A conventional mortgage bites the dust!

[Steve Vaughan]

I have a goal of paying off at least one commercial (high hassle) mortgage and 2 higher rate residential mortgages this year, in 2017.

So far - the commercial mortgage has been refinanced with a $61k cash-out, no points, no fees private loan with a 10-yr straight am at 6%.  Check!  This bank won't be bothering me anymore for my financials every year, nor will they be adjusting my rates or having the right to call it every 5 yrs.  See ya!  

Today I satisfied a rental house mortgage I've had since 2004. 30-yrs at 7.99%. The area is now zoned industrial so it was a hybrid commercial type loan with no PMI. At the time (with the no PMI factor, 7.99% wasn't bad) conventional 30-yr rates were about 6.5%. Now it seems astronomical in our 3-4% world!

The PP of the rental (a 5bd, 2 ba) was $105k in '04.  It's probably worth $175k now.  The balance last month was $61k.  I had been over-paying it $400 per month for a couple years. $200 per month for several years prior.

I told my private lender about this mortgage at 8%, so he knew the purpose of the cash-out. With this money I started hitting this mortgage in the nose twice weekly with $9600-ish ACH payments.  Monday, bam!  Thur, bam! $37,000 per month. ACHs are free and can be designated online as 'principal only'.  I stayed below $10k because of the IRS notification I am weird about.  Why let them know if you don't have to, right?

Anyway, I paid the last $2507 this morning over the phone when a rep from Ocwen called. Instead of all the payoff quote, fax, processing, wire transfer and whatever else fees that are normally charged when you sell ($300ish) , she only charged an $88 satisfaction fee. That's legit since they have to draft and record a reconveyance.

So that's it.  I am excited to be able to share what are wins in my eyes.  My market is frothy and an 8% risk-free, tax-free and hassle-free return sounds good while I wait things out.  It's a triple net lease at $1150/mo with NO DEBT!

Next up is a $75k seller-financed rental house at 6%.  We are negotiating a discount for early pay-off now.  I try to get enough of a discount so my 'yield' will be 8% as well.

Not even I am accelerating any long-term, fixed-rate residential mortgage at 5% or below.  That return can be easily beaten elsewhere.  Cheers and thanks for reading!

[Kyle J.]

Congrats Steve. I have a mix of completely paid off properties with no loans, paid off properties with HELOCs on them (presently unused for quick easy access to capital), and properties with low interest mortgages (leverage) on them. There's advantages to each, depending on your individual investment goals. But there's something to be said for the peace of mind that comes with a paid off property.