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Should You Pay Your House Off Early?

In my last article, I ended by saying that I don’t believe in paying your house off early. Today I will explain why I think what I think. Yes, we all know debt is a terrible thing! So shouldn’t it make sense that we should want to pay our houses off?

I urge you to consider this material. Things are not always what they seem.

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March 18, 2008 - Posted by | Debt, Home Issues, Retirement | , , , , , , , , ,

4 Comments »

  1. nice

    Comment by saima | June 15, 2008 | Reply

  2. I do not want to pay my House off Earlie. It is really a very difficult to think about this.
    _______________________
    veny
    http://www.mydebtconsolidation.name

    Comment by veny dawson | July 19, 2008 | Reply

  3. Hello. I have a question about not buying a house if you can’t pay cash for it up front. Sounds great, but you have to start somewhere, right? And, what is the alternative? Paying rent? That would mean putting money every month into something that has absolutely zero return for you. You don’t own anything of value, you don’t make interest off of it. Doesn’t sound very smart from an investment stand point to me. But, maybe I am missing something.

    I am finally in a position to soon get out of the hell of renting and throwing that money away every month. I am going to build a house for my young family to live in. Something that has value that we “own”. Sounds far more sound than taking that payment every month and giving it to someone else. I might as well live under a bridge and take my monthly rent payment and play it at the casino’s or something if I’m not going to buy a house when the opportunity is there.

    You also mentioned the average rate at which houses appreciate. I would like to ask if the appreciation value of a home was factored into scenario number one, and if you factored in the value of that house at the end of the 30 years, on top of what was made in investments. I’m thinking the value of the house, and the investment revenues might come closer to scenario #2. Even if not it’s far better than renting forever. I don’t know anything about investment, b/c I’ve never been in a position to be able to do so… until now.

    Scenario 3:
    Pay x dollars in rent every month that you will never see again, and throw the extra expendable income you have towards a mutual fund forever…..

    that vs. buy a house with a mortgage (throwing the same amount of expendable income at first towards investment), pay it off early, and then in 12 years (going off of your above scenario) you now have 3 times more money every month to put towards investments, and you have value of your home to add to that total. Being able to do that in 12 years, vs. paying only 1/4 of that amount into investments for all eternity and not owning anything of value that actually appreciates sounds a far better option.

    Thanks for your time.

    Comment by Jason | August 4, 2008 | Reply

  4. Hey Jason, Thanks for your question.

    First,

    My reason for saying don’t buy a house unless you have cash upfront to buy it is not because I feel that paying a house note is bad (because otherwise I would be saying you should pay it off early)
    My reason is based on our current state of economy. Historically, in a lot of cases, when an economy crashes, you will have banks that recall the loans. If that were to happen, people would go into bankruptcy or have to foreclose. Otherwise I would say it’s ok. Also, I don’t mean buy a house cash (I wouldn’t do that), I just mean have that much accumulated (I just wanted to clarify just in case).

    Now, lets talk about scenarios. I did not factor in the appreciation of the house in scenario #1 for 2 reasons.

    First, if I factored in the appreciation in scenario #1, then I would have had to factor in the same appreciation in scenario #2, and then they would have nullified each other. The illustration was done on the same house in both scenarios over the same time, so the appreciation is constant. So either way the person who pays the minimum and invests the rest comes out on top. You see what I mean?

    Second, appreciation of your home (equity) means nothing. Equity is nothing but a secured credit card. You can’t get a “return” on your home it unless you sell it. The only other option you have is to borrow the equity (a.k.a. put your house up for collateral and go back into debt). This brings me to my next statement.

    You say that renting is throwing your money away, and that buying a home is an investment. I urge you to consider the following material.

    The Conspiracy Of Home Loanership
    http://freeyourmindonline.net/homeloanership.html

    Renting may not be the “Hell” you think it is.

    I hope I have answered your questions. If not, let me know.

    Thanks again.

    Comment by freeyourmindonline | August 6, 2008 | Reply


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