This guest post was written by Henry Truc from Go Banking Rates, a website that brings you informative personal finance content and helpful tools, as well as the best interest rates on financial services nationwide. Follow them on Twitter at @GoBankingRates.

For most homeowners, paying down their mortgage loan is akin to fighting off the plague, but the dream of one day owning their home in full keeps them going. Unless you’re flush with cash, buying a house usually means taking on a sizable amount of mortgage debt, and with that, forking over a fortune in interest payments.

Conventional wisdom suggests that owning your home outright is the smarter financial strategy. You don’t owe lenders anything, you save money on interest payments and you’re one major step closer to financial independence.

That said, there are some disadvantages to owning 100 percent of your home equity that should be considered.

Disadvantages of Owning Your Home in Full

Though it’s debatable whether or not there is such a thing as good debt, paying off your mortgage in full does reduce certain opportunities for better use of your money. Home loan debt isn’t necessarily a bad thing and here are a few reasons why:

  • Tax Deductions: One of the most popular reasons for maintaining mortgage debt is the tax advantages that you enjoy on interest payments. It doesn’t necessarily make sense on its own because owing money just to save money on interest defeats any economic purpose. It does, however, effectively reduce the cost of that debt.
  • Greater Financial Flexibility: Instead of having no cash in the bank and a mortgage paid in full, it may be a good idea to tap into that equity just to ensure that you have some access to cash if an emergency arises. If you pour every dollar into paying down your mortgage and don’t have anything left over for home repairs or one-off incidents, you could be positioning yourself in a tough spot to handle any costs of unforeseen events.
  • Cheaper Debt: If you can get a good mortgage rate, chances are it’s multiple times less than your credit card, personal loan or auto loan interest rate. Consolidating your debts with a home equity line of credit or home loan refinance can provide you some debt relief and help you save money on interest payments. Plus, mortgage interest payments are tax deductible, unlike credit cards or other personal loans.
  • Property Value: Since your property value isn’t affected by your mortgage balance, you can put your equity to better use than just having it sit around idly by, waiting for you to sell your house. You may want to consider taking out a loan against your home for value-added investments like remodeling your home or adding another bedroom that will increase its market value.
  • Return On Investments: By the same token, you can probably do better with your home equity than having it sit around earning a zero percent return. Depending on your risk tolerance and the potential return on investment, you may be able to outpace a low fixed mortgage rate. Granted, no investment is guaranteed and you’d be hard pressed to find a CD rate that trumps your mortgage rate. So for practical purposes, putting your home equity at risk to pursue any investment may not be a shrewd idea.

Keep in mind that these options should only be considered if you own a majority of your home equity or own your property outright. Mortgage debt is still debt. Whether you owe a balance on your first mortgage, are refinancing to consolidate other debt with higher interest rates or using it to fund a home improvement project, you’re still taking out debt on your home. Before agreeing to any home loan, use a mortgage calculator to ensure that you can afford the monthly payments first.

Advantages of Home Equity

Owning your home, whether outright or just a majority of the equity, has undeniable advantages. The more equity you own in your home, the more stable your financial situation may be. The peace of mind and stability of not having to worry about meeting mortgage payments is hard to put a price on.

You shouldn’t consider taking on more mortgage debt against a home you have little or no equity in. In addition, if you are fortunate enough to be in a financial situation where you can own your home outright, be debt free and have a surplus of savings to invest wisely, you may not need to access your home equity at all. The key, as always, is to find the right balance that fits your financial strategy and maximizes the efficiency of your money.

 

Do you think it’s better to own your home outright or to owe a small mortgage balance?


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85 Comments

  1. retirebyforty Reply

    I think it’s good to pay down the mortgage at the early stage of the loan. At the beginning of the mortgage, most of the payment goes toward interest and if you pay down it reduces the interest quite a bit later. Once most of the payment goes to the principle, I think it’s better to invest the extra money and not pay down.
    Is this a good idea?
    .-= retirebyforty´s last blog ..November 2010 Credit Card Bill =-.

    • @Retirebyforty – I think that’s a good strategy – pay more towards the principal early on, especially if you know you’ll be living in your home for quite a while. I’m not a mortgage expert by any means, but it makes sense mathematically.

  2. I paid off a significant amount of my mortgage debt over the last few years. I did it to diversify my investments. I had almost all my savings tied up in stocks and it was just too painful to ride the crash down and see all my savings evaporate. I still invest in the market, but now I feel like I at least have home equity to fall back on if times get rough.

    Other secure investments right now like CD’s just aren’t even worth the effort as they’re making like 1%.

    • @First Gen American – CD rates are really quite pitiful, I’d have to agree. Not much better than an online savings account. As for paying down a mortgage, there are definitely some pros to that argument.

  3. Squirrelers Reply

    I have read these thoughts before, and I’m not necessarily disagreeing….I just have a viewpoint that also incorporates peace of mind and being debt free. Having no mortgage payment at all and being free and clear of such debt seems like where I would like to be instead, personally. Sure, there are considerations on rate of return on equity, but I like the idea of not owing vs. owing.

    Anyway, interesting points thought.
    .-= Squirrelers´s last blog ..The Role of Money in our Life =-.

    • @Squirrelers – I like the idea of being completely debt free. Especially if paying off the mortgage or the total cost of the house was low. 😉

  4. Those initial years where you pay so much interest are killer! Of course, those are the years you can usually afford to pay down the least, otherwise, you would have just put down a bigger down payment.

    I would LOVE to have my mortgage paid off. 6 more years to go. I would pay it down tomorrow if I had the lump sum of money, whether it ‘smart’ or not. I hate debt, and my own piece of mind matters more than a few percentage points of possible interest.
    .-= Everyday Tips´s last blog ..15 Inexpensive Things To Do In Winter =-.

    • @Everyday Tips – 6 years is awesome! I think it does bring a piece of mind. But you made a good point about those first years when most people struggle to make their payments after first moving into a house.

  5. Financial Samurai Reply

    I don’t plan to pay off my home until I retire. Once you get into the 33%+ tax bracket, it behooves you to just keep the mortgage.
    .-= Financial Samurai´s last blog ..The Freedom To Chase Storms =-.

    • @Financial Samurai – I’m guessing that’s because of tax write-offs for the interest? I can see where being able to write off as many items as you can is helpful at tax time. That’s one part of owning a business that I enjoy. 😉

  6. Sandy @ yesiamcheap Reply

    I don’t know Sam, paying more interest than necessary just so you could write it off on your taxes? I wrinkle my nose. I would add every extra $5 I could to my payments. I do it now with my HELOC. Every $20 that I find laying around my bank account goes to debt. The sooner I pay it off, the less interest that I pay and the more money that I have in my own pocket.
    .-= Sandy @ yesiamcheap´s last blog ..Finance 101- How To Avoid Bad Tenants =-.

    • @Sandy @ yesiamcheap – Paying off the HELOC as fast as you can is probably a good idea. There’s no need in paying more interest on a piece of property you’re already paying interest on.

  7. I love owning my house outright. The tax deduction is way overrated. Don’t be surprised if the tax deduction does not get eliminated sometime down the road like in Canada.
    .-= The Biz of Life´s last blog ..Computer Geek Humor =-.

    • @The Biz of Life – If the tax deduction was eliminated, I bet people would be more apt to stick within the 2 to 3 times their income rule of thumb for purchasing a house. Instead of going up to 4.4 times their income (I read that this is the average home price in relation to a family’s income).

  8. nomortgage Reply

    Interesting points, however I prefer to live debt free. My home is paid, the money I save by not having a mortgage goes into the investment fund.
    The golden rule in this house is that the debt column must equal zero at the end of the month.

    • @NoMortgage – I’d have to agree that owning a home outright is the best option. However, I’d have to save that a large portion of home owners don’t own theirs out right. I think the point the author was making is that if you’ve got a long way to go to pay off your house, say you’re only in 5 years on a 30-year note, it might be a better option to invest extra money someplace else rather than put extra money towards the mortgage.

  9. Home Owner Reply

    Everyone talks about “equity” like it is guaranteed. If you have $60k of equity in a $200k home and the market TANKS (like it has in the last 3 years)…now your $200k house is worth $125k….where is that equity now?

    It is ALWAYS best to own your home. If you absolutely have to borrow against it, then you can.

    Pay your home off as soon as you can.

    • @Home Owner – Owning a home outright is a great idea. However, I think it accounts for a small portion of home owners. I know that in California, where I live, people who owe on average $350K on their homes have a long ways to go before owning their home out right. So, I think the point Henry was making was that instead of putting any extra money into the mortgage, say $250 a month, it might be better to invest that $250 someplace else. I’m sure this advice is locale specific; for instance a home that only cost $95K seems like it would be much easier to pay off at a quicker rate versus a home that cost $350K. Just a thought.

  10. This sounds like advice BEFORE the recession and housing bubble burst. I will have my home paid off in 2014 when I turn 59 (paying off in 9 years on a 30 year mortgage), contribute 22,000 to my 401K and 6,000 to my Roth.

    • @Jean – It’s fantastic that you are able to pay off your house in 9 years! That’s wonderful. However, I think Henry’s article was geared toward housing markets where homes were averaging over $300K and paying them off in less than 10 years is much more difficult. I could be wrong about that, but trying to pay off a home in under 10 years is tricky if that home is worth more than 2-3 times an annual income. Of course, one could argue that it’s ridiculous to buy a home for more than 2 to 3 times an income, but that’s what happened during the housing boom; people made purchases on homes that were 5 times or more their income!

  11. This is one of the DUMBEST articles I have EVER read. Henry Truc should invest in a BRAIN. Hey, Henry, have you been PAYING ATTENTION the past 3 years? or has your head been stuck in your laptop writing idiotic articles. How about having NO debt? Ever hear of that? Those of us WITH brains, have. And if you aren’t paying a mortgage, GUESS WHAT! You can put that money away for those Emergencies you speak of, and tap the money FOR FREE instead of taking out ANOTHER loan. Here’s a clue for ya, it’s LIVING IN DEBT that is the reason this country is in the state it’s in financially. And I REALLY wish clowns like you would stop using “tax shelter” as a reason to not pay down your mortgage. The pure lack of logic in that statement makes my head spin

  12. This isn’t an advice article, it’s an sham. There is NO downside to owning a house as opposed to having a mortgage. The tax deduction only works if you are bad at math. Paying $14K a year in interest to get a couple thousand dollar refund is simple bad math. How about you pay me the interests and I’ll refund you the actual difference in your final tax bill?

    As for the investment thing. Can you guarantee that you will earn more on the money you take out of your home than the payments? No. This is just propaganda designed to keep the average person subservient to the banks and the wealthy.

  13. @David

    Wow, you’re a moron. The author is not speaking to your individual situation and is clearly addressing a general concept. Get off your high horse. Any idiot can see that the housing market has tanked and won’t likely recover. That’s not what’s being discussed in the article. It’s whether you should continue to pay down the mortgage aggressively or save for other things, all the while earning an extra tax deduction.

  14. @David

    @David

    Wow, you’re a moron. The author is not speaking to your individual situation and is clearly addressing a general concept. Get off your high horse. Any idiot can see that the housing market has tanked and won’t likely recover. That’s not what’s being discussed in the article. It’s whether you should continue to pay down the mortgage aggressively or save for other things, all the while earning an extra tax deduction.

  15. @David,

    You’re Not a moron but addressing a bunch of morons. Live like no one else!

    Best I can say about this article is to do the exact opposite! This post was written with the wrong intent or by an ignorant person with inch deep knowledge of money.

    To the general folks here; stay in school.

  16. Sustainable PF Reply

    Here in Canada our mortgages are NOT tax deductible. Paying off the mortgage makes sense. Another strategy up here is called the Smith Manoeuvre. Essentially if you get a HELOC you use the equity in your home to invest in Canadian stocks. Loans to invest are tax deductible here so you essentially keep the same amount of debt but it becomes tax deductible and you build a portfolio.
    People have been preaching for years the “bubble will burst” in Canada – some for over 10 years … and the wait continues with prices still going up as they have historically (over the last 50 yrs).

  17. Is this article for real? Has he ever heard of risk? When I pay my house off in three years, I reduce my risk, risk of losing my house because I lose my job or have my hours reduced. Paying interest to my bank so I can keep from paying Uncle Sam taxes, let me think…

  18. This article is irresponsible and dangerous.

    The idiocy of the tax write-off thing is obvious.

    The last notion. . .that you can do more with your equity than sit around having earn 0% is ludicrous.

    1) It’s not earning 0. It’s earning what your house appreciates at.
    2) You need to borrow at, say, 5%. Yeah. . .the market MAY outpace that. It may not. The only “guaranteed” money you can get is a US Treasury Note. That will return you about 2%. It will NEVER be higher than a mortgage rate. Completely irresponsible.

    Finally, the author seems to miss the point that a person who is paid off can EASILY access his equity. Just because he doesn’t have the cash in hand doesn’t mean he can’t get it for “improvements” or “emergencies”.

    Irresponsible, thoughtless article. Probably written by a shill for the industry.

  19. You have got to be joking me. Whoever wrote this article has absolutely no clue about fiscal security or personal economics and finance. It’s this exact mentality that has us where we are right now. “Cmon everybody let’s go further into debt because the interest rates are low!” Seriously? Are you that ignorant?

    So let us talk about your points above:
    1) Tax Deductions -> Yes you get a tax deduction on the interest you pay, but you save more by paying NO interest at all. Not having to pay $5k in interest is better than getting $1k back on $5k paid.
    2) Greater Flexibility -> Um, what? If you don’t have a mortgage payment, you don’t have to pay that $1k+ to the bank every month, why would you not have positive cash flow now?
    3) Cheaper Debt -> Seriously? Like I stated previously, this is the problem with America, instead of buying what we can afford IN CASH we dig ourselves a deeper hole an inch at a time trying to keep up with the Jones’.
    4) Property Value -> Yes upgrading your home does add value, but why throw away money in interest when you could save up what you would have been paying in a mortgage and do your remodeling in cash?
    5) Return on Investment -> Really? Thank god you added that caveat at the end of this paragraph or I would have lost all respect for this site. Going into debt to invest is just plain stupid.

    In conclusion, this article about advantages to a mortgage over owning outright is just plain misleading, misinformed, un-researched and regardless of market, idiotic. Anyone who would be so naive to follow this advice deserves to have the foreclosure sticker slapped to the front door.

  20. When I need cash in a hurry, it sure is easier to pick up the phone, call my stockbroker, sell something, and get the money in a day or so. Try doing that with a house! Especially now since banks aren’t making loans to anyone unless you are Mr 800 plus FICO. Real estate is too capital intensive and illiquid. There are other ways to reduce your taxes instead of mortgage deductions. Get one of those “pay no taxes” books.

  21. The tax benefits only really help with offsetting the burden of making payments, if you own your house free and clear the tax deduction is not necessary. There are plenty of other areas to gain tax benefits. You should always strive to pay off your primary residence. Manipulating equity should be reserved for investment properties, since the interest doesn’t matter as much when renters are paying it for you.
    I think the author is wrong in saying “…having it sit around earning a zero percent return.” Real estate is a tangible asset and if maintained will gain value. The 100 year average return on real estate is slightly higher than the stock market (11% vs. 10%). However your primary residence is more of a store of wealth than an investment. The equity in your home is more resistant to inflation.
    I think the author should have made the point that it is not worth trying to pay off your house at an accelerated rate until your revolving debt is clear, you have established an emergency fund, and have maximized your retirement investments.
    Oh, and I don’t buy the $300+ mortgage argument that they are harder to pay off. Income levels in those areas are equally as high. And if you are in a home that is more than 2-3 times your income level I recommend you get out and move somewhere with a lower cost of living.

  22. We decided to pay off our mortgage early if possible because we want to pay less interest over the life of the loan, having less debt means less risk and more peace of mind, and because paying off debt is a sure thing – while investing isn’t. We also wanted to have the freedom of some day being able to work for less since we have a paid off home, and less debt obligations.

    I wrote about our situation here:

    Pay Off Mortgage Or Invest
    .-= Pete´s last blog ..1000 Child Tax Credit Extended Through 2011-2012 =-.

  23. erta werta Reply

    What if you get laid off or have your hours cut?
    What if you incur some other debt?

  24. I had my house paid off about 4 years ago and then I took the equity ourt of it to purchase another property now I am almost ready to lose the first home again!

    I will never have another mortgage on it if I figure it out!

    Do not let them bull crap you sit tight on your equity in the end you will have a roof over your head you can come home to without all the worry!

  25. This article is, for lack of a better word, ridiculous. “Cheaper debt” as a reason to keep a mortgage? People need to start realizing that it isn’t absolutely necessary to always have payments of some sort to make. How about getting yourself OUT of debt completely? What a concept.

  26. This is a completely ridiculous article. It’s totally irresponsible for Little House in the Valley to post this as credible financial advice. It’s written by a guy who works for a company PUSHING debt. These people have a vested interest in discouraging people from owning their home free and clear and staying out of debt. Yeah, that site offers “helpful financial tools.” It’s like selling you a hammer so you can beat yourself over the head with it and then the company will sell you bandages and stitching thread so you can nurse the injury. Run!

    From the GoBanking website:

    GoBankingRates.com also partners with banks and lenders offering the best deals and interest rates to our visitors. We work with them to get you the most recent rates.
    Our team consists of experienced writers, experts and market research professionals who investigate which banks and lenders are the best at providing great customer service and the strongest banking offers. Meet the team »
    We dig though hundreds of sites to get you the best:
    * CD Rates
    * Savings Account Rates
    * Credit Card Offers
    * Mortgage & Home Loan Rates
    * Personal Finance Stories

  27. @Financial Samurai
    Um…or you could pay off the home, donate to charity and get THE EXACT SAME DEDUCTION ON YOUR TAXES as you would get for mortgage interest.

    It’s funny, the closer I look at it, it seems to me that only homes with a mortgage get forclosed on.

  28. What is the risk of losing my free and clear home if I am sued? The first thing a lawyer looks for are assests to go after. It is easy to see in public records if a home has a mortgage or if its paid off. Seems like having a paid off home could make me a target. Also, I will never really “own” my home with $400 – 600 per month in taxes.

  29. Yeah, this is gererally bad advice. I question the motives of the writer, and I remove this blog from my list of daily reads.

  30. Who wrote this article Goldman Sacks? What a load of baloney. Ask all the people who lost there homes if having a paid off home is a good or bad thing.

  31. This article is BS. For a $250,000 house, a 30 year mortgage will cost $275,000 in interest. I.e., that 1/4 million $ house just became a 1/2 million $ house. That’s just ridiculous. Better save for 10 years and buy the house straight down. The rental expense over those 10 years will be just $75,000. Total savings- $200,000. You’ll never get that $200k in taxes and investments etc.

  32. Prismatist Reply

    Chris :
    @Financial Samurai

    It’s funny, the closer I look at it, it seems to me that only homes with a mortgage get forclosed on.

    Actually, Bank of America seems to have been doing a decent job of attempting foreclosures on mortgage-free homes. Take a look through the Consumerist archives. Sure they haven’t succeeded, but they’ve made a lot of undeserving, responsible folks lose a lot of sleep and time.

  33. And that people, is how you stay in debt without making any financial progress. This guy is an idiot. Stay debt free, and if you aren’t, pay off your debt and get your life back.

  34. considerthecource Reply

    Notice that the author is in the business of selling loans. . .

    Debt should be avoided whenever possible. Anyone telling you otherwise is selling you something.

    And this author is blatantly trying to sell you something.

  35. Truly unbelievable advertisement masquerading as an article. There is no disadvantage to owning your home outright. The banks have enslaved America lock stock and barrel due in part to this line of thinking.

    There is not one situation where it is in an individuals best interest to have this kind of debt over their heads. A necessary evil of home ownership possibly, but nothing more.

    As to bloodsucking lawyers looking for a payout via your home, the answer lies in a trust where your valuable assets such as a paid-off home should be placed. The saying is own nothing, control everything.

  36. These reasons are absolute garbage
    Tax Deductions: You are only getting the interest part saved as a tax deduction. The rest is being wasted.

    Greater Financial Flexibility: So you spent your money paying off your mortgage. You know what really gives you flexibility? All the money freed up by not having to pay a mortgage every month.

    Property Value: Your home value NEVER goes up $1 for $1 of a home equity loan. Doing it for this purpose is a waste.

  37. Damn, guess i messed up at age 23 🙁 so should i just buy another house? (with all this money i have saved up by not wasting it on interest?)

    Go America, where if you’re not in debt, you’re a NOBODY AND MAKING WRONG DECISIONS.

  38. Heywood Broun Reply

    Owning a house (mortgaged or not) is a bad idea, since house prices are headed down at least another 20% from here. You are better off renting.

    But if you must own, then use as small a mortgage as possible, unless you plan to walk away from the whole deal when it is under water.

  39. No mortgage saves me $700 a month over my previous mortgage.
    Nobody can foreclose on me, my only fear would be failure to pay property taxes. If I need a HELOC or equity loan, I can have it literally on demand.
    The only disadvantage is that I still haven’t bought homeowners insurance, but this will serve as a reminder to get that done.
    For the Dave Ramseys among us, I AM DEBT FREE!!!!!!
    And it feels good!

    Tom

    • @Tom – I think it’s great to be completely debt-free. I’m far from that, but I can see it bobbing around on the horizon.

      As for owning a home out-right, I think that is definitely something everyone should strive for (especially a few years before retirement!). However, I’m pretty sure this article was targeting people who still owe A LOT on their home. Henry was making a point that if paying off a home is far, far away – like 25 years away – maybe instead of putting any extra money towards the mortgage, it could be going towards other investments instead. Just a thought. But, hey, I live in Los Angeles where homes average $375K and paying off such a huge chunk of dough seems terribly difficult to do.

      Thanks for listing my guest post on your site. I think that was a good thing? 😉

  40. This is so bad I barely know where to begin.

    1) Tax deductions – is paying your banker $1 to get 40 cents back from the IRS a good deal to you? No? Then why are you doing it?

    2) Greater financial flexibility – What makes you think I finish paying off a house and have no money left? Before you pay off your house you need an emergency fund and you need to pay off all other debt. The true “greater financial flexibility” is being able to keep the money each month instead of sending it to the bank.

    3) Cheaper debt – You think I paid a house off, and still have credit cards? Are you insane? This is not financial advice.

    4) Property value – Wrong again. You should not try to invest your money instead of paying off your house. Rainy days happen. We just had one and people doing what you have advocated lost what would otherwise be a paid-for house. Invest to invest, but a home is more than “putting your money to work,” it’s a requirement for living. Make sure you have one so you can sleep at night when the economy is raining.

    5) Home equity does not earn a zero percent return. If you have a 5% mortgage note, you are making 5% on it by not owing it. Homes can increase and decrease in value but interest is not free. Don’t fool yourself with the notion that you can make 10% on the market while paying 5% on your mortgage. That old saw adds even more danger to the downturns.

    In closing, I’m likely going to buy a house at 40% of it’s previous value because I have cash. The person I hope to buy the short sale from thinks exactly like this author.

    I’m retired and I’m 38.

    You’re wrong… end of story.

  41. Common Sense Reply

    Debt = risk.

    The idea is that you have cash set aside for an emergency WHILE paying off the house. Their ‘logic’ above is false because their assumption is that people can only do one thing at a time.

    Dollar for dollar never having a mortgage is better than having one for any length of time; you destroy your “investment” earnings because you pay way more than the house was worth when it is all said & done in interest payments.

    Paying interest is giving your money to someone else to fulfill THEIR plan to get rich.

    Why would I send 10,000 dollars to the mortgage company to save 2500 in taxes? Hello? Does this make sense? To anyone?

  42. We just paid our house off last November and it sure feels great. Just like getting a huge tax free raise. Remember a Dollar earned is a Dollar less taxes but a Dollar saved is a whole Dollar. Go back into debt…I think not

  43. Common Sense, I did exactly that, paid off the house while setting aside for my emergency.

    It was not so much an emergency as a certainty.

    I have MS and I knew that someday, it was going to get me.

    If more people though of getting old that way, as an inevitability, we would have fewer homeless.

    I wholly own the condo where I reside outright and I’m ever so glad I do.

    I became partially disabled in 1997, lost my job in 2008, and haven’t been able to find work since.

    (People have problems with my mobility issues. I can’t begrudge them that even though I am no more likely to cause their insurance rates to go up than any of the other employees. [Try telling that to someone who works in HR. Don’t waste your breath… {If you walk in leaning on a cane, you might as well not have shown up. Is amazing how the light just goes off in their eyes, even before you’ve had a chance to get asked the first interview question.}])

    I see no reason for letting the fact that I can no longer dance be the reason for putting me in a snow covered cardboard box somewhere along the Jersey Turnpike.

    Its cheaper for me and my wife to stay here in my 1,200sqft condo in Jersey City than it would be for me to rent a 400sqft apartment somewhere far out of town.

    Ownership is the difference.

  44. What can I say? When I bought my house 6 years ago, I put a lot of money down (like 70% of it’s value). Because of this, I am stil “above water”. However, my home value has dropped so much that if I bought my house today with that money, I wouldn’t have any mortgage. Buying a house was the dumbest financial decision of my life. Every time I see it I want to puke.

  45. BCL1.. the dumbest financial decision of your life was *not* paying off your home 100%, it was buying a house in an inflated market.

    You made a great decision to pay off your home, but a bad one to buy one when you did. Since it seems 99% of everyone is stupid.. Wait for interest rates to be ridiculous before you *buy* a home outright.

    -Everyone else waits until interest rates are low to buy, and supply and demand dictates that house values will be inflated then.

    For anyone else out there who needed to read this far.. Don’t buy a house *until you need the space*.. When will that be? Probably when you need 3-4 bedrooms to house your family.. Sell it as soon as you only need 2 bedrooms..you can easily find a nice apartment in most markets with 1-2 bedrooms. The only way you get ahead on a house vs. an apartment is if you own the house in full and bought it when values were *low*.

    You’ll save money on maintenance in an apartment, you’ll save money on electricity, and you’ll have the freedom to *move* if the neighborhood goes down.. Try to sell a house after you’ve been the victim of a break-in… You’ll get the point then. You want to move, and you can’t find anyone who wants to buy your place, possibly for years. If the same thing happens in an apartment, the worst case is you lose a few thousand breaking your lease immediately or you have to wait a few months to end it the right way.

  46. Big believer in zero debt for myself, but I’m glad there are a bunch of suckers out there to keep the American economy going by living above their means; Spending all their money as well as money they haven’t earned yet. My sister, who is not the best money manager, received a windfall and paid off her mortgage and invested the rest in the stock market (I advised her not to put all her eggs in that basket but she was enthralled with the dividends, not understanding, what goes up, must come down.) I am so happy she used some of that money to pay off her house because at least she has something to show for that money now.

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