Hey Baron posted in the thread so it must be legit.
Paying off mortgage
- Thread starter stevegee58
- Start date
Realized my mistake vis a vis using the term "investing" after my edit time had expired..d'oh!
It doesn't matter what numbers you use or if it's you specifically or a generic you. Those terms simply help some people see things more concretely.
I think you missed my entire point. If you have any amount of money in cash, plus a stream of money coming in every month, it doesn't matter how you allocate that money. You don't "free up" anything when you tie up your cash in a house by paying it all down in a lump sum, if anything you reduce your flexibility. In your examples, you could have used the money you used to pay off your home to buy your RV, purchase a second home, pay for kids college... and used your income stream to keep making house payments and achieved the same results....Paying off your home isn't what allowed you to do those things. The fact that you had a lump sum of $X, an income stream of $Y allowed you to do that and it had absolutely nothing to do with if you used $X to pay off your house or not.
Again, very basic concept about money and fungibility, it's illuminating to me to see how difficult it seems to be to grasp.
One thing I learned about this forum...to many people read those "generic you" statements as fact.
Also, your "basic concept about money" doesn't apply to everyone.
I prefer my concept of money and how to invest the freed up money that I no longer need to put it into a home after paying off my house.
P.S. I still gotta pay property taxes and other dues
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So they had to wait until AFTER they paid off their home to do those things? They were probably in their 50s. That's not my idea of financial savvy. I could do any of those things in my 30s because I didn't pay off my mortgage; rather, I invested the home equity and generated income starting in my 20s.
Had they not paid off their mortgage, they'd have 2 rental homes instead of 1 because they could have been generating income in their 20s & 30s instead of waiting until their 50s & 60s.
Paying off the mortgage has a huge opportunity cost.
It's a question of whether people consider their total net worth and how to grow it, as opposed to looking at their monthly cash flow. The forest versus the trees.
Leverage is a nice thing, when you can get it cheaply. Over the long term, most homes bring a pretty modest return, so paying for your house in cash is sort of like buying a long-term Treasury bond and holding it to maturity. If you think that is the best investment you can make, then why are you trading?
Leverage is a nice thing, when you can get it cheaply. Over the long term, most homes bring a pretty modest return, so paying for your house in cash is sort of like buying a long-term Treasury bond and holding it to maturity. If you think that is the best investment you can make, then why are you trading?
This thread has gotten too civil. I need more people like @Overnight coming in here in screaming for us debtors to die.
Hey @Overnight I'm levered to 5465464x annual income in unsecured credit. I'm gonna default and take the whole global economy with me.
Hey @Overnight I'm levered to 5465464x annual income in unsecured credit. I'm gonna default and take the whole global economy with me.
I actually agree with both of you.One thing I learned about this forum...to many people read those "generic you" statements as fact.
Also, your "basic concept about money" doesn't apply to everyone.
I prefer my concept of money and how to invest the freed up money that I no longer need to put it into a home after paying off my house.
P.S. I still gotta pay property taxes and other dues
I think both of you are on the same side, same general philosophy just different perspectives and used different examples.
The question or statement that everybody is replying to is what the OP (thread starter) stated...
He's in the position to pay off his house (he didn't state his age nor how many years he's been paying a mortgage) but some financial advisor told him to instead refinance the home. Yeah, there could be more to the story of why the financial advisor made such a recommendation.
I and others stated to NOT refinance the home and continue paying off the mortgage. Thus, nobody stated to take a lump sum payment to pay off the home. For example, if he was paying for just $135 per month and had only 22 months of mortgage payments after he's been paying for 30 years...continue making those mortgage payments until its paid off and then do those renovations or complete them that he had mentioned was important to him.
Regardless to the amount he was paying (he didn't give a number) and how many months he had remaining on his mortgage...he choose to NOT refinance and decided to use the money I believe to renovate. That in itself "increases" the value of the home if he choose to sell it one day.
Others chimed in to get bent out of shape (suggesting it was not financial savvy or they thought people knew this was an investing forum) that when someone stated to continue with the mortgage payments until they had it paid off. Once again...no comments about a lump sum payment. Just continue with whatever the mortgage was and pay it off considering the OP stated or implied he was close to having the house paid for.
Nothing wrong with paying his mortgage until there's no longer a mortgage payment and just property taxes.
The suggestion I made is what to do with the money after he completes his mortgage payment ?
I gave examples of what others have done. Such as investments, luxury senior citizen dwelling, purchase a RV, purchase a 2nd home (once again the mortgage thingy pops up), help pay for a family member's college education, purchase other properties and so on. I myself want to get an RV when I have my 2nd home paid off.
My aunt will have her home paid off I believe in June. She's been paying a mortgage since I was in my late teens. I asked what will she do with that $650 per month (I think that's what she's paying now in the last year of her mortgage payments) ?
She stated she will pay off her credit cards and some soon to be medical bills (she begins radiation treatment soon for Leukemia). My point, everybody is in a different situation and when they pay off their home regardless if it took them 30 years, 20 years or only 10 years...I recommend continue with the payments until the home is paid off and then take the freed up money and invest it or just enjoy life because life is short.
Like someone else suggested in this thread...if you're close to paying off your home...don't refinance it. Stay on the path, keep making those mortgage payments until you have your home paid off. Any other "generic discussion" not needed because ET folks get to confused about what's being stated.
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You are right that some of us got off the track a bit. I guess the question the OP must ask himself is whether the renovations really are an investment. As much as some people want to believe otherwise, location and square feet largely determine the price of real estate, and unless the place was a complete shack to begin with, most renovations do not fully pay for themselves. Borrowing money to invest (in an investment, or in yourself) is a good idea if you understand the investment and have a high expectation of profit over the term of the loan. Borrowing money to buy toys may not be such a great idea. I suppose a remodel falls into a gray area. I have done a lot of remodeling, but have never borrowed money to do it. I think of it as a "want," not an investment.
Exactly, I recently met someone that put about 40k into renovations into her kitchen prior to selling her home and she did not get back the value of that 40k investment after renovations because she had to in fact lower the sale price just to sell it.
I myself don't recommend borrowing money for renovations but I have met some "home flippers" that do such with success. Once again, the real estate market in the area has a great impact on if renovations is a good thing and the condition of the home.