One example: If you get to own a house (that’s paid off) not having debt on it is stupid because you get the lowest interest a regular person possibly can get. Even if everyone else has interest rates up to their mouth you’ll get a rate so cushy investing the money in any index fund will outperform your interest payments.
Disagree, sure you can make more in the open market over time by getting another mortgage on a paid off home.
But that invested money means absolutely nothing if the market has a downturn and you lose your job. Now you’re on the hook to a mortgage you can’t pay and risk losing a place to live.
While on paper you can make more money, it’s very dumb to gamble with things you need to survive. And that’s all any loan is, a gamble that you will be in good health and have the means to pay it back.
the trick here is balancing between liquid assets, physical assets you could sell (cars, things, another house maybe) and investments into the stock market, where you can still beat your inflation handily. It requires more money overall, but you pull out more money long term as well. And if you play your cards right, you get minimum risk aversion. While still managing to put yourself in an economically sound place.
That really depends on how risk averse you are, what your payment is, and how stable your job is. For example, my payment is tiny because I got a great rate, bought below my means, and have owned it for several years (so inflation is doing its thing). At this point, I spend more on food than I do on my house.
To mitigate risk, I keep a sizable emergency fund (sustain lifestyle for 6 months), which is currently invested in very safe bonds and money market funds returning a higher rate than my mortgage rate. Why would I pay down my mortgage when I can get more essentially risk free in bonds?
I really like Dave’s question: if you had a paid off house, would you get a mortgage on it? My answer is, hell yeah if I could get the same rate I have now! It’s free money!
If my rate was >5%, I’d pay it down aggressively. But it’s way below that, so I’m holding it until I have enough to retire.
One example: If you get to own a house (that’s paid off) not having debt on it is stupid because you get the lowest interest a regular person possibly can get. Even if everyone else has interest rates up to their mouth you’ll get a rate so cushy investing the money in any index fund will outperform your interest payments.
Disagree, sure you can make more in the open market over time by getting another mortgage on a paid off home.
But that invested money means absolutely nothing if the market has a downturn and you lose your job. Now you’re on the hook to a mortgage you can’t pay and risk losing a place to live.
While on paper you can make more money, it’s very dumb to gamble with things you need to survive. And that’s all any loan is, a gamble that you will be in good health and have the means to pay it back.
the trick here is balancing between liquid assets, physical assets you could sell (cars, things, another house maybe) and investments into the stock market, where you can still beat your inflation handily. It requires more money overall, but you pull out more money long term as well. And if you play your cards right, you get minimum risk aversion. While still managing to put yourself in an economically sound place.
That really depends on how risk averse you are, what your payment is, and how stable your job is. For example, my payment is tiny because I got a great rate, bought below my means, and have owned it for several years (so inflation is doing its thing). At this point, I spend more on food than I do on my house.
To mitigate risk, I keep a sizable emergency fund (sustain lifestyle for 6 months), which is currently invested in very safe bonds and money market funds returning a higher rate than my mortgage rate. Why would I pay down my mortgage when I can get more essentially risk free in bonds?
I really like Dave’s question: if you had a paid off house, would you get a mortgage on it? My answer is, hell yeah if I could get the same rate I have now! It’s free money!
If my rate was >5%, I’d pay it down aggressively. But it’s way below that, so I’m holding it until I have enough to retire.