EV calculations revisited (or v2.0)

Yeah, I did hard calculation on refi and cash out to do a major renovation including solar. But the numbers just did not come out in favor of my future plan. I have less than 10 years left on my current mortgage. I can not refinance without extending the term, but I don't want to go into retirement with mortgage payment left. Besides, our current mortgage rate is already very low at 2.5%, I can't find any lender who can lower this rate. I am looking into a debt free way to install solar by doing most of installation myself, but before that, I have to finish the remodeling of the house which includes addition of breath way to expand the roof area where the panel goes.

Plus in our northern climate, the payback time for the solar installation is very long. One estimate came to be the payback time of 17 years. That is just not a good investment.

 

Separate from the issue of not finding a sufficiently lower interest rate ...

Does a longer mortgage come with a prepayment penalty these days?

If not, then pay it off faster than the official schedule. Use your own personal schedule. That is what I did when we bought this house just over thirty years ago, back when 9.75% was still a good rate. And a rate where adding just a little bit of extra principal to each payment whacked off several months from the other end of the schedule.

I never paid just the scheduled amount, but added $25 to the very first payment. Then kept going up from there at whatever amount was comfortable for any given month. Add in an occasional larger overpayment, plus two self-selected 'balloons' where I thought that getting rid of the mortgage was a more comfortable investment choice than the alternatives, and we paid off a 30 year mortgage in a bit under 7 years.

The accelerated results of this overpayment plan are not nearly as dramatic at today's 2%-ish rates as they were with the 10-15% rates of the 1980s. But the concept is the same. It helps to be a numbers wonk keeping track with your own running spreadsheet of the debt remaining. And when paid off, keep that payment stream flowing into boosted investments to complement the official retirement savings.

We have been through multiple economic shocks since buying this house -- the Y2K / Dot Com Bust, a Two Pink Slip Christmas, the Housing Crash / Bush Great Recession, and now Covid-19 Recession. Being mortgage-free produces a lot of freedom when (not if) these things happen.

 

Usually not, but you have to read the small prints. I have never had a mortgage or any loans that would not let me pay off quicker without penalty. I've always made more than the minimum required payments. In fact, I am on an auto biweekly payment plan which automatically pays one extra payment each year. Paying more during the early years of the amortized term is the key to reduce interest. In addition to saving I made from extra payments, I have refinanced current mortgage three times now, each time at a lower rate saving close to $20K on interest. My last refi was 6 years ago, converting the 30-year term with 20 years remained into 15-year loan. I am on schedule to pay it off in 8 years.

 

That's impressive!! We bought our house almost six years ago with a 15-year mortgage. I think we have about seven years to go at our current rate.

 

Do remember that I did that at a time of higher inflation, which made it easier, and far higher interest rates, which greatly increased the incentive to pay early. Double-digit inflation wasn't very far behind in the rear view mirror, and double-digit interest rates were still present.

At 10% interest rates, compounding doubles the price or value every 7 years. Over a 30 year plan, that is a 16-fold increase. At 2.5% interest like today, the same time period produces barely over 2-fold increase. An earlier stock market boom was also in progress for a good portion of that time. So the pressures and incentives and economic conditions are very different today.

Being mortgage-free has very significant value when stock market busts and mass layoffs arrive.

 

Yeah, at 10+% interest, paying off the loan would be the best and safest investment strategy. With the current sub 3% rate, I have very little incentive to pay my mortgage off much quicker. My IRA is a lifetime average 14% annual return.

 

When the stock market returns were even higher, many people disagreed.

That was before the stock market busts and layoffs. And many people lost their homes.

 

I just heard a report this morning that a lot of Americans are regretting not saving more these days. Ya think!?

It's always a balancing act between reducing debt and increasing savings. And the equation is always changing. One can have lots of net worth and still be strapped for cash. But it's still going to be nice to get done with the mortgage in a few years. I'd hoped to do that before I retire, but that's probably not realistic.

 

Yeah, if we didn't have kids and cars, I would have been retried years ago. LOL But what fun life would be without kids and cars!

 

I didn't see it as a balance between just debt reduction and savings-investment increase. Discretionary spending was always in that balance equation too.

And my concept of 'discretionary' seems more broad than how many other people see it.

 

That's the point of the Fed manipulating interest rates: to entice people to move money out of savings. Always seems funny to me that periodically the media sounds the alarm about how little savings Americans have but they never mention why. Oh well, that's a HUGE political discussion probably not for this forum.

 

Very confused about the Kw it takes to charge a 2020 Prius Prime. ToyotaCom (PriusPrime) (FAQ) (I can't post a link yet) says "Prius Prime uses less than 3.3 kW to charge with a wall-mounted level 2 charger, which is roughly equivalent to powering a small, residential air-conditioning unit. Using the included charging cable requires much less power". A lot of post in google and this thread say it take 6.X. Am I mixing apples and oranges? How many kW does it take to charge a 2020 Prius Prime when the battery is empty?

 

This applies to all lithium battery chargers, which almost universally use constant current/constant voltage (CC-CV) charging, or multi-stage CC-CV charging. Broadly speaking, the charger feeds in electricity at a constant current until the battery reaches a certain voltage threshold, then the charger switches to providing a constant voltage until the current drops to near zero. That means the battery charges quickly during the constant current stage, and then progressively charges more slowly the closer it gets to full.