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Old 05-20-2015, 10:41 AM
 
Location: Forests of Maine
30,682 posts, read 49,443,611 times
Reputation: 19129

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Quote:
Originally Posted by WaikikiBoy View Post
The strategy of maintaining a mortgage, or borrowing more on your mortgage, does make some financial sense. With the low interest rates you pay on the mortgage, you can frequently make a greater return on the money when invested than you pay on the mortgage. ...
Yes and no.

Separate the monthly P&I mortgage payment from the Principal only mortgage payment.

If your money is only going to the principal, then you can get a fairly decent effective return in equity.
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Old 05-20-2015, 11:17 AM
 
Location: NC Piedmont
3,911 posts, read 2,878,179 times
Reputation: 6291
This may be old ground; I haven't read all the replies. But one reason I am considering cashing in equity in current house and buying outright at retirement is that I will be moving to a state where an owned primary residence is untouchable as far as judgments go. If some expensive incident occurs and you are liable for an amount beyond what you can pay, you could lose those funds that are invested to make money to pay the mortgage. Then if you can't pay the mortgage, you lose the house. If you own the house, your investment pays off by not having mortgage or rent in your monthly expenses.

In a similar vein - if you own a home that isn't extravagant, you can probably afford to live there on SS alone if something happens to wipe out everything else.
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Old 05-20-2015, 04:45 PM
 
12,705 posts, read 9,970,523 times
Reputation: 9515
Quote:
Originally Posted by CarvedTones View Post
This may be old ground; I haven't read all the replies. But one reason I am considering cashing in equity in current house and buying outright at retirement is that I will be moving to a state where an owned primary residence is untouchable as far as judgments go. If some expensive incident occurs and you are liable for an amount beyond what you can pay, you could lose those funds that are invested to make money to pay the mortgage. Then if you can't pay the mortgage, you lose the house. If you own the house, your investment pays off by not having mortgage or rent in your monthly expenses.

In a similar vein - if you own a home that isn't extravagant, you can probably afford to live there on SS alone if something happens to wipe out everything else.
It sounds like this peace of mind is valuable to you, so go for it, as long as you do have a decent amount of liquidity elsewhere (6 months expenses).
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Old 05-20-2015, 04:48 PM
 
Location: Colorado Springs
4,837 posts, read 4,952,340 times
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Quote:
Originally Posted by CarvedTones View Post
I will be moving to a state where an owned primary residence is untouchable as far as judgments go.
Would that state be Texas?
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Old 05-20-2015, 05:22 PM
 
Location: NC Piedmont
3,911 posts, read 2,878,179 times
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Quote:
Originally Posted by Vision67 View Post
Would that state be Texas?
I think lots of states have this but I am looking at Florida. I have a lot of family there and I hate the cold.
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Old 05-20-2015, 08:34 PM
 
1,820 posts, read 1,316,381 times
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Taxes and insurance are going to be just about the same in any case, but the P&I on a $400K mortgage is $2147 per month at 5% and $1910 at 4%. You can finance the closing costs and still walk away with a very nice boost in cash-flow. You don't have to invest it in anything to be better off. It is just money that doesn't go to your lender anymore. Hard to say whether the time to do that is over now or not, but anyone whose existing mortgage rate is !% or more above currently available rates should certainly look into it.
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Old 05-20-2015, 08:41 PM
 
1,820 posts, read 1,316,381 times
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Quote:
Originally Posted by CarvedTones View Post
I think lots of states have this...
Yes they do, but either way one can typically get a million or two in umbrella liability coverage for very little money. Keep in mind that the actual purpose of such insurance is to make sure that money will be available to help those who are injured in some way to recover and return to what had been their normal lives. Seems like something that people should just do.
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Old 05-20-2015, 09:04 PM
 
Location: Myrtle Creek, Oregon
12,248 posts, read 12,499,482 times
Reputation: 19393
Quote:
Originally Posted by jrkliny View Post
Listen to yourself. This is just garbage with no content just loaded words and insults.

I have a mortgage because the rates are very low and I am confident that I can invest the money I borrowed and make a return that will pay the principal, interest and turn a profit. I bought no stocks but invested in a diversified portfolio mainly of mutual funds.

In the 2 years I have had the mortgage I have paid $30K in principal and interest and pocketed another $30K in profits. In addition the mortgage interest deduction helps keep my taxes down.

I don't live in fear of another major market crash. First I think we already saw our once in a lifetime event. Second, my portfolio has more than doubled since the 2008 crash. Third, my investments are conservative and diversified.
As long as you have the cash flow to support the lifestyle, you are in great shape. There are just times that you will pocket a loss instead of gains with any investment, while the mortgage interest just keeps adding up and never goes negative. When that happens you can't afford to have a hitch in your cash flow, or you will be forced to sell investments at a loss to cover the mortgage. That's how all those debt speculators ended up at the food bank, too broke to even buy groceries, driving their food stamp Cadillacs.

If you think that's a once in a lifetime event, you don't plan on living long.
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Old 05-21-2015, 04:29 AM
 
Location: NC Piedmont
3,911 posts, read 2,878,179 times
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Quote:
Originally Posted by Major Barbara View Post
Yes they do, but either way one can typically get a million or two in umbrella liability coverage for very little money. Keep in mind that the actual purpose of such insurance is to make sure that money will be available to help those who are injured in some way to recover and return to what had been their normal lives. Seems like something that people should just do.
Actually more concerned about liability for medical expense beyond insurance but also our litigation happy society does make protecting yourself a good idea. Something could happen that you should be liable for, in which case an umbrella policy is a better option.
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Old 05-21-2015, 06:23 AM
 
6,251 posts, read 4,728,813 times
Reputation: 12833
Quote:
Originally Posted by Major Barbara View Post
Yes they do, but either way one can typically get a million or two in umbrella liability coverage for very little money. Keep in mind that the actual purpose of such insurance is to make sure that money will be available to help those who are injured in some way to recover and return to what had been their normal lives. Seems like something that people should just do.
Absolutely. I have an umbrella policy that protects me for several million and costs less than a dollar a day.
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