that the hospital we worked for may be in trouble. The main consideration was the worst case scenario of - what if I never find a job again, and this is based on the dwindling numbers of psychiatric hospitals/units in the area and my age which has become unattractive to employers even though that fact is never mentioned.
          The main reason for not paying off a mortgage is one needs liquid assets to be used for everyday expenses. While paying it off significantly decreases one's monthly overhead. The mortgage being the largest expense in my case. Now for a lot of people, this may not work, especially those who can revert back to renting a home or apartment which may be substantially less than paying a mortgage. That argument no longer applies to me because renting a similarly sized apartment (1 bedroom and 1 bath - living within my means meant that was all I can afford. Believe me, I'm probably one of the poorer Filipinos in the U.S.) is going to cost more than what I pay the mortgage lender each month. So after crunching the numbers, it came out that I could save the interest of almost $3000 in the 5 years I had left in the mortgage. In separate columns, I also lined up my monthly expenses with and without the mortgage to see how much money I have left will last in case I remain unemployed. After weighing all that, I decided to take the leap and pay off the mortgage balance.
          I sent an inquiry to the bank and they sent me a statement showing how much I will have to send them to retire my debt. I then moved some of my savings from one bank to another to come up with the final amount, then mailed a cashier's check to the mortgage company. A few weeks later, I received an escrow check from them for the amount I overpaid. The check was for a bigger amount than I expected, and knowing that my L.A. County real estate taxes were due, I assumed that the mortgage company didn't send that payment to the county. I checked with the bank and the county to make sure and upon learning that the taxes were not paid, I immediately sent payment. Fortunately I made it before the cut-off date and didn't have to pay a late penalty.

          The next concern was - what's next? Do I receive the title to my property? A statement from the bank saying I paid my debt and it has been retired? The L.A. County Tax Assessor's Office told me that the Deed of Reconveyance (http://www.investopedia.com/terms/d/deed-of-reconveyance.asp) was already sent by the bank to the L.A. County Registrar for recording. Am I to receive something similar to that from the bank or from the county?

          Those are questions which answers I still am not sure off, but it is certainly a great relief not to have to pay a mortgage next month, or next year, or forever, although I still have to pay the monthly homeowner's association dues. Now it's just a matter of surviving with whatever leftover savings I have plus the unemployment checks which only lasts for 26 weeks. If things still don't work out and for some reason Obamacare gets repealed, I may just have to sell the condo and move back to the Philippines. That would be another set of pros and cons that I have to consider.

Public comments below, private comments: E-mail Me!

3 comments:

Avril Copperfield said...

There'll always be some pros and cons when it comes to paying your mortgage. In the first place, you have to weigh them before getting a mortgage plan. If you think liquidating of assets is more practical, then let your properties be sold and use them to pay off remaining debts. But for some people who want to keep their houses, it's advisable to consider debt consolidation or refinancing.

Avril Copperfield @ Georgia.ChurchillMortgage.com

Kevin Fritz said...

Congratulations on paying your mortgage, Noel! I understand the doubts of paying off your mortgage when you don’t have enough income. The advantage is you don’t have to think of mortgage payments anymore! I hope you already got the title for your property. Any updates about it? :)

Kevin Fritz

Noel DLP said...

Hi Kevin, thanks for your comment. After calling up the L.A. County Recorder's Office, I was told that the Deed of Reconveyance was sent back to the bank who in turn sent it to me after I called them to ask about it.

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