[quote=CA renter][quote=matt]I am 36 (i consider that young :), currently working overseas with my former NCC primary home now rented. I still owe 400K on the property which likely appraises today at 950K or so. I bought in 2010 and have struggled to refi as it is very difficult to close a loan when you work for a non-US company overseas (despite having verifiable tax returns, pay stubs, etc)… so my current loan is 4.75% and payment 2600 / month, renting at 4K / month. I am thinking about paying this off to #1 assure my family a roof over our heads should we ever need it, #2 call me conservative but a guranteed 4.75% for me is a decent return. With the property paid off worst case i have an asset cash flowing me almost $3K / month and the security of a beautiful home in a great schol district to live in should we ever need it, with the sole pressure of generating enough income to pay for property taxes, bills, and food to provide a decent life for my family. This for me is compelling as I know life throws punches and i may not be able to generate the cash i can today in the future.[/quote]
Totally agree with this.[/quote]
Yep. As usual, I totally agree with CA Renter.
Look, the thing is that there is NOT a “one size fits all answer” to this question. It’s going to depend on each individual. And it depends on many factors like how well diversified you already are, what other assets and savings you have, etc.
You will always get people that tell you how it’s wise to take on debt and how they can make better returns in the stock market, or something else. I’ve mentioned this countless times but people mostly talk about their “winners” and rarely talk about their “losers”. We ALL have loser investments. Most people rarely talk about them but we all have them.
Is paying your mortgage off completely when you are younger conservative in nature. Sure. But there isn’t anything wrong with that. I’m one of those “not too old types” (I won’t say younger as I don’t consider myself too young anymore…ha ha) that paid off my mortgage while I was relatively younger.
For me, it made sense and I’m totally content with my decision to have paid it off. I actually have always waited until I had the cash to buy properties. Is it conservative? Sure but I’ve done very well even being this conservative.
I know MANY people like flyer mentioned, that made millions but were too aggressive and lost it all (and more as some took on leverage). The fact remains that MANY people out there have a NEGATIVE net worth.
Matt, I TOTALLY agree with your strategy for all the reasons you mentioned. There are VERY FEW investments out there where you can be guaranteed 4.75% TOTALLY risk free.
I know I won’t sell my property. Even when the kids move out and go to high school I’ll simply rent out the house probably with short-term vacation rentals and I’m confident I’ll do well. Or even if I did a longer term lease I’m confident I’ll be able to rent it out.
All my properties I hold mortgage free and I could care less what prices are doing in the interim while I own them. I don’t listen to the “noise” or stress about interest rates, values, sales, inventory, etc. The only thing I care about is cash flow on the rentals. That’s the only thing important to me and I don’t plan on selling them.
I also totally agree (as usual) with flyer’s point as well about trying to totally be on the path by the time you are 50 in trying to be more financially secure. I realize it’s not feasible for many people but it should be a personal goal of more people out there.
Many people make a ton of money but they spend all that money (and more) on a lavish lifestyle, expensive cars, etc. In my experience, I’ve seen that most people that make a lot of money think they will make a lot of money forever for all eternity…but the older you get, typically the harder it is to make money.
And the true danger is I’ve seen a LOT of people that as they get older and make less, still want to live that lifestyle when they made a lot of money. So they do whatever they have to do to continue to live it. Including using their credit cards, taking personal loans, cashing out retirement savings, or taking equity loans out of their homes. It’s a slippery slope.
Like flyer, my goal was to be totally financially secure by the time I hit 50 and part of that plan was not having a mortgage for the reasons flyer and UCGal mentioned.
