Does it make sense to pay off the house?
estreya
16 years ago
Featured Answer
Sort by:Oldest
Comments (10)
kkny
16 years agoRelated Discussions
Paying off the house vs BMW is the new status symbol
Comments (24)--It is the mortgage scenarios with no future prospect, goal or even intent of ownership that I have trouble getting my head around. Like credit card debt becoming so "normal". Basically, one can have pretty much anything without really ever owning it.-- I definitely see your point. I have a friend who thinks Donald Trump is the bomb. I once pointed out that he's had a bankruptcy or two... her response was something along the lines of that being not such a bad thing in a business situation, actually sort of a kind of business plan. Mind you, this is someone who's very responsible with her own finances and wouldn't dream of cheating someone she owes money to. Somehow she didn't make the connection that when businesses go bankrupt, there are people who are not getting paid. Mr Trump uses other people's money to finance his deals, then doesn't pay them back. ugh. Ok, maybe he didn't plan it, but how can he be a good business man if his investors lose money (and why do people keep investing with him)? On the other hand, I think there's a big difference between that kind of thing and on the personal scale credit card or other unsecured debt, vs. mortgage or other secured debt. I did have a couple thousand in credit card debt at one point in my life (ironically because I was trying to avoid debt; I underestimated what I would need to survive my last year in college and didn't take out enough on my student loan. ha.) but at this point in my life, it would take a very dire emergency to take that on again. I suppose it was a fairly dire emergency at the time (I needed to eat), but if it hadn't been temporary, I would have found other solutions (cheaper living situation, fewer classes to pay for, etc). Meanwhile, I do have a mortgage and I do pay the minimum while investing about $1000/month in mutual funds. I have about half my outstanding principle saved (not counting retirement accounts). Will I pay it off when I have the full amount? I actually don't know. Partly that will depend on mortgage rates at the time (right now I have an ARM that makes its first adjustment in a couple years). Partly, it will depend on what I'm doing in my life. It would be wonderful to have a paid-off house, on the other hand, it would also be wonderful to have enough money in savings that I could quit my job, go to grad school, travel for a year, etc, if I got the urge. However, regardless of whether or not I keep the mortgage, having debt against an asset, you at least still have a positive (or neutral at worst) net worth. Using a credit card to buy consumables, you end up with just the debt. I don't know. Maybe the average person doesn't make the distinction and the idea that debt (including mortgage) is normal feeds the inclination to run up credit cards, etc....See Morelow interest rates: Any reason to pay off home?
Comments (9)Just a heads up (with no political comment intended and please no political comments in response). One of the things proposed in the debt ceiling negotiation are lower rates but with a reduction or maybe elimination of certain deductions including the home mortgage interest deduction. I have no idea whether that shakes out or not, but If it does happen, it would favor paying off home mortgages earlier. Now, regardless of what happens, my opinion is that in general -- and there are always exceptions -- paying extra towards a home mortgage when you can is good fiscal discipline even though when you run the numbers their may be a slight advantage the other way. The only things that probably should come first, other than are higher interest rate debt ( if any) emergency reserves and retirement savings. As others have said, a debt free home is very liberating. It's also an emotional disincentive to overextending by trying to keep up with the jones. It's easy to rationalize moving into something more expensive if you've got a mortgage and moving up will only cost x dollars a month more, it's much harder to go from no mortgage even to a small one. Now this is where exceptions come in especially depending on where you are in life like a growing family that really need more room, but generally I think folks are happier with a mortgage free home, than one that may be slightly nicer/bigger. Kymike does make a good point on flexibility. That's why when we bought a second home, after our primary was paid and the kid was out of college and with 45 percent down, we went with a 30 year mortgage, but ran a second amortization schedule for a ten year payoff. We're ahead of the ten year track slightly, but have the comfort of knowing that if bad times hit we will be okay. This also disciplined us not to over extend inthe first place and will have it paid for 4-5 years prior to retirement. It's also kept us more frugal on other nonessentials but those are sacrifices we can live with....See Moreold kitchen space--does this make sense?
Comments (28)Fori, my parents just bought an Eichler on the Peninsula as their retirement home project. It's mahogalicious! In fact, they too have the kitchen opening directly to the right as you enter the front door. Paneling as far as the eye can see. My mom is despairing because the paneling darkens the place but she can't/won't paint it out of historical respect. I agree on the virtues of a smaller more private entranceway as a place to take off one's hat, check lipstick and correct slip peekage before tromping straight into the living room. Ideal if you have room for a coatrack, shelf for purses, and a mirror. We have a tiny little 5x5 vestibule with a second door and love it. Besides being great for stopping thermal loss, it's the perfect cat airlock. People do forget that in sunny climes, you really don't need-capital-N a mudroom for dirty boots & dripping coats. But you could use my plan above and add a nice big coat closet or mudroom with shoe bench to the right of the door, either only on one side, or across the whole shebang, giving you another doorway between hall and office/laundry room. This would also be swell if you go shoeless in the house. My Japanese friends have special shoe racks with guest slippers in that very spot. With that said, I'm off to shovel the 10" of new snow we just got last night here in Maine. My outlaws are arriving today for a long visit, 'nuff said....See MorePay off my house or buy a new one?
Comments (33)Some things to consider that I haven't seen mentioned yet, cost to move can be significant. New houses are more expensive than the price you're told, generally. Most people I've talked to who built new found out the hard way that things like locks on the windows are optional extras, and so on. As mentioned, new houses, unless custom built, will normally have builder grade everything. 10 year roof, cheap faucets, plumbing fixtures and lighting. If you want to upgrade, figure quite a bit more than retail at the DIY store. Also they might not build it the way you want. For instance, a friend couldn't get the builder to install an ADA height toilet. So that would have required installing it himself or hiring someone else. More money. Appliances? If they come with, which seldom they do, they'll be cheap ones so plan on replacing in 5-10 years. And if they're not included/specified you could spend $1000 on them or $20,000 on them, depending on tastes. Figure that into the bill too. Unless you spend some major money on the new place, you might just defer your expenses for 5-10 years and be in the same boat you are now. If you put the roof on now, (which you might need to in order to sell it anyway), it should be good for 20-30 years or more. Now for other considerations, are there concerns as far as medical services, shopping, emergency or the like? You know what you have, will it be more expensive in a new place? If so, it's an added cost. My point is to be careful to consider all items in making your decision. Heat costs are high for you now, but insulating should help significantly and you might even get some assistance if you qualify. Some other costs could outweigh the heating savings. Don't forget about taxes, assessments, HOA fees and other incidentals. If the new place has a public sidewalk you probably have to maintain that, additional effort or expense. Personally, I would like to move. And soon. But there's a real comfort in having no house payment. Ideally I could move to an area where I could buy/sell with pocketing money, but that's not as easy as it would have been a while back. And a built house most likely wouldn't have the cripple-compatibility & conveniences I'd want so there's expenses there. Buying a modular, even customized would have issues. There's other benefits to living where I do. Problem is, being crippled up makes everything more difficult. So I hire mowing, shoveling and a lot of the maintenance. Would still have to do that at a different place though. Lots to consider. Good luck!...See Moreduluthinbloomz4
16 years agoestreya
16 years agofandlil
16 years agoJonesy
16 years agokkny
16 years agoJonesy
16 years agoLc Jones
6 years agoal_w_lee
5 years ago
Related Stories
VACATION HOMESMake Your Vacation Home Pay Off
Renting your vacation house when you're not using it makes good financial sense. These tips can help
Full StoryHOUZZ TOURSMy Houzz: Family Efforts Pay Off for a 1915 Home
Everyone from the kids to the grandparents helped renovate this Montreal house — and the results show how much they care
Full StoryMOST POPULAR5 Remodels That Make Good Resale Value Sense — and 5 That Don’t
Find out which projects offer the best return on your investment dollars
Full StoryCONTEMPORARY HOMESHouzz Tour: Foresight Pays Off in Atlanta
Seeing the growth potential leads to a couple’s creative live-work space in a newly desirable neighborhood
Full StoryROOM OF THE DAYRoom of the Day: Patience Pays Off in a Midcentury Living-Dining Room
Prioritizing lighting and a bookcase, and then taking time to select furnishings, yields a thoughtfully put-together space
Full StoryHOUZZ TOURSMy Houzz: Treasure Hunting Pays Off in Maryland
Artfully layered accessories and patterns plus an eclectic furniture mix make for intriguing decor with vintage flair
Full StoryHOUZZ TOURSMy Houzz: Patience and Resourcefulness Pay Off in Dallas
Unhurried remodeling lets a growing family stay within budget and get exactly the look they want for their Texas home
Full StoryLIVING ROOMSRoom of the Day: Dark and Daring Pay Off in a Den Redesign
Indigo walls and woodwork, textured furnishings, task lighting and a media center turn a neglected room into a family hangout
Full StoryHOUZZ TOURSMy Houzz: Vision Pays Off in a Vibrant Live-Work Space
A plain box becomes a creative, eclectic home at the hands of hardworking homeowners and their remodeling team
Full StoryVACATION HOMESPatience Pays Off for Owners Renovating Their Beach Condo
A Jersey Shore unit gets a bright new look, a more functional layout and increased space for extended family
Full StorySponsored
Jonesy