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homes are better cost cutters than they are on the appreciation side since you either are using the house to cut costs or selling the house for the money . if you are using the house the value means little since you can't get both .
it cost money to get at the money in the house whether a reverse mortgage or an equity loan . the reverse mortgage is really a loan with a balloon payment due . you can just give them the house instead of paying it off but it cost you a lot in both cases to access the value when consuming the house ..
I agree but I am not thinking in terms of getting at the money to enjoy life except for the LTC emergency I see the house as a repository for the 10 to 15 years they wish to enjoy the stay there. I see them rethinking holding on to that house beyond age 80 and seeing renting an apartment with other seniors and using the nest egg of the sale of the house to make the move, travel, eat well, pay for incidentals and otherwise just relax. Having $200k in a brokerage account fund designed to provide about 3% to 4% annual growth will allow them to reasonably enjoy a leisurely life.
As for having a paid off house, that occurs naturally for most of us because mortgages are eventually paid off.
If you are an expert investor you could certainly do better renting and investing the proceeds. During a bull market you can just buy QQQ or SPY and count your money every day. Call yourself a genius. For example, QQQ is up about 24% from election day.
But for most people, having the security of a paid off house and enough money in the bank to meet emergencies and a predictable monthly income is a better plan.
Most people are lousy investors. I know a few who rode the market down to the March 2009 low and sold there out of desperation. When you are 70 years old, you may not live long enough to ride that market back up.
we have not owned a primary residence in almost 2 decades but rent instead . but we have invested in much better growth areas than our home was .
we paid 169k for our home in queens in 1987 . for comparison if you put that much money in the fidelity insight growth model we have been using since then that money is worth 3.80 million using plain ole fidelity funds .
our house today just recently sold for 656k . we sold it for 335k almost 17 years ago .
if we subtracted out all our rent we paid and taxes we could buy multiple homes today with that difference .
so owing is not crucial to doing well in retirement .
what is crucial is that if you don't buy that you invest elsewhere .
in survey after survey you see that what enabled most people to retire they say was not the value of their home . it was the fact they reduced their housing costs much lower so they don't need as much income .
but the danger of getting to hooked on cost reduction and not growing other assets is that for a while they have the same effect . but cost cutting has a bottom after which rising expenses can't be offset .
so growth vehicles are needed too in retirement even with that cost cutting ability of a house ..
it also depends where you live . here in the tristate area a paid off home can mean little in affordability .
homes were 30-35k when we all started buying them in the 1970's . that mortgage was crushing back then .
well today that mortgage is paid and taxes are 12-15k a year . that mortgage you retired represents a piece of a utility bill today as far as affordability and really does not make it any easier to afford to stay here . .
Last edited by mathjak107; 05-29-2017 at 06:49 AM..
Without going into all the incidentals let just say I find myself in a very poor financial situation at 65 due to some extremely poor life decisions. At any rate not complaining better off than some worse than others.
Recently retired working collecting SS. Paid down quite a bit on house on have a shade over 6 years left not a very large payment live in a fairly low COL area. I can accelerate the mortgage payoff and cut the period in half or I can save the money instead. No savings put down a very large chuck as a down payment 3 years ago and have been pre paying the mortgage the last 3 years. I am in good health and could probably work my current job for at least 10 years. Two new cars so I am in good shape there.
Keep the mort.
Save what you can, nothing beats liquid assets, a house is not liquid, cash is.
"Mortgage free" is the poor mans economy. Its a big FAT liability target.
I bought 3 years ago and paid only 200K. Same house in the area of Western Monmouth Co. in NJ would have been at least twice as much. Of course this is not NJ and the schools at least where I lived in NJ were far superior to the area of NC where I currently live. Taxes here are less than 3K annually.
Mortgage taxes and homeowners insurance plus a small monthly HOA fee are less than what I would pay for a small 1BR apt down here. Since I do not itemize tax consideration on the home and taxes is a non starter and since the amount I pay is too small to matter even if I did have a high income the home doesn't help there but like I said the house doesn't cost more than an apt now anyway. Hopefully I am years away from having to do major maintenance since the house is only 3 years old.
I imagine once I get much older I will probably sell and I guess that should bring enough with savings going forward to be able to get by no trips to Europe but I won't starve.
I bought 3 years ago and paid only 200K. Same house in the area of Western Monmouth Co. in NJ would have been at least twice as much. Of course this is not NJ and the schools at least where I lived in NJ were far superior to the area of NC where I currently live. Taxes here are less than 3K annually.
Mortgage taxes and homeowners insurance plus a small monthly HOA fee are less than what I would pay for a small 1BR apt down here. Since I do not itemize tax consideration on the home and taxes is a non starter and since the amount I pay is too small to matter even if I did have a high income the home doesn't help there but like I said the house doesn't cost more than an apt now anyway. Hopefully I am years away from having to do major maintenance since the house is only 3 years old.
I imagine once I get much older I will probably sell and I guess that should bring enough with savings going forward to be able to get by no trips to Europe but I won't starve.
We are closing this month, in Maine, house is very nice $49K w/ 1 acre,
in Boston the same house would be $400K.+++ and taxed up the ying yang.
Tax for us in Maine is $800.
Retired, nothing but SS to live on and I can still afford to go to europe.
My current rent near boston is 5 times the mortgage/tax/ins I'll pay in Maine.
Its all about managing whatchagot.
Sounds like you have the same monthly payment as when you took out the mortgage. Since you have paid down a lot of the principal you can ask if they would reduce the monthly payment.They can do this and no need for a new mortgage settlement.
If your house is burdened by involuntary membership in an HOA then keep the mortgage as a defense against the HOA and its vendors. People with paid off houses are targets for HOA management companies and HOA vendors. Why? Because they take the HOA's foreclosure power and use it to take money and eventually your house from you.
If your house is burdened by involuntary membership in an HOA then keep the mortgage as a defense against the HOA and its vendors. People with paid off houses are targets for HOA management companies and HOA vendors. Why? Because they take the HOA's foreclosure power and use it to take money and eventually your house from you.
Excuse me? How do they do that?
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