We have been 100% debt free including our mortgage for seven months now and the thought of borrowing money gives me anxiety. Following the baby steps changes you. Pay off your home!
We have 2 paid for cars and I will never again take out a loan to buy a car. After feeling what it’s like to not have a car loan, I can’t imagine having one.
I actually had my investment advisor tell me to mortgage my house and invest the money with him. After I finished laughing, I told him to forget it. I asked why he would want me to do that and he said my house was nothing but a "Dead Asset" and was doing me no good. That paid-off mortgage really frees up a great amount of money. Great video!
@@aaront936 A house is shelter, one of the most fundamental needs humans have. It doesn't have to produce income to be beneficial. It provides in protection from the elements as well as a place to keep food, belongings, etc and that is more than enough reason to call it beneficial. It's good to not always think of anything we own in terms of how much money it's making as opposed to how much benefit it's providing in other ways.
I ran the numbers years ago and found that I could avoid paying the IRS $14,000 per year, but in order to do so I would need to send $37,000 to the bank. The net result is that keeping to me mortgage schedule was resulting in 'somone' ending up with $23,000 of my money, rather than being able to keep it in my pocket.
show numbers. which state? what’s your interest deduction, prop taxes, any charity? i assume no charity. i have high prop taxes in Tx, have mort interest and decemt charity. that pushes me above standard ded. so 2.6% mortgage. 5% int on cash. and i keep the cash handy. so ….
Observation. This guy became a multi-millionaire "while having a mortgage". For many years, he prioritized investing in his retirement account over paying off his low interest mortgage. If his priority was reversed, his net worth would be far less today. btw - there is no "tax benefit" discussion in the video.
He only owes about 200 on a 900k house. Sounds like he’s been fast tracking that mortgage payoff. It’s difficult to speculate how long ago he paid off other debt and began paying more on mortgage but it appears he has paid extra. I think the point was well made when asked if he would borrow money against the house and go invest it. No one with any sense of risk would do that.
@@profiveoh Don't assume "fast tracking". I've never made mortgage curtailment payments, and my mortgage is only about 30% of appraised value. If you've owned a few homes and they have gone up in value, and you always roll the increased equity forward, it's easy to have that situation without curtailment payments. At retirement, just sell, downsize, and pay cash from the equity without ever diverting funds that could otherwise be used for investing.
That feeling of freedom from paying off your mortgage is really great, until your property taxes come due and then you realize you're not really free at all.
Yes, but you do consume sewer services, benefit from education systems, and use some type of public service (elections, inspectors, etc). Paid-for real estate in the USA is about as good as it gets in the developed world.
Most people don’t realize you have a negative real rate on your mortgage today. Inflation is higher than the interest rate you pay on your mortgage. That literally means your getting paid to borrow money. As long as you can serve your loan, your getting paid to borrow money. The debt is getting wiped out through inflation. The value of the debt is going down faster because of inflation.
Very good point. I see no reason in my case to deplete my savings/investments by $315k in order to pay off my house. I have a bunch of equity already, like the diversification of the various assets. Just with my home value growing at the rate of normal inflation, I coming out way ahead. If one of my stock investment runs up then I may consider doing extra payments on the mortgage.
Agree using borrowed money to invest in risky assets is not a good idea. However he can get 5% on a money market fund so he is earning a 2% spread before the tax deduction. So he can use the extra cash earned on the spread to pay extra on the principal
I've listened to many of Daves videos and I have struggled with the idea of paying off our home early... this video pushes me in favor of paying it off early for the peace of mind instead of the return in investment accounts.... I'd love to live without ever having to pay something unless I want to... I feel I could better stay the course that way for long term wealth... if I retire with 3 million instead of 4 million but end up with an extra 10 years of a paid off house early in my life... ill take it
When you have a couple dozen it makes sense. This is why the best thing we can do is invest in rentals, they will get paid down with time of you're worried about not owning them outright. Or you can leverage debt and continue to grow the portfolio.
I am skirting around the edge of understanding these concepts precisely (the reverse egineering thing), but I get it enough as a reminder why I am doing all I can to pay off our mortgage early. This was a good message to receive after 18 months of following Dave and deciding to pay our house off. Because every now and again I question it. Dave's example of taking some money out of an existing paid off house and putting it into the stock market. BOOM. I felt my heart and stomach go!
2.725 mortgage. 5% on cash now. AND interest is deductible. assuming you have other deductions like church and charity to keep over the standard deductions. keep mortgage.
Disagree. I think he is good where he is at, but needs to de-risk his portfolio. If anything, he should save more in cash as opposed to throwing it at the mortgage.
Equity doesn't make money either. I'd much rather take on fixed rate debt against a property and invest into more cash flowing properties. Equity is lazy money.
I’ll keep my 2.5% mortgage and remain invested. As long as rates stay that low, and either my employment income or portfolio income leaves me with little risk in making the mortgage payment, I’ll cash-out refinance that sucker back to 80% LTV and invest the equity into better-appreciating, cash-flowing assets until death. I’d rather my kids inherit a $10M portfolio and $500K of debt than a $5M portfolio with no debt! 💡
The reason why this guy never paid his house off he knew he can make more money in the market and he had the money to pay his house off at the same time so there wasn't risk
Housing has never outperformed the stock market over a 15 or 30 year period. Mortgage rates are under 3% right now. The reason to keep a mortgage is to place your money where it will mathematically make you the most money. The highest and best use of that money is to invest it rather than pay off your mortgage early.
@Nick White I did not say having a mortgage was the safest way to own a home. But, when done responsibly, is a very safe way to own a home. Granted, this is coming from a prospective of extreme job security. Investing is always a risk. Carrying a mortgage in order to invest is not very risky at all. Especially if you’re talking about foreclosure. For someone like that to foreclose, they’d have to lose their job, lose all of that money they’d invested, and have no emergency fund to cover expenses. Many of the things Dave advises not to do are very safe and rewarding when done properly. Such as mortgages, 0% interest loans, credit cards, etc.
@Nick White What you don't include there was that the majority of the people that went through foreclosure were in deep with BAD adjustable rate mortgage loans at high loan to value ratios prior to the collapse. Additionally, banks were letting people take cash-out on remaining equity often up to 90%+ LTV - even over 100% at times. That type of stuff isn't happening anymore from regulatory and common sense perspectives. Individual cash-out refi's are down precipitously as compared to 08' and foreclosure rates, even if the housing market were to drop by 15% or more in the next year would be drastically lower than they were in 08' simply because lending standards are higher at this time and predominantly fixed at very, very low levels. While I certainly agree that avoiding unnecessary risk is good for more people and surely good for your retirement assets, to bring up the foreclosure crisis of 08' is a bit misguided considering we're very unlikely to see something quite like that again in our lifetimes unless lending standards relax a considerable amount. Which is again, unlikely. And ARM loans are far less common for personal mortgages in the current market. Meanwhile, the vast majority of homeowners who refinanced in the last three years did so without taking out additional cash as part of the deal. So they've freed up more monthly and annual cash flow and lowered their annual debt service burdens. Which means they are more insulated to interim risks like a market or real estate crash scenario because their payments are lower.
@Nick White Nick, the worse case scenario to avoid foreclosure (if you can't make your mortgage payments) is to simply sell the home. Get your equity out and start over. Your emergency fund will buy you the time to sell.
My son bought a house 6 weeks ago. He just paid his first mortgage payment and said he added an additional $300 (from overtime pay) to the principal. 👍👍
@@ThatGuyOnRUclips2 home values rise and fall regardless of whether it has a mortgage. Have fun prepaying a cheap mortgage while inflation is skyrocketing.
Have several coworkers facing early retirement due to an impending mandate. I will be forced out as well but have several more years in not facing the same hardship I’m sure having a paid off house would make their ordeal less severe
Dave became wealthy playing the math game when he was 27 and lost it all. He’s speaking from experience and his advice is not terrible as the man is worth over 200 million.
Dave wasn't playing a "math" game, he was playing a leverage game. A risk proposition whereby he was about as highly levered and exposed to risk as an individual can get in a bubble type atmosphere where interest rates were far, far higher than they are today and lending practices were much less strict. Math is not fungible without the addition of external variables. There is nothing wrong with "math". With how well this guy has set himself up, in general, he should be dumping as much money as possible into other investments and not his personal residence mortgage.
@@kaynenbrown5102 dave got rich in sales. He sells books, classes, investors, apps, dabe didn't get rich by paying cash for everything and saving for 30 years.
At 5:41 - I'm an engineer and fit into the category of D.R. study. When Dave asks the question in reverse I tend to think that I WOULD take a mortgage on my paid off house, however my current mortgage rate is only 2.8%. At current mortgage rates obviously I would not. Maybe once my house is paid off and if interest rates return to 2.8% I'll change my attitude and just say no. I'd point out that I became a member of folks in his study all while having a mortgage (as in I fit the financial and education profile, I was not actually contacted or interviewed as part of his study).
Ramsey is giving 30 year old advice. Would you go to doctor who is giving 30 year old advice. Back in the day when mortgage rates were near 10% or higher It made sense to pay it off asap. Rates are around 3 % .investing your money makes a lot more sense
@@alinatamashevich3354 I have no idea what your point is.its Ramsey who says you can make 10% on your investments. So if you rather not pay a 3% mortgage And not make the differential of 7% Please tell me how your ahead financially I really like to know. Plus you obviously never heard of realestate crashing as it did in 2008.. If you want to tie up all your money in a house ,that's your business .
When my $1,500/mo mortgage gets paid off, I will still have a $500/mo city property tax payment, and that never goes away. I can pay that once a year, or monthly.
I find it so odd that so many come here to trash daves plan. They must be so rich leveraging themselves to the hilt and they have free time to come trash him.... or they are insecure and broke, up to their ears in debt hoping they can convince everyone else to make terrible choices too
It's my Home not an investment is how I look at my paid for house. The feeling of knowing that I don't owe anyone a penny on my home is worth more than any return on investment.
Good video, but mortgage debt of about $270k @ a little over 2% on a home worth $900k does not equal risk. What does equal risk is high growth mutual funds returning 30% this year with no connection to real world valuations. The caller, given his situation, should be concerned about de-risking his IRA portfolio, which he can do on a tax free basis, as opposed to being concerned about a $270k tax friendly mortgage.
Very true. The highest exposure to risk that this caller has is absolutely his portfolio. He probably doesn't even know what his IRA's are actually invested in either or the fees he's being assessed on an annual basis.
@@aolvaar8792 Annnnd are you the caller? What's the point of this comment? If you're in single stocks, you are inherently at a greater risk than say holding an index or other more diversified funds. However, if you've got strong conviction those companies, then it can be a very profitable long-term play. It's all risk tolerance. Regardless - if you're not the caller, why would you even bother to comment on my comment?
@@brett4932 He probably doesn't even know the fees he's being assessed on an annual basis. ????? Why wouldn't he know? I know $40/yr Flat. That is why I commented.
@@aolvaar8792 Welp, welcome to the minority I guess? the vast majority of Americans who have retirement accounts can’t even tell you what they are invested in and don’t know their fees. There are numerous documentaries that have been done on the predatory nature of fee structure in IRA accounts and how little the average consumer knows about them. So yeah - I’ll continue to contend the caller probably doesn’t know what’s even happening in his IRAs and he’s better off figuring that out than laying down the very last of his mortgage. And your personal stewardship of your IRAs is good for you, but irrelevant to my original comment.
Sometimes renting short term is better. I lived in northern California near Sacramento. Found a studio for 500 a month. It included water, trash, sewer, and natural gas. Had a gas furnace, hot water for showers and gas stove. Electric was 10 $ and included the air conditioning. I left a larger 925 a month apartment plus utilities. 425 plus savings a month increased lifestyle. Could afford to attend a church congregation of singles. We as a group went all over northern and central California site seeing ,dances, Temple attendance etc., fun times. Loved the job I had at the time . Didn't make much but got lots of over time that helped. So the studio was just a place to sleep and shower anyway.
It’s always fascinated me that I feel like one repeated question is why pay off the home, I feel like every caller is in the same boat, is there a deeper meaning or is it really all in investing or is there a psychological feeling with having no debt
Pay off the house so it's yours. It's not worth the government handout you get once a year to essentially rent the house from the bank. Noone ever regrets paying off their home.
I regretted paying off my 3.25% $400k mortgage at 32 years of age within one year of purchase. It was the worst financial decision I ever made. After paying it off, I was still paying $20k on taxes, so I never felt 100% ownership you mention.
@@afonsecadotorg I’m sorry to hear that, taxes never go away (for anything), and I’m sure there is a way to know in advance how much will be paying before you wind up regretting it. This thread is strictly about debt however, which is different.
But Dave, you being “naive” in not factoring that he has likely paid the vast majority of the interest on that mortgage upfront. He likely is not paying all that much in interest over the remaining years and could likely use the 250k to conservatively make that interest back in a year or two.
This guy's mortgage is nothing to even think about. It's pocket change for him. Schedule it for autopay and forget about it.. What goes up every year - property taxes, insurance, utilities, services, and if one lives in a place like NYC, union wages for doormen, supers and porters. A little push back or shopping around on these expenses would be more worthwhile.
Wealthy people borrow money to make money. They use other peoples money at a low interest rate so they can invest their own money making much higher returns. Never makes sense to pay off your mortgage unless you want that feeling of having it paid off
Sam, please check how much that firm is charging you. I heard they charge over 1% assets under management (AUM). That's over $10k per year on a $1 million portfolio 😮
Dave wouldn't recommend pulling out Roth contributions tax and penalty free to pay a mortgage. That's the exact opposite argument to mortgaging a paid for house to invest. Most people wouldn't be comfortable with either.
Time value of money makes the mortgages and low interest loans free money when you factor in inflation. You take all of your risk of not PaYinG OfF yOuR dEbT and realize it into losses by raising the PV of loan. This is compounded by the opportunity cost of not investing in accounts with a higher RoR and ROI. STOP PAYING OFF YOUR MORTGAGES EARLY.
@@Fc9ers time value of money dictates that cash in your hands today is worth more than cash in your hands tomorrow. Lets say you forgo spending $300,000 today and put down $50,000 down on a 5% mortgage and invest the $250,000 instead. Over the course of a 30 year mortgage, assuming an annual average rate of return 20% and no additional contributions to your initial investment, your $250,000 is worth $59 million. The amount paid on your loan, in contrast will only be $533 thousand. Keep in mind, if your property is appreciating at a rate of 3% a year, the effective interest rate of your loan is 2% and when adjusted for inflation is actually 0 to -2%. If you have the money to buy a house, it makes zero sense to buy it in cash. If you have the money to pay off your house, it makes zero sense to not invest the money into a higher yield investment. If you spent all your $300,00 on your home today, and bought it outright that return on investment will only be worth $570,000 in 30 years. Your higher yield investments (stocks) at most could only generate a future value of $21 million with the same assumptions and a contribution of an equivalent mortgage payment. It makes no sense.
@@jerichorosas so why take out a home loan if you dont plan on paying it off? the interest payment, tax property, insurance and home maintenance cost can be used towards investments. if one is making so much money from investments why not use some to pay of home? if not, why not just rent and invest your money. More money to invest I guess
@@Fc9ers I just explained why, if you have the cash to buy a home outright today, the cash you do not invest in the mortgage WILL have a higher return on investment. The more liquid funds you have today to invest, the more money you will have tomorrow. Real estate does not appreciate at the same rate as most securities. Leverage is a good thing when the underlying is a sound investment. Paying off your mortgage early is asinine and only makes you feel better. It doesn’t in anyway help you and in many ways hurts the individuals Dave Ramsay is teaching.
Ramsey Solutions........the Coca-Cola of the financial industry. Coca-Cola keeps their consumers thirsty for more Coca-Cola. Ramsey Solutions does exactly the same thing, with their financial principles and awesome leadership. Always motivating people, to live a DEBT FREE lifestyle. Along with general life advice on multiple scenarios. Hopefully Papa Dave is still around on the show for the 50th Anniversary.
With 2.125 rate in his mortgage.. acting like it’s a risk to not pay it off is disingenuous. Who said you had to be in stocks. Several virtually no risk investments paying several percent above his mortgage rate
Wrong, borrowing money to acquire liabilities is stupid. Borrowing with an ultra low rate to to acquire assets and grow your wealth is something wealthy people and companies do all the time. Your money compounds faster. Some people are not psychologically affected by borrowing because they follow a well calculated risk plan.
if he paid off his house today and then took the money he was paying for the Monthly mortgage and invest it for the next 30 years he would be sitting pretty!
The only benefit that I can see to not paying off my mortgage is that the interest rate is so incredibly low on it that mathematically speaking it makes more sense for me to just invest the money in the market. However, the problem with math is that it is a hard fact-based science and there is no room for human variables with it (such as emotions). So yes, it mathematically makes sense for me to have that mortgage at such a low rate but I hate the feeling of debt. It feels awful. Therefore, our mortgage on our new home will be paid off in 6 years, not in 30 years (our 30 year mortgage has a lower interest rate by an entire point than a 15 year fixed, oddly enough, so we grabbed the 30 year and set our payment schedule to be done with it in 6 years). Oh, but there is zero tax benefit to the interest. That doesn't even mathematically make sense.
Today's interest rates are less than yearly inflation is before inflation skyrocketed. Keeping your mortgage to term is actually saving you money in the long term. Let tomorrow's cheaper inflated dollars pay your mortgage.
We did not follow Dave’s plan and went from renting with multiple other debts to buying a house without saving for a down payment. We are now debt free except for the house AND our house is valued 200k over what we bought it for. If we had followed Dave’s plan, we would still be in debt, renting a mouse infested home (because that was the only rental we could afford) and still no retirement. With the money we are saving on a lower house payment by refinancing at a lower rate, we had the funds to pay off all other debts and are investing in our retirement funds . We also have money to pay off the house early or sell it for a nice chunk of change! Glad we are not doing the debt snowball anymore!
Most US mortgages are owned by the US Government thru Fannie Mae and Freddie Mac...all it would take for the Federal Government to take over those properties is to call in those loans...just like any other institution.
"I'd pay the house off tomorrow." Once again, Dave Ramsey doesn't consider the tax implications of his advice. With a current income of $260k, there is no need to dip into his retirement accounts to pay his house off. The caller already stated he could pay the house off within two years with his current income. No need to pile a bunch of income on top of his already high income and pay 35% (or more) on the withdrawals. Once folks get past Baby Step #2, they need to get their financial advice elsewhere. .
Yup the caller is better off investing more in the retirement account, save on taxes and pay off the home as normal. The pensions coming in should be able to take care of it without even thinking if everything is automated
The tax benefit (not discussed) is complete BS. I’ve heard people say not to pay off the house because of the tax deduction. Lets look at the math. If you assume you are in a 28% tax bracket your mortgage tax deduction will get back 28 cents in tax return for every $1 spent on mortgage interest. But if the mortgage was paid off, you’ll no longer have the mortgage tax deduction but you get to keep the post tax value ($1-0.28=0.72). So, would you like to keep the mortgage so you can pay the bank $1 in interest so you can get back 0.28 cents on taxes, or would you just prefer to pay off the mortgage and pay taxes on the $1 and keep 0.72? Hmmm… 0.72>0.28. Simple math. Pay off the *amn mortgage. And anyone who tells you to keep a mortgage for the tax deduction are complete idiots.
This math makes leveraged idiots mad. If you have a paid off house, u probably are not taking out more mortgages voluntarily. They are caught up in the analysis trying to justify their terrible choices. Pay it off and be happy.
@@aaront936 I've heard that argument as well, which works out perfect on whiteboard. However, very few people are disciplined enough to follow through on investing the difference consistently over three decades. The majority of American's are short sighted and impulsive with no self-control or discipline. That is why it is better for these people to pay off the house. At least then the house acts as a sort of forced savings that is difficult to cash out of in an impulsive action.
Can someone help me with this: Should I payoff my house or max my Roth IRA?... FYI, since I'm near the end of my house loan, the interest per month is very little, so of course my Roth return is much higher. Thank you in advance!
Considering contributions to your Roth are capped at $6,000 or $6,500 (depending on your age) you should max your Roth first then make any other additional payments on your house second. Once the tax date deadlines are past, you are unable to retroactively max your Roth for the year. So max your Roth in the annual window for that tax year and go from there.
Dave does a great job with people and making them also think with there heart when they should. This is why he will always have a place in the market to teach(great job). That being said the tax benefits I get from my house being self employed is far greater then paying it off. Now yes I have thought about it and if the world goes to crqp I can pay it off no problem.
They aren't making lots of money, its all relative to the specialization and industry within your field. Software probably makes the most. The rest make money by experience. Engineers that make the most money are in upper management, subject experts, consultants, or own a company. It's an experienced and specialized based industry. On average engineering isn't a high paying field.@@HappyPenguin75034
Well it is NOT a $900,000 loan. I know you’re using that as a figure just as an example. But you exaggerate the risk when you inflate the loan number lol. I’m learning to be a numbers guy and there is literally not that much risk if he didn’t pay it off. Making your initial statement at the beginning of the video true: it’s more of a technical question and viewpoint question
@@aaront936 I can get a HELOC and buy food. I can get a reverse mortgage and buy food. I can refinance and buy food. I hope 3 examples are good enough.
Paying off the mortgage is way overrated. Pay the mortgage low interest rate and invest the extra money in some basic index funds. Mathematically, this is the best financial decision. Emotionally, paying off the mortgage gives one a peace of mind. That's it.
If you have any type of net worth, you keep the fixed low rate mortgage. That is a slam dunk. You have no worries either way. I have enough stock exposure, I love the diversification that real estate provides and I like some cash liquidity for the future.
If I was 25 and was offered 500k at 2 or 3 percent I’d take it all day long. 75 probably not. Dave always leaves out little bits that might sway the argument in the other direction. To put it another way. When someone gives you a one size fits all appropriate it’s your cue to use them as a starting point to your personal situation
Assuming that your mortgage is your only debt and it is a very low percentage of your income and you have a significant net worth, if the stock market dumps 50% and you are paying down your mortgage early instead of investing in the market, you're simply not making the best financial decision. Period.
@@eatpigsnot If I was just doing math, I would not be assuming that the scenario above had a significant net worth and a low debt to income ratio (10% or lower). Debt is a neutral tool. If you abuse it, it's like a cigarette that will kill you. If you are very responsible with it, it can supplement your wealth in a conservative manner. Treating 2.5% interest mortgage debt the same as credit card debt makes you look stupid.
10% average stock market return over 100 years vs. a 2-3% mortgage rate. That's how you figure the math. 22%/24%/30something% (depending on your bracket) write off on property taxes and mortgage interest if you itemize and only pay the minimum while you throw the extra money in the stock market and watch it soar. That's how you figure the math.
I’m sorry but I can’t stand boomers like this guy! He’s a Millionaire with a 6 figure salary and 2 lifetime checks coming in at $80k a year and he’s wondering if he should pay off a $200k mortgage on a million dollar property!!!! Just pay the stupid thing off… enjoy a higher net worth and go travel a bit! You obviously earned it! It’s not rocket science!
You talk about math and yet risk has actual statistical measures based on each individual situation. Trying to measure risk with ‘your heart ‘ is not mathematical. You do amazing things for people Dave, but sometimes you’re blatantly inaccurate.
If you make more than the house interests, than no, it's not worth it to pay off the house. 2.8 vs making 5 times and more in the markets. No one ever said to take out a loan to invest. Dave's strawman argument is getting old.
Dave's mortgage advice is probably the worst advices he gives in a sub 3% lending market. He is literally cost his listeners a million dollars at retirement. Yet the cult of Dave is not smart enough to see it. If you are investing the difference there is almost no additional safety in paying it off early.
The only reason I haven't taken out a Mortgage on my home is because I dont have steady income to pay it back and my sister would get half. If I was going to build a new house or 2 here then I would do a mortgage and rent those out.
If you have a problem with debt then you have a problem with God. There are many promissory notes in the Bible. Abraham, David, the twelve Apostles are waiting for rewards that will be paid sometime in the future. These are debts that the Lord carries.
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We paid our house off earlier this year - 9 months later STILL LOVING THE FREEDOM!!!!
Congratulations. What’s some of the best parts off paying it off?
We have been 100% debt free including our mortgage for seven months now and the thought of borrowing money gives me anxiety. Following the baby steps changes you. Pay off your home!
We have 2 paid for cars and I will never again take out a loan to buy a car. After feeling what it’s like to not have a car loan, I can’t imagine having one.
I actually had my investment advisor tell me to mortgage my house and invest the money with him. After I finished laughing, I told him to forget it. I asked why he would want me to do that and he said my house was nothing but a "Dead Asset" and was doing me no good. That paid-off mortgage really frees up a great amount of money. Great video!
@@jackcapone4375 He's gone.
A "dead asset" you can live in! Geesh, these people are snakes!
@@mountainsriversandtrees1474 Agreed!
In a sense he's right your house is a use asset that's not making you anything. He's wrong in telling you to take out a second mortgage.
@@aaront936 A house is shelter, one of the most fundamental needs humans have. It doesn't have to produce income to be beneficial. It provides in protection from the elements as well as a place to keep food, belongings, etc and that is more than enough reason to call it beneficial. It's good to not always think of anything we own in terms of how much money it's making as opposed to how much benefit it's providing in other ways.
I ran the numbers years ago and found that I could avoid paying the IRS $14,000 per year, but in order to do so I would need to send $37,000 to the bank. The net result is that keeping to me mortgage schedule was resulting in 'somone' ending up with $23,000 of my money, rather than being able to keep it in my pocket.
Excellent point!
show numbers. which state? what’s your interest deduction, prop taxes, any charity? i assume no charity.
i have high prop taxes in Tx, have mort interest and decemt charity. that pushes me above standard ded. so 2.6% mortgage. 5% int on cash. and i keep the cash handy. so ….
He is talking about the interest you pay. I did the same calculations and was convinced. Pay it off!
Observation. This guy became a multi-millionaire "while having a mortgage". For many years, he prioritized investing in his retirement account over paying off his low interest mortgage. If his priority was reversed, his net worth would be far less today. btw - there is no "tax benefit" discussion in the video.
I agree. He's done amazing well.
He was paying the mortgage off while funding retirement tho...
He only owes about 200 on a 900k house. Sounds like he’s been fast tracking that mortgage payoff. It’s difficult to speculate how long ago he paid off other debt and began paying more on mortgage but it appears he has paid extra. I think the point was well made when asked if he would borrow money against the house and go invest it. No one with any sense of risk would do that.
@@ThatGuyOnRUclips2 Well, everybody slowly pays their mortgage loan off with regular mortgage payments.
@@profiveoh Don't assume "fast tracking". I've never made mortgage curtailment payments, and my mortgage is only about 30% of appraised value. If you've owned a few homes and they have gone up in value, and you always roll the increased equity forward, it's easy to have that situation without curtailment payments. At retirement, just sell, downsize, and pay cash from the equity without ever diverting funds that could otherwise be used for investing.
That feeling of freedom from paying off your mortgage is really great, until your property taxes come due and then you realize you're not really free at all.
Yes, but you do consume sewer services, benefit from education systems, and use some type of public service (elections, inspectors, etc). Paid-for real estate in the USA is about as good as it gets in the developed world.
@@redfox435cat taxes are different all over. A lot of people pay way more than that
You're all smooth brains
You can often offset that against your income taxes, so you don't really end up paying that much more.
@@jamesmorris4617 plowing the road is about the only thing they do for me.
Most people don’t realize you have a negative real rate on your mortgage today. Inflation is higher than the interest rate you pay on your mortgage. That literally means your getting paid to borrow money. As long as you can serve your loan, your getting paid to borrow money. The debt is getting wiped out through inflation. The value of the debt is going down faster because of inflation.
Very good point. I see no reason in my case to deplete my savings/investments by $315k in order to pay off my house. I have a bunch of equity already, like the diversification of the various assets. Just with my home value growing at the rate of normal inflation, I coming out way ahead. If one of my stock investment runs up then I may consider doing extra payments on the mortgage.
@@Redtopper02high interest in cash too
Agree using borrowed money to invest in risky assets is not a good idea. However he can get 5% on a money market fund so he is earning a 2%
spread before the tax deduction. So he can use the extra cash earned on the spread to pay extra on the principal
I've listened to many of Daves videos and I have struggled with the idea of paying off our home early... this video pushes me in favor of paying it off early for the peace of mind instead of the return in investment accounts.... I'd love to live without ever having to pay something unless I want to... I feel I could better stay the course that way for long term wealth... if I retire with 3 million instead of 4 million but end up with an extra 10 years of a paid off house early in my life... ill take it
The difference between 3 and 4 million is pretty big. Are you sure it's actually that big, or worse, are you sure it's not even bigger?
@@donaldlee6760 I'm sure I'll be fine based on the track I'm on
you pay many bills each month - mortgage is just another one.
Pay it off, see how it feels. Great advice.
Paid mine off in 2015. Still feels great.
When you have a couple dozen it makes sense. This is why the best thing we can do is invest in rentals, they will get paid down with time of you're worried about not owning them outright. Or you can leverage debt and continue to grow the portfolio.
Math doesn't show risk. Great statement!
Risk can be measured mathematically, and Dave will never show you that math.
"Math doesn't lie, but liars do math."
Trust me, I'm an engineer.
@@braceyourselvesfortruth2492 Bruh, you never did a risk analysis on any of projects?
@@gabrielbaradel8969 you sure you're asking the right person?
Sencer!!!!!
Maybe Numberphile will make a video showing the risk.
I am skirting around the edge of understanding these concepts precisely (the reverse egineering thing), but I get it enough as a reminder why I am doing all I can to pay off our mortgage early. This was a good message to receive after 18 months of following Dave and deciding to pay our house off. Because every now and again I question it. Dave's example of taking some money out of an existing paid off house and putting it into the stock market. BOOM. I felt my heart and stomach go!
2.725 mortgage. 5% on cash now. AND interest is deductible. assuming you have other deductions like church and charity to keep over the standard deductions. keep mortgage.
As the mortgage ages the interest portion of the payments actually gets smaller. My concern is $150k sitting in the bank earning nothing.
It’s less than1 percent of his assets, and it’s less than a year’s income.
Disagree. I think he is good where he is at, but needs to de-risk his portfolio. If anything, he should save more in cash as opposed to throwing it at the mortgage.
Where did u not hear the man have 1.7mil🤣🤣
Equity doesn't make money either. I'd much rather take on fixed rate debt against a property and invest into more cash flowing properties. Equity is lazy money.
@@Buggu3 But it isn't in cash. Its in high risk equities.
I’ll keep my 2.5% mortgage and remain invested. As long as rates stay that low, and either my employment income or portfolio income leaves me with little risk in making the mortgage payment, I’ll cash-out refinance that sucker back to 80% LTV and invest the equity into better-appreciating, cash-flowing assets until death.
I’d rather my kids inherit a $10M portfolio and $500K of debt than a $5M portfolio with no debt! 💡
Great, hopefully the market stays the way its going. Your gambling.
@@mph5896 you’re*
@@anthonysmithjr.7388 lets go Anthony.
The reason why this guy never paid his house off he knew he can make more money in the market and he had the money to pay his house off at the same time so there wasn't risk
Housing has never outperformed the stock market over a 15 or 30 year period. Mortgage rates are under 3% right now. The reason to keep a mortgage is to place your money where it will mathematically make you the most money. The highest and best use of that money is to invest it rather than pay off your mortgage early.
@Nick White I did not say having a mortgage was the safest way to own a home. But, when done responsibly, is a very safe way to own a home. Granted, this is coming from a prospective of extreme job security. Investing is always a risk. Carrying a mortgage in order to invest is not very risky at all. Especially if you’re talking about foreclosure. For someone like that to foreclose, they’d have to lose their job, lose all of that money they’d invested, and have no emergency fund to cover expenses. Many of the things Dave advises not to do are very safe and rewarding when done properly. Such as mortgages, 0% interest loans, credit cards, etc.
@Nick White What you don't include there was that the majority of the people that went through foreclosure were in deep with BAD adjustable rate mortgage loans at high loan to value ratios prior to the collapse. Additionally, banks were letting people take cash-out on remaining equity often up to 90%+ LTV - even over 100% at times. That type of stuff isn't happening anymore from regulatory and common sense perspectives. Individual cash-out refi's are down precipitously as compared to 08' and foreclosure rates, even if the housing market were to drop by 15% or more in the next year would be drastically lower than they were in 08' simply because lending standards are higher at this time and predominantly fixed at very, very low levels.
While I certainly agree that avoiding unnecessary risk is good for more people and surely good for your retirement assets, to bring up the foreclosure crisis of 08'
is a bit misguided considering we're very unlikely to see something quite like that again in our lifetimes unless lending standards relax a considerable amount. Which is again, unlikely. And ARM loans are far less common for personal mortgages in the current market. Meanwhile, the vast majority of homeowners who refinanced in the last three years did so without taking out additional cash as part of the deal. So they've freed up more monthly and annual cash flow and lowered their annual debt service burdens. Which means they are more insulated to interim risks like a market or real estate crash scenario because their payments are lower.
@Nick White Nick, the worse case scenario to avoid foreclosure (if you can't make your mortgage payments) is to simply sell the home. Get your equity out and start over. Your emergency fund will buy you the time to sell.
My son bought a house 6 weeks ago. He just paid his first mortgage payment and said he added an additional $300 (from overtime pay) to the principal. 👍👍
He'd be better off buying an s&p index fund with that money.
@@aaront936 No he’ll do fine by paying off his house.
@@hollyb6885 home values up 30% and wont collapse based on a joe biden speech overnight. Your sons fine
@@ThatGuyOnRUclips2 Right. He’ll be fine.
@@ThatGuyOnRUclips2 home values rise and fall regardless of whether it has a mortgage. Have fun prepaying a cheap mortgage while inflation is skyrocketing.
Have several coworkers facing early retirement due to an impending mandate. I will be forced out as well but have several more years in not facing the same hardship I’m sure having a paid off house would make their ordeal less severe
So would getting the shot.
@@braceyourselvesfortruth2492 they’re not getting the shot. It’s not an option. It’s a freedom thing you wouldn’t understand
Even if it’s not the shot your life can dramatically change in one day and you have to make decisions
Having resilient, cash-flowing investments far exceeding your mortgage payment would make it even less severe!
Disagree. Having the cash on hand that they used to pay down the mortgage would have made that ordeal less severe.
From the Uk, similar outlook pay it off. The world is hooked on cheap debt they think will never end
Dave became wealthy playing the math game when he was 27 and lost it all. He’s speaking from experience and his advice is not terrible as the man is worth over 200 million.
Dave wasn't playing a "math" game, he was playing a leverage game. A risk proposition whereby he was about as highly levered and exposed to risk as an individual can get in a bubble type atmosphere where interest rates were far, far higher than they are today and lending practices were much less strict. Math is not fungible without the addition of external variables. There is nothing wrong with "math". With how well this guy has set himself up, in general, he should be dumping as much money as possible into other investments and not his personal residence mortgage.
@@brett4932 I see!!
You’re crazy if you think Dave didn’t play the leverage game this time around as well. He did. He just got it right this time around.
@@kaynenbrown5102 dave got rich in sales. He sells books, classes, investors, apps, dabe didn't get rich by paying cash for everything and saving for 30 years.
@@aaront936 bro u comment on every persons response slandering dave. We get it, ur up to your ears in debt and hate him 🤣
At 5:41 - I'm an engineer and fit into the category of D.R. study. When Dave asks the question in reverse I tend to think that I WOULD take a mortgage on my paid off house, however my current mortgage rate is only 2.8%. At current mortgage rates obviously I would not. Maybe once my house is paid off and if interest rates return to 2.8% I'll change my attitude and just say no. I'd point out that I became a member of folks in his study all while having a mortgage (as in I fit the financial and education profile, I was not actually contacted or interviewed as part of his study).
Ramsey is giving 30 year old advice.
Would you go to doctor who is giving 30 year old advice. Back in the day when mortgage rates were near 10% or higher
It made sense to pay it off asap.
Rates are around 3 % .investing your money makes a lot more sense
Warren, and you are not worth 250M
Warren, just mail me 3% of your paycheck, since it is not that much. Bet you won't!
@@alinatamashevich3354 I have no idea what your point is.its Ramsey who says you can make 10% on your investments.
So if you rather not pay a 3% mortgage
And not make the differential of 7%
Please tell me how your ahead financially I really like to know.
Plus you obviously never heard of realestate crashing as it did in 2008..
If you want to tie up all your money in a house ,that's your business .
@@warrenkatz1469 You do not understand theft. Wealth people collect interest, poor people pay it.
@@alinatamashevich3354 you still haven't learned what compounding interest is. You're willfully ignorant at this point.
When my $1,500/mo mortgage gets paid off, I will still have a $500/mo city property tax payment, and that never goes away. I can pay that once a year, or monthly.
I would pay it once a year -- that sounds like a good thing.
always bills
I find it so odd that so many come here to trash daves plan. They must be so rich leveraging themselves to the hilt and they have free time to come trash him.... or they are insecure and broke, up to their ears in debt hoping they can convince everyone else to make terrible choices too
Keeping a mortgage and investing extra isn't "leveraging" have fun tying all of your money up in a house for the next 10 years.
@@aaront936 a mortgage is debt and you are leveraged. Bro, get educated. You troll this entire thread spewing ignorance 🤣
Hard to itemize these days. Take the standard and pay off your debt.
It's my Home not an investment is how I look at my paid for house. The feeling of knowing that I don't owe anyone a penny on my home is worth more than any return on investment.
Good video, but mortgage debt of about $270k @ a little over 2% on a home worth $900k does not equal risk. What does equal risk is high growth mutual funds returning 30% this year with no connection to real world valuations. The caller, given his situation, should be concerned about de-risking his IRA portfolio, which he can do on a tax free basis, as opposed to being concerned about a $270k tax friendly mortgage.
Very true. The highest exposure to risk that this caller has is absolutely his portfolio. He probably doesn't even know what his IRA's are actually invested in either or the fees he's being assessed on an annual basis.
@@brett4932 I have 30+ single stocks in an unmanaged IRA, cost $40/yr to keep it there.
@@aolvaar8792 Annnnd are you the caller? What's the point of this comment? If you're in single stocks, you are inherently at a greater risk than say holding an index or other more diversified funds. However, if you've got strong conviction those companies, then it can be a very profitable long-term play. It's all risk tolerance.
Regardless - if you're not the caller, why would you even bother to comment on my comment?
@@brett4932 He probably doesn't even know the fees he's being assessed on an annual basis. ?????
Why wouldn't he know? I know $40/yr Flat.
That is why I commented.
@@aolvaar8792 Welp, welcome to the minority I guess? the vast majority of Americans who have retirement accounts can’t even tell you what they are invested in and don’t know their fees. There are numerous documentaries that have been done on the predatory nature of fee structure in IRA accounts and how little the average consumer knows about them. So yeah - I’ll continue to contend the caller probably doesn’t know what’s even happening in his IRAs and he’s better off figuring that out than laying down the very last of his mortgage.
And your personal stewardship of your IRAs is good for you, but irrelevant to my original comment.
Except in Illinois where you have to pay $10,000 a year for property taxes.
Only $10,000! Try $25,000 in the #1 school district.
but you have to pay those property taxes along with a mortgage amount, right? so it’s mortgage + property taxes vs only property taxes?
Sometimes renting short term is better. I lived in northern California near Sacramento. Found a studio for 500 a month. It included water, trash, sewer, and natural gas. Had a gas furnace, hot water for showers and gas stove. Electric was 10 $ and included the air conditioning. I left a larger 925 a month apartment plus utilities. 425 plus savings a month increased lifestyle. Could afford to attend a church congregation of singles. We as a group went all over northern and central California site seeing ,dances, Temple attendance etc., fun times. Loved the job I had at the time . Didn't make much but got lots of over time that helped. So the studio was just a place to sleep and shower anyway.
It’s always fascinated me that I feel like one repeated question is why pay off the home, I feel like every caller is in the same boat, is there a deeper meaning or is it really all in investing or is there a psychological feeling with having no debt
Pay off the house so it's yours. It's not worth the government handout you get once a year to essentially rent the house from the bank. Noone ever regrets paying off their home.
The house is never EVER yours. Miss a tax payment and see who really owns it.
Amen!
And I have yet to get the urge to run out and get another one!
Saving to pay 100% $$ for the next house.
I regretted paying off my 3.25% $400k mortgage at 32 years of age within one year of purchase. It was the worst financial decision I ever made. After paying it off, I was still paying $20k on taxes, so I never felt 100% ownership you mention.
@@afonsecadotorg
I’m sorry to hear that, taxes never go away (for anything), and I’m sure there is a way to know in advance how much will be paying before you wind up regretting it.
This thread is strictly about debt however, which is different.
@@afonsecadotorg Congrats. You must be killing it if you were able to pay off $400k in one year.
But Dave, you being “naive” in not factoring that he has likely paid the vast majority of the interest on that mortgage upfront. He likely is not paying all that much in interest over the remaining years and could likely use the 250k to conservatively make that interest back in a year or two.
Still stupid
This guy's mortgage is nothing to even think about. It's pocket change for him. Schedule it for autopay and forget about it.. What goes up every year - property taxes, insurance, utilities, services, and if one lives in a place like NYC, union wages for doormen, supers and porters. A little push back or shopping around on these expenses would be more worthwhile.
Wealthy people borrow money to make money. They use other peoples money at a low interest rate so they can invest their own money making much higher returns. Never makes sense to pay off your mortgage unless you want that feeling of having it paid off
My heart jumped and he wasn’t even talking to me.
Sam, please check how much that firm is charging you. I heard they charge over 1% assets under management (AUM). That's over $10k per year on a $1 million portfolio 😮
Dave wouldn't recommend pulling out Roth contributions tax and penalty free to pay a mortgage. That's the exact opposite argument to mortgaging a paid for house to invest. Most people wouldn't be comfortable with either.
I have literally heard dave tell a California retiree to pull roth assets to pay off a cheap mortgage. Dave's terrible advice knows no bounds.
I have 145k in cash and 80k in mortgage, pay it off?
Time value of money makes the mortgages and low interest loans free money when you factor in inflation. You take all of your risk of not PaYinG OfF yOuR dEbT and realize it into losses by raising the PV of loan. This is compounded by the opportunity cost of not investing in accounts with a higher RoR and ROI.
STOP PAYING OFF YOUR MORTGAGES EARLY.
so why get a mortgage in the first place?
@@Fc9ers time value of money dictates that cash in your hands today is worth more than cash in your hands tomorrow. Lets say you forgo spending $300,000 today and put down $50,000 down on a 5% mortgage and invest the $250,000 instead.
Over the course of a 30 year mortgage, assuming an annual average rate of return 20% and no additional contributions to your initial investment, your $250,000 is worth $59 million. The amount paid on your loan, in contrast will only be $533 thousand.
Keep in mind, if your property is appreciating at a rate of 3% a year, the effective interest rate of your loan is 2% and when adjusted for inflation is actually 0 to -2%.
If you have the money to buy a house, it makes zero sense to buy it in cash. If you have the money to pay off your house, it makes zero sense to not invest the money into a higher yield investment.
If you spent all your $300,00 on your home today, and bought it outright that return on investment will only be worth $570,000 in 30 years. Your higher yield investments (stocks) at most could only generate a future value of $21 million with the same assumptions and a contribution of an equivalent mortgage payment. It makes no sense.
@@jerichorosas so why take out a home loan if you dont plan on paying it off? the interest payment, tax property, insurance and home maintenance cost can be used towards investments. if one is making so much money from investments why not use some to pay of home?
if not, why not just rent and invest your money. More money to invest I guess
@@Fc9ers I just explained why, if you have the cash to buy a home outright today, the cash you do not invest in the mortgage WILL have a higher return on investment. The more liquid funds you have today to invest, the more money you will have tomorrow. Real estate does not appreciate at the same rate as most securities. Leverage is a good thing when the underlying is a sound investment.
Paying off your mortgage early is asinine and only makes you feel better. It doesn’t in anyway help you and in many ways hurts the individuals Dave Ramsay is teaching.
Ramsey Solutions........the Coca-Cola of the financial industry. Coca-Cola keeps their consumers thirsty for more Coca-Cola. Ramsey Solutions does exactly the same thing, with their financial principles and awesome leadership. Always motivating people, to live a DEBT FREE lifestyle. Along with general life advice on multiple scenarios. Hopefully Papa Dave is still around on the show for the 50th Anniversary.
With 2.125 rate in his mortgage.. acting like it’s a risk to not pay it off is disingenuous. Who said you had to be in stocks. Several virtually no risk investments paying several percent above his mortgage rate
Borrowing money against a paid-for asset of any kind is stupid.
Wrong, borrowing money to acquire liabilities is stupid. Borrowing with an ultra low rate to to acquire assets and grow your wealth is something wealthy people and companies do all the time. Your money compounds faster. Some people are not psychologically affected by borrowing because they follow a well calculated risk plan.
if he paid off his house today and then took the money he was paying for the Monthly mortgage and invest it for the next 30 years he would be sitting pretty!
Or if he took the money he was going to use to pay it off & put it in the market he would be doing even better. Time in the market always wins
Prepaying the mortgage and then investing the principle amount doesn't beat compounding interest.
The only benefit that I can see to not paying off my mortgage is that the interest rate is so incredibly low on it that mathematically speaking it makes more sense for me to just invest the money in the market. However, the problem with math is that it is a hard fact-based science and there is no room for human variables with it (such as emotions). So yes, it mathematically makes sense for me to have that mortgage at such a low rate but I hate the feeling of debt. It feels awful. Therefore, our mortgage on our new home will be paid off in 6 years, not in 30 years (our 30 year mortgage has a lower interest rate by an entire point than a 15 year fixed, oddly enough, so we grabbed the 30 year and set our payment schedule to be done with it in 6 years). Oh, but there is zero tax benefit to the interest. That doesn't even mathematically make sense.
Today's interest rates are less than yearly inflation is before inflation skyrocketed. Keeping your mortgage to term is actually saving you money in the long term. Let tomorrow's cheaper inflated dollars pay your mortgage.
We did not follow Dave’s plan and went from renting with multiple other debts to buying a house without saving for a down payment. We are now debt free except for the house AND our house is valued 200k over what we bought it for. If we had followed Dave’s plan, we would still be in debt, renting a mouse infested home (because that was the only rental we could afford) and still no retirement. With the money we are saving on a lower house payment by refinancing at a lower rate, we had the funds to pay off all other debts and are investing in our retirement funds . We also have money to pay off the house early or sell it for a nice chunk of change! Glad we are not doing the debt snowball anymore!
you couldn’t rent nicer but jane money to pay off mortgage. hmmm
If you want to build wealth why would I pay off a sub 3% mortgage when I can earn 8-10% on an index fund? You're leaving so much money on the table.
Remember from a macro point of view stock market has done great since the 80s - it doesn't go on forever. Just be balanced.
Most US mortgages are owned by the US Government thru Fannie Mae and Freddie Mac...all it would take for the Federal Government to take over those properties is to call in those loans...just like any other institution.
They will never do that. Political/career suicide. Get a clue.
@@braceyourselvesfortruth2492 just one crisis away...we have to abandon the free market to save it comes to mind.
"I'd pay the house off tomorrow."
Once again, Dave Ramsey doesn't consider the tax implications of his advice. With a current income of $260k, there is no need to dip into his retirement accounts to pay his house off. The caller already stated he could pay the house off within two years with his current income. No need to pile a bunch of income on top of his already high income and pay 35% (or more) on the withdrawals.
Once folks get past Baby Step #2, they need to get their financial advice elsewhere.
.
Certainly if their income puts them in the 22% or higher bracket. Good grief.
But he never mentioned to withdraw from retirement accounts. So how would this caller get taxed?
You misunderstand what was said
Yup the caller is better off investing more in the retirement account, save on taxes and pay off the home as normal. The pensions coming in should be able to take care of it without even thinking if everything is automated
@@ajtoriano719 capital gains tax
The tax benefit (not discussed) is complete BS. I’ve heard people say not to pay off the house because of the tax deduction.
Lets look at the math. If you assume you are in a 28% tax bracket your mortgage tax deduction will get back 28 cents in tax return for every $1 spent on mortgage interest. But if the mortgage was paid off, you’ll no longer have the mortgage tax deduction but you get to keep the post tax value ($1-0.28=0.72).
So, would you like to keep the mortgage so you can pay the bank $1 in interest so you can get back 0.28 cents on taxes, or would you just prefer to pay off the mortgage and pay taxes on the $1 and keep 0.72? Hmmm… 0.72>0.28. Simple math. Pay off the *amn mortgage.
And anyone who tells you to keep a mortgage for the tax deduction are complete idiots.
Now do the math on how much a 2.5% 30 yr mortgage costs you when average yearly inflation is 3%. Keep the mortgage and invest instead of prepaying it.
This math makes leveraged idiots mad. If you have a paid off house, u probably are not taking out more mortgages voluntarily. They are caught up in the analysis trying to justify their terrible choices. Pay it off and be happy.
@@aaront936 I've heard that argument as well, which works out perfect on whiteboard. However, very few people are disciplined enough to follow through on investing the difference consistently over three decades. The majority of American's are short sighted and impulsive with no self-control or discipline. That is why it is better for these people to pay off the house. At least then the house acts as a sort of forced savings that is difficult to cash out of in an impulsive action.
I have over 200k and don’t want a house at all. If I had a paided off house. Would 100% borrow all the equity
People who justify keeping a mortgage for a tax benefit really don’t understand basic mathematical principles.
Honestly, I love that question that Dave asked! Borrowing a million dollars at 2%, I would be set for life!
My 2.5% interest rate is worth it
That is what Ric Edelman preaches.
He has 170 in cash...pay off the house!!!
How has Chrissy Wright never heard Dave talk through that, when I’ve heard that line around a few dozen times??
the smith maneuvre has its time and place for people that know what they are doing with leverage which is not the 99% of us. I agree to pay it off.
Had a little moment when I paid off all CC and one student loan. Can't wait to get the rest of my student loans and mortgage out of my life.
Ok so the tax Benifits isn’t worth it but what about a 3% loan and the depreciation of money over time?
Can someone help me with this: Should I payoff my house or max my Roth IRA?... FYI, since I'm near the end of my house loan, the interest per month is very little, so of course my Roth return is much higher. Thank you in advance!
Considering contributions to your Roth are capped at $6,000 or $6,500 (depending on your age) you should max your Roth first then make any other additional payments on your house second. Once the tax date deadlines are past, you are unable to retroactively max your Roth for the year. So max your Roth in the annual window for that tax year and go from there.
The whole point of ROTH, is not paying taxes on withdrawal or forced distribution.
I make over $100K/yr in retirement, No Taxes with 4 kids.
@@brett4932 THANK YOU!
@@aolvaar8792 THANK YOU!
Invest
Sounds like Sam like to brag
Dave does a great job with people and making them also think with there heart when they should. This is why he will always have a place in the market to teach(great job). That being said the tax benefits I get from my house being self employed is far greater then paying it off. Now yes I have thought about it and if the world goes to crqp I can pay it off no problem.
Number one is engineer? i assumed doctor or lawyer, are there alot more engineers than other professional professions?
software, electrical, structural. all making lots of money. it’s crazy.
They aren't making lots of money, its all relative to the specialization and industry within your field. Software probably makes the most. The rest make money by experience. Engineers that make the most money are in upper management, subject experts, consultants, or own a company. It's an experienced and specialized based industry.
On average engineering isn't a high paying field.@@HappyPenguin75034
Well it is NOT a $900,000 loan. I know you’re using that as a figure just as an example. But you exaggerate the risk when you inflate the loan number lol. I’m learning to be a numbers guy and there is literally not that much risk if he didn’t pay it off. Making your initial statement at the beginning of the video true: it’s more of a technical question and viewpoint question
Dave concedes that point in the video that in this case, there’s not much risk at all carrying this loan.
Dave always exaggerates... So annoying
But the opportunity cost definitely shows why you should keep the mortgage. 10%>3%
the market avg was 30%+ last year lol
Housing 26% YOY
@@aolvaar8792 you can't eat a house. Your equity means nothing unless you're actively selling.
@@aaront936
I can get a HELOC and buy food.
I can get a reverse mortgage and buy food.
I can refinance and buy food.
I hope 3 examples are good enough.
Paying off the mortgage is way overrated. Pay the mortgage low interest rate and invest the extra money in some basic index funds. Mathematically, this is the best financial decision. Emotionally, paying off the mortgage gives one a peace of mind. That's it.
If you have any type of net worth, you keep the fixed low rate mortgage. That is a slam dunk. You have no worries either way. I have enough stock exposure, I love the diversification that real estate provides and I like some cash liquidity for the future.
Hind sight... YES we all should not have paid off our mortgage early. But the future is unknown.
If I was 25 and was offered 500k at 2 or 3 percent I’d take it all day long. 75 probably not. Dave always leaves out little bits that might sway the argument in the other direction. To put it another way. When someone gives you a one size fits all appropriate it’s your cue to use them as a starting point to your personal situation
If you have a paid off house right now, would you run out to take on a massive mortgage loan again? Nope. Debt sucks, get rid of it
I wonder how many people in this thread, with paid off houses, have paid off homes in California.
Can he explain how he has 1.7 in a ira retirement account
Look up how compound interest works.
@@aaront936 o you’re the caller?
@@TopVillain have fun being financially illiterate and enjoy those babysteps.
@@aaront936 ? Get a life
There is no discussion of "Tax Benefit" in this video.
Assuming that your mortgage is your only debt and it is a very low percentage of your income and you have a significant net worth, if the stock market dumps 50% and you are paying down your mortgage early instead of investing in the market, you're simply not making the best financial decision. Period.
you are only doing math. there is much more to money, and especially financial peace which is what Dave is teaching, than math.
@@eatpigsnot If I was just doing math, I would not be assuming that the scenario above had a significant net worth and a low debt to income ratio (10% or lower). Debt is a neutral tool. If you abuse it, it's like a cigarette that will kill you. If you are very responsible with it, it can supplement your wealth in a conservative manner. Treating 2.5% interest mortgage debt the same as credit card debt makes you look stupid.
If you had 50,000 in the bank, would you spend it all on a car ? No, then why would you by a 50,000 dollar car when you have no money in the bank ?
Answer: Debt vs. no debt
I would buy a car, I have a large government pension.
don't need $50K in the bank
Who doesn't want a little risk!
I cannot believe people still think this is a thing... how do they figure the math?
Bc they are conned by bankers
10% average stock market return over 100 years vs. a 2-3% mortgage rate. That's how you figure the math.
22%/24%/30something% (depending on your bracket) write off on property taxes and mortgage interest if you itemize and only pay the minimum while you throw the extra money in the stock market and watch it soar. That's how you figure the math.
I’m sorry but I can’t stand boomers like this guy! He’s a Millionaire with a 6 figure salary and 2 lifetime checks coming in at $80k a year and he’s wondering if he should pay off a $200k mortgage on a million dollar property!!!! Just pay the stupid thing off… enjoy a higher net worth and go travel a bit! You obviously earned it! It’s not rocket science!
I love laughing at those in debt trying to justify leveraging yourself w debt. "Derrrrp im duh smart one".
Borrowing money at 2.125% for an arbitrage of 10% makes my heart want to jump in to the maximum. What weak hearted investor is scared of that?
The scared
The one who lived through 20 years bear market. Before your time.
@@mccoyji show me a 20 year period where the US stock market was negative. Past his time.
@@ShawnDeLaCruz I believe 1929 was the start. Was it 20 years before it recovered? Them were tough times bro.
@@mccoyji 115% total return from 1929 - 1949 or 3.73% compounded annual return. Adjusted for inflation, 2.11% annual compounded return. Try again.
You talk about math and yet risk has actual statistical measures based on each individual situation. Trying to measure risk with ‘your heart ‘ is not mathematical. You do amazing things for people Dave, but sometimes you’re blatantly inaccurate.
If you make more than the house interests, than no, it's not worth it to pay off the house.
2.8 vs making 5 times and more in the markets.
No one ever said to take out a loan to invest. Dave's strawman argument is getting old.
It's getting old to you because you literally watch and comment on every video.
@@superblump87 That's because he gives bad advice sometimes.
His advice is sometimes good to get out of debt. But not when it comes to investing.
Logically by choosing to invest instead of paying off debt is choosing to use borrowed money to invest. I agree with you on the other part.
Odd you are still here. Go take put loans and get rich then. Prove him wrong! 🤣
8:43 Dave channeling his inner Joe Biden
Hahahahaha
I would 100% borrow on my house to invest
I have an MBA and I can tell you this is bad advice. The tax benefit is worth it. It's easy math.
But the thing is life does happen. People die. People get super sick and it drained all of their savings. Nice to have a paid for house!
Dave's mortgage advice is probably the worst advices he gives in a sub 3% lending market. He is literally cost his listeners a million dollars at retirement. Yet the cult of Dave is not smart enough to see it. If you are investing the difference there is almost no additional safety in paying it off early.
The only reason I haven't taken out a Mortgage on my home is because I dont have steady income to pay it back and my sister would get half.
If I was going to build a new house or 2 here then I would do a mortgage and rent those out.
God created engineers to move humankind forward. 🙏
I bought my house without a mortgage, wish I could get a tax break
@@Greg766 guess I'm out then.
You can get a mortgage for the tax deduction if you want to.
@@Greg766 Married filing jointly, $25K is the standard deduction
@@aolvaar8792prop taxes. charity. or you greedy
🤣
If you have a problem with debt then you have a problem with God. There are many promissory notes in the Bible. Abraham, David, the twelve Apostles are waiting for rewards that will be paid sometime in the future. These are debts that the Lord carries.
Whoa! Please read Job 41:11 and rectify this statement.
Don't prepay the cheapest mortgages in history. You need to look at the opportunity cost Dave's "advice" is costing you.
Go take out a few mortgages then since they are so good. Stop telling others to and do it! More debt! Hurry! Get rich!
Are the words "tax benefit" ever uttered in this video? Click bait. And, TERRIBLE ADVICE.