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Respectfully, not wearing underwear may also be "liberating" but in the grand scheme of wardrobe choices it is not a very prudent decision.
If your home DECLINE IN VALUE it is incredibly stupid to throw more money into it.
If the return you can EARN on your money is far greater than the tax adjusted rate that you otherwise "save" by paying down your mortgage it is foolish to not want to GROW your money.
There are a wide range of option between buying a distant, likely undersized home and a "dream home", it is wise to consider not just your immediate needs but the scenario that you and your family will face for the next 5-7 years whenever you buy a home.
Pardon, but this makes little sense in deterring pay down. Whether your house fluctuates in value or not, you are on the hook for the full AMOUNT owed to the mortgage company. Best to pay it off early then to let it linger.
Our first home was a 15 year mortgage with a 3% interest since we qualified for historic loan and first time buyer. we paid it off in year 7 , and turned around and sold it rather quickly! We were in our mid 20's when we invested.
I have always paid extra.
Even if only $10/month.
It all adds up.
Now, no mortgage, only a HELOC (5% of IRA or 50% of annual income) for the new kitchen.
We built two town houses; lived in one and rented the other. 1987.
We paid off our side.
The other side was paid off by the tenants.
We bought another home, but kept the two town houses and rented them both out.
We paid off our primary residence with the income from Townhouse A & B.
Now we are retired with no mortgages and plenty of income.
We used 15 year mortgages on everything.
All this "You can get a much better return in the market" stuff is true today. But I didn't hear anyone saying that in 2007. 2008. 2009.
Knowing you have received your very last paycheck changes your thinking.
Just wait.
my rate is only 3.5% and I get back half my mortgage interest per year in a tax credit so I'm in no hurry to pay off the house even though I could. I'd rather invest the money and make more than 3.5%. Lots of big corporations have significant debt they use to buy back stock for this very reason.. the interest rate is so low, they can make more money investing in the company stock or the business.
I have a 30 year mortgage at 2.75%. I could have gotten even lower with a 15 year, but with my rate as low as it is, we felt it gave us more options to do a 30 year and we can either choose to pay more or just the amount we owe. As it stands we make at least one extra full payment per year, sometimes two. We went from having a $200k mortgage to a $400k one, but the home we are in now could be our forever home, whereas the previous home was not. We'll probably have the house paid off around the 20 year mark, based on future expected costs (college fund for our daughter, wedding, etc.) If she ends up getting a full scholarship or something then we'll be in great shape LOL.
I am 62 and buying my first house (alone). I doubt I will live to be 92 when it would be paid off but what do I care? It's a 2 bedroom 2 bath that I am buying for a very good price so I can relax a little and not worry about $$$ and my rent going up every year. My pension will more than cover my mortgage, not even accounting for my Social Security and my part time job. My kids will be in their 60's and I expect will have their own place by the time I pass from this world. It's a place to live and I will fix it up nice but it's not my dream home.
First, congratulations. You know what you want and you're on the path to getting it. Congratulations.
I just want to point out the main monetary benefit of homeownership is that you receive tax-free income in the amount of the fair market rental rate of the property. This is a bit of a weird concept, so let me explain it.
To see this, let's do a thought experiment. It is a bit convoluted, so please stay with me.
Let's say you and I are the same age. We attended and graduated from the same schools with the same grades and the same degrees. We work for the same employer in the same jobs with identical salaries. We have the same debts, and the same investments. Our marital status is the same. We purchased otherwise identical houses with identical down-payments and identical mortgages. In fact, our houses are immediately adjacent to one another and we are next door neighbors.
That is, in every economic way that matters, we are identical. Let's call this "the base case."
Please, stay with me.
Now, let's imagine our respective IRS Form 1040s. Each of us has income that is identical, deductions that are identical, credits that are identical. Our total total tax obligation is identical. Our IRS 1040s are identical except for our names & addresses & SS numbers.
Still with me? Hang in there. Let's show the alternative hypothetical which shows the difference.
OK, now let's imagine that instead of living in your own house, you become a landlord and rent your house to me. I become a landlord & rent my house to you. Each of us are both landlord and tenant. That's right, it is silly, but stay with me. Because our houses are otherwise identical, the fair market rental rate is the same -- let's say it is $3,000 per month. So, you pay me $3,000 in rent, and I pay you $3,000 in rent.
Now imagine our IRS Form 1040s. Each of us has the same income as the base case above, but now each of us also has $36,000 of rental income, so our Adjusted Gross Incomes (AGIs) are now $36K larger than the base case. Each of us has some landlord expenses and depreciation expense. Each of our total tax obligations is identical -- but now higher than in the base case. We have more income, so we owe more income tax.
So at the end of the day, each of us is worse off because we pay the IRS income tax on the extra rental income (less some extra deductions). Our bank accounts will be worse than in the base case.
So you can see that a major benefit of homeownership is that you "pay yourself rent" but this phantom income doesn't show up on a 1040. That is tax-free income.
Over a lifetime, this adds up. Housing prices will go up and down - but over a lifetime, adding this extra "tax-free" income to your worth is very significant.[/quote]
Most of you are young compared to my hubby and me. He's 76 and I'm 70. We didn't buy our first home until we were 56/50 respectively. Then he retired at 61 and we sold our home and traveled the country for 3 1/2 years in our motor home. When we settled down again (in TX) we bought a home and only lived there for 3 years. We then moved back east to be with family and lived there for 8 years. Then in 2012 my husband had a fall from a ladder and shattered his left ankle. We had many medical bills and he had 4 operations within 10 weeks and 6 months+ in recovery. Living in the humidity and cold and snow was not a pleasant lifestyle for him so we moved in 2014 to AZ.
We bought a beautiful home and we love it here but we just sold it because it's too large for us now that his kids aren't coming to visit from CA....they've moved here. So, cleaning 4 bathrooms and the additional expense of a swimming pool, has been getting harder for us to maintain.
We are downsizing everything. The home we're buying is 1800 sf instead of 2200sf and I only have 2 bathrooms to keep clean instead of 4. No pool this time and not a lot of yard maintenance for him. We're near a golf course and our community, which is mostly seniors, will be a pleasant change from what we now have.
My point is....we're never going to be able to pay off a mortgage and at this point in our lives, we really don't care. Sure, it would be nice to have an extra $800 every month, but we're going to be saving $500 from our mortgage we have now. Plus we've scaled down on other things like water (for the pool).
Do I wish we would have bought a house when we were younger? Absolutely. However, we didn't get married until 1997 so we didn't have the opportunity to get into the housing market sooner.
We're doing ok financially and I know we could do better if our circumstances were different, but they aren't and it's too late to play "catch-up". I could make extra payments and bring down the mortgage, but why would I want to do that now at our age? I'd rather have that extra money going into our savings (or somewhere) that will grow a little. Let's face it...we're going to need every penny for the coming years.
I bought my first house (this house) in 1995 (at age 36) with a 30-yr mortgage. I believe the interest rate was 5.5%. I made some double payments, but mostly paid the extra each month that would be equal to one extra payment per year.
When i got lump sums of money, i sent it in to the mortgage principal. Then my my passed away 14 yrs ago and i received some inheritance money; i had about $15,000 left on it and paid it off. House is now for sale, and i'm moving out-of-state and will buy my next one with the proceeds. (I retired at 48 with a disability.) Still driving my 2003 Toyota Tundra with 110K miles, paid off in 2005
(Edited to add: Always make sure there are no penalties for early payment of the loan, AND make sure you send the money in to the PRINCIPAL of the loan.)
Last edited by Jellybean50; 06-17-2017 at 03:14 PM..
I bought my first house when I was in my early 30s. It was a conventional loan, 20% down, 30 year term, and IIRC 9.5% interest (which was the going rate at the time). After a few years and a few salary increases I started building up savings, far more savings than would be needed for an emergency fund. (It's a good idea to have 6 months take home pay in the bank if you can afford it, in case you lose your job or have some other emergency.)
As it turned out saving interest dropped below my mortgage interest and I started adding a few hundred extra each month, occasionally a thousand extra. After living there about 15 years I noticed my loan balance had dropped to several thousand and I could easily spare that from my savings. I had been saving up for retirement too, in addition to my IRA and 401k, so one day I phoned my lender and asked them what my payoff would be on X date (about a week later), and showed up at their office on that date with a cashier's check, payment in full! It was a real thrill, having no mortgage, no payments, owning my home in full!
It turned out I lived there another 15 years with no house payments, and that allowed me to save even more money! By the time I retired I was able to pay cash for my retirement "dream" home! I haven't paid a house payment in decades!
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