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That piece of mind having no mortgage is really just a case of the emperors new clothes ….having a mortgage and a horde of invested liquid assets can actually be far more of a comforting feeling
That's the way I do it. I feel it's a more reasonable path.
Most people owe it to themselves to live in a house or condo and build equity over time, as well as invest in the stock market.
some people have paid off homes and plenty of liquid investments. It's not a all or nothing situation. Owning a home outright can be just a portion of your wealth.
Or not ..
We know so many who dumped every extra penny in to getting rid of the mortgage faster ..now they have more than I would call healthy tied up in their house and a reduced retirement income from a less than pile of liquid assets then they really should have ended up with .
Now any extra they invest has a lot of pressure on a shorter time frame to do well …
The most precious resource we have when it comes to investing elsewhere is time ….by delaying putting more in to those investments until that mortgage was paid they left themselves with a much shorter time frame.
A lost decade could leave them in a real bind and has .
Two of our friends did just that …now it ended up despite a paid mortgage they could not afford to live here .
So they had to leave family and friends for florida and now regret not doing things a lot differently.
Priorizing paying off a mortgage at the expense of the pool of money that will end up supporting you is not a wise thing either
You have to understand , banks who do not hold on to the mortgages they make , sell them off ..the requirements for the mortgages that go into that bundle are income based ….
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In fact the biggest mortgage buyers like Fanny Mae and Ginnie Mae demand the loans they buy are income based.
Yes, I understand that. When the Ex and I bought our huse in NJ in 1983, we had a "jumbo" mortgage, which was non-conforming and couldn't be sold to the usual secondary markets, so carried a higher interest rate. My current mortgage balance is $65K. I get refinancing offers with cash-out because no one wants to loan under $100K- another non-conforming loan. The latest "offer" was so silly I put it on FB- $100K cash out for only $156/month more than my current payment.
Except that instead of owning the home free and clear 9 years form now it would be 30 years form now. And the interest rate would be 4.5%, not 3%.
I came to the conclusion several years ago that I didn't want to worry about what the market was doing. I paid off my house, and I'm making extra payments on my rental mortgages. That's a guaranteed 4% return to eliminate debt, versus half a percent or less in money markets. I know index funds have offered better returns, but it pleases me to watch the debt load evaporate and know that I'm closer to retirement. It's like losing excess weight!
As far as I'm concerned, the appreciation in real estate was a good hedge on my conservatism anyway. My Roth is all in ICSH right now. I feel no inclination to put it into this frothy market. I did buy last spring, made about 25%, got out when the S&P was around 3600. Yeah - I left money on the table versus today's valuations. I don't care. Other investors can party in the casino in my place.
I came to the conclusion several years ago that I didn't want to worry about what the market was doing. I paid off my house, and I'm making extra payments on my rental mortgages. That's a guaranteed 4% return to eliminate debt, versus half a percent or less in money markets. I know index funds have offered better returns, but it pleases me to watch the debt load evaporate and know that I'm closer to retirement. It's like losing excess weight!
As far as I'm concerned, the appreciation in real estate was a good hedge on my conservatism anyway. My Roth is all in ICSH right now. I feel no inclination to put it into this frothy market.
It may be a guaranteed 4% return in nominal terms but because of inflation the real return was 2 or 3% less than that. Also, some people potentially lose the tax deduction as well. Throw in the cost in opportunity to use the money elsewhere, and you lost money.
It’s also not less risky. You just shifted one financial risk for a different financial risk. “Guarantee” is just a word for locking in inflation risk and higher opportunity cost.
You may be fine with that of course, but financially it’s not optimal.
some people have paid off homes and plenty of liquid investments. It's not a all or nothing situation. Owning a home outright can be just a portion of your wealth.
Exactly. Owning your home outright is a piece of mind by having no mortgage. Yeah you never truly own it as long as property taxes exist, but better than having mortgage and never ending property taxes.
And where did you sell way above asking price and move to California to buy a home outright cash. California metros are most expensive in country. Where in California did you buy?
And property tax rate in California is actually relatively low, but home prices are so high it makes taxes high. Though there is Prop 13 cap so if you brought a while ago, taxes will be locked in lower. But if you just bought now it uncaps and resets to current market value which are exosphere high in CA compared to almost every other state.
We sold our home in Utah (the Salt Lake Valley) where there are not enough homes to satisfy the need. We bought our first home there in 1993 for under $92K. Moved up to our second home soon after and sold that 2.5 years ago for $400K.
We live in semi-rural California 20 miles from Monterey. Home prices here ranged from $500K - $800 K when we bought. Those prices have recently risen considerably because Bay Area people are moving here to work from home. We have neighbors who have been here for over 30 years who sold their homes because of the boom in prices. The area remains more rural than suburban with the “salad fields” surrounding us.
When I hear all this talk about 6 figure incomes - not only here in California but across the country - I am boggled.
I worked in government for the last 30 years of my career. My end salary was $60K. I worked up from the high $20’s at my last employer - yes, with promotions along the way.
I DID save almost a million dollars - in our portfolio- because I knew I was going to need it in retirement. It’s a lot of money to me. Lucky for us - we also inherited money - but lived our lives as if we weren’t going to. We’ve been able to live on the pension and social security alone not touching savings nor the portfolio. Everything else is a buffer against what life will present to us as we age.
I wonder what all those folks with 6 figure incomes will think is “not enough”. If they are spending all of their 6 figure income - are they saving for the future? Time will tell.
Very true. It is the classic "Millionaire Next Door" tale - people who have a million or two are much more likely to be frugal savers & wise investors than they are to be high earners.
I know a guy who was was being groomed for executive management at a Fortune 50 company, but ultimately his career stalled at the VP level and was told he'd probably never make it to EVP or the C-Suite.
He hung on for a while, then retired in his mid 50s... only to need to go back to work after about 9 months. I have a rough idea of his compensation - probably in the $500K range including his bonus. If the stock of the company had done well, he would have made millions - but the price of the stock had been mostly stagnant for over a decade.
He should have been set for life. But this guy spent money like crazy. He has nearly a dozen wrist watches that are in the $100,000 to $250,000 price range, for example. Just completely nuts. His home audio system is a sight to behold - I don't know how much it cost, but it takes up a wall and is one of those "if you have to ask, you cannot afford it" custom systems.
He wanted a home espresso machine - so he went out & bought this for over $6000:
And, of course, he needed a coffee grinder so he bought this for over $3100:
He's a classic HENRY: High Earner, Not Rich Yet. So he's back to work at a startup to fund his lifestyle when he should have been set for life.
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