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I personally believe you should never pay back any money you borrow before it is due. However, I own a financial calculator, know how to use, and have read lots of books on buying mortgages/notes. Why would I ever pay down a fixed rate mortgage at 5% when I could invest that capital in a mortgage that pays 10% or more? I could give it to the local hard money lender and he would lend it out at 9%, 8 years, interest only for me.
I have many mortgages and I don't pay one penny more than the minimum requirement.
Should you pay off your mortgage
For me, as long as there is some equity (like 25%), I would reinvest the cash flow to other properties. Its not like you are leveraging to the max with zero equity. You still need to put down payment and you are paying off the loan on monthly basis. I'm Nike Training Pants not talking about spending every additional funds on the next high risk property, you should still have enough in your reserves to cover vacancies, repairs, maintenance, etc, and however more for your piece of mind. But after that, reinvest. Why not use your additional capital and keep making it work for you?
I have to politely disagree. I don see anything wrong with a paid off house before or after you retire. If you retire your house is paid off, you don have to worry about foreclosure. And you can take that "house payment" money invest it if you so choose.
As Robert Kiyosaki said: Leveraged is a 2 edged sword. It can help you if you know what you're doing but it can hurt you if you're not careful with it.
Second of all, these so called "financial planners" assume people need 85% of their working income after they retire in order to maintain their standard of living. Oh great! Just what I want to do in retirement downgrade my quality of life so I can get by.
So my vote is: do not pay extra to pay down a low interest mortgage but be disciplined with your finances so you can invest that extra cash and get Nike Shorts Big Logo
I deal with people in foreclosure all the time. Unfortunately, some of them are landlords or real estate investors who are losing their own personal residence because they overleveraged themselves.
The fact that this article seriously believes that people's only two options for surviving post retirement is by either contributing to their 401K or paying Nike Socks Girls
I know that I'm losing out on the spread between what I could borrow at with my secured loan, and what I could earn with another investment. I'm willing to lose out on that small spread to have the peace of mind of having a much lower monthly 'nut'.
Paying off your mortgage is investing your money at whatever interest rate your mortgage is, but you can't get it back and you lose all future production of those dollars.
The fact of the matter is, the rich and super rich in this country have a portofolio of over 80% in real estate. If you want to be secure in retirement, do what they do and start finding ways to earn passive income.
If your mortgage rate is under 5% it would not be very difficult to find a passive investment vehicle that would have at least a 5% annual return over a 5 10 year period. In my opinion the rates would only need to match for it to make sense to me. Anything above the interest rate on the mortgage made through a different investment would just be a bonus. The reason for this is in line with Aaron's point. Once your mortgage is paid off, this money is no longer working for you. If you invest it in a stock/bond portfolio or real estate, this money will compound and work for you for the rest of your life.
Yes, from a mathematical standpoint it makes sense NOT to pay down your mortgage. Why pay extra to pay down a 4% mortgage when you can invest and make more than that?
Not everyone wants to be a real estate investor. And as for the 401k funds being a bad investment. They are LONG term, so while returns aren top notch now, history has shown that they do have a 12% growth and over time your money will grow.
Instead of contributing the max to your 401K, whose returns are historically low after all expenses are taken out, only contribute what the employer match is and use the extra money to invest in real estate.
$1, pay taxes on that dollar, then send the rest to the bank as an interest payment in order to get a tax deduction? Stoopid.
OMG! This article is so bad in so many ways I don't even know where to begin. First of all, most people nearing retirement age do not have enough money to sustain their current lifestyle when they do retire. So his answer is, oh, just keep working longer arghh!!
That is just a moronic statement made by someone who has no clue about the value of money. Why would you want to earn Nike Blue T Shirt
I'm very happy with my paid off mortgage. I consider it the 'bond portion' of my portfolio. I paid off a 6% mortgage about 4 years ago. Its like having a 200,000 annuity that pays my rent.
However, this requires strict discipline with your finances. You need to ensure that whatever money you would be using to aggressively pay down the mortgage is actually being used for other investments. This proves to be difficult for most people. including me.
Instead of paying down your mortgage and being a sitting duck for the bank to pick off when you can't make your mortgage payment in retirement (after all, who do you think they'll want to foreclose on first the person with no equity or the person with a ton of equity?), take those extra payments and invest in real estate.
However, depending on your situation, it might make sense to pay down your mortgage so you don't have a lot of overhead, specially if you don't have enough passive income yet (from real estate) or your job is not that secure.
Thanks for sharing, Jimmy. Articles like these amaze me!Work Hard Play Hard!
down their house just shows how misguided most of the information out there is, and it's why these strategies aren't working!
Mathematically its not ideal, but there's more to life than math. It makes me happy and more willing to take higher risks elsewhere.
So yes, I think it a great idea to pay off your house!
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