Do You Have To Pay A Mortgage If You Build Your Own House – Should I pay off my mortgage early? This is a great question but unfortunately, standard advice comes with traps.
Your average American (and Canadian) has about $200,000 in mortgage debt and American homeowners hold $13.5 trillion in mortgages. This makes your mortgage payment an important matter!
Do You Have To Pay A Mortgage If You Build Your Own House
That’s a lot of money and it makes it important to pay off your mortgage early! Learning how to save for a home is enough of a struggle for most people, but then, you’re still blowing money on mortgage payments for years.
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Well, I tell you, I am against early payments but there are some good cases for paying them immediately. I did too!
“I’m very much against it though. I paid off 2 mortgages in 2019, decades ahead of their due date.” Mr. FireEscape
The standard advice you’ll see written in newspapers or receive from your family is that you should own a home and pay off the mortgage early. Simple, right?
How can paying a mortgage be foolish? It doesn’t take much for a house to pay tens of thousands in interest every year, but it’s not that simple.
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Obviously, having that money in stock would be nice but that’s not why people recommend you pay off your mortgage. It’s more complicated than that.
No one is in serious trouble paying off a mortgage. So this is never bad advice.
Paying off debt will almost never hurt anyone, and that’s the basic reason why everyone recommends it.
Telling someone to invest a potential down payment in the stock market has probably ended in some unhappy people. So investing your money isn’t always good advice, even if it’s often very true.
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Did you know that people really like writing advice in newspapers and magazines? Safe and universal truth statements.
Trusted people researched it and decided it was very safe advice which caused its popularity to explode.
If your advice was conditionally true then something could be wrong. So, in a newspaper, you never read:
* I do not recommend you to do drugs. If the site was about drugs it would be called MyFiveYearBender and the logo would be a person peeing on a wall.
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You’re clever** though, and I won’t shield you from dangerous advice. This is my site and no one is going to fire me for screwing people over.
So I will tell you. Don’t pay off your mortgage early unless you meet 1 of the 4 magic conditions. You can do better with that money.
There are so many good things you can do with your money, so I’ll list 4 reasons why paying off your mortgage early is bad.
But I’m generally against it. I paid off 2 mortgages in 2019, decades ahead of their due date. So, I agree that there are 4 special cases when you should pay off your mortgage early.
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Many mortgage defaulters fixate on this reason because it’s a big one and I’ll keep it short because the calculation is simple:
Say it takes you 10 years to pay off your 0% downpayment, $500,000 mortgage with monthly payments of $5,015.
At 3.5% you will pay $92,600 in interest over 10 years and end up with no investment or debt.
If you paid the minimum payment each month for a 30-year mortgage — $2,315 — and invested another $2,700 each month at an average return of 10% for those 10 years, you’d be better off.
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Sure, you’ll pay $155,400 in interest and still have $387,000 to pay off.
That’s because mortgages are magic and don’t count toward any other factors like employee stock purchase plans or mortgage prepayment penalties.
Quick tip: Don’t consider mortgage prepayments until you’ve filled your employee stock matching and tax-sheltered investment accounts.
Many people (like me) happily invest in rental properties with mortgages. We wouldn’t have mortgaged real estate portfolios if we thought it was better to pay mortgages.
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The reason I really hate paying off my mortgage is because once the money goes into my mortgage it’s stuck.
The only way to get money back (#LifeHappens) is to refinance your home. That’s a pain in the butt! Trust me, it’s worth it but… Blechhhh.
If you keep your “investment” money in your home, you are all in your home. Let’s hope it doesn’t cost anything.
Possible scenario: A general housing market crash or if they put a sewage plant in your neighborhood and you want to move. Your house has no value anymore and you can’t move to a better location because your investment (house value) is tanking. A
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If your money wasn’t invested in your house, moving to a non-smelly place wouldn’t be a problem.
One of the amazing benefits of having a mortgage is that you can often use the mortgage interest to reduce your taxes (in many cases it counts against your income).
In the US, you can deduct interest on up to $750,000 of home value and in Canada, you can do the Smith trick.
There are 4 specific situations where mortgage prepayments are best. Let’s list them to see if they match you:
Should You Pay Off Your Mortgage If You Could?
Why? If you can convert that motivation into saving extra money then this is the best investment for you because frugal living is better than the most amazing investment strategy in the world.
Is it strange to imagine about having no mortgage? Sure, but I’m excited to sleep so I’m going to judge.
This is why I paid off two mortgages in 2019. I wanted to give myself a little stability in my first full year of retirement. Paying off the mortgage created cash flow stability and security.
“There’s no incentive to stay in debt, life is unpredictable. What if you get divorced or have an unexpected expense elsewhere? Your once-tidy mortgage is suddenly going to look not-so-tidy.” Kevin O’Leary
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Of course, you need cash if you need it, but paying off the mortgage in full will free up some extra money each month and have guaranteed results.
It becomes more worthwhile when you are rich. So you have more risky investments and don’t need more risk from more investments.
A good solution: If you need access to your money in the short term, and can’t pay off the entire mortgage, keep it as cash for easy access instead of extra mortgage payments.
There are many reasons to want more cash, but if you’re just scraping by each month or you think you’ll need your money soon, it may be time for a mortgage payment* no matter how efficient it is not to pay it off. .
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*Special Note: Paying off part of the mortgage will not be deducted here. You have to pay the whole thing off before you see extra money in your pocket each month
If you invest your hard-earned money without paying off your mortgage early, this is a good idea. However, it’s a bad idea if you:
This is why landlords are 46 times richer than renters, forced payments. If you don’t pay your mortgage you need to invest all the extra money properly.
If you’re lazy or the epitome of fear, then mortgage payments make for a very simple, fear-free investment.
Should I Pay Off My Mortgage?
I’m very motivated to save my time but I think it’s too lazy not to bother with an investment account. Investing can be very simple and very productive, but if you leave your butt to pay your mortgage and don’t buy stocks. Then this is the right choice for you.
You can’t have a bad “I paid off my mortgage year” but given enough time, any bad year in the stock market will fade from memory, leaving more money for you!
So I know I will make sure I always have a mortgage to keep me company. Do you love or hate yourself? Tell me below
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