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So far, having a mortgage has contributed to my financial independence far more than ever being mortgage free would have. I have always bought more home in the better locations than I could afford without a mortgage. Every single house I have owned and sold (5) had made a tidy profit based on the percentage of what I bought it for, and except for the first house (6 years, late ‘80s/early ‘90s, where Just getting a house was a major accomplishment) l have consistently easily beat the mortgage rates with investing. Essentially, I saved $10k for my first house down payment, and have never had to “save” another cent towards the next house and so on and so forth. The appreciation of past homes often beat the market returns and I made thise teturns with the banks money. Current house is literally worth almost 10 times what I paid for the first house and worth more than 5 times what that first house is worth today. I refinanced many times as rates went lower and took advantage of that cheap money. Perhaps I could have made the equivalent, but I sincerely doubt it, as every gain on each home was tax free. Until this last home, it was always tied up in the next one, but this time Indecided to “cash out” and was under the $500k exemption.
There is no way I could have amassed as much as I have without leveraging others
Mortgage money to make money. I concede that I had lucky good timing on my part and never had to sell during a bad period. Now have a 4% 30 on current “retire in place home” that I could easily pay off. I see no reason to. All that does is lock up $450k in a 3.8% return so that my heirs have a free and clear home. Heck, when I collect SS, that will more than pay the mortgage easily, and meanwhile that mortgage money has been averaging over 10%/yr for the last 20 years. I know too many people that refused to move because “the house is paid for” and are now stuck in dated homes in old less desirable locations. There is a huge difference between “debt free” and “income producing debt”. Obviously it appears it is not for everyone, but it has served me very, very well.
Last edited by Perryinva; 03-03-2019 at 08:38 PM..
... and meanwhile that mortgage money has been averaging over 10%/yr for the last 20 years. .
If you guarantee me 10% ROI, I'll write you a check for $1M first thing in the morning to open an account in your fund.
Personally, I've always paid cash for houses, but I can see the sense in being fully maxed out on a mortgage, perhaps interest only. Any in-between state (partly paid for) would be more due to financial necessity. I do like the logic of converting a financial stream like SS or a pension into a house payment as, failing a disability, your need for both disappear at the same time.
I expect that reverse mortgages are going to grow in importance, although it's a bummer how expensive they are.
resi real estate over all historically tracks a bit above inflation unless it is special situation stuff ...even if markets produced half as much historically they would have been well a head ..
i know we can buy multiple homes like we had based on how our other investments did over the decades , and that is after subtracting out rent and taxes
Yes, mortgage free. Not the ideal house, but we if we want to we can sell this house and add some retirement money to it and buy something else. Or we can keep all our retirement money and just stay here. It’s easy to tolerate flaws in a paid-off house.
Those are good reasons not to pay cash. Not everybody has money to pay a house in cash, not in California unless you are FCB(Foreign cash buyers aka rich Chinese from China). But if the bank don’t loan you a mortgage, that’s a good reason to stay away of the house. Well in most cases at least.
Skip fire insurance is a great idea until it isn’t.
Honestly, the idea to pay off the mortgage then later get a reverse mortgage sounds great as long as you don’t like your heirs.
Hey I spend differently if I don’t have heirs. I live it up, really.
I'll have a new mortgage at the end of this year, as we're having a modest-sized luxury home built in a 55+ community, for when I retire this year. Since we'll be spending much more time at home than when working, we want an attractive place that meets our lifestyle needs, with little maintenance. I could buy it outright, I suppose, but I'm averaging 15%-plus on my investments, so a mortgage at 4.5% is a bargain, given how my money is working for me. Renting might be cheaper in the short run, but rents go up, and the full mortgage payment and additional costs won't be much more than renting, anyway. We'll still have plenty of income left over to travel as much as we wish.
Honestly, the idea to pay off the mortgage then later get a reverse mortgage sounds great as long as you don’t like your heirs.
The option to take out a reverse mortgage in the future, should it become necessary (meaning REALLY necessary, as in being the only way to have money to pay for essentials) is one of the many reasons why I always want to own my own house.
That said, if/when that time comes I will sit down with my son and lay out my financial situation in detail, offering him the choice (if he is able/wants to) to help me financially directly now and receive my house free and clear later, or (if he can't or doesn't want to) me taking out a reverse mortgage line of credit and all that that will entail for him immediately after I die. In other words he can decide whether he'd rather pay something now and get back more later, OR pay nothing now and receive less later.
I'd never take out a reverse mortgage or incur any other debt involving my house without bringing my son (only heir) into the loop first and giving him a say in what happens to what will eventually be his. My house is likely to be the only asset he will inherit, unless there are a few paltry dollars left over in my relatively small IRA.
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