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I had never owned a 'home' in the standard sense, not before my retirement.
I bought Multi-Family-Residences, for zero-down loans, and lived in them. I have had rental income paying for each building's mortgage and expenses. My additional cash that I put into principle payments, did shorten the life of each of those mortgages. While effectively building equity.
All the time it was a possibility that resale values could have dropped and I could have lost that equity.
However MFRs have not gone through the same kind of bubble that Single-Family-Residences have gone through.
So when I was forced into retirement by my former employer, I was able to sell some of my MFRs, and buy a farm with no mortgage. Keeping only one MFR.
My 'investment' was those MFRs. Only rarely did I ever have to make a regular monthly mortgage payment from my salary, 95% of the time all the money came from the rental income.
My MFRs have provided tax-sheltering over themselves and over my salary. They have effectively bought my farm for me.
I also paid off my mortgage against the advice of my financial adviser, and now I am able to focus a bit more on investing. No, I do not have the benefit of compounding on that money, but I have something better - peace of mind. I have been calculating things like pension income, etc., and without the burden of a mortgage hanging over my head, I will be able to live very comfortably in retirement - with no worries about rising rent or having to sacrifice other necessities to keep a roof over my head.
I agree that this a personal decision for each person, but I know I have no regrets with the option I chose.
I'm doing both (Currently 15% of income to retirement accounts and extra towards principle on my home each month.) Hopefully I can have my house paid for in 5-6 years. By then I'll be 42/43, with plenty of time to load up on my retirement accounts.
I see great arguments on both sides of the fence, but I've never heard anybody say they regretted paying off their home early.
I am trying to pay off my mortgages, but I got sidetracked with my payoff plan. That makes me feel bad since by my calculation, I should be able to pay them off completely in 5 years, but that would involve some serious belt-tightening like no new clothes at all, reduced amount of food (I am too fat anyway) and no shopping period. I haven't been able to be that austere, and I think I need a payoff buddy! Either that or a massive raise.
Anyway, I am not sure what to do myself, so I can't advise you. Personally, I am paying more toward my mortgages, though. I also invest in stocks and bonds, keep cash and metals and stuff. I don't know what the magic bullet is. I'm not rich, and more and more I see it's pretty tough to GET rich if you start from 0, no matter how smart you are or how well you plan and invest.
Of course, the bible says that all of our worldly goods are pretty much worthless, so maybe I should try to do more to help other people and have that be more of a priority. If it makes you feel better, pay off your house. It may not be a good investment numbers-wise, but the peace of mind might be worth it.
My DH and I are under 30 and our goal is to pay off our home. We have been tyring to add a little extra ($50 a month) more each month. In about a year both of our cars will be paid off early so we will save half of that amount and then use the other half to add to our mortgage payment.
As for investing, we have a little money we use for it. Mostly though we save. DH does have stock bonuses at work so there's our investment, if it's worth something one day great but I'm not counting on it.
Writing yourself a check is so much more rewarding than writing one to a mortgage company. Been mortgage free for 15 years now, and debt free a little less. It is liberating, very liberating
Our culture as a whole has evolved, as all cultures have, slowly. Today we might not allow slavery with chains. But we do allow slavery via indebtedness. Our culture not only allows this but rather encourages it.
Today we have 'wage-slaves'.
Where once factory workers were wage-slaves working in a factory or in a mine, where their apartment was owned by their employer. They bought food from a company store, they drank beer in a company bar, their shoes came from another company store. Every dime they spent went back to the company. So after each week of working they were slightly deeper in debt to the company.
Today we may no longer live in a company owned town. But we live in a bank owned town. Our employer does not truly own his business, his bank owns it. If your boss's company shows a profit or not, the bank still gets it's profit first. Every grocery store is in debt to a bank. Every gas station, every shoe store, and nearly every home has a bank's lien on it.
Buy anything you want on credit, and spend the rest of your life paying the debt.
A person's cost-of-living might only be $5,000 a year, except for his debt. One dollar each month goes to his home's outstanding principle, while $700 goes to the interest. $200 each month might go for his food, but since it was purchased on a CC, he is really paying $400 each month. And on it goes. So in reality he must earn $30,000 each year to pay all of the extra debt he has. he has allowed himself to become a slave to the banks.
Getting out of debt, truly out of debt is a freeing experience.
You can earn a dollar, and it can be your dollar.
Granted as you earn more dollars, your income will become high enough that you may have to file income taxes. And if you earn more you may have to even pay income taxes [unless you first learn to 'itemize'].
It is a great experience to earn money, and to be able to keep that money.
I mean if own the thing free and clear, you own it. Will its value ever drop to nothing?
To fully analyze the situation your total after tax returns on the alternative would have to be factored, but as pretty much EVERYTHING is negative YTD ...
It is not just 'declining equity' -- what did you borrow to buy the place -- don't forget that your "total potential cost" is what the lifetime of loan's interest would have been too -- having to "grow back" the 3x plus total cost of 30 year loan is even harder...
Not suggesting that you make yourself "cash poor" to continue paying off your house (in fact having more liquidity is probably a good idea right now...) but you don't really lose until you sell, and if you wait 30 years to pay off your loans that is a lot more of your money that goes to interest.
I always look at total cost. Lost equity is fairly simple- I bought a place 5 years ago with 40% down. The place is now valued at less than the down payment. I have plenty of cash flow to support the place and leave it sit empty with a caretaker watching it. But it is not liquid at any reasonable price. So my dilemna is if I pay it off quicker, I still have no chance to get any return. However, most of my other investments are not exactly setting the house on fire either but I believe thay offer better chance of upside than the property.
Our culture as a whole has evolved, as all cultures have, slowly. Today we might not allow slavery with chains. But we do allow slavery via indebtedness. Our culture not only allows this but rather encourages it.
Today we have 'wage-slaves'.
Where once factory workers were wage-slaves working in a factory or in a mine, where their apartment was owned by their employer. They bought food from a company store, they drank beer in a company bar, their shoes came from another company store. Every dime they spent went back to the company. So after each week of working they were slightly deeper in debt to the company.
Today we may no longer live in a company owned town. But we live in a bank owned town. Our employer does not truly own his business, his bank owns it. If your boss's company shows a profit or not, the bank still gets it's profit first. Every grocery store is in debt to a bank. Every gas station, every shoe store, and nearly every home has a bank's lien on it.
Buy anything you want on credit, and spend the rest of your life paying the debt.
A person's cost-of-living might only be $5,000 a year, except for his debt. One dollar each month goes to his home's outstanding principle, while $700 goes to the interest. $200 each month might go for his food, but since it was purchased on a CC, he is really paying $400 each month. And on it goes. So in reality he must earn $30,000 each year to pay all of the extra debt he has. he has allowed himself to become a slave to the banks.
Getting out of debt, truly out of debt is a freeing experience.
You can earn a dollar, and it can be your dollar.
Granted as you earn more dollars, your income will become high enough that you may have to file income taxes. And if you earn more you may have to even pay income taxes [unless you first learn to 'itemize'].
It is a great experience to earn money, and to be able to keep that money.
The only way my property will be worth 0 is if NYC gets nuked. If not, then not only will it always be worth something but I'll always have a place to live. Somehow zillow is "Z"Estimating us for reasonably more than we bought it for. We have also made some significant upgrades (kitchen...where they count!!!) with more to come (bathroom!). Wife and I finally decided on splitting the monthly investment... maxing out the Roth IRA and the rest into mortgage. Sadly on paper this is only going to cut 11 years off of it and that is assuming we can make those extra payments for the next 17 years, unlikely once if/when little ones come into the picture...
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