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IF we get the house we'll be sending in extra principle payments every month. We have some CC debt to take care of first as well but we will be putting at least $100 extra a month towards the house payment.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Quote:
Originally Posted by Capitalprophets
Be debt free. Stop slaving to your lender. Don't listen to naysayers. People who say ROI is greater if you put that extra income somewhere else than to put in for a house. They themselves don't even know that would be the case 30 years later but thats just the excuse they tell themselves to not have to face the reality. But if you pay off your house you are guaranteed debt free. Invest your extra income only then.
Highly disagree. Loan payments carry about a 4% interest rate. A loan with 320K if you had the ability to pay off that early in one lump sum you could save about 1525 a month. Investing that elsewhere I got 13% which is 3468 a month. That's 1943 a month better than paying the loan off early.
That ROI pays your mortgage and you can put the rest into a retirement fund.
In 30 years the house is paid for and the difference if just getting a market return of 6% average is you have nearly 2 million the bank.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Quote:
Originally Posted by heart84
When the really bad times come in 2020 through the early part of 2021 we will see how many people with their houses paid off are complaining.
Depends on if people are making payments way more than they should.
People with paid off houses can also lose net worth when they spent all their money paying off a house that is now worth 60% what they paid. Then if they need money to live on and they spent it all on paying off the house they might even loose the house.
We felt it was necessary to pay off our 15 year loan because mortgage interest was at least 10%, probably 12%. We did pay it off in 9 years. That was just too much interest to bear. Btw, we are doing okay in our retirement as our only debt is a tractor at 0% interest and is a deductible for our business. Taxes and insurance run around $400 a month. I can’t imagine being retired and owing a mortgage in our situation.
Renting is not smart at all because you're paying someone else's mortgage and building 0 equity. What is so smart in that?
It can be smart in certain situations.
Say you have $600,000 of equity tied up in a house. Your only chance to make money is upside appreciation on the house. Instead, you take the $600,000 equity out of the house and invest it in the stock market at 6%. That’s $36,000. Say your rent is..$2,000 a month...$24,000.
In other words, there’s an opportunity cost to having a paid off mortgage and having your equity tied up when that money can make you money elsewhere.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,441 posts, read 8,678,932 times
Reputation: 16857
Quote:
Originally Posted by Thatsright19
It can be smart in certain situations.
Say you have $600,000 of equity tied up in a house. Your only chance to make money is upside appreciation on the house. Instead, you take the $600,000 equity out of the house and invest it in the stock market at 6%. That’s $36,000. Say your rent is..$2,000 a month...$24,000.
In other words, there’s an opportunity cost to having a paid off mortgage and having your equity tied up when that money can make you money elsewhere.
That’s exactly what I did. I used an example of paying off a loan early in my previous post.
For me when I moved to Atlanta I had the cash to buy a house and be debt free.
Instead I invested it and got my 13% return from buying rentals.
Each month after expenses I got about 3468 that I made. I rented a house and paid 1650 in rent. So every month my investments paid my rent and gave me an extra $1818 a month. If you are really thrifty you could possibly stop working on this amount.
The house I rented over two years went up maybe 25k in value. The rentals I bought almost doubled in value.
So being debt free versus investing?
Well in a sense I was debt free because I had no house payment. But you still have to live somewhere and probably pay rent.
But just numbers wise, after two years I was about $339k ahead than if I had gone the “paying rent is stupid” way.
I don’t care what people do but I hate the loaded emotional comments like they can retire w/o a mortgage, nonsense, they can sleep well without a mortgage, more nonsense, they own the house if they pay off the mortgage, more and more nonsense. You owe nothing, if you don’t have a cash flow to pay property taxes and HOAs, they take it away from you like they did in the housing bubble, with or without a mortgage.
We paid off our home about 4 yrs ago. It's nice not having that payment every month. It felt right to us at the time.
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