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I am mortgage free at age 33 and I can vouch for some posters here that it is one of the best decisions I have ever made. I would do it over and over in a heart beat. Investments are volatile and a home is a place to live and granted there are maintenance but if you're handy, most things can be done by yourself. Taxes and insurance plus utilities are the bills that you will have to deal with. I have been stashing on all money into savings and 401k and college funds...not spending much. it depends on your life style and how you see yourself in the future with your financing...many people will go against paying off mortgage early because you can use the $ to invest instead...but there's pros and cons to these things and it is really comes down to what you find most comfortable with.
it can really suck losing a job , having a mortgage and having to liquidate those investments you made at a loss in a down market to pay the mortgage would be most un-good..
on one hand making gains is nice when you have a mortgage , but needing more money for bills if you fall on hard times can be the negative flip side.
severely down markets and crappy times go hand in hand so the worst time to lose a job is when you have to sell in to a down market.
this! Think about the downside of "having to pay" the bank...this is why a lot of people are foreclosing their houses, can't afford to pay because of no jobs and etc...so buy within your boundary and take the mortgage off your shoulders...you'll better off without it. No jobs? you can live off of your emergency 'til you find a new one...
If you live in a condo or townhouse, the alternative is far more frightening. Would you want to be attached to neighbors who choose not to maintain their homes, and have no recourse at all? If it is time to replace the roof but your attached neighbors don't want to cooperate, what will you do? If it is time to repave the parking lot but other homeowners decline to share the cost, what will you do? If the premium is due on the insurance policy covering the exterior of the building and the other homeowners won't pay, will you pay the entire premium yourself or will you go without insurance? What a nightmare.
If my understanding was correct, I haven't seen a shared item like a roof covered by these HOA dues. I have no idea how it would otherwise be handled from a practical standpoint though.
I paid off my 15 year mortgage several years before retirement, then kept making the payments to myself. For several years I socked $2k a month into retirement savings, which built a nice cushion. That wasn't when I started saving for retirement, since I had averaged $500/month over 20 years, but that last boost was really nice. I still haven't touched any of it, and it has been sitting there multiplying ever since I retired. I will have to start taking minimum distributions in a couple of years, but with no mortgage my wife and I live well on two pensions and SS.
What you get for an HOA varies greatly. For townhouses, some cover all exterior maintenance, mowing, snow removal, cable, internet, trash, who knows what else plus amenities like community pool, tennis courts, park use, health club, free car washes in the batcave parking for the property (true - I know of one such place - and the underground parking is heated in the winter, so if you want, you could keep a pretty clean car all winter long) and - again- who knows what else. When we refinanced last month, the loan officer mentioned that she has been writing loans for downtown Minneapolis condos recently where is was common to see the HOA fees match or exceed the monthly mortgage.
Or, in our case, the HOA cover trash removal, snow removal for common areas and bike paths, and amenities (pool, which our kid uses a lot), ice skating rink (yet to use), free use of one of two community centers.
That said, I would much rather not have an HOA (our old house in another community was non-HOA).
But the reality is, at least when looking in the 'burbs we considered around the Twin Cities, HOAs dominate most neighborhoods built within the past 30 years. If we wanted to live in those 'burbs, it was going to be very tricky to find a house outside an HOA that still had other things we valued (location, schools, contemporary design, neighborhoods with kids were all high on our list).
On two occasions when we were shopping for a home in California, we looked very closely at properties within HOAs. In both of those times, those HOAs did not 'give' you much. Each home-owner did his own exterior maintenance, mowing, cable / internet. The county provided road paving / snow removal and trash. There was no pool, tennis court, park or health club, bike paths, ice skating rink or two community center.
This was in California, so maybe that has something to do with what we saw in those HOAs.
If you live in a condo or townhouse, the alternative is far more frightening.
I have never lived in a condo.
I was career military, we knew that at each location we were likely only going to be at that location for 3 to 5 years, then we would bounce. So that flavored our choices a lot.
We stayed with Multi-Family-Residences [MFRs]. Tri-plexes, 4-plexes and 5-plexes. Buy with zero-down. Live in the largest apartment, rent the other apartments out, so the rental income covers the mortgage. My income only goes to buying down the principal.
We built equity. After I retired, we cashed out the equity from our MFRs and used the cash to buy our retirement home mortgage-free.
I relocated in 2000 and the best mortgage rate that I could find was 8.5%. Six months later, the interest rate was 6.5% and I went to refinance. The mortgage company was not interested in financing without a fee that represented about 5% of the loan. If I went elsewhere, the fees were less onerous but still $2500 or so.
I decided to pay off the mortgage in 10 months by liquidating some stock holdings (at the top of the market) and some savings bonds that We had accumulated. The broker told me that I was crazy to sell stocks to pay off a mortgage when the market was doing so well. The stock that I sold was down about 40% a year later.
With no mortgage to pay off, we could max out 401(k) and IRA balances at a time when the market was well off the peaks.
Most people should pay off their mortgages as soon as they can because they do not have the discipline or the investment sophistication to out earn a low fixed rate mortgage over 30 years. Of course they are stashing current 100% valued money into a highly illiquid asset that will appreciate exactly the same whether paid off or 100% leveraged.
My first purchase was a coop in the 70's that I could not finance for ore than 15 years. The difference in payment if I had a 30 year mortgage would be $50. Doesn't sound like much today but if I'd invested that money each month over 15 years I would have had more than enough to pay off the mortgage but because of inflation it would be silly to pay off what was now a small mortgage payment.
People who have only been adults over the last 15 or so years have no idea what inflation can do to expenses when they are not fixed. Once my coop went condo (investment property now) I was able to pull out 10 times the initial purchase price to be paid by the new rents. As a retiree I can pull out over $100,000 a year in mortgages that are paid for by increased rents and appreciation is increasing my net worth and my LTV's are decreasing.
I also never understood why people will take a current lump sum to pay off a low mortgage only to then funnel future lower valued money to try to get the same savings they gave away!
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