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re: Never pay off your house?
Posted on 3/10/09 at 11:48 am to LSU Fan 90812
Posted on 3/10/09 at 11:48 am to LSU Fan 90812
the logic is, your house is not really an asset (and it's certainly not appreciating these days), so you shouldn't dump money into it if you don't have to. If you take that to its logical conclusion, it means that you shouldn't pay down your house AT ALL if you don't have to.
3
Posted on 3/10/09 at 11:49 am to Colonel Hapablap
Our house has been paid off for quite a few years and since the insurance companies that we have faith in left the state we have been self insured for quite a few years. With the exception of Fed flood ins, we have none. If we had a mortgage we would have to have full coverage on the house.
I don't know if you have thought about the insurance angle? Before we dropped the insurance we were paying about $2,200 a yr and it was headed north.
I don't know if you have thought about the insurance angle? Before we dropped the insurance we were paying about $2,200 a yr and it was headed north.
Posted on 3/10/09 at 11:52 am to Cold Cous Cous
quote:
I don't think there is such a thing. People assume the market looks like a V - hits a bottom, then rockets back up, and you have only a short time to buy in at the bottom. But it doesn't have to - it can be a U, or even a \___________/. In which case you have a long time to "buy in at the bottom."
I'm thinking more of a \______ and then slowly angle up from there. That "once" will last a while.
Posted on 3/10/09 at 11:53 am to Colonel Hapablap
quote:I seem to remember a minor dustup a couple years ago when doing this sort of thing got some people in trouble...
If you take that to its logical conclusion, it means that you shouldn't pay down your house AT ALL if you don't have to.
Actually I've heard this theory before. Alhough I understand what he's saying, it's a little too risky for my blood. Putty makes a great point about getting Katrina'd though. I guess this could make sense assuming you're able to continually refi at lower and lower interest rates. But assuming "interest rates will always go down" makes as much sense as assuming "property values will always go up."
Posted on 3/10/09 at 11:55 am to Putty
quote:
Example B: You live in a $500k house in Lakeview that you owe $500k on, but you have $500k in the bank. Your house got totalled, you got $250k in flood money, you sold your lot for $50k. You have $800k and owe $500k. But you are holding $800k. You are in a much better position to deal with a bank, run away with the cash, put it in protected assets, etc.
you wouldnt get the 250,000 insurance money nor be able to sell your lot for 50,000. the insurance money would go to the mortgage holder.
Posted on 3/10/09 at 11:56 am to Cold Cous Cous
the problem only comes in if you SPEND the equity that you take out. Otherwise, it just gives you extra cash that you wouldn't otherwise have.
Posted on 3/10/09 at 11:56 am to Colonel Hapablap
I have mine paid off. The wife received "psychic" value of the comfort of having it paid off. I pay no Interest payments.
I do have a HELOC setup (with zero balance) as an emergency hedge.
I would have paid the mortgage on schedule, but my wife wanted to pre-pay. I am glad we did, though I am not a fanatic for either side of the coin.
I do have a HELOC setup (with zero balance) as an emergency hedge.
I would have paid the mortgage on schedule, but my wife wanted to pre-pay. I am glad we did, though I am not a fanatic for either side of the coin.
Posted on 3/10/09 at 11:58 am to Colonel Hapablap
I paid off my house in December. Early by about 3 years. The reason was simple. I had no tax advantage with mortgage interest because I put such a large down payment on it. I was below the line of making a difference from itemizing to standard tax form.
I've always bought homes, sold them for a big profit, plowed the profit into the down payment of a better home and saved myself tens of thousands in interest I never paid.
Now, I'm in my final home on the lake and my savings is increasing noticeably due to no mortgage payment. And yes, I did the same thing with cars. Never borrowed to pay for a car.
I've always bought homes, sold them for a big profit, plowed the profit into the down payment of a better home and saved myself tens of thousands in interest I never paid.
Now, I'm in my final home on the lake and my savings is increasing noticeably due to no mortgage payment. And yes, I did the same thing with cars. Never borrowed to pay for a car.
Posted on 3/10/09 at 11:59 am to Zach
quote:
sold them for a big profit
Well this is the tricky part, isn't it.
Posted on 3/10/09 at 12:03 pm to Cold Cous Cous
In today's market, it makes more sense than it did 10 years ago.
I think the idea is, if you are going to have ANY debt, that a home mortgage is probably the best kind to have. I wouldn't want to take this to the extreme however. I would say that you want to keep enough equity in your home to be mobile at least.
I think the idea is, if you are going to have ANY debt, that a home mortgage is probably the best kind to have. I wouldn't want to take this to the extreme however. I would say that you want to keep enough equity in your home to be mobile at least.
Posted on 3/10/09 at 12:19 pm to Colonel Hapablap
I told my wife she could quit working when we got the house mortgage paid off. I think I’ll refi for another 30 year loan.
Just kidding – we are in the process of refinancing for 15 years. My retirement game plan calls for a paid off house with only tax, insurance, maintenance, and utilities. Looks like I can get 4.5% but having to pay 1 point.
Just kidding – we are in the process of refinancing for 15 years. My retirement game plan calls for a paid off house with only tax, insurance, maintenance, and utilities. Looks like I can get 4.5% but having to pay 1 point.
Posted on 3/10/09 at 1:02 pm to Cold Cous Cous
quote:
sold them for a big profit
quote:
Well this is the tricky part, isn't it.
What I did was look at homes that were undervalued. Then I projected what would the neighborhood become in ten years. I sold the house before the property values declined. It's very much like owning a baseball team.
You need to sell your star player the year before his skills decline instead of the year after.
I do not flip houses. I'm talking about 4 home sales and purchases in my life. They all worked very well.
This post was edited on 3/10/09 at 1:03 pm
Posted on 3/10/09 at 1:21 pm to Colonel Hapablap
You'd be much better paying off your house and then putting a "friendly" mortgage on it.
This post was edited on 3/10/09 at 1:21 pm
Posted on 3/10/09 at 1:30 pm to Meauxjeaux
Someone may have already touched on this (I did not read all replies), but the risk with putting your house in a corp. and leasing it back to yourself is bankruptcy. In a worse case scenario and you had to file, your house would not be an exempt asset since it is owned by a corporation. If you lived in a state like Texas where your entire homestead is exempt, creditors can't touch your house even if it is fully paid off. If held by a corp., the trustee would take the stock, you lose the house, and they can reject the lease.
Posted on 3/10/09 at 1:36 pm to Colonel Hapablap
quote:
ETA: and a follow up question for mortgage gurus - my credit score is in the high 700s, is there anyone out there doing refis to 90% or 95
I looked recently and had a hard time finding anyone with a good rate that would refi unless you had 20% plus on the house (or had paid that much off)...
Posted on 3/10/09 at 1:40 pm to Colonel Hapablap
quote:
the logic is, your house is not really an asset
There's really no logic in that, though.
Just because an asset is not currently appreciating, does not make it NOT an asset.
Posted on 3/10/09 at 1:51 pm to Y.A. Tittle
quote:agreed. Anything with a nonzero value is an asset. My car is an asset, and it sure as hell isn't appreciating.
Just because an asset is not currently appreciating, does not make it NOT an asset.
Posted on 3/10/09 at 2:18 pm to Y.A. Tittle
excuse me, I used the wrong word. Your house is not an INVESTMENT.
Posted on 3/10/09 at 3:10 pm to Y.A. Tittle
quote:
Just because an asset is not currently appreciating, does not make it NOT an asset.
Tell that to Robert Kiyosaki.
Posted on 3/10/09 at 6:08 pm to Colonel Hapablap
just pay rent then
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