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Old 05-12-2015, 05:40 PM
 
381 posts, read 352,121 times
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We took 30 yr mortgages on three houses at various times of our many moves. We paid each one off ahead of schedule. On one house, we took a five year mortgage and really applied the $$. Paid it off. Paid full cash price for one house. We have always kept our real estate purchases well below our "abilities" level. We have never lost money on any of our house purchases. Some we sold ourselves. We still managed to put three children through engineering masters programs and saved for retirement. We lived well but have never been big spenders. We were not trying to be frugal but truly enjoy the simple things of life.....which are usually free. We knew we would move many times and always looked for the small house in the absolutely best school district. Worked for us.
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Old 05-12-2015, 06:24 PM
 
378 posts, read 226,419 times
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After paying off the house make the same mortgage payment to your savings account...retire early
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Old 05-12-2015, 06:45 PM
 
Location: SF Bay & Diamond Head
1,779 posts, read 1,417,509 times
Reputation: 1971
I'm glad everyone is retiring with paid off houses. That will be less a drain on the taxpayers for your LTC. Might have been better to use some of that paydown money for LTCi since the nursing home will get your house anyway. My plan includes converting my age 70 SS income into over $650,000 lump sum payment to me.
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Old 05-12-2015, 08:58 PM
 
Location: Garbage, NC
3,124 posts, read 2,046,060 times
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Quote:
Originally Posted by BeerGeek40 View Post
Finally ---- someone who GETS it! I paid off my mortgage last year at age 45. Done for good with banks, mortgage statements, and interest being flushed down the drain.

You are on the right track.
1. Small mortgage. Yes sir! Buy a moderate sized house you can afford rather than trying to keep up with the Jones's
2. You didn't mention this one, but put 20% down when you purchase, if you can, in order to avoid PMI, private mortgage insurance (a good deal/bad deal: good deal for the bank. bad deal for you).
3. Take out a 20 year mortgage -- yes, they exist, and then pay it down as quickly as you can. It took me about 12 1/2 years.
4. Ditch the landlord. Another person you can do without in your life, making rules for you and making life more complicated than it needs to be. Raising your rent, and tying you into a lease. Run your own life, your way, in your own house.
5. Disregard some of the advice of rjm1cc. Do not take out a 30 year mortgage just because interest rates are low. It's more important to get the house paid off, than to be throwing a ton of money into your retirement account when you won't be able to touch the money for another 30 years. He/she is correct about maintenance costs, so do your homework on whatever house you do decide to buy.

Good luck.
I think I like you.

I, too, hate renting. Hate, hate, hate, hate.

No one here will ever, ever convince me that renting is better than buying. So what about maintenance costs? I've had to pay for maintenance-type things in all of the rentals I've stayed in to make them livable, since slumlords don't want to pay for anything. I'd rather put it toward something that I'm going to own!

I also think paying it off as fast as possible is smart. I know the OP posted this in the retirement forum for a reason, but as a 27-year-old who will have our home paid for by the time I'm 30, I'm going to tell you that the RELIEF seems worth it.
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Old 05-12-2015, 09:33 PM
 
Location: Tennessee
23,541 posts, read 17,525,434 times
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Quote:
Originally Posted by Ariadne22 View Post
With that track record of mobility, know that if you need to move, houses aren't sold in five minutes. Real estate can be a very illiquid asset when times get rough.

Since you have an average income, I would establish an emergency fund for at least a year's expenses and then be aggressively investing as much as possible in retirement funds. If you can handle the taxes, Roth is preferable.

If you are certain you can stay put, buy a property that fits your financial needs - after you establish retirement savings strategy. Rent may seem to be rathole money, but know that what you don't pay in rent can often be paid in maintenance (roof, heating/ac, plumbing, remodeling, appliances) - not all of which you get back. I knew a tax attorney who firmly believed he would always come out ahead renting. So don't be too quick to consider renting a bad deal.
As I said, the mobility was not entirely my choice. I graduated college in 2010 in a depressed area, had an internship in my field, applied in NC/SC/TN/Atlanta, and could only make $29k in a call center after college. I never got any better offers elsewhere for the first six months after graduation, and ended up sucking it up there for two years.

There is little to no professional work in east Tennessee, so I stayed until I did get something better, which happened to be in Iowa. I made $41k there (+10% shift bonus), but hated Iowa with a damn passion and the people I worked with. I had never lived outside the South and it was major culture shock plus rude coworkers. I tucked my tail between my legs and came home for a $12/hr contract job hired by someone I knew, then was laid off/fired (never knew what happened) six months later, and ended up making a little over $10/hr. My finances went down the tubes and I was probably just a few months from bankruptcy by the time I got my current job. At that point I would have gone wherever, and here I am in Indiana. It's taken me most of the past year just to get out of credit card debt, sock back about $7k, and get my credit score back in order.

I'm not certain I can stay put. I've seen the bottom fall out so many times both with myself and with people I know to know that staying in any one location for any length of time is difficult. Perhaps I'm irrationally scarred from growing up in Tennessee and seeing the recession virtually end many lives, and nearly going under myself, but I still have a fear of being laid off and having to flee to the next town. The economy here in Indianapolis is pretty strong and I'm fairly certain I could get work without having to move, but don't know if I can make what I do now.

$60k might be "average" to you, but coming from a town where the median household income is just slightly over $30k, and most of the nearby counties being in the mid $20k range, it feels fairly well off to me. I have a nice car, decent apartment, can go out to eat, save some for retirement, take occasional cheap trips to FL, travel around the Midwest about all I want, etc. Life is far better now than it has been at any other point in my life.

I am not convinced Indy is my "forever home." It's perfectly fine - I live in an affluent suburb, it's comfortable, the economy is good, the city is fairly cheap for the amenities it has, etc, but there are some things (mostly weather and outdoors related) I miss about the South. There are other places I'd rather be - Florida, South Carolina, North Carolina, the Maine coast - but I realize the places I want to be, I'd probably lose $20k or more in income by going South or rural. I can't afford to go from $60k in a northern state like IN to $35k in SC/NC/FL, even though I'd rather be there. Indy feels like my best option for the foreseeable future from a value standpoint.

FWIW, I am not looking to do something today or tomorrow. My lease isn't up until next April and it's possible I could rent for a couple more years until I'm totally debt free at 32, assuming my finances simply stay the course. Part of the frustration is that if I do continue to rent, I need to move to a cheaper place or find a better value for my rental dollar. I do feel like I'm getting jipped for what I have.
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Old 05-12-2015, 09:46 PM
 
Location: Garbage, NC
3,124 posts, read 2,046,060 times
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Quote:
Originally Posted by Emigrations View Post
Part of the point of the thread is the psychological comfort/fall back in the event something goes wrong. Let's say you lose your job and your income is drastically reduced. Having no mortgage payment and keeping housing costs to utilities, insurance, and taxes could very well keep you afloat. Also, if I had a paid for condo and rented it out, I could probably make at least a little money off of that, as well as having a paid for place back in Indiana if I decide to move off.

After going through the recession back home in Tennessee, I watched a lot of folks who lost their jobs in local factories get foreclosed upon because they went from a $15-$20/hr job with lots of overtime down to $10/hr or even less working in retail, fast food, or call centers. Perhaps watching everyone lose it all kind of scarred me mentally and skewed my perceptions.
Quote:
Originally Posted by ameridreamNoT View Post
I am mortgage free at age 33 and I can vouch for some posters here that it is one of the best decisions I have ever made. I would do it over and over in a heart beat. Investments are volatile and a home is a place to live and granted there are maintenance but if you're handy, most things can be done by yourself. Taxes and insurance plus utilities are the bills that you will have to deal with. I have been stashing on all money into savings and 401k and college funds...not spending much. it depends on your life style and how you see yourself in the future with your financing...many people will go against paying off mortgage early because you can use the $ to invest instead...but there's pros and cons to these things and it is really comes down to what you find most comfortable with.
Agreed. It's all about peace of mind. It's all about knowing that you have a place to live, which is one of our most basic needs.

If you rent, you can be 5-10 days late on your rent and find yourself homeless.

If you owe on a home, you are about three payments away from homelessness.

Everyone says that it won't happen to them, but for younger people, you really don't know that.

Yes, home maintenance can be costly, but I think some people exaggerate. Still, in a worst-case-scenario, you have a roof over your head. Some maintenance can be put off if necessary (yes, I know it only makes it worse, but we're talking about bad situations) or can be rigged to get you by. Friends and family sometimes know how to work on things for free/cheap.

You still have a home, a paid for home, a roof over your head, no matter how bad things get. If you buy relatively modest (as OP mentioned), then you should be able to keep things going off of your savings or a lower-wage job. The same is not true if you owe on a 30-year mortgage or, even worse, if you rent.
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Old 05-13-2015, 02:36 PM
 
12,704 posts, read 9,959,474 times
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Quote:
Originally Posted by lkmax View Post
Agreed. It's all about peace of mind. It's all about knowing that you have a place to live, which is one of our most basic needs.

If you rent, you can be 5-10 days late on your rent and find yourself homeless.

If you owe on a home, you are about three payments away from homelessness.

Everyone says that it won't happen to them, but for younger people, you really don't know that.

Yes, home maintenance can be costly, but I think some people exaggerate. Still, in a worst-case-scenario, you have a roof over your head. Some maintenance can be put off if necessary (yes, I know it only makes it worse, but we're talking about bad situations) or can be rigged to get you by. Friends and family sometimes know how to work on things for free/cheap.

You still have a home, a paid for home, a roof over your head, no matter how bad things get. If you buy relatively modest (as OP mentioned), then you should be able to keep things going off of your savings or a lower-wage job. The same is not true if you owe on a 30-year mortgage or, even worse, if you rent.
Yes, but if you rented and kept your money liquid, you'd be more than 3 months away from homeless because you'd have a huge pile of assets to dip into to pay your rent.

If you put your money into a house, you have to sell the house to get it back out since no lender will touch you if you are unemployed.
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Old 05-13-2015, 04:12 PM
 
Location: Forests of Maine
30,669 posts, read 49,416,421 times
Reputation: 19119
We stuck to 30-year mortgages.

I understand that with changing interest rates the math will be different from one mortgage to another.

In each on our mortgages, my salaried income was only going to the principal-only payments. The regular monthly P&I payment was made from the rental receipts.

In terms of our Net Worth, we got a very healthy return on our money. Equity built quickly, and eventually we were able to extract all of the equity as cash for our retirement home.

Avoid using your own salary income on P&I payments. Your return is horrible that way, and you get very little tax-sheltering from that. Get renters and use their money to make your monthly P&I payments.
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Old 05-13-2015, 04:36 PM
 
Location: SW Florida
9,741 posts, read 7,022,649 times
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Quote:
Originally Posted by Emigrations View Post
I just turned 29 and am looking at buying my first home over the next year. I work in Indianapolis but don't want to live in the inner city. I'm looking at reasonably priced condos and small SFHs in the better parts of the city and suburbs and am finding quite a bit I can afford, but I can go to small towns outside of Indy and probably save considerable amounts of money. I'm currently renting a 2BR and with rent, water/sewer, and electric, I'm up to $1,000/month. It's a decently kept but very dated apartment, and it's money down the drain. There are smokers/animals beside me and I want neither, and I want something on one level, with a basement possibly for optional use. There is a possibility of me getting married but can't foresee any kids.

I have been thinking of buying with a small mortgage ($50k-$110k or so) and trying to pay it off as fast as possible (hopefully by 40-45). This would give me the ability to be completely debt free for ten to twenty years prior to retirement, and to contribute a considerable amount.

Did you pay off a mortgage early and find it helpful or that the money was better allocated elsewhere? Even if it was better allocated elsewhere, did you find the peace of mind of being debt free worth it?
I've posted this before, but when we bought our last house in 1985, we went for a 15 yr. mortgage and a large down payment. We did this partly for a lower monthly payment, but also for the goal of paying off the mortgage in 2000. We did just that, and saved the mortgage money. Our retirement plans including finding the place we wanted to retire, buying property there and building our retirement home. We found a beautiful spot on the water, bought the property, and made plans to build the house. To fund the building of our retirement house we took out a large equity line of credit on our paid off house, and we made sure to put as much money back into that equity loan as we could manage to keep the available amount high and we were careful not to use that money for anything frivolous. We were able to do that as we had no other mortgage, were both working, and it took a few years to build that house. While we were waiting we used the money from the equity loan to pay off our cars and buy a new one, and make repairs on our old house in preparation for its sale, and we were still able to make the payments on the construction of the new house. The idea there, of course, was that we would have a newly built retirement home with no mortgage.

By the time we put our old house up for sale, we'd pretty much used the equity amount as we anticipated paying it off when we sold the house- the last thing we used it for was to put a new roof on the old house. That house was on the market for one day when we got three offers, one for the asking price and that is the one we accepted. We ended up making a pretty nice profit on that house- about $175,000 after we paid off the equity line of credit.

So now, we're enjoying our retirement in a new house with no mortgage, very little debt and in a spot we consider paradise. IMO there is nothing better.
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Old 05-13-2015, 06:33 PM
 
Location: Tennessee
23,541 posts, read 17,525,434 times
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^ About how old were you when the mortgage was paid off?
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