If you have no mortgage, the savings on mortgage interest is like tax-free income. This is “tax-free income” (savings) can be invested every month. This is one of the safest ways to make a return on your money, especially if you never intend to sell your house (don’t worry as much about home price fluctuations).
Yes, the value of one’s house can go up or down, but so can the value of all the other investments you’ve mentioned.
As far as you losing your job at the same time as a tenant not paying rent and the stock market crashing, etc…sounds exactly like what happens during severe recessions/depressions, which aren’t nearly as rare as some might want to believe. With a paid-off house, if one is wise enough to set aside the money that’s being saved by not making monthly mortgage payments, there should be sufficient enough savings to make it through a fairly prolonged period of unemployment, and you don’t have to worry about losing your house because you can’t afford to make the mortgage payment. For many people, this peace of mind is worth a million dollars.[/quote]
Exactly. To be honest, I don’t even care what housing prices are doing or how they might fluctuate. For the principle HOME that I live in, where I’ll raise my kids for the next 15 years, I don’t look at the house as an “investment”. It’s just a home.
Flu, you mentioned that these people are “hoping” that property prices keep going up but for the most part, for those that plan to stay in their homes for the long haul or raising kids in them….they could care less and don’t even think about it.
I do own other investment properties so I understand your chain of thought flu. But on a principle home I don’t look at it the same way.
Also, I probably won’t sell this house in the future even after the kids finish high school. Maybe we’ll rent it out as rentals are very solid and I think they probably will be in the future as well in good school district areas.
I totally agree with you CA Renter that there are many many scenarios where having a paid off place gives you great peace of mind.
I do agree that every person needs to look at their individual situation and see what makes sense to them but to dismiss people paying off houses as crazy isn’t correct.
[quote=flu]
And while personally I wouldn’t gamble on one stock , I wouldn’t want to tie everything into a non income house either if I could do something else with it.
And the way it is…no risk no reward..taking calculated risk is different from being reckless. Though I would say most people whom you are referrinf to either had poor money management skills ( they couldn’t handle an unexpected windfall ) or took on way too much risk beyond what they can handle.
.[/quote]
Well, I don’t think it’s just a matter of “gambling on one stock”. It’s easy now to sound so optimistic with the stock market up tremendously the past few years. But some people forget what it was like at the depths of the Great Recession. People don’t realize just how close we came to a systemic crash in the financial markets.
I don’t care how diversified you were, there was a period where everyone in the market (except short sellers) were taking big hits to the portfolios. Very few people didn’t have any worries at all. So I guess I’d mention to remember that period of time.
And again, it wasn’t just a matter of gambling on one stock. There are entire companies that aren’t around anymore. So it’s not a matter of waiting for their stock price to come back. Some of them are gone. Or others like Citibank which have rebounded, are still next to nothing compared to where they were.
The stock market is very frothy right now. I guess I wouldn’t have much of a problem if I read the same advice several years ago but the market isn’t a place I’d continue to expect these huge returns. The Fed has basically forced people to push their money into the stock market but it by no means is a safe place.
You mention investment properties. I know that area well as I own several investment properties. But I can honestly tell you it’s NOT for most people out there. Being a landlord isn’t for everyone. Most people just don’t have what it takes to be a good landlord. (i’m not saying it’s not a good investment because I do believe the returns from investment rental properties depending on where you buy are great). But no way I’d pretend that just anyone can be a landlord. Plus it sucks a lot of time as well.
