The True Value Of Having A FULLY Paid Off Home
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- Опубликовано: 1 июн 2024
- 00:00 Intro
00:14 My Views
02:19 Assumptions
03:15 Paid Off Home
04:13 Carrying A Mortgage
05:05 Renting
07:45 Finance Is Personal
09:01 Investing Is Still Important
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Disclaimer: Please note that this video is made for entertainment purposes only and not to be taken as financial advice. Always make sure to do your own research.
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Thanks for watching, I appreciate you!
I paid off my mortgage last week! I took a 30 year mortgage, but paid it off in 11 years for peace of mind. Feels great! 🎉
Sweet, congrats!
You would be better off to convert your real estate wealth into a stock portfolio
WAY TO GO!!!!!!!!!!!
@@kevinwelsh7490and live where?
@@jolkraeremeark6949 houses are overrated. Just have a nice stock portfolio and live in a cardboard box under a bridge.
Just turned. 56 and paid off my house last week. What a great feeling! Retirement just came a little sooner.
In today's economy our GenX generation will probably never retire 100%. I have two paid off houses in CA and FL (rental property). Their combined annual property tax burden is over $17,000 combined (excludes insurance) Wrap that around your head.
My wife and I built our house in 1982 and paid off the mortgage in 2007. We don't really consider our home/land an investment. We built it because that is the way we wanted to live. It was a great feeling once we paid off the mortgage, one less expense to worry about. But as you said there are still considerable expenses once the mortgage is paid off. Having said we don't consider it an investment it does represent value we can tap if things become desperate and something to pass on to our kids when we croak.
Exactly. A home is NOT an investment in a typical sense such as rental properties, stocks, bonds, gold, or a business. The huge difference is that a home is a NECESSITY. I NEED a home to live in, so I refuse to gamble and leverage my home...so I decided to pay it off. However, I DO NOT need any stocks. Stocks are great, but they aren't a necessity.
Really happy for you!
@@cdsersd2dshe now has her whole income to invest
Not being a debt slave to the bank, is the true path to freedom
You still being a slave of the IRS, state taxes, county taxes and the rest of the scam, if you want I to know who owns your house stop paying property taxes, you will find out who the owner is and it won’t be you for sure.
@@bracsimYes but with taxes come the benefit of living in a community and enjoying its services. Paying a bank serves one purpose: to make banks rich.
And how do you do that when money is precisely monetized debt?
@@bracsim boo-hoo, keep bitching boy. You can always leave the country.
@@dominicclark5342 simple. don't be a slave to your debt
A paid for home gave me the freedom to leave a job that no longer suited me.
Living a debt free, mortgage free lifestyle frees your money up for investing even more money providing more freedom.
Yep. Get your necessities paid off BEFORE you invest. A home is a necessity. There is nothing more nerve racking than having BOTH a mortgage AND losing money in an investment.
@@cdsersd2d people need to invest in a roth ira as soon as they start working. Do not wait until your home is paid off.
@@cdsersd2dim planning to sell one investment property to pay off my mortgage.. i have 3 investment properties and my own home. Do u think its a good idea?
I'm building a small 1,200 square foot home. I took out a 30-year mortgage and was planning on paying it off in 15. I just inherited enough money to pay it off as soon as the builder is finished. I feel awesome right now.
Invest the inheritance, you’ll come out far ahead.
@@MuzixMaker Yeah, unless he loses his job, or has health problems and can't work. If that happens and he can't make his payments he loses the home to the bank. Then he can watch his investment portfolio while he lives under a bridge.
@@robgrey6183 he can make the additional principal payments from the dividends and keep his inheritance, which will also grow faster than the home price over the next 15 years.
@@robgrey6183 why did you delete my response you coward
@@robgrey6183 Right. Owning a home outright gives a lot of security. "Home is your castle". I think even in case of catastrophic medical expenses, they can't take away your home, right?
In my opinion if most people didn't include their paid off home in their net worth they would have very little net worth.
This is true, because most Americans don’t have a whole Lotta net worth, and most metrics are showing real estate as a portion of your net worth but we all know that the asset portion of the house that people have is just an best. Guess you can’t say that you will know the price of your house when you sell it as well as people don’t take consideration the portions of the house overtime that’s maintenance, that counts against the true asset value of the house because of all these unknowns I also do not put my house as part of my net worth. I think that this also flies in the face of if I want to sell my house to get into the asset portion of that again I would have to sell it and I don’t want to sell it so it is an asset to me or a liability and even when I pay it off, is it a asset or liability, I think in general I agree with her and people like the money guy Show it’s what you wanna do with your money and the end of the day I can buy and sell in the market and does not affect my actual life if I sell my house that affects my house my family, my everything therefore I don’t consider a house as an asset. You live in it when it changes is if you actually are investing in real estate, such as buying a property renting it out then I would include that in my net worth statement, but not the house that I live in. What you’re saying here is an opinion that is actually fact most people have very little net worth and so maybe that’s an issue in how we think of net worth as Americans if you consider that your house is worth 150 and you go to sell it and you only get 100,000 you’re ready Have negative net worth and you didn’t ever think about it at that point because you’ve always thought the asset was 150,000 this is a problem overall this is why I do not count it unless I can arbitrarily understand what the acid value is at? Any moment in time when I do want to go sell not what I think it is or what a real estate agent considers she could get for the housenot to mention all of the cost associated with buying and selling assets does make sense. I think this is something that has American people we need to wake up understand what true net worth is it’s not the house.
I agree!
The Exception is the Few that do have a bunch of money in their 401K!
Very few have more!
Rental Houses
A Business
These are real possibilities though!
Speak for yourself
It's an asset. Why wouldn't they include it?
So what?
One thing people probably don't appreciate about having the house paid off is that you don't need to earn the income for mortgage or rent payments, which means you don't need to pay the payroll taxes on that income. That might be an extra ~30% of the housing expense that you don't need to deal with every year if you're in FIRE mode and in control of your income.
The true value of owning your home clear and free of debt? Priceless! No matter how bad it gets, you have a roof over your head and you can focus on basic needs like food and clothing. With clothes pretty much figured out, it really boils down to food.
Nooo... Property tax, maintenance, etc
@@kbanghartProperty tax is miniscule compared to a mortgage.
@@sgtm7 depends on the property. In Texas, they tax property fairly high so you really have to watch out.
@@kbanghart The house I owned in the states was in Texas. So my statement is based on Texas. Even though the percentage is higher than many of the high cost places that have an income tax but lower property tax, because the property is cheaper, it is still miniscule compared to a mortgage.
@@sgtm7 cool.
Also, I never said otherwise.
A paid off home has enormous peace of mind value. Especially true in retirement.
I couldn't even fathom trying to retire with a mortgage.
Took a 15 year instead of the traditional 30. Paid it off on just under 9 years.
The value of not having the stress of coming up with that monthly nut is incalculable.
Do you have a job with variable income? Most people who own a home have a regular predictable income. If you budget properly there is no "stress" of coming up with a payment, it simply comes in for having worked.
I hear you. Unfortunately property taxes never go away and in some places can cost as much as rent. It’s insane. You never own anything. Always renting.
What state?
@@es330td It still sucks having a substantial amount coming out of your income consistently every month.
Nut?
I paid off my house two years ago. Its truly awesome.
Congratulations man, am on my way too
I truly understand the school of thought about investing rather than paying off a mortgage, but investments can take losses and that mortgage still needs to get paid. I got rid of my mortgage 3 months ago and now I am free to max out my investments with the freed up money and I love not having a bank holding my note. It’s Mine! all Mine!
That is great and I too look forward to the day I can say that. Let's be honest though. If you stop paying property taxes you'll find out quick who really owns your home.
@@mrniceguy423 Death and taxes. Two things you cannot avoid.
Well it’s yours and the governments.
@@mrniceguy423isn’t that incredible? Continuing to pay tax on an asset you’ve already paid in full…
I'd say maxing out a Roth IRA, if at all possible, is also one of the best things you can do. And you can put those funds into something safe, like an S&P 500 fund, which is probably at least as safe as the value of a house over the long term.
When I bought my house 30 years ago it was so it would be paid off before retirement. It would cost the same to rent but in the end I’d end up with nothing. There’s no way I’d be able to afford retirement with having to pay rent. That said I don’t consider it an asset since I can’t live without it. It’s more a necessity, like clothing or food.
Great advice. I built my home in 1995 and had a 30 year mortgage, paid it off in 15 years to the day from moving in despite of people telling me I’d lose the tax write off. Since doing that I have been able to save millions and pay cash for everything since. I think it’s great advice and never considered the home as an investment.
Thanks for sharing this amazing story. I look forward to doing the same
It's funny but the effects of inflation over are time are very real. My parents have been in their house for over 67 years and it initially cost them $12,000. If they sold today their house would probably sell for about $1,000,000 (the average for Southern Ontario). They told me that near the end of the mortgage their water bill was more than the mortgage payment. So after paying their mortgage off (over 25 years) has allowed them to live the next 42 years mortgage free and more importantly "worry free".
We paid off our home a few years ago, and now save the equivalent amount in an account for property taxes and home improvements. It’s a great feeling to have the resources to pay for new Kitchen, new roof, yard improvements and whatever else comes up in the future.
That's great. If you are planning to sell your home, improvements are a good idea. If you are planning to stay in your home for years to come...they are still a good idea in terms of your comfort and enjoyment, but not so much in a financial sense. Of course you want to make sure everything is in working order and clean, but if you are really looking to max out your moolah long term, start investing it instead. 10k on a granite counter will never outperform 10k in a conservative mutual fund.
I will 2nd that other response. A coworker just made 100k on his house. Meanwhile, a family member of mine will never be happy with her primary residence and has spent THOUSANDS over the years to redo the same things multiple times.
As a retiree, when we downsized, the income from selling the home was tax free. Tax free (no capital gains) up to $500,000 for a couple filing jointly.
Yes it truly is part of networth when used to advantage
My rich great aunt and her husband are on their 3rd free $500,000. They buy homes near the beach.
A good point, but be careful depending on this in retirement. My father passed away suddenly and that deduction dropped to $250k for my mom. Life is uncertain.
@@blueblur1984 $250k for one person tax free is a rare thing.
It is comforting knowing that property tax, utilities and insurance are the only housing expenses we have in our retirement.
not the only, since you are responsible for inside and outside of your house maintenance, which also includes appliances, etc.
Where I live that’s a thousand bucks a month.
That's more than your mortgage amount in some states.
@@hanwagu9967 ur obviously not an adult
You did a good job of explaining the value of a paid off home. I paid my home off early about 3 years ago and retired a year and a half ago. My home doesn't make me money, but it saves me money that I'd be spending now and in the future on a mortgage or rent. With private equity firms buying up a lot of apartments and homes to rent at exorbitant prices, I think the value of a paid-off home will be even more evident in a few years as it becomes harder for people to make payments. We are already seeing signs of it now in the increasing numbers of homeless people and those doing vanlife, for instance.
The three things that I always dreamed of doing at some point in my life were being able to retire comfortably, being able to pay cash for a new vehicle, and being able to pay off my mortgage. I’ve done two of these things this year and I’m about to do the last very soon.
Nice job Harry Balls!
My last mortgage payment was this month. It was an ARM mortgage 7% and climbing 🎉🎉🎉
Congrats on getting it paid off!!
Mortgage rates have a single digit as percentage like 7% , but do not get confused because this is compounded interest (not simple interest)....unless you pay it faster if you just do the minimum you will have provided the Mortgage company 2 Times the amount of your home purchase in interest...It is an advantage to pay off your home as fast as you can possible do it ...Things like yearly tax refund applied towards the principal or sending additional $$$ to the principal will allow you to pay your home early...other things that help are job increases if you get $1.00 more per hour you can contribute $40 dollars more per week or $160 more per month....You finished paying your car off after 60 months now use the same $$$ amount and send it towards the principal every month...you will pay off your home faster! And enjoy life when you are older in life!!!!
We paid off our house early two years ago. There is only one word to describe the feeling of a mortgage free home. Priceless!
It's not priceless. It cost you😅
But having the feeling of no longer paying a mortgage is priceless
Freedom
The feeling is priceless DUH@@LRF49
You still have to pay property tax or you loss it.
Well said! Having a paid off home also gives homeowners the opportunity to invest more money.
Great video Erin, we paid off our home 2 yrs ago and was best decision we ever made. Gave us piece of mind, lack of stress and clear path toward retirement! Keep up the great work!
I paid off my home years ago, but I still have a 36-year mortgage. In perpetuity. Every 36 years, the county tax assessor takes 100% of my (and every) home's value. If I move to a lower property tax state, that "mortgage" can be as long as 180 years. As I near retirement, I MUST move in order to help preserve my limited retirement income.
Very good episode! I'm an accountant and I evaluate my personal financial progress excluding my home from my net worth statement as well. No matter how much equity there is, it can't really be spent/consumed without bearing a cost. When I've utilized my HELOC it was only for quick opportunities in which I knew I would be refinancing the purchased property within a short duration.
When we retired 7 years ago we had a mortgage. However our 2 pensions and social security easily covered our living expenses so it was no big deal. We still had plenty of income left over to travel and do the things we wanted in retirement.
However in the last year our property taxes went up 60% and our insurance also went way up. Those two costs that get us nothing enjoyable in return are now about $25K a year. So we plan to sell, move and pay cash for a house elsewhere where property taxes are lower and wildfire risk is less. That should allow us to do all the travel and other things we want to do in retirement. Moving is stressful. We had hoped to avoid it, but our state and local governments got too greedy and are forcing us and probably many other retirees out. Time to find a state that's not so greedy.
Wow, in what state do you live?
Is there a state that you think you might move to?
Moving from Colorado to Utah.@@galens2543
I keep a spreadsheet with columns off all my asset classes and net worth with and without our home. We paid off our place but we have friends who definitely believe that it is marginally better to keep a mortgage and use the excess money to invest rather than put it against the loan. One reason is that their mortgage interest is lower than what they expect when investing and also for the tax write-off. However, I look at paying it off as just another diversified investment along with my stocks, bonds, and CDs.
I agree with much of what you’re saying. I have a network spreadsheet with investments only, but throw in my 2 homes for the cherry-on-top! I’m also debt free and will retire from a gov’t job next spring. I also retired from the Air Force 22 years ago, I think I’m set. I shouldn’t have to touch my investments for normal living expenses! Oh, and for paying off your house before retirement…….WHAT A GREAT FEELING!!! That feeling is PRICELESS!!!
I was prior service Navy....and Army (because I apparently didn't learn my lesson), plus, I retired as an LMS 0346-13/07 at the end of '19. Free advice: do NOT file for SSN in the same year you retire. I'll bet you can guess how I know. Retired 31-Dec-19, filed for SS to start 02-Jan-20. In '21, SS sent me mail - lots and lots of mail, but among that mail, they said "you made $16,000.00 too much for 2020." The reason is, as it turns out, is that I took a buy-out in 2019. Guess when the paycheck hit the old bank? If you said "January of 2020," you would be correct.
So, the IRS took 30% of my buyout, SS took 30% of the gross, and with the rest, I funded my 2020 Tundra....just before the 2 weeks to flatten the curve.
Stay safe. I appreciate your service.
Good advice about the SS. I can’t take it until the following year so I should be fine. I’ll retire this spring as a GS-0856-13/07…. Thanks!
I had a difficult time picking between paying off my mortgage and investing. I’m glad I did the later. I’ve been watching clips on youtube for months now and with professional help, I’m making outstanding progress.
I’ve put investing into consideration also. What do you think is the best approach for someone who is just starting out?
Herman Jonas is the brain behind my success. I've gotten into a plethora of assets with $13k spread across stocks (options and futures) for the short term and Roth IRA, index funds, and ETFs, for the long term. Now I sit back, and just reinvest at intervals while I handle my other businesses.
Do not forget that when it comes to the stock market, prices can be erratic, rising and declining quickly, often in relation to companies' policies, which individual investors do not influence.
How can I reach him, please? I've seen good recommendations of his work elsewhere. I need help with investing in stocks. I'm ready to pay for his services.
Hermanw jonas (a Gma!L comm
Is he taking commissions for his services? Yes, I’m I still making money in the process? Hell yes!
Good thoughts. A paid for home provides imputed income, and this is why it does make sense to include it in your net worth. This is what you spelled out in the video.
I lost over $70k when everything started to tank. Not because I was in an exchange that went belly up. I was just stupid to hold and because that's what everyone said. I'm still responsible. It just taught me to be a better investor now that I understand more of what could go wrong. It took me over two years of being in the market, I'm really grateful I found one source to recover my money, at least $10k profits weekly. Thanks Natalie Strayer
Wow. I'm a bit perplexed seeing her been mentioned here also Didn’t know she has been good to so many people too this is wonderful, i'm in my fifth trade with her and it has been super.
You trade with Natalie Strayer too? Wow that woman has been a blessing to me and my family.
YES!!! That's exactly her name (Natalie Strayer) so many people have recommended highly about her and am just starting with her from Brisbane Australia🇦🇺
I'm new at this, please how can I reach her?
Her good reputation already speaks for her .I’m also one of the beneficiary of Natalie Strayer. So happy I gave it a trial after being skeptic of the process.
I agree with the don’t include the home for financial planning. If you are trying to get a loan, then you use the net worth statement that includes the house. But if you are trying to create a spending plan, don’t use it. It’s pretty simple. Maybe the term should be Usable Net Worth
Bought my first home (1000 square feet) when I was 23. Used the equity for a down payment on my second home (1500 square feet) when I was 33. Added a 500 square foot addition myself. Paid off at 48. Looking at early retirement now.
I actually agree with her, because yes, it is technically part of your net worth, but it's only made available to you as cash to use if you sell it, or borrow against it-which would be dumb. If you sell it, cool, you've got a big pile of cash, but where are you gonna sleep?
I will vote for adding the value of your home to your networth, my reason being if you didn't have that home, you will be renting somewhere else which will have an effect on your networth.
On point. I am retired and fully own my house. You are absolutely correct in regards to having multiple streams of income vs just relying on home ownership 😉. Life is good for this old retiree 😊❤....
So many variables to consider. Decided to move during covid due to job loss for not taking the injection. Gain from previous house didn’t quite cover the cost of new place. I have a small mortgage that I just lucked into a 2.25% 30 year . It’s $600 a month. Makes no sense to me to pay that off ever. Yes I have enough to pay it off if needed.
u still paying half in interest regardless, i have a 2.5 an still gonna pay off early. look at ur amortization schedule u still giving away plenty money
Survived company layoffs in 2007. The fear of “am I next?” changed the way we see money. We worked very hard and paid off our 30 year mortgage in 13 years, then began investing that freed up cash (plus we saved $$$$ in interest). Being debt free is a freedom very few of us ever get to experience and it’s incredibly liberating.
I think this is bad advice. Inflation erodes the value of the debt of the mortgage. Also, the opportunity cost is too high. If the individual is disciplined in investing that money, they will have a far greater return then they will on their house.
Can't invest when you're in fear of being laid off and losing your home. We could have chosen to invest, but our home was something we weren't willing to lose. Been free of all debt for ten years now. We're in our late 40's and are looking to retire comfortably at 55. We're happy with our choices.@@tito4018
Next video: retire with money is better than retire poor.
I've watched a bunch of retirement and pension videos and it all comes down to that.
I paid mine off 5 years ago @ 53 & I set myself up to retire @ 56 it was the best decision i ever made, I been retired 28 months now
That's awesome. Since I was 25 I planned to be able to retire at 55 if I want to. I'll probably stick around until 60 because I still love what I do and it pays very well. It just means more retirement funds and maybe a few more toys to enjoy when I don't have to go to work everyday.
I bought my home with the intention of being able to pay it off early, by 55 so I wouldn't carry a mortgage into retirement. I made that goal early by 2.5 years, so that's another $120k+ in large mortgage payments that I don't have to make for those next two years. Then another 5 years of extra income, while being rent free that I'll be able to save and invest.
I'm happy we went with a 10-year fixed refi mortgage when rates were below 2% during the Covid. House will be paid off in my mid 40's. I think a paid-off house also takes away a lot of stress, if you lost your higher-paying job you could get by with a very basic income. We will still need to put away $500 a month to cover property tax and insurance when it's paid for.
I paid my mortgage off 2 years ago and I’m 32 years old it’s been a life changing thing no stress no worries I hope everyone can experience this life!
Wow, that is AWESOME beyond words. I didn't even buy my home until I was 38 years old. Enjoy the peace of mind and much lower levels of stress this brings you.
6:01 So after 11 years you would have paid around $310,154 to rent and have no equity to show for it. I've hear it said that if you plan to live somewhere for more than 5 years, it almost always pays to buy (obviously this would not apply to all market areas).
Dear Finance is Personal, LLC
I think your message is spot on as usual.
Make sure you are investing beyond your mortgage.
We never included our home in our net worth, but I assume that’s for two big reasons.
1. We we’re saving aggressively beyond our mortgage.
2. We like you grew up in the midwest with affordable housing.
If you are not or able saving aggressively you are probably counting your home in your net worth.
We paid off our house at age 45, but the watch out was how much our house still cost us as you said.
Our house now makes up 5% of our net worth.
Thanks Erin for your advice and input.
Tony
My home is paid off, but you still have taxes, insurance, and upkeep my mortgage payment was 1680 per month now that it's paid for I still have to save 900 per month just to pay taxes and insurance. That said I agree if possible you should have your mortgage paid off going into retirement. A paid-for home really gives you choices. Thanks for continuing to educate people about their finances and encouraging them to save for retirement.
900 hundred means u live in a high cost state and big house lol
I bought my first home at 22. Paid it off in 6 years. Fast forward 30 years, we now own our own home freehold plus 4 fully paid off rentals. We are now able to retire early on our rental income, and can sell off rentals in the future for additional cash if we want. Looking forward to enjoying the rewards of our hard work.
Good for you and your family.
One of the great ironies today is that in some areas people with a typical 3 br. home are paying taxes of about $12000 or so. That means that after paying off the home, they are now renting the dirt under it from the state for what had been mortgage or rent payments.
Yep. Basically you'll never really have a home paid off completely because property tax and house insurance will always be there. It's such BS.
@@Westcoastguy Renters are also paying property tax and building insurance but just indirectly through their rent payment. I paid my house off 12 years ago and the cost of property tax and insurance is about $500 per month. Houses in my neighborhood similar to mine are renting for $3000 per month. Property maintenance isn't costing me the $2500 per month difference.
No mortgage, rent, credit card or car payments here. We only pay monthly utilities and groceries. Many people won't know the peace of mind and freedom. Life is good.
Paid mine off ten years early literally just before the hike in interest rates. Best decision I ever made. Wasn’t easy but absolutely worthwhile. I’m in England.
Great video! House being paid off is huge. Like anything else, it depends on personal circumstances and preferences.
Definitely a very interesting aspect of FI planning for sure. Having a paid-off house is the right call for the vast majority of people entering retirement, especially those with low enough mortgage balances to not be able to take advantage of the mortgage interest deduction. Although, that could be changing. The standard deduction could be getting chopped in half in 2026, which would open up that deduction for a lot more families to take.
Either way, income taxes, ACA subsidies, SS tax and Medicare IRMAA penalties, Roth conversion strategies, etc. all have to be taken into account before making the call to keep the mortgage in retirement or not. Definitely not a trivial issue or easy calculation.
Personally, I’m planning to keep mine as long as I’m working due to being in a high tax bracket and getting the mortgage interest deduction. The high mortgage interest also pushes SALT taxes into deductibility. The net cost savings is much better than the mortgage interest savings from paying the mortgage down early.
However, I’ll definitely have a plan to be mortgage free for my primary residence when entering retirement, or shortly thereafter, since those tax benefits will no longer make sense.
This a very good video, maintaining proper context is over looked, the value of our primary is not liquid. Great job illustrating this concept and most important how that relates to retiree’s
I paid off my house 6 years ago. Took 11 years out of the 25 year mortgage. Still feeling the pinch with credit card bills, regular bills and investments.
Paying off the mortgage is the most liberating and rewarding thing you can do for yourself!
Love the hair! Long time. Better, brighter future? If you have a roof over your head, and running water AND a toilet in your house, you are living the dream compared to the rest of the world. If you don't have to go outside to use the bathroom and fear a snake biting your butt, you already have a blessed existence on this planet! Love the simple things in life and having your needs met and you will be much closer to being happy.
Great video. Could not agree more. I don't include home value in my net worth statement and also deduct my mortgage. This could be overly conservative, but as Erin says, the home is not an income producing asset and I will eventually have to pay off the mortgage. True financial value of home ownership is accumulating equity to minimize housing costs in retirement.
I think if the goal is to reach and secure the chances of maintaining financial independence as much as possible and not just to maximize making money then paying off your home makes sense.
I'm speaking from the U.K. At nearly 64 I'm thinking semi / full retirement. Have paid off the mortgage in full so own the house we live in outright. Ideally I wouldn't wish for a mortgage through retirement. The house fully paid for is an asset that if needs be in future could generate some ready cash if I was to downsize later in life in retirement.
Five years ago my old asset manager said I should consider a material mortgage on the house and place the spare money on the investment market i.e. stock exchange effectively. Low loan interest rates and overall good high investment returns - i.e. make the lender work for you effectively. I said no - I'm too old to gamble the house on the stock exchange effectively. Boy did I make the right decision as roll the clock 5 years forward and as now loan / mortgage interest rates are far far higher and investment returns have suffered.
Don't kid yourself. Unless you're a multimillionaire, we are all one medical crisis away from financial ruin.
Yeah and for some it means a multi-millionaire!!
Keep in mind, we could all die tomorrow. That doesn’t mean you shouldn’t plan on living past then.
One other option to consider is that in retirement selling your home and investing it can generate passive income to pay for a good portion of your rent. Also, when you get older, maintaining your home gets more expensive because you become dependent on paying people to maintain and fix things that in your younger years you used to do yourself. Thirdly, the longer you stay in the house the more likely you'll have to replace expensive things in the house, like roof, furnace, AC, siding, or a sagging garage that may need replacing. All these things add up. Fourthly, subtracting property taxes, home insurance, and extra cost of heating and cooling a home compared to an apartment which is much less. So when you subtract those extras or forthcoming costs of staying in a house and moving into an apartment, the actual cost of renting may be paid off via the interest you made in investing it into the market. Just a thought to consider for those older folks. If you're younger with a paid off house, this would be very different.
Great video and well positioned. We paid off our home in 18 years so had zero payments for the past 5 years. Decided to buy a new waterfront home about a year ago and the prior home paid for all but $100K so we owe less than 10% of the properties current value. Both of us are still working so payments are minuscule but we can also sell an investment property to fully pay it off should we like. We agree that a paid off home gives one great comfort.
I paid off my condo and my hoa is 2568 a year, school taxes 1285.60 a year town taxes 801.09, property taxes 458.31 a year. For a total of $5113.00 a year or $426.08 a month. So owning a home is much cheaper than renting for me.
How much for homeowner's insurance?
The insurance is included in the hoa.@@AndrewJones-th3vi
@joshlowell3075 Yes! In the long run, homeownership usually pays off compared to renting. Especially once the mortgage is paid as you described in your situation.
Managing money is different from accumulating wealth, and the lack of investment education in schools may explain why people struggle to maintain their financial gains. The examples you provided are relevant, and I personally benefited from the market crisis, as I embrace challenging times while others tend to avoid them.
So true Rod, I'll one better ya. Financial education starts at home long before school. I'm pushing 70 and was raised by parents who emphasized early the value of a dollar and the importance of saving and investing for the future. As kids we never went without but were never spoiled by the extras unless we earned them. Parents don't realize the problems they cause early in life when toddlers are pre conditioned to get what they want when they want it. Sounds silly, but allowing a child to take home a toy of their choice every time they go shopping vs giving them an allowance and purchasing a toy with their own money is a simple but educational lesson. My wife and her siblings were all spoiled as kids. Got almost anything they wanted and never took care of anything. All of them grew up as adults who lived paycheck to paycheck and were never out of debt. Two will work til the day they die, up to their eyeballs in debt. All the nieces and nephews, ditto. Fortunately I was able to convert my wife away from this instant gratification lifestyle and over time she has become savvyier than me at living debt free and making educated financial decisions. Both of us retired in our late 50s, haven't had a mortgage or any debt in 20 years. Pay cash or CC off immediately. Review our investments once a year and trust in our advisors long term strategies. Wealth accumulation is a slow life long process. Anyone who tells you differently is full of it or likely has an ulterior motive.
My parents married in 1932, poor as church mice. I inherited my basic money management techniques from them, as well as the example of my mom's stepmother, who could pinch pennies until they screamed (and was the nicest person in the world). And don't believe that legendary nonsense about "The Roaring Twenties;" although there were some rich people, for most the 1920's were plenty rough.
Buy when others are fearful!
I bought my first home at the age of thirty, and ten years later, we bought my current home. My wife convinced me to keep our first home as a rental, and what a great idea, rental income paid off that property 7 years later, and it helped us pay off my current home this month at the age of 62. Also, in that time frame, both properties have tripled in value. I’m going to retire at 65 with no debt and we’ll either keep the rental property for income or sell it for more financial independence. Owning property gives me a great sense of security and freedom to do whatever we want in retirement. Also, for US residents, check with your county. In my county, property taxes increase’s are frozen for folks 65 and older. Excellent video Erin, I enjoy, & learn a lot listening to your videos.
It's like you're saying, 'Hey, let's focus on assets that work for us, not just what society tells us to count.' - definitely got me reevaluating my financial game plan.
I took a 35 yr home financing 7 years ago. I am planning to fully settled it next year, after which I will be concentrating in building savings for the kids educations as well as for my retirement.
I believed in consistency and high level of discipline when planning for retirement. Whether or not you plan to settle your mortgage early is irrelevant.
I'm 67, with a mortgage, and I have no idea when (or if) it's going to be paid off. Frankly, Scarlett, I don't care.
Here's the thing: I refinanced in 2015; about 6 months before my wife passed. Now, even though she was an annuitant, her income wouldn't pay for an apartment in a small town.
I've always believed, and I've preached it, that couples should never buy more house than one of their incomes could support. Most people don't listen to me, but I listened to me, and my mortgage costs just under $1,100.00 a month. The house across the street - admittedly a bigger house (mine is 1100 sq. ft.), just rented for $2,200.00 a month.
With the mortgage, utilities, and everything (except eating out), it costs me right around $24,000.00 a year to live. I gross $60,000.00 in retirement.
So nope, don't care about paying off my mortgage.
If I made $60K per year and had $1100 payments in retirement income, that would leave me about $2800 net per month after paying mortgage. That's reasonably comfortable for me, and in your situation, I probably wouldn't pay off the mortgage either.
However, in many other situations, I think paying off the mortgage makes tons of sense.
thanks -- interesting as always even if this speaks to current or near-retirees. We did pay off our home. oh, 6-7 years ago and it gave us a lot of flexibility in finances. Now, it's both good and bad -- some big repairs were due, wanted to move but real estate was super crazy the past two years (and only modestly better now) so we'll likely stay put. Home ownership was tax favored for so long, but less so now that I not only don't recommend home purchase to my kids but I try to steer them from it.
Paid my house off at 45. Retired at 51. Taxes have increased about 50% faster than budgeted. Have repair insurance ($500 a year). The ACA made it happen. I've done some gig jobs since. Barely retired before layoffs at my company. Was set to tell them I was retiring on Jan1st, they laid us off the prior august with an effective date of December 31st.
The value of a paid off house is nearly incalculable. My friends rents have more than doubled. And they built up no equity. Renting is great if you move frequently.
I was always told NOT include a home in your net worth but never understood why growing up. The way you explained this makes it so simple and easy to understand. Excellent points!
Glad it was helpful!
I go back and forth about paying off my 3.25% (8 year loan). While it'd be great to get that off the table, it also increases my cash & investment liquidity by maintaining the mortgage.
I do the same. Don’t be house poor.
As an old fashioned sort of guy, the happiest day was paying off that mortgage. Nine years. I know that's not a long time, but it was longer than I wanted. I value my freedom and the money I saved on interest. My wife was shocked but first thing I did was hang an American eagle above the front door. Love being free and clear and every penny we earn is ours.
Thank you for pointing out the obvious. I agree and share your value.
One can turn home ownership into an income generating asset by acquiring a multifamily home - then ever Erin could include its equity into her net worth calculation. Mortgage payment stays fixed, but the rent you can charge increases over time. Over the last 15 years, one of the units in our 3 family home now gets more than 250% rent than it did when we bought it 15 years ago, and we are likely charging below what the market would support.
Owning them outright, we can charge a little below what the market will support for our units too. When prospective tenants ask us "what's the catch?" we say that what we want in turn for a little lower rent, is to never be late with it. We also don't want to get early am calls for simple fixes like light bulbs or if your kid put a hole in the wall. If you damaged it, you fix it promptly. Call us for the big stuff.
Living in Sydney Australia, the housing market has been out of control since the mid 80's. With a city that has 4 immigrants for every Australian born birth, there has been massive growth. My 2 million dollar house has doubled in price in 8 years & since I live in it, its capital gains tax free.
So are you saying that the immigrants are bad or good ?
@@bradbriggs5347 Bad. People can't afford families, because housing takes a working couple 30 years to pay off. One wage can't support a family of 5 to 7 children, like 100 years ago. The system is rigged. You replace what families once did, with government services. One of these services, replacing reproduction, with immigration. Other services like welfare dependency, has replaced what families used to do. Families used to be your pension in old age. Big government & high taxation is out of control. Remember income tax didn't even exist in the USA, Great Britain & Australia before the 1920's.
@@bradbriggs5347 I don't think anything was said about that one way or the other. Sydney has been growing like mad for decades now is the point. A colleague of mine at work came to the US from Sydney partly because home prices/values were so crazy he felt he was being priced out of the market and couldn't afford to live there any longer. This despite making what many would consider a really good income.
@paulfly3121 I felt it was a fair question, I live in a northside beach side Brisbane suburb and we have had a landslide of immigrants from nsw, I was wondering if it was a ultimately a good thing or a bad thing, sorry if you thought it was racist but that says more about you than it does me
@@bradbriggs5347 What's better, having your own family & a legacy. Or making housing unaffordable, so you can't afford a legacy.
Low birthrates are a government policy. Immigration is a government policy.
No such thing as low birthrates, before woman got the vote.
When you have a section of society that overwhelmingly vote for provision & security, this is ultimately the result. Total & absolute demographic replacement.
Overall very appealing way of explaining. Great job. The 30 y mortgage is simply a tool to serve/keep paying the banking system. The earlier we can pay off the better.
When I see and listen to someone who is as young as you appear, and they are on top of the game - I have renewed faith that our country will be okay. 😉 March, 1994 - the date our mortgage was completed.. Since then our property tax has quadrupled though 😮💨
I live in southern Missouri and paid slightly less than $25,000 for my home, which is on an acre of land. I paid cash for my house. Having my home paid off in full is a feeling of security. I can't imagine the stress of having to come up with money every month for rent or a mortgage payment. I know millions of people do it and don't give it a second thought until something happens. The main breadwinner could die or suffer a catastrophic illness or injury. The country could go into a depression like what happened in 1929. Any number of things could happen to destroy a person's financial security. I could have used my $25,000 as a down payment on something newer but I am glad that I got a house I could pay for in full. I am especially grateful that I did this because I have had times over the years where my financial situation has really taken a hit. With rent or a mortgage, it would have been very stressful. I am 100% debt free. No mortgage or rent, car loan, credit card debt, or any other kind of debt. I don't want to ever be in debt again.
Just having property taxes and insurance a great spot to be in.
We are completely debt free as well! Feels great Have a great day 😊
My wife and I have very comparable circumstances. She is a great partner in this. Slightlty sad is it took us until our early 50s to get there. Sooner would have been better.
@@De-Centralized Better late than never. My late wife left us in debt via a couple of credit cards and some other stuff. It could have been much worse, however. I started that debt-free journey late in life (2010), and I was still at almost a half million by the time I retired at the end of 2019. Took a hit in 2020, but I'm still in good shape. Sooner WOULD have been better, but it is what it is.
@@billfunk3168 property taxes, utilities, groceries, and an unlimited bus pass...
I bought my current home in July 2011 as a bank REO for $300K. Living cheap, working like a dog and paying ahead on the principal at every turn allowed me to write my final mortgage payment the beginning of August, this year. It's life changing to have this freedom.
We paid off our home when we were in our early 40’s, and then put all the monthly savings towards retirement. Peace - John
I’m new here, but you have the best personal finance channel I’ve seen so far.
Thanks 🙏 so much! Welcome to the channel!
My house has been paid off for a decade and it feels good. Foreclosures rarely happen with a paid off home, it’s the mortgage that gets people in trouble. It’s a huge risk factor people don’t account for. People with mortgages don’t view it as a risk until it’s to late.
Actually some are going to be taxed out of their homes soon and without any extra income without working hours or worse
@rockystaatz521 What's the percentage of people that get taxed out of their houses? I would say 99 percent less than those still have a mortgage.
There’s a person on my street that has a paid off home, however, over the years taxes have risen so much that the person is now paying more in taxes than the mortgage
@@auomi8762 so they have both, I’m saying if you have taxes only it’s better then a mortgage on top of it.
@@rossta3949 you are probably correct except for some fixed income , still have a mortgage because my money makes more than my mortgage but taxes have raised the payment to an unexpected amount with utilities going up at the same time. When the taxes quadruple in just 3 years that’s not something you can plan to cover in almost every range
I bought my house in cash in 2021 for 500K on a double lot, I pulled out 400k at less then 3% and bought some rental properties in cash in Detroit and invested the rest in the stock market. Everyone has their own path. I saved every dollar when I first started working and now it has paid off. im in my early 30s
We paid off our 30 year mortgage in 17 years. We sold our home at the top of the market last year and moved to a different state and paid cash for a bigger home with more land that costs less. The insurance on my new home is now half of what it was in Texas ( high prices due to hurricanes, flooding). Florida and Texas have high home insurance prices as well as car insurance especially in the large cities. We got tired of the traffic and weather too.
Haha, here in New Zealand, if you live in a weather prone area “everyone’s” insurance goes up to pay for it!
The North Island has been hit really hard in the last year or do, with cyclones, flooding etc, yet all our home insurance premium payments went up because of it, and I live in the lower half of the South Island where the weather’s more stable!
Most people have a mortgage between 2% and 4%. A basic savings account (not a CD) pays 5%. Paying extra on your mortgage is literally like flushing currency down the toilet. A home is never paid off. In some states, the costs of a house (taxes, insurance, repairs, maintenance) outweigh the actual mortgage amount.
Engagement for Erin. Keep up the great educational content!
Much appreciated!
Renting after retirement is only for the wealthy!….or the poor. If you just want a nice comfortable retirement, pay off an appropriate primary residence. Having no debt in retirement is priceless! We know, as we did just that. No worries, no concern about market crashes. We can easily live off of JUST Social Security, but we also have investments to fund all the fun stuff.
Goals 👏
Same, except my house isn't paid off. As I said above, my mortgage is half what an apartment (or some houses) go for. My 3 year old Tundra is paid off, and other than utilities, I could live off just Social Insecurity. It would be tough, but thankfully, I have an annuity, plus income from investments. Although I lost money (around $30K) in 2020, I'm still not doing badly, since most of those investments aren't in the stock market.
Disagree partially. Your living situation should reflect your lifestyle needs. My wife and I travel a lot, so having a lot of home maintenance would be a pain. So, we rent and will rent for the foreseeable future.
being house rich is not security.
So you are assuming the Republikkkans aren’t going to gut your SS entitlements?
I'm very proud that my wife and I paid off our home when I was 40 and she was 36. I'm 58 now and have put the money I would have used for the mortgage first to help my kids through college and now paying off a second home which will bring income stream through rent when I finally retire.
Another plus for ownership vs renting is that the ownership neighborhoods are typically a different lifestyle or quality of life than what you get with renting. During college we rented and didn't really care about this factor. If the garbage bins were overflowing or people were changing their oil in their cars in the parking lot, we could care less. Our first home was a townhouse, it started out great but after about 5 years the turnover seemed to accelerate and the community went downhill with many units becoming rentals. We then moved on to a single family neighborhood of 130 homes in the late 90's with an average cost of $350k-450k, which I considered high at the time. Today those homes now go for 1.2M - 1.6M. As you can guess nobody is paying that kind of money to turn the house into a rental. Renting may offer more flexibility, which is a positive, but that is also what makes it more transient and less like a neighborhood which for some is a negative.
nobody? Seems to me my tenants for the past three years must not be the nobodys you mention, because that is exactly what they do. Given all the applicants we had wanting to rent our house and going into a rent bidding war, I'd say your assessment about nobody is wrong. Plus, people spend ridiculous amounts on rent all the time, even multi-million dollar homes and paying $20k/mo.
@@hanwagu9967 The word 'nobody' obviously was a poor choice of words as it is an absolute. Better said, would be that, typically people on average don't buy a 1.6M house and rent it out, but I'm sure that it does happen.
Paid off our mortgage a couple of years ago at age 38, it took us about 8-9 years. BUT So glad that we did as did allow us to max out retirement accounts, 0 debt of any kind and allowed us to build up 2 years worth of emergency fund as well. But the best part is that it gives me no anxiety for losing my job anymore and sleep well at night with peace of mind and feel kind of semi retired. Especially during this turbulent times with stock market volatility and high inflation.
Nice. I wish I bought in early 2010's... I got mine in 2018... if I stuck to my goal than it would be paid off next spring. But I'm about 3 years behind schedule. It is hard to stick to the plan for 8 years in a row. Hopefully I stay working for the next couple years, strap down and stick to the plan
Use that exact amount to invest for your future and sudden unexpected home repairs. Congratulations.
Hey Erin Thanks for the video I disagree with the method you calculate the cost of the paying for mortgage since your calculation is time independent - I mean as if the 30 years loan started right with the retirement- Let's say a person is only 5 years away from paying off the home, and they want to retire, it certainly doesn't cost them $800 000 more in savings. Besides, they can get a roommate, it probably wont cover the monthly house payment but every dollar helps I calculate my personal wealth as two different values : the money in stock market and money + house eq together. One value tells me what will grow in stock market next year while the other one tells me how far I am paying off the house I love your videos, #keepgoing
We paid off our house years ago. Sometimes I forget the benefit that provides for us. I am grateful to have had the chance to do so. (Think, hard work & sacrifice).
I think owning a home greatly increases your networth because it reduces your expenses which is actually better than an income stream of the same amount because savings are not taxed.
networth isn't correlated to reduction of expenses or income stream. Plus, your home may appreciate 4.5% over time, but that is reduced by inflation over time and you have no flexiblity with home equity.
@@hanwagu9967 I disagree net worth is totally coordinated with reduction in expenses or increases in income
Except property taxes.
@@dariogomez8721 In many jurisdictions, some people are exempt from property tax. Senior citizens and military veterans of certain tax brackets are exempt. Also, if you do pay property taxes, it's usually less less than the increased worth of your home year over year in the long run. Now, maintenance cost will definitely decrease your networth. Writing a $20k check for a new roof or major repairs will put some dents in the networth
@@hanwagu9967homes and people's situations are all unique. You can't just say home ownership is a bad investment. I put 0% down, my home has appreciated 50% in 3 years. And I can rent it out currently for ~140% of my mortgage. It's an investment that will pay for itself. As long as I put the extra rent into an account to pay for expenses on the house, I will never have to pay out of pocket for it while renting.
1000% agree with you on this one! I never count my house as part of my net worth, even though it's already been paid off since 2014. Now, you might be able to include this if you have an investment home. I would rather have a 1.5 million in 401k, cash, brokerage etc than a 500k of the same and a primary home worth 1 million. To me a primary home is not an investment because I live in it and you pay property tax, insurance and $$$ maintenance. Think about it, high property value=more property taxes! Unless you downgrade to a smaller home, then it make sense adding the profit back into the net worth.
cash is a dpreciating asset
@mra95662 - So are houses and guess what, rich people can deduct their investment home as a depreciating asset therefore reducing their taxes and you pay rent to help them pay their mortgage! You can only realize your gains on your home (If you're not underwater) by selling it and its not as liquid as cash and you still have to find a place to live. How do you buy food? Cash or credit card. You work for a paycheck that you can easily withdraw from your bank right? Many got into trouble thinking the government will take care of them with social security but I got news for you, DON'T be fooled. Average SS benefits $1,700. How much is rent these days on average. Think of ways to get ahead to make more money, we will always have inflation so one of the ways to get ahead is make more $, save and invest. The rich get richer cause of their friends in the white house, not us. Ever thought of why a company stock price goes up celebrating after a layoff, let that sink in. Can you eat your house. No.
You dont include your principal residence as apart of your net worth? Net worth is assets minus liabilities.. your house should be included in that
@raze5346 That's their definition. Not mine. You believe inflation is at 4%? Up to you. The government changed the definition of recession when we had 2 quarters of consecutive negative GDP. The way I see it, anything which does not generate money and isn't liquid, I won't add it. Unless you do a reverse mortgage "selling" your house to the bank and get monthly payments which im not interested in. Other than that, homes are meant to be lived in especially a primary home. It takes time to sell and make your profit but you still have to live somewhere. Even if you are mortgage free, property taxes, insurance and maintenance still apply.
I agree with Robert Kirosaki's definition of an asset, which is something that makes you money. If you are living in your home, it's not an asset, but a liability. Even a house that no mortgage is still a liability!
Live in a cardboard box assett,$$$$it folds neatly everyday.
Of course it is an asset because it eliminates the cost of rent. If your rent is 2000 a month then you have paid $24,000 at the end of the year but if you own the home you pay no rent so you have made $24,000 a year.
The home is an important asset, be it good or bad. We are on our 4th home and this home certainly has been our best experience. Two of the four homes we broke even, one home we made perhaps 10%, our fourth home will make a good 40% return. Since we are later in life it makes sense to carry our home loan as our mortgage was around 2.3%, well below what our portfolio was making. All in all, owning a home has been good for us. In our out years we may consider renting, this is not the best financial decision but more of a quality of life. Renting means we don’t need to worry about home maintenance
I didn't become financially independent till I was in my mid 40s after having a major financial setback during the covid , Thank God i'm now on my feet . In addition to buying my second house, I'm also making money on a monthly basis through passive income, and I've also met some of my goals. I really hope this motivates someone to know that it doesn't matter if you don't have any of these things yet; no matter your age, you can start today. Investing can help you change your future!
Wow, interesting indeed! Currently I'm in need of investment ideas or tips. Earlier this year I hesitated and failed to take any action until now. However, I'm determined to try some new as I am very open to various investment ideas . I want to be retired in my forties or fifties. I really wish I can achieve what you have achieved and I believe it will happen
It's essential to comprehend the complexities of investing. Having a trustworthy support system, such as a financial adviser, who can advise you is crucial, especially when choosing assets.
Thank you for your advice, it's challenging to find a reliable investment advisor here. Seeing the success you have achieved through investing I would love to have access to your investment advisor.
Generally, investing requires higher knowledge. For this reason, it's important to have a solid support structure to guide you through especially in asset picking. I operate with (ALEX MARTIN TARLOR) an investment specialist who partners with a licensed wealth management firm. For the record, his experience has been the best for my finance
Wow, I'm surprised you know Alex martin tarlor He has been my financial advisor for over a year now and not only do I receive large passive income monthly I am able to achieve 4 out 5 financial goal I have for the year