Paying off your house

LostintheOzone said:
I don't know what his net worth is. For all I know he could have several million in the stock market.

If we are talking about residential real estate here's a good comparison to other investments.

For the period 1890-2005, inflation-adjusted home prices rose just 103 percent, or less than 1 percent a year.
History says home real estate is a bad investment - CBS News

A lot depends on the interest rate on your mortgage. A lot also depends on what you are doing with the money instead of paying your mortgage down with extra payments. If you purchased a house in 2006 and for some reason lost your job in 2012 the best possible scenario would be to have some cash on hand or liquid investments to bridge your mortgage payments until you could find work. Cash is king in a bad economy.
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No. The best possible scenario is to not have a mortgage payment to make. This makes the "cash on hand" part of your equation much easier to realize.

I'm glad I didn't mortgage my home to buy stocks a couple of weeks ago. Your mileage may vary.

Residential real estate isn't necessarily a great investment because of price appreciation, but because it either produces an income, or else you get to live in it.
 
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wbraswell said:
I currently owe on nothing. I like it that way. No worry, no stress. I can take off, and vacation whenever I want. If I lose my job, I'm OK. If I get sick, I'll be alright financially. I can't stand to worry over money. God, I feel lucky.
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Wayne, anyone that raced motorcycles and still can take a vacation is lucky;)
 
Wife and I don't own a whole lot, but it's all paid for. After several years of accounting courses and a bunch of tax courses, I still haven't figured out how to make / save money by buying sh*t I don't need in order to take some part of it off the taxes. Only good reason I ever could see for borrowing money (after I got the student loan squared away) was where I could for sure make more off their money than it cost to borrow it; but nothing's THAT sure.
Of course, my 3/4 tonner is an '85, and my daily driver is a '99 Volvo turbo that won't go a bit over 180 mph, but they're mine and they do their jobs. (Actually, I'm not that certain about the Volvo--the speedo pegs at 140, with a lot of throttle left. It paid for itself the night my wife had a heart attack and I went from the middle of my town to the hospital in the middle of an other town 35 miles away in 17 minutes. Got 'er there just in time. ) My main drill press is a 1910 belt-drive 21" Superior; and I'm working on my first metal lathe, a 1915 Carroll-Jamieson. Kinda like good ole S&W iron, just a bit harder to carry concealed.
Buy good stuff for cash and take care of it; let the neighbors scoff in their leased Beemers all the way to bankruptcy court
 
gregintenn said:
No. The best possible scenario is to not have a mortgage payment to make. This makes the "cash on hand" part of your equation much easier to realize.

I'm glad I didn't mortgage my home to buy stocks a couple of weeks ago. Your mileage may vary.

Residential real estate isn't necessarily a great investment because of price appreciation, but because it either produces an income, or else you get to live in it.
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Living in it while equity builds is the only reason I can see to own at least one house. Managing rental property isn't for most people because they don't understand the actual costs involved. Taxes, maintenance, insurance and damage all eat into any profit you might make.

Here's how I look at it. Money is money no matter where you have it. If you have it home equity great. Not very liquid but still an investment. If you have it in a pig farm, that's good too because it generates income if the price of hogs is good that year. If you have it in the market that's also an investment. That can go south just like the real estate market did in 2006. One investment is not necessarily better than any other. Me, I like a lot of cash on hand just in case. I think about 25% of my net worth is in cash. About 50% is in liquid assets like stocks and bonds. Only about 25% is in real estate. I truly don't like real estate as an investment because if you need to sell the market may be in the toilet like it was for 6 years.

Other than that it's great.
 
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LostintheOzone said:
Living in it while equity builds is the only reason I can see to own at least one house. Managing rental property isn't for most people because they don't understand the actual costs involved. Taxes, maintenance, insurance and damage all eat into any profit you might make.

Here's how I look at it. Money is money no matter where you have it. If you have it home equity great. Not very liquid but still an investment. If you have it in a pig farm, that's good too because it generates income if the price of hogs is good that year. If you have it in the market that's also an investment. That can go south just like the real estate market did in 2006. One investment is not necessarily better than any other. Me, I like a lot of cash on hand just in case. I think about 25% of my net worth is in cash. About 50% is in liquid assets like stocks and bonds. Only about 25% is in real estate. I truly don't like real estate as an investment because if you need to sell the market may be in the toilet like it was for 6 years.

Other than that it's great.
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I do buy stocks, mutual funds to be more specific, as investments. I really don't consider my home an investment in the same sense as mutual funds. I bought my home in order to have a place to live. I personally don't care what it's worth at a given time, because I can live in it regardless.

I personally don't own rental properties because I don't wish to deal with renters and the problems they bring.

When you refer to cash, do you mean a stack of hundred dollar bills lying in your gun safe, or something like a CD or money market account? You do realize that cash can lose value as well, right?

Investments should be made while taking into account one's risk tolerance.

I stand by my statement that a lack of debt is a good plan regardless. Paying interest on debt gives a 100% probability of losing money.
 
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I do not consider my home to be an investment. It is my little slice of the pie that belongs to my wife and I. My house is a 960 square foot crackerbox on a 50'X100' lot. It just happens to be in a prime area. Its current value is in excess of $600,000. I will most likely never sell it so I do not care what it is worth. We do not have any children to leave it to. I can't get evicted unless I stop paying taxes on it. My brother thinks I should sell it and use the proceeds to buy land in Iowa. There would be a very remote possibility of that happening if I was single. I just ordered two avocado trees which I will be planting next week. I don't think I could do that in Iowa and expect them to last thru the winter.
Edited to add that I see gregintann and I agree on this. One other thing is I do not care if the bottom falls out of the real estate market and all of a sudden my land is only worth say $50,000. It is still paid for and I do not plan to sell it, I will leave that to my nephews and niece.
 
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Rule #4 you need shelter...........

I own 2 homes..... one in the "burbs of the Burgh" and a "cabin and land in the Laurel Highlands of Pa." either will provide more than adequate shelter to me and my family.

Actually the Cabin would be better if TSHTF or we face TEOTWAWKI........

Ya; property taxes are a ________ but I can afford the $1200 or $5500 in yearly taxes for a long time vs. a $2500 monthly mortgage payment in addition to those taxes.

If the value of my "real estate" is cut in half ...... OK so is the value of my neighbors homes.... but they will still have to pay the "bank" $2500 or more a month +taxes ......if they want to keep a roof over their family's head.......... me I'll be applying to reduce my tax burden due to the decrease in the assessed value of my home. LOL

There are a lot of folks around me that have a lot more "stuff" than me.......but I "own" my stuff...... they just "owe" the bank or credit card company..........................................
 
EQGuy said:
I do not consider my home to be an investment. It is my little slice of the pie that belongs to my wife and I. My house is a 960 square foot crackerbox on a 50'X100' lot. It just happens to be in a prime area. Its current value is in excess of $600,000. I will most likely never sell it so I do not care what it is worth. We do not have any children to leave it to. I can't get evicted unless I stop paying taxes on it. My brother thinks I should sell it and use the proceeds to buy land in Iowa. There would be a very remote possibility of that happening if I was single. I just ordered two avocado trees which I will be planting next week. I don't think I could do that in Iowa and expect them to last thru the winter.
Edited to add that I see gregintann and I agree on this. One other thing is I do not care if the bottom falls out of the real estate market and all of a sudden my land is only worth say $50,000. It is still paid for and I do not plan to sell it, I will leave that to my nephews and niece.
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Property value is relative.....

15 years or so ago my wife and I were in Carmel (Calf)........... and traveled the; what do they call it, "the golden mile" near Pebble Beach....... we were shocked....... what $500,000 bought in Carmel........was $80,000 in "the Burgh"....... the "golden mile"....... the homes were at best $250,000 in the "burbs of the Burgh"........ will admit "lonesome Pine" was nice!
 
4011 said:
Paying off the house was like a huge weight has been lifted off your shoulders. May not be smart but darn sure feels good!
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Financial wizards advice might agree that it is not smart.
A glance at the economy they are responsible for and common sense side strongly with the root cause for your sigh of relief.
 
There are a few of my neighbors taking advantage of the booming real estate market and have their homes on the market. I looked at Zillow and it shows my house at $785,000. This is for a 960 square foot 3 bedroom 1 bath house with a 1 car garage that a VW might fit in. I find this truly astonishing and rather sad. This is a starter home built in the early 50's. I have no idea how young couples starting out can afford to buy a house in this area. My wife was born 10 miles from here and I was born 80 miles away. This is our home and if we ever sold we would not be able to ever return.
 
venomballistics said:
Financial wizards advice might agree that it is not smart.
A glance at the economy they are responsible for and common sense side strongly with the root cause for your sigh of relief.
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Financial wizards are for the most part BROKE!

Were they wealthy, they'd be busy applying their principles to their own finances rather than looking down their nose and telling you what you're doing wrong.
 
gregintenn said:
Financial wizards are for the most part BROKE!

Were they wealthy, they'd be busy applying their principles to their own finances rather than looking down their nose and telling you what you're doing wrong.
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On average they make 100k+. They make money by giving you advice, advice which can be most often googled. We all have to have daytime jobs.
 
My first house cost $29,000 and my mortgage was $191 a month. I let it go 30 years. Fast forward thirty years my house was worth $300k.
Sad isnt it.
 
Paying interest on debt gives a 100% probability of losing money.
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Depends on what the interest rate is and what you do with the money. Borrowing money to make money isn't a new concept. Most healthy businesses run a debt to equity ratio of about 50/50, some higher.

We owned a house back in the 70's that my wife and I bought for 21K. We had a mortgage on the house because we were both young and didn't have a lot of money. We lived in the house for 3 years and I did a lot of work on it in that time. We sold it for 40K and paid off the loan in 3 years.

I'm pretty sure we came out ahead on that deal considering mortgage interest at 7%, materials and labor.

I don't know if you know who Steven Cohen is but he's worth about 11B. He's a hedge fund investor who uses borrowed money to make money. I'm not saying I would necessarily model my life around his but you get the picture.
 
LostintheOzone said:
Depends on what the interest rate is and what you do with the money. Borrowing money to make money isn't a new concept. Most healthy businesses run a debt to equity ratio of about 50/50, some higher.

We owned a house back in the 70's that my wife and I bought for 21K. We had a mortgage on the house because we were both young and didn't have a lot of money. We lived in the house for 3 years and I did a lot of work on it in that time. We sold it for 40K and paid off the loan in 3 years.

I'm pretty sure we came out ahead on that deal considering mortgage interest at 7%, materials and labor.

I don't know if you know who Steven Cohen is but he's worth about 11B. He's a hedge fund investor who uses borrowed money to make money. I'm not saying I would necessarily model my life around his but you get the picture.
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No it doesn't. You borrow 100k and invest it. I take 100k from my bank account and invest it exactly the same way as you did. How on earth would you come out ahead of me?
 
gregintenn said:
I know lots of people who make 100k+ and are broke. A good income isn't a very reliable indicator of wealth.
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the money cycle.
seen a case where someone was something like $15 k in debit and essentially boned ...
someone bailed the idiot out.
end of the following month they were over 33K in the hole and doubly boned.

If you cannot break that cycle, no amount of money will ever save you.
 
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