I literally paid off my house and got laid off a month later last October. Not having any mortgage to worry about month to month turned my 6 month emergency fund to 12 months… also have kids and a family. The guy was spot on at end
@@aolvaar8792dude, that's awesome. Please take as much time as you feel like to pay that off. The stats of your mortgage are just great. But, please realize that that is a very unique mortgage. I have a 3.8% mortgage from 2016 for a 156k loan and my payment is 1000 per month. That's very low by today's standards
It’s a behavioral question. When you have extra money sitting in the bank or brokerage account, it’s so easy to tap into that whenever you “need” it for a vacation, nice car etc. but when that money is in your home, you can’t touch it, which effectively protects you from your worst enemy: yourself.
For sure. IF YOU have the discipline to not use the "extra" money towards lifestyle creep or sigining for a new car, buying lavish things. Then yeah you could come out ahead. BUT the stress of not having to pay a mortgage sounds so amazing that i would wanna experience that.
Actually a disciplined person that saves by choice can have more self control than someone that is forced to save by making house payments. Doing a cash out refinance is not that hard my step mom does it all the time and never finishes paying her home…
@@aolvaar8792 its based off the price of your home. And my tax is far more than what you just said but every state is different and my property tax went up this year because they say the value of my property went up.
@@inmate0054 My tax went down (a bond expired) My State has a Law, 6% Max increase per year. ie. $500 this year, $530 next year Max My $50K in 2011, now $400K and $800/yr tax
The take away here is, there can never be a "formula" for peace of mind, because peace mind is directly correlated with your current situations level of risk. Peace of mind for Graham carries less weight, because he doesn't have children and family obligations to the same exact of George. Very good conversation - happy that both sides stood their grounds and had a very insightful sharing of perspectives.
I think it depends ultimately how comfortable you are in the math and how firmly you grasp financial concepts, the more you know the more completely at peace you can be with what Jack is doing - but if you feel uncertain/confused, you’re better off following your gut and desire for peace than blindly following the advice of someone who knows better - because you’ll feel suffering the whole way.
Always appreciate that Jack and Graham are willing to have people on with opposing view points. Everyone keeps it respectful and you get to hear two ways of doing things. One way is better for some people and the other is better for others
Totally agree. Peace is something you can't measure. I'm debt free, my wife is a stay at home mom (homeschool the kids), and I have the option to change careers at any point. Debt is bondage. He can have it.
The thing about the Ramsey way is that it is great for those who struggle with finances (and the psychology surrounding it) and/or those who want to live a conservative lifestyle. It isn't the "only" way. I am one of those that struggled with my finances but obtained financial freedom from the Ramsey program.
@@wolfofrevelation6401 thats the point, if the market crashes the world will suffer so why be afraid? Its morally hard for people to understand that if the American economy crashes the most valuable thing in life would be guns and canned goods.
Yep, crashed for Dave Ramsey and he lost all of his properties. Crashing for one doesn’t have to mean crashing for all. But Dave got back up again and made another million later and he is just fine.
Paying off my house in a couple months. It's gonna be so worth it. Gonna start my semi retired life at 40. Started the Ramsey plan about two years ago and it was a life changing experience. Along with having a paid off mortgage, I was also able to start a business while maintaining a full-time job and this whole process also allowed my wife to leave a job that she did not like. I would say don't knock the Ramsey plan until you've tried it. It allowed me to clean house on my life and focus on the important things.
I don't care what benefits you get with a mortgage, at the end of the day you do not own that property, the bank does. You effective made the bank your landlord and if you fail to pay they will not only take the property but also all of the equity too. You count on your income to pay the mortgage payment but if you lose your job its a whole lot easier just paying property taxes only rather than a mortgage payment and property taxes. Living 100% debt free makes living expenses much easier and gives you more control. Playing with debt is like paying with fire.
Not to mention if you miss paying hoa fees..thry can take your home if you don't pay thr fines through court....so you don't really own land..unless it'd hoa free..but thrn you gotta worry about taxes if no hoa...
Grahm already has peace of mind because he can afford to pay all of his properties off...hence...he's not that worried about it...and can't understand the concept of having less risk.
That or have a 3 family house in which your tenants pay off your mortgage and in the case of an emergency you have plenty of time to save up an emergency fund.
My monthly payment went from $1,048 to $1,248, because of taxes and insurance going up, because of home values in my area sky rocketing. So people who say homeowners don’t have inflation are wrong.
If you hodl enough and get enough cash flow, just hire a property manager and manage them instead. As long as you’re still positive cash flow and property is still appreciating, it’s worth it. Especially if you have several properties.
property managers can really destroy your property, seen it so many times, not following up and suddenly the property has major issues, a big problem when you have a renter that can sue for things like mold @@Odelle8
I refinanced my mortgage back in June and NOBODY explained to me that paying just towards your principal outside of your natural can shave potential decades off the house so I want my 30 year mortgage absolutely paid in full by 10 or 11 years at the absolute most
To those were buying bonds when mortgage rates were high how are y’all faring right now with the abrupt turn of events? Mortgage rates are down to 6.67% from 6.95% and will still dip.
And who said I was keeping my money in the bank bud? I see those who buy bonds like following the crowd like sheep during a recession, there is barely any tangible interest investing in bonds. Safe asset indeed.
Exactly there fire sure investments stocks, curriences, funds and even better speculative/defensive assets you can use to hedge against inflation. People aren’t just thinking.
If you wanted to make money from bonds and fixed income you would look into hedgefunds and wealth planners at your disposal that are into mortgage-backed securities. I make a killing working with 0:12 monica 0:12 mary 0:12 strigle who has been with the fam for close to 10yrs. Do your research, thank me later.
The arguments against paying off a mortgage are usually made by a younger person who's never experienced fluctuations in the job market. I work in healthcare, and right now things are booming. 10 years ago, however, it could be VERY difficult to find a job, depending on where you lived. The peace of mind I gained by paying off my mortgage is immeasurable. All of my stress literally vanished. The only thing I have to worry about now is property tax, insurance and utilities, and the insurance is optional if things really get tight.
I paid off my house in 2020, and I'm glad that I did. Instead of being stuck in this house because I'm afraid of swapping a 3% mortgage for a 6% mortgage, we are able to think about moving to a bigger house with the cash we've accumulated since. This is while everyone else is "stuck" in their current house because they love their low rate so much. Paid off house gives me options.
But since you paid off your 3% didn’t you lose the liquidity of the cash you paid your mortgage with? If you didn’t pay off the mortgage you would have the cash you have now plus the cash you didn’t pay your mortgage off with which would allow you a bigger down payment or more cash to buy bigger house and rent out your old house with the 3% mortgage and still probably cash flow from it. But since you paid down your 3% that would give you less cash to put down and therefore have to get a larger loan for your bigger house at a higher percentage…Am I missing something?
@@Odelle8 No. He’s done with loans. He paid off the house and will save up cash. When he’s ready for the bigger house, he will sell this one and use cash for the difference.
@@Odelle8 I appreciate your humbleness to ask the question. If I didn't pay off the mortgage, I certainly would not saved up cash as quickly as I did, because much of my cashflow would have gone to the mortgage. Let me ask you this way. If you had a paid for house right now, would you do a reverse mortgage on it to get back into debt and buy another house? I certainly wouldn't.
If I have $300K mortgage at 3% and have 300k earning 5%, wouldn't I be in the same or better situation? If you have a balance sheet that has 300K liabilities and 300k assets, you are essentially debt free. Why would I put my cash in a non liquid home earning 0% return?
Right now is a special time where cash is earning 5% it won't be that way forever. Keep your cash at 5% don't pay off the mortgage. But when the cash savings account rates drop to 2%, then it's a whole different analysis.
From the start, there is no mathematical reason to pay off a 2.6% mortgage when HYSA is above that. Literally worse case scenario you put the money you would use to pay off the mortgage in a HYSA and when the yield on that is less than the actual mortgage than you would just pay off the mortgage instead of leave it in a HYSA.
yeah if I had a fixed mortgage of $250k at 2.5% and $250k in a savings account earning 5% I would have both the peace of knowing my mortgage is paid off and the benefits of the leverage. If the $250k was in the stock market it might be different.
For me peace came with a year of emergency fund. I feel so much better with it. Now I can take my extra money and throw it where ever I want with no guilt. I can save for retirement and start paying off the house.
Owning has worked out for me, but only because my house has doubled in value. I kind of think renting is better when you factor in repairs that are needed on a house
I've been thinking the same about renting. You save the purchase price of a house, the property taxes, and the maintenance and repair, while still getting to live in a house. This is way cheaper than buying the house.
Renting you still pay for the property tax, the maintenance, etc. as it is all included in your rent. The mortgage portion of the rent never goes away, even after 30 years. Property taxes go up means rent is going up too.
I'd pay everything off. The psychological benefit alone would be worth it. I'm also not the type of guy that will sit at a car dealership to save a few hundred on my car purchase. $200 in savings for $2,000 in headache. No thanks. I value my time, freedom, convenience and peace of mind much more than money. The Ramsey folks needs to do a better job explaining the value of time as part of overall wellbeing. Everyone likes to quantify things. Not everything can be reduced to numbers. Remember, people literally pay millions if not billions of dollars just to get divorced from their partner. And they do it you know why? Because it's worth it. Freedom folks. It's priceless.
I understand Graham because imo most people aren't like him. He's not just good with Personal finance he's educated in business finance and real estate. The methods that works for him is due to this financial discipline which most people don't have.
I paid off my mortgage in 2023 and did the debt free scream on Dave Ramsey. Living a stress free life is 100% better than keeping the mortgage and trying to invest it for a couple percent more. The peace of mind is unmatched. Not sure what they’re talking about with money being tied up in the house - home equity line of credit is fine for huge emergencies that the emergency fund doesn’t cover.
That's nice, although some people may want or need that couple percent more income that they can get from investing rather than paying the mortgage early. In fact, I have found that with the right investment, it can actually be 10, 20 or 30% more than someone would get from paying their mortgage of early. That can make a big difference in a person's life.
@@erikrohr4396 true, if I never lost my job, and the market continued to average around 8%, I would make more money. But personally, for me, that’s just too much risk. I can always pause my retirement contributions if I lose my job, but I couldn’t pause mortgage payments if I lost a job.
@@globalfamily8172 true, and insurance, both of which have gone up with everything else. All the more reason to get rid of the mortgage - one less payment.
....but you've effectively decided to invest a significant portion (for most folks, likely a majority) of your net worth into a single thing. How is that not insanely stressful? lol
The one tried and true advice that fits everyone is do the math. It's so frustrating to talk to people about their strategies, advice, what they've done, etc...and you learn that they either haven't done the math or "don't need to do the math". Regardless of the outcome, doing the math will give you a much better chance of succeeding.
@@brett4932No it doesn't ignore the math. The Ramsey approach makes an adjustment for risk. Looking at the interest rate only is ignoring the math, because no adjustment was made for risk.
A good middle ground would be, have your main residence as fully paid house and mortgage out rental properties or take out business loans to build your businesses. This way you have the peace of mind of having a paid off house while building businesses and investing
Peace of mind would be proportional to the neuroticism of the person. The more negative they are, the greater piece of mind paying off the house will be. The more positive people are the less peace of mind. I think it could be converted in a formula
I think the most important thing to think about is your own situation and goals. If you pay off your morgage or invest instead of spending that money, you are doing it right anyway.
My mortgage has $45k left at 3.5%. My principal/interest payment is only about $250 a month. If i paid off the loan today and started saving at the same rate, it would take me 15 years to get that $45k back.
You owe the money either way. Spend it now spend it later, but you have to spend it. I dislike monthly payments. I’d pay it off. 250 a month for vacations now.
@@shanep2760 or put it in a 5% liquid hysa and get keep the 45k and let it give you 5% also. Paying down your 3.5 Is gonna give you less than 3.5 because you would lose your interest write off also. Math people
I don’t think George is suggesting to use funds that have a specific purpose to pay down a mortgage (emergency funds, vacation savings, holidays, etc), but if you are fortunate to have abundance with no set plans for it yet, he suggests paying down that mortgage. Also, $250 a month invested with compound interest will get you back your 45k much quicker than 15 years.
@@shanep2760 You can't spend it on vacations. You owe that money. The argument for not paying a mortgage down is that money is invested for the long haul untouched, eventually selling at the right time to yield a higher return than saving on interest. If that isn't being done, better to pay it off as the money is owed, thus freeing up 250 cashflow which now does not *have* to be tied to either an investment or debt, the money is truly yours to spend as you please.
You gotta take risk to get ahead in life! If financial peace is all you're after, then stay away from taking leverage. For me, taking a well calculated risk is good
On the point about losing your job, one thing that a person who has their house paid off doesn't have to worry about is going homeless because they don't have an income coming in. That would be a huge game changer.
You can still lose a paid off house to the county if you dont pay taxes, and your utilities would get turned off if not paid. I get your point, but just saying you still need some money coming in to pay for taxes, insurance, utilities, maintenance, etc..
I think the missing conversation to this is, why housing is important to have not for you, but for your kids or family. They’re looking at housing solely as investment or an asset; however, housing has become and will become a luxury because of the lack of inventory and affordability. So, yes a house can be a depreciating or appreciating set, but it can be a starting tool for a generation priced out. I know many people who have inherited homes and it has helped them financially and gave them an opportunity to focus on generating money.
but the math shows you will make more money by investing that extra cash you would put towards your mortgage, but instead into an index fund. Just pretend that extra money you're using is "going towards the house" but into a different account with a bigger average yield. When you get enough saved in their to pay off the mortgage in full, do that. And you will do it faster than trying to put extra money directly to the loan.
Even with a paid off house, you still have to make those annual property tax payments, home insurance, and general repairs. If you lose your job, you can't afford those expenses. Not paying your property tax can result in you losing your house. Nothing is truly risk free.
Assuming you have the amount of cash necessary to pay off your loan, keeping that cash invested and living off of the returns, or perhaps selling a little before you get back on your feet is the better option. Assuming your mortgage rate is something below 4%. Losing a house to your mortgage company with, say, 30% equity is better than losing 100% equity in a house because of failed tax payments.@chillrobp
I would say split your excess cash 50/50. If you have $2,000 excess cash after your bills and house payment, put $1,000 extra on the house and $1,000 in investments.
For me, it seems to make the most sense to pay off your personal living home. This gives you that peace of mind. With rental properties you think of it as a business and investment in which you use those mortgage debts to your advantage. Never think of your home you live in as an investment.
Effective 2.4% is only $2400 a year on $100k. Even if you triple that, just don’t think that’s worth playing the leverage game. That amount of money isn’t going to make you wealthy. And those high yield bonds/savings accounts aren’t going to last 10.20.30 years. Freeing up your monthly income to invest in other options that could return 10-12% seems better to me.
You ignored risk in your analysis. You looked at only the interest rate. Risk is part of the analysis as well. You have to make an adjustment for risk in your analysis.
@@inertiaforce7846 I think risk is negligible in this. Far more people keep their jobs than lose them. Within 1-2 years, savings are enough to cover most "life happens" moments.
The banking system is one big scam for most Americans. Get out of debt. Pay off your debt ASAP. Live life on your terms. Visit family. Travel to places.
These dudes keep taking the math perspective with money to the Ramsey folk and their whole ethos is freedom, not math. Freedom from obligation, freedom from payments, freedom from slavery. There may be situations where that freedom comes with a missed opportunity, math wise, but these fellas totally miss the mark on the upside of that freedom. I do think it’s only when you’ve lived through significant loss that you get a balanced view of risk.
AFAIK, paying off your mortgage early in the term (e.g. after 5 years) can save you hundred of thousands of dollars in interest but when you are paying it off late (e.g. after 20 years), you are just doing the bank a favor. That's because in the beginning most of your payment goes towards interest, not principal. Also, when you invest the money instead of paying off your mortgage, you get a compounding effect which can also make a big difference over 30 years. You really have to do the math.
That’s true. Having a family allows to take different risks. My wife and I have of peace of mind not having debt. A friend has a lot of properties, however he’s over leveraged and has to drive 4 hours to see the property while his girl is pregnant.
What they all forget is that a paid off house is like buying a huge dividend stock. You have the main value in the house but you’re getting the benefit of the extra cash each month from not having a mortgage payment. Even if you’re to invest that 300k into something else, you would still have that mortgage payment to contend with, ultimately reducing gains from the outside investment.
Loved this segment!'Was really helpful to hear the debate. We have 4 kids and been in our first home 3yr now; that's our only debt and it's such a HUGE relief knowing my emergency fund is there to cover our mortgage for a few months in case something happens. Do it people! Pay off the mortgage ASAP and have an emergency fund! Took us 5yr to get all our other debt paid off and get an emergency fund. You got this 💪
I have never met anyone who paid off their house early who said “I really regret doing it and if I had it to do over I would have invested that extra principal I was paying”
Very few people do it in their first place because for years the banks were selling the American dream of owning a home, HARD. They sold the point so hard it seemed like the only way to build wealth was buying a home. People still believe that today and unfortunately if they would’ve invested into the S&P they would have much more money laid out for retirement. Why? Because the S&P has grown at a faster rate and higher percentage than home values. Most people don’t know that because they don’t research.
I’m assuming you don’t know any rich investors. I have a paid off investment house which I regret not remortgaging in 2020. One of my biggest REI regrets.
Here is the deal. Playing the debt game isn’t for everyone. Cash buys is better for the majority. I see great debt jugglers and everyone that I know has either filed bankruptcy or was looking at it at some point in time. It’s not for the average person
Bingo. In addition, if you want to juggle debt, it should only be a small part of your total net worth so that there's minimal risk. The benefit of leveraging has to be balanced against the risk of leveraging.
Even if I pay off my mortgage, I don’t have peace because there is always monthly insurance and property tax payments. The monthly payment is just less. And there is always the possibility of high expense repair on my house. I think of it as what gets the most return for my money.
@@morganhill2586 only an idiot would not pay for insurance to cover their house. Also you cannot avoid property tax unless your property is a cemetery. If you live there that wouldn't suffice.
I get it. No one likes paying for things, but honestly that is just our life. There will always be a re-occurring expense, whether for housing or for health. You will always need a place to stay. So, instead of seeing it as a pain in the ass, if you can pay it off,be happy up can do that. We will always pay taxes on something and there will always be something that needs to be repaired, whether a house, car, van or trailer you live in.
I've had the same thought about buying a 30 yr treasury. Coupons pay the payments, and then after 30 years you still have the principal, all risk free. The real opportunity would be to pay off the mortgage at its market value rather than its face value. I just don't know how you do that.
It’s not the bank's money. It’s your future earnings (cash) that you now give to the bank because you never had enough money to begin with. Live within your means and stack cash so you become your bank, and you’re free to jump on business opportunities that only people with cash with no loan attached get deals on.
Graham is trying to win. George is trying to avoid losing. Very different goals. Graham is trying to excel. George is trying to be sensible and limit all risk.
Yep. He's a grifter. And the guy sitting opposite of him is a Dave Ramsey lackey, the guy who enforces his evil evangelical Christian views on his employees.
Yeah, the math totally says I shouldn't have done a 15 year. But, once my house was paid off, I felt so much relief that even if things went bad, I have the house, etc... I don't know how to put a value on that piece of mind, but it is significant... And being honest, if I would have done a 30 and "decided to invest the extra to get a higher return..." I wouldn't have invested all of it... Things would have come it... I wouldn't have blown all of it... But I wouldn't have invested all of it either... I know me...
Being in debt by itself is not a problem. The actual problem is overspending. If you don't overspend you could carry debt intentionally and know you have the means to pay it off if you want to. To me that is peace of mind. If you choose to save money and pay minimum payments on debts, you will still see satisfaction because you cut spending enough to improve your financial health.
Well said. I carry debt but the upside to keeping my money outweighs paying it off. $100 in interest I pay a month is nothing compared to the $1,000 I make on my investments. it’s a no brainer.
From the perspective of not having a payment i prefer a paid off house. But... grahm is right that having money not locked into your house is really good.
I would only say pay it off if you don't have discipline. A lot or people would bleed through that savings. A paid off home is more of a safeguard to blowing it for many.
Mortgage is modern day indebtedness. 30yrs to own a home and paying vast interest. Most loans have life span of 5-7yrs which goes to interest under amortization plan. Save money live modestly and buy a home under a plan that suits you and not the banks.
What Graham doesn’t understand is that leveraging causes more inflation and adds to overall cost. Once you inflate the price of an asset, you decrease the amount you can play with in interest rates. This is why the U.S. can barely afford a fed fund rate of 5.5% vs 18% in the 80s. Prices are so high due to low rates that the existence and continuation of these prices depend on very low rates until rates are nonexistent. It’s being milked out fast Once the juice has been fully squeezed from what low interest rates provide, leveraging is no longer an option. There will be nothing to leverage
Economists have already created ways to compare the personal benefit from non-quantitative things like being debt-free. They're called utility functions, and can even be tweaked to represent the behaviors of risk-averse and risk-seeking individuals. However, they're mostly a theoretical tool and are not actually used to deduce the numeric benefit from certain actions as far as I am aware.
It makes absolutely zero sense to pay off a sub 3% mortgage. This is where I diverge with the Ramsey principals. He has no valid reason other than emotional regurgitation. The data is clear, even a high yield savings account gives 5%. That’s hundreds of thousands of dollars of 30 years.
If you're planning to stay somewhere for longer than 5 years I think the investment is worth it, even now; if not the costs/risks/opportunity costs probably outweigh the benefits
Even 5 years maybe not worth it.. have to take into consideration costs to buy and sell (realtor commissions), loan origination fees (and other fees associated with getting a mortgage). Have to figure your personal situation..
You always have to live somewhere & I've always thought of mortgage being a rent payment that you'll probably get some portion back as a refund eventually. If you buy and have to sell after 5 or 10 years, even if the value of your place is a third of what it's original price was for reason, you're still getting a portion of the money you put in back, plus you got to live somewhere for a period of time. If you were renting, you just got to live there for a period of time.
I’m always amazed at how committed each side is in this debate. Personally, I would sleep better at night with zero debt and cash in the bank. I’m also amazed how people have been successfully programmed to view a mortgage as not being debt!
HYS are offering 5% all over the place. Why would I put my cash in to a mortgage if it’s less than 5%? Especially if the interest in my mortgage is tax deductible
Most people aren't finance bros who can move from place to place and rent. They have dogs, kids in school, etc. While I do agree a mortgage makes little sense if you know ahead of time you will move up in a few years, most people stay put 5-7 years, enough to recoup the commission on the home sale plus inflation protection as home prices rise. Stocks don't always go up more than housing. During the 70s, real estate soared while stocks crashed. The assumption is there is always a better place to put your money. Not always. Real estate is as good a place as any to park some savings. I know many people who literally would not be able to retire if not for their home equity. It's a huge deal in terms of wealth creation.
If I can borrow money at 2.25 I will pull out as much money as I could. There are so many places I can put it where it will grow better than 2.25. Golden Handcuff me 10 times over please. Hahah
@@inertiaforce7846 these are gov backed loans. Yes there are risks, but the risks don’t seem significant at all. I’ve said it before, Ramsenians always reference risk as not being accounted for, but you know who notoriously doesn’t quantify risks? Ramsenians. How would you quantify it? Have you considered the risk of paying a low interest mortgage down? The opportunity costs of paying a low interest loan down especially in a high inflation market (like we’ve had in the last few years) is objectively more risky. Think about it, if you’re not deploying cash/value as much as you can in a high inflation market, you’re losing value every day. If your net worth isn’t outpacing inflation, you are losing.
People pick apart each individual step, but you need to start with 1 and go up. So if u do them, they will work. For the first time we have money when our car broke down and not salvageable.
I do agree having liquidity is much better. Currently I have a 7 month emergency fund and I am going to bring that up to a year or maybe more than a year. I also have a mortgage that is at 2.7%. There is no way I am ever going to pay that off early. There's no need to, unless the balance on the house is a fraction of my investments and it wont hurt me at all.
Graham reveals his stupidity every time he makes this argument. First, the Ramsey team never recommends selling off all your stocks to pay off a house. Second, they tell you not to use your six month emergency fund for it. So you’re covered for retirement and a job loss. Third and arguably most important is people who pay off their house early have their act together and aren’t subject to being victims of the numerous non-sensical scenarios he makes up for the sake of being right.
You could say the exact same thing about all the Ramsey Solutions Team members. They'll argue that you must pay off a mortgage early because either no one ever uses that extra money to invest over 15% or it's impossible to do so. They'll also say that if you waiver in any way from the Ramsey Baby Steps, you're completely irresponsible and will wind up eyeballs-deep in debt regardless of what you do.
Who the hell has enough cash just sitting around to pay off a mortgage that isn't in equities? Otherwise you'd have to look at it from monthly contributions to pay it off faster, but then you have to consider that adding money for a
@@tcgtpl All fair points but, embarrassingly, as someone who has listened to every word out of Dave’s mouth, people misconceive their advice and intentions. Their advice is always to put money over 15% into the house for two reasons: peace, and so retirement is not under-funded nor over-funded. And they are also okay with wavering from the baby steps just as long as people don’t claim to be doing the baby steps. For example, they tell people “you’re doing your plan, not our plan, and your plan isn’t working, that’s why you called us.”
@@ericcarlin So retirement is not over-funded? An over-funded retirement? That is the silliest thing I've ever heard in my life. That's like saying your wife is too hot or your car is too fast. The biggest issue with Dave is that he completely ignores interest rates. As a thought exercise, if you had a billion dollars cash, a billion dollar investment opportunity with a 10,000% ROI, and a billion dollar loan at 0.00001% interest, strictly following his advice, he would recommend you pay off the 0.00001% interest debt instead of going for the 10,000% ROI. That's stupid.
Bought a condo for 320g 6 years ago sold it for 530gs last year. Bought a house 3 years ago for just over a mil now its worth 1.4 - 1.5 easy. Show me returns like that ill wait...
I was a big fan of Dave Ramsey. Saved 20k and put it towards my mortgage. Knowing what i know now its one of my biggest regrets. Shouldve just HYSAd it or invest. Mortgage easy to put money in hard to take money out
If you don’t owe money to ANYONE you don’t have to worry about ANYTHING! You have true freedom and that level of peace isn’t something you can quantify. That’s more important for some people than others. Dave Ramsey has a great system that would work for anyone. But it’s most geared towards people who struggle with their finances. That way of doing things is a lifestyle and it’s not for everyone. But I’d say the guy worth several hundred million knows more than anybody commenting or listening on RUclips…
The thing I feel like the Ramseyites never talk about is you are never debt free. Even once you pay off your house you still owe taxes and have to pay homeowners insurance. So you are always paying on that property. If you get a mortgage that you can afford at a good rate it doesn't really make much sense to pay it off quicker. It doesn't eliminate that bill entirely it just reduces it.
Bc that’s like going to the dollar store and saying “it’s not a dollar. It’s a dollar plus tax” you come across like a know it all and that’s off putting and most know you won’t be living “free” just you don’t have debt. Not that you won’t have bills
Let me weight in… I own 5 properties that are completely paid off. Occupied with great long term tenants. If I was given the opportunity to cash at refi at 3% I would do it. Use that cash to buy more properties.
Amortization Schedule: Know it, understand it. If the principal is greater than the interest, make extra payments. Then, do all your math, calculations, comparisons. But if you are only knocking off $200 of principal while paying $1100 interest, you are getting taken advantage of. You could make an extra $200 payment and skip an interest payment, but people look at 10% (average s&p return) on that $200.
I think Graham is right for highly disciplined responsible people that will put money that could have been going to extra principal payments into other investment vehicles. Most Americans will blow it on useless crap, though, so paying it down early is better for them.
I literally paid off my house and got laid off a month later last October. Not having any mortgage to worry about month to month turned my 6 month emergency fund to 12 months… also have kids and a family. The guy was spot on at end
$50K home, $214/mo mortgage, Worry?
@@aolvaar8792 Yeah, if you live in like Idaho or something that's fine, most people live in higher density, populous cities.
@@arcanumxxx
PHX, AZ
During the Great Recession, 25% of my subdivision went into foreclosure.
@@aolvaar8792dude, that's awesome. Please take as much time as you feel like to pay that off. The stats of your mortgage are just great. But, please realize that that is a very unique mortgage. I have a 3.8% mortgage from 2016 for a 156k loan and my payment is 1000 per month. That's very low by today's standards
It’s a behavioral question. When you have extra money sitting in the bank or brokerage account, it’s so easy to tap into that whenever you “need” it for a vacation, nice car etc. but when that money is in your home, you can’t touch it, which effectively protects you from your worst enemy: yourself.
For sure. IF YOU have the discipline to not use the "extra" money towards lifestyle creep or sigining for a new car, buying lavish things. Then yeah you could come out ahead. BUT the stress of not having to pay a mortgage sounds so amazing that i would wanna experience that.
And the problem is also that it’s stuck in your home. If an emergency expense arises, what will you do?
Actually a disciplined person that saves by choice can have more self control than someone that is forced to save by making house payments. Doing a cash out refinance is not that hard my step mom does it all the time and never finishes paying her home…
This is a very good point
Property tax is a tax on unrealized gains. Then you pay a tax on the sell of your home. It’s robbery
????
$100/yr 911 service, $100/yr county roads, $600/yr public schools,
Has nothing to do with the price of the home.
@@aolvaar8792 its based off the price of your home. And my tax is far more than what you just said but every state is different and my property tax went up this year because they say the value of my property went up.
@@inmate0054 My tax went down (a bond expired)
My State has a Law, 6% Max increase per year.
ie. $500 this year, $530 next year Max
My $50K in 2011, now $400K and
$800/yr tax
Yup. My property tax went up 40% last year. Inflation isn't 40%.
Income tax is theft too and we still have to pay it.
The take away here is, there can never be a "formula" for peace of mind, because peace mind is directly correlated with your current situations level of risk.
Peace of mind for Graham carries less weight, because he doesn't have children and family obligations to the same exact of George.
Very good conversation - happy that both sides stood their grounds and had a very insightful sharing of perspectives.
I think it depends ultimately how comfortable you are in the math and how firmly you grasp financial concepts, the more you know the more completely at peace you can be with what Jack is doing - but if you feel uncertain/confused, you’re better off following your gut and desire for peace than blindly following the advice of someone who knows better - because you’ll feel suffering the whole way.
Graham is only comfortable with debt because it represents such a small amount of his net worth
Such a small percentage of people can write off mortgage interest. Not even worth bringing it up.
Yes, and I’m always confused when people bring that up. How many really itemize their deduction??
Put a little more effort doing your taxes. It's not much, but you'll get a tax credit.
@@triumphiztation
My interest is ~$2000/yr
My standard deduction is +$30K
?????
Isn’t that because they have to exceed the standard deduction?
Not true
Always appreciate that Jack and Graham are willing to have people on with opposing view points. Everyone keeps it respectful and you get to hear two ways of doing things. One way is better for some people and the other is better for others
Totally agree. Peace is something you can't measure. I'm debt free, my wife is a stay at home mom (homeschool the kids), and I have the option to change careers at any point. Debt is bondage. He can have it.
It’s only bondage if you don’t have the money to pay it off. That’s the whole point. Don’t spend money you don’t have.
The thing about the Ramsey way is that it is great for those who struggle with finances (and the psychology surrounding it) and/or those who want to live a conservative lifestyle. It isn't the "only" way. I am one of those that struggled with my finances but obtained financial freedom from the Ramsey program.
if the market crashes he is fucked
That's just false. No debt payments, an emergency fund, and a good income? I think he'll be fine.@@wolfofrevelation6401
@@wolfofrevelation6401 thats the point, if the market crashes the world will suffer so why be afraid? Its morally hard for people to understand that if the American economy crashes the most valuable thing in life would be guns and canned goods.
Yep, crashed for Dave Ramsey and he lost all of his properties. Crashing for one doesn’t have to mean crashing for all. But Dave got back up again and made another million later and he is just fine.
I cannot wait until my mortgage is paid off!! Can't put a price on that type of freedom
Paying off my house in a couple months. It's gonna be so worth it. Gonna start my semi retired life at 40. Started the Ramsey plan about two years ago and it was a life changing experience. Along with having a paid off mortgage, I was also able to start a business while maintaining a full-time job and this whole process also allowed my wife to leave a job that she did not like. I would say don't knock the Ramsey plan until you've tried it. It allowed me to clean house on my life and focus on the important things.
The Ramsey plan is gold
My parents are helping me heaps. My goal is to pay off the mortgage as quick as possible. Then quit full time work
All that in 2 years? BS. I swear most Ramsey followers are liars.
Lucky you, people 10 years younger than you don't have the ability to do that.
Are you a parent? If so how did you balance all that?
I don't care what benefits you get with a mortgage, at the end of the day you do not own that property, the bank does. You effective made the bank your landlord and if you fail to pay they will not only take the property but also all of the equity too. You count on your income to pay the mortgage payment but if you lose your job its a whole lot easier just paying property taxes only rather than a mortgage payment and property taxes. Living 100% debt free makes living expenses much easier and gives you more control. Playing with debt is like paying with fire.
Not to mention if you miss paying hoa fees..thry can take your home if you don't pay thr fines through court....so you don't really own land..unless it'd hoa free..but thrn you gotta worry about taxes if no hoa...
I love this comment I would rather rent a home then buy a home and even then I would prefer a bunker if I was rich.
Grahm already has peace of mind because he can afford to pay all of his properties off...hence...he's not that worried about it...and can't understand the concept of having less risk.
...but sinking the vast majority of your net worth into a single asset is kind of the exact opposite of de-risking lol
That or have a 3 family house in which your tenants pay off your mortgage and in the case of an emergency you have plenty of time to save up an emergency fund.
My monthly payment went from $1,048 to $1,248, because of taxes and insurance going up, because of home values in my area sky rocketing. So people who say homeowners don’t have inflation are wrong.
Real estate gurus never seem to add in cost of taking care of a property.
Even a little bit
If you hodl enough and get enough cash flow, just hire a property manager and manage them instead. As long as you’re still positive cash flow and property is still appreciating, it’s worth it. Especially if you have several properties.
property managers can really destroy your property, seen it so many times, not following up and suddenly the property has major issues, a big problem when you have a renter that can sue for things like mold @@Odelle8
I refinanced my mortgage back in June and NOBODY explained to me that paying just towards your principal outside of your natural can shave potential decades off the house so I want my 30 year mortgage absolutely paid in full by 10 or 11 years at the absolute most
To those were buying bonds when mortgage rates were high how are y’all faring right now with the abrupt turn of events? Mortgage rates are down to 6.67% from 6.95% and will still dip.
Still better than keeping your money in the bank making you little to no interest.
And who said I was keeping my money in the bank bud? I see those who buy bonds like following the crowd like sheep during a recession, there is barely any tangible interest investing in bonds. Safe asset indeed.
I have always thought same, its like robbing the poor to pay the rich imo. Did you see the increase in loan delinquencies ?
Exactly there fire sure investments stocks, curriences, funds and even better speculative/defensive assets you can use to hedge against inflation. People aren’t just thinking.
If you wanted to make money from bonds and fixed income you would look into hedgefunds and wealth planners at your disposal that are into mortgage-backed securities. I make a killing working with 0:12 monica 0:12 mary 0:12 strigle who has been with the fam for close to 10yrs. Do your research, thank me later.
We’re in a reverse recession. All good points discussed here. Having kids with no debt is so nice
The arguments against paying off a mortgage are usually made by a younger person who's never experienced fluctuations in the job market.
I work in healthcare, and right now things are booming. 10 years ago, however, it could be VERY difficult to find a job, depending on where you lived. The peace of mind I gained by paying off my mortgage is immeasurable. All of my stress literally vanished.
The only thing I have to worry about now is property tax, insurance and utilities, and the insurance is optional if things really get tight.
I paid off my house in 2020, and I'm glad that I did.
Instead of being stuck in this house because I'm afraid of swapping a 3% mortgage for a 6% mortgage, we are able to think about moving to a bigger house with the cash we've accumulated since. This is while everyone else is "stuck" in their current house because they love their low rate so much. Paid off house gives me options.
But since you paid off your 3% didn’t you lose the liquidity of the cash you paid your mortgage with? If you didn’t pay off the mortgage you would have the cash you have now plus the cash you didn’t pay your mortgage off with which would allow you a bigger down payment or more cash to buy bigger house and rent out your old house with the 3% mortgage and still probably cash flow from it. But since you paid down your 3% that would give you less cash to put down and therefore have to get a larger loan for your bigger house at a higher percentage…Am I missing something?
@@Odelle8 No. He’s done with loans. He paid off the house and will save up cash. When he’s ready for the bigger house, he will sell this one and use cash for the difference.
@@Odelle8 I appreciate your humbleness to ask the question. If I didn't pay off the mortgage, I certainly would not saved up cash as quickly as I did, because much of my cashflow would have gone to the mortgage.
Let me ask you this way. If you had a paid for house right now, would you do a reverse mortgage on it to get back into debt and buy another house? I certainly wouldn't.
Not with todays rates. But back at sub 3% I definitely would
@@Odelle8Then you do whatever you think is right. I assume you went up to your eyeballs in debt when the rate was 3%.
If I have $300K mortgage at 3% and have 300k earning 5%, wouldn't I be in the same or better situation? If you have a balance sheet that has 300K liabilities and 300k assets, you are essentially debt free. Why would I put my cash in a non liquid home earning 0% return?
Right now is a special time where cash is earning 5% it won't be that way forever. Keep your cash at 5% don't pay off the mortgage. But when the cash savings account rates drop to 2%, then it's a whole different analysis.
From the start, there is no mathematical reason to pay off a 2.6% mortgage when HYSA is above that.
Literally worse case scenario you put the money you would use to pay off the mortgage in a HYSA and when the yield on that is less than the actual mortgage than you would just pay off the mortgage instead of leave it in a HYSA.
yeah if I had a fixed mortgage of $250k at 2.5% and $250k in a savings account earning 5% I would have both the peace of knowing my mortgage is paid off and the benefits of the leverage. If the $250k was in the stock market it might be different.
For me peace came with a year of emergency fund. I feel so much better with it. Now I can take my extra money and throw it where ever I want with no guilt. I can save for retirement and start paying off the house.
Totally agree with George Kamel. Regardless if it will on paper make your richer, it won’t in reality enrich your life more. Well explained!
Owning has worked out for me, but only because my house has doubled in value. I kind of think renting is better when you factor in repairs that are needed on a house
I've been thinking the same about renting. You save the purchase price of a house, the property taxes, and the maintenance and repair, while still getting to live in a house. This is way cheaper than buying the house.
Renting you still pay for the property tax, the maintenance, etc. as it is all included in your rent. The mortgage portion of the rent never goes away, even after 30 years. Property taxes go up means rent is going up too.
I'd pay everything off. The psychological benefit alone would be worth it. I'm also not the type of guy that will sit at a car dealership to save a few hundred on my car purchase. $200 in savings for $2,000 in headache. No thanks. I value my time, freedom, convenience and peace of mind much more than money. The Ramsey folks needs to do a better job explaining the value of time as part of overall wellbeing. Everyone likes to quantify things. Not everything can be reduced to numbers. Remember, people literally pay millions if not billions of dollars just to get divorced from their partner. And they do it you know why? Because it's worth it. Freedom folks. It's priceless.
I understand Graham because imo most people aren't like him. He's not just good with Personal finance he's educated in business finance and real estate. The methods that works for him is due to this financial discipline which most people don't have.
I paid off my mortgage in 2023 and did the debt free scream on Dave Ramsey. Living a stress free life is 100% better than keeping the mortgage and trying to invest it for a couple percent more. The peace of mind is unmatched. Not sure what they’re talking about with money being tied up in the house - home equity line of credit is fine for huge emergencies that the emergency fund doesn’t cover.
Too bad you still have taxes.
That's nice, although some people may want or need that couple percent more income that they can get from investing rather than paying the mortgage early. In fact, I have found that with the right investment, it can actually be 10, 20 or 30% more than someone would get from paying their mortgage of early. That can make a big difference in a person's life.
@@erikrohr4396 true, if I never lost my job, and the market continued to average around 8%, I would make more money. But personally, for me, that’s just too much risk. I can always pause my retirement contributions if I lose my job, but I couldn’t pause mortgage payments if I lost a job.
@@globalfamily8172 true, and insurance, both of which have gone up with everything else. All the more reason to get rid of the mortgage - one less payment.
....but you've effectively decided to invest a significant portion (for most folks, likely a majority) of your net worth into a single thing. How is that not insanely stressful? lol
Im w Ramsey. Less bills you have on the books, the better. Gives you way more flexibility, and opens up your long term options.
The one tried and true advice that fits everyone is do the math. It's so frustrating to talk to people about their strategies, advice, what they've done, etc...and you learn that they either haven't done the math or "don't need to do the math". Regardless of the outcome, doing the math will give you a much better chance of succeeding.
The Ramsey approach fundamentally ignores math when debt is involved. Thats the biggest issue.
@@brett4932if it was all about math we wouldn’t have so much consumer debt to begin with.
@@brett4932No it doesn't ignore the math. The Ramsey approach makes an adjustment for risk. Looking at the interest rate only is ignoring the math, because no adjustment was made for risk.
A good middle ground would be, have your main residence as fully paid house and mortgage out rental properties or take out business loans to build your businesses. This way you have the peace of mind of having a paid off house while building businesses and investing
Peace of mind would be proportional to the neuroticism of the person. The more negative they are, the greater piece of mind paying off the house will be. The more positive people are the less peace of mind. I think it could be converted in a formula
I think the most important thing to think about is your own situation and goals. If you pay off your morgage or invest instead of spending that money, you are doing it right anyway.
Very well said at the end there. And that’s why it doesn’t add up mathematically, peace and joy are the goals, not more money.
The "peace" is an artificial construct
All this to say either way works AS LONG AS you live on less than you make. Most people’s margins are so thin that one emergency destroys them
My mortgage has $45k left at 3.5%. My principal/interest payment is only about $250 a month. If i paid off the loan today and started saving at the same rate, it would take me 15 years to get that $45k back.
You owe the money either way. Spend it now spend it later, but you have to spend it.
I dislike monthly payments. I’d pay it off. 250 a month for vacations now.
@@JacksonScott-os7kj but I can afford a lot more vacations now with the $45k in cash than I can with an extra $250 a month 🤷
@@shanep2760 or put it in a 5% liquid hysa and get keep the 45k and let it give you 5% also. Paying down your 3.5 Is gonna give you less than 3.5 because you would lose your interest write off also. Math people
I don’t think George is suggesting to use funds that have a specific purpose to pay down a mortgage (emergency funds, vacation savings, holidays, etc), but if you are fortunate to have abundance with no set plans for it yet, he suggests paying down that mortgage. Also, $250 a month invested with compound interest will get you back your 45k much quicker than 15 years.
@@shanep2760 You can't spend it on vacations. You owe that money. The argument for not paying a mortgage down is that money is invested for the long haul untouched, eventually selling at the right time to yield a higher return than saving on interest. If that isn't being done, better to pay it off as the money is owed, thus freeing up 250 cashflow which now does not *have* to be tied to either an investment or debt, the money is truly yours to spend as you please.
You gotta take risk to get ahead in life! If financial peace is all you're after, then stay away from taking leverage. For me, taking a well calculated risk is good
On the point about losing your job, one thing that a person who has their house paid off doesn't have to worry about is going homeless because they don't have an income coming in. That would be a huge game changer.
You can still lose a paid off house to the county if you dont pay taxes, and your utilities would get turned off if not paid.
I get your point, but just saying you still need some money coming in to pay for taxes, insurance, utilities, maintenance, etc..
Property taxes. You never really own your house.
do u kno wut utilities are my g
Average property tax in USA $1700 a year. How hard would it be to come up with with 2k in 12 months
@@Jackaroo. True, but to the point, you can pay those property taxes off if you're retired easy OR just work a little every month. That's not hard.
I think the missing conversation to this is, why housing is important to have not for you, but for your kids or family. They’re looking at housing solely as investment or an asset; however, housing has become and will become a luxury because of the lack of inventory and affordability. So, yes a house can be a depreciating or appreciating set, but it can be a starting tool for a generation priced out. I know many people who have inherited homes and it has helped them financially and gave them an opportunity to focus on generating money.
I think George wins this one. Pay off your mortgage. Lowers your risk…peace of mind. Frees up cash to invest more!
but the math shows you will make more money by investing that extra cash you would put towards your mortgage, but instead into an index fund. Just pretend that extra money you're using is "going towards the house" but into a different account with a bigger average yield. When you get enough saved in their to pay off the mortgage in full, do that. And you will do it faster than trying to put extra money directly to the loan.
George is not winning this one because the Ramsey position makes no sense.
Even with a paid off house, you still have to make those annual property tax payments, home insurance, and general repairs. If you lose your job, you can't afford those expenses. Not paying your property tax can result in you losing your house. Nothing is truly risk free.
The escrow is about 40% of the entire mortgage payment. That's easier to stomach than a full mortgage payment. Setting that money aside is easier.
Assuming you have the amount of cash necessary to pay off your loan, keeping that cash invested and living off of the returns, or perhaps selling a little before you get back on your feet is the better option. Assuming your mortgage rate is something below 4%. Losing a house to your mortgage company with, say, 30% equity is better than losing 100% equity in a house because of failed tax payments.@chillrobp
Still cheaper than a mortgage
so when you get guaranteed income without working
You don't have to pay homeowners w paid off
I would say split your excess cash 50/50. If you have $2,000 excess cash after your bills and house payment, put $1,000 extra on the house and $1,000 in investments.
For me, it seems to make the most sense to pay off your personal living home. This gives you that peace of mind. With rental properties you think of it as a business and investment in which you use those mortgage debts to your advantage. Never think of your home you live in as an investment.
ONLY after you are saving and investing and have no other debt.
Also depends on country. Canada interest rate is 7%ish and houses are 600-800k for a family home
Effective 2.4% is only $2400 a year on $100k. Even if you triple that, just don’t think that’s worth playing the leverage game.
That amount of money isn’t going to make you wealthy.
And those high yield bonds/savings accounts aren’t going to last 10.20.30 years.
Freeing up your monthly income to invest in other options that could return 10-12% seems better to me.
You ignored risk in your analysis. You looked at only the interest rate. Risk is part of the analysis as well. You have to make an adjustment for risk in your analysis.
@@inertiaforce7846 I think risk is negligible in this. Far more people keep their jobs than lose them. Within 1-2 years, savings are enough to cover most "life happens" moments.
The banking system is one big scam for most Americans. Get out of debt. Pay off your debt ASAP. Live life on your terms. Visit family. Travel to places.
These dudes keep taking the math perspective with money to the Ramsey folk and their whole ethos is freedom, not math.
Freedom from obligation, freedom from payments, freedom from slavery. There may be situations where that freedom comes with a missed opportunity, math wise, but these fellas totally miss the mark on the upside of that freedom.
I do think it’s only when you’ve lived through significant loss that you get a balanced view of risk.
AFAIK, paying off your mortgage early in the term (e.g. after 5 years) can save you hundred of thousands of dollars in interest but when you are paying it off late (e.g. after 20 years), you are just doing the bank a favor. That's because in the beginning most of your payment goes towards interest, not principal. Also, when you invest the money instead of paying off your mortgage, you get a compounding effect which can also make a big difference over 30 years. You really have to do the math.
That’s true. Having a family allows to take different risks. My wife and I have of peace of mind not having debt. A friend has a lot of properties, however he’s over leveraged and has to drive 4 hours to see the property while his girl is pregnant.
George won this debate
I want to live free and clear. Goal is to pay off everything.
What they all forget is that a paid off house is like buying a huge dividend stock. You have the main value in the house but you’re getting the benefit of the extra cash each month from not having a mortgage payment. Even if you’re to invest that 300k into something else, you would still have that mortgage payment to contend with, ultimately reducing gains from the outside investment.
Loved this segment!'Was really helpful to hear the debate. We have 4 kids and been in our first home 3yr now; that's our only debt and it's such a HUGE relief knowing my emergency fund is there to cover our mortgage for a few months in case something happens. Do it people! Pay off the mortgage ASAP and have an emergency fund! Took us 5yr to get all our other debt paid off and get an emergency fund. You got this 💪
Being Debt free has given me the time to be with my family that needs me more than ever.
I have never met anyone who paid off their house early who said “I really regret doing it and if I had it to do over I would have invested that extra principal I was paying”
Very few people do it in their first place because for years the banks were selling the American dream of owning a home, HARD. They sold the point so hard it seemed like the only way to build wealth was buying a home.
People still believe that today and unfortunately if they would’ve invested into the S&P they would have much more money laid out for retirement. Why? Because the S&P has grown at a faster rate and higher percentage than home values.
Most people don’t know that because they don’t research.
I’m assuming you don’t know any rich investors. I have a paid off investment house which I regret not remortgaging in 2020. One of my biggest REI regrets.
Agreed
Here is the deal. Playing the debt game isn’t for everyone. Cash buys is better for the majority. I see great debt jugglers and everyone that I know has either filed bankruptcy or was looking at it at some point in time. It’s not for the average person
Bingo. In addition, if you want to juggle debt, it should only be a small part of your total net worth so that there's minimal risk. The benefit of leveraging has to be balanced against the risk of leveraging.
Even if I pay off my mortgage, I don’t have peace because there is always monthly insurance and property tax payments. The monthly payment is just less. And there is always the possibility of high expense repair on my house. I think of it as what gets the most return for my money.
You don't have to pay insurance, if you burry a family member on property there goes house tax
@@morganhill2586 only an idiot would not pay for insurance to cover their house. Also you cannot avoid property tax unless your property is a cemetery. If you live there that wouldn't suffice.
My tax plus insurance is currently about $8k/year, not exactly the peace of mind I would want paying off my mortgage
I get it. No one likes paying for things, but honestly that is just our life. There will always be a re-occurring expense, whether for housing or for health. You will always need a place to stay. So, instead of seeing it as a pain in the ass, if you can pay it off,be happy up can do that. We will always pay taxes on something and there will always be something that needs to be repaired, whether a house, car, van or trailer you live in.
I've had the same thought about buying a 30 yr treasury. Coupons pay the payments, and then after 30 years you still have the principal, all risk free. The real opportunity would be to pay off the mortgage at its market value rather than its face value. I just don't know how you do that.
why would I waste my cash when I can leverage the banks money at less than 3%?
It’s not the bank's money. It’s your future earnings (cash) that you now give to the bank because you never had enough money to begin with. Live within your means and stack cash so you become your bank, and you’re free to jump on business opportunities that only people with cash with no loan attached get deals on.
Where the 3% at? lol
Interest rates are around 7% right now. Where are you getting less than 3% at?
@@Hboogie182 most people with mortgages right now have low interest rates.
@@Hboogie182 about 65% of people have a mortgage interest rate under 4%.
Jack - you can measure the peace people experience from paid off debts by LISTENING TO THEM. Stop fighting everyone about every topic. My God.
Graham is trying to win. George is trying to avoid losing. Very different goals.
Graham is trying to excel. George is trying to be sensible and limit all risk.
The peace is real. No debt.
Remember graham was telling everyone to buy NFTs and FTX tokens. he is a scammer
Yep. He's a grifter. And the guy sitting opposite of him is a Dave Ramsey lackey, the guy who enforces his evil evangelical Christian views on his employees.
I'm paying off the mortgage any time if have cash. That 2-3k per month that'll become available for investing or saving & enjoying some of it.
Yeah, the math totally says I shouldn't have done a 15 year.
But, once my house was paid off, I felt so much relief that even if things went bad, I have the house, etc...
I don't know how to put a value on that piece of mind, but it is significant...
And being honest, if I would have done a 30 and "decided to invest the extra to get a higher return..."
I wouldn't have invested all of it... Things would have come it... I wouldn't have blown all of it... But I wouldn't have invested all of it either... I know me...
Free and clear is ALWAYS best. We danced through the GFC without a care. Your pay goes where you want it.
Being in debt by itself is not a problem. The actual problem is overspending. If you don't overspend you could carry debt intentionally and know you have the means to pay it off if you want to. To me that is peace of mind. If you choose to save money and pay minimum payments on debts, you will still see satisfaction because you cut spending enough to improve your financial health.
Well said. I carry debt but the upside to keeping my money outweighs paying it off. $100 in interest I pay a month is nothing compared to the $1,000 I make on my investments. it’s a no brainer.
Leveraging debt only seems ok if it's a small amount of your total net worth. That way, you can leverage while also keeping your risk balanced.
From the perspective of not having a payment i prefer a paid off house. But... grahm is right that having money not locked into your house is really good.
Mortgage rate: 2.625%
High yield savings: 5.00%
Assuming I have cash, why on earth would I pay off a mortgage?
I would only say pay it off if you don't have discipline. A lot or people would bleed through that savings. A paid off home is more of a safeguard to blowing it for many.
@@mcleananderson4948 if you have trouble with being disciplined with your money, see a psychiatrist, much cheaper than paying off your sub 3% mortgage
Paid off house last fall. Totally worth it.
Couldn't you earn more than 3% on investments?
“Worth” isn’t only defined monetarily.
I doubt you will ever find any money at 3% ever again.
Agree that family responsibilities change the goal post. Peace is sometimes worth more than the money
Mortgage is modern day indebtedness. 30yrs to own a home and paying vast interest. Most loans have life span of 5-7yrs which goes to interest under amortization plan. Save money live modestly and buy a home under a plan that suits you and not the banks.
What Graham doesn’t understand is that leveraging causes more inflation and adds to overall cost. Once you inflate the price of an asset, you decrease the amount you can play with in interest rates.
This is why the U.S. can barely afford a fed fund rate of 5.5% vs 18% in the 80s. Prices are so high due to low rates that the existence and continuation of these prices depend on very low rates until rates are nonexistent. It’s being milked out fast
Once the juice has been fully squeezed from what low interest rates provide, leveraging is no longer an option.
There will be nothing to leverage
Economists have already created ways to compare the personal benefit from non-quantitative things like being debt-free. They're called utility functions, and can even be tweaked to represent the behaviors of risk-averse and risk-seeking individuals. However, they're mostly a theoretical tool and are not actually used to deduce the numeric benefit from certain actions as far as I am aware.
It makes absolutely zero sense to pay off a sub 3% mortgage. This is where I diverge with the Ramsey principals. He has no valid reason other than emotional regurgitation. The data is clear, even a high yield savings account gives 5%. That’s hundreds of thousands of dollars of 30 years.
It really comes down to 1 question do you want to control assets or your life ?
The real question is, what are your goals. Being debt free is as much of a goal as building a big portfolio.
If you're planning to stay somewhere for longer than 5 years I think the investment is worth it, even now; if not the costs/risks/opportunity costs probably outweigh the benefits
Even 5 years maybe not worth it.. have to take into consideration costs to buy and sell (realtor commissions), loan origination fees (and other fees associated with getting a mortgage).
Have to figure your personal situation..
You always have to live somewhere & I've always thought of mortgage being a rent payment that you'll probably get some portion back as a refund eventually. If you buy and have to sell after 5 or 10 years, even if the value of your place is a third of what it's original price was for reason, you're still getting a portion of the money you put in back, plus you got to live somewhere for a period of time. If you were renting, you just got to live there for a period of time.
I’m always amazed at how committed each side is in this debate. Personally, I would sleep better at night with zero debt and cash in the bank. I’m also amazed how people have been successfully programmed to view a mortgage as not being debt!
if you dont consider rent debt, it makes sense
you always have to live somewhere....a mortgage is just rent that'll you'll eventually get a partial refund on.
HYS are offering 5% all over the place. Why would I put my cash in to a mortgage if it’s less than 5%? Especially if the interest in my mortgage is tax deductible
BINGO! Someone is smart finally
Most people aren't finance bros who can move from place to place and rent. They have dogs, kids in school, etc. While I do agree a mortgage makes little sense if you know ahead of time you will move up in a few years, most people stay put 5-7 years, enough to recoup the commission on the home sale plus inflation protection as home prices rise. Stocks don't always go up more than housing. During the 70s, real estate soared while stocks crashed. The assumption is there is always a better place to put your money. Not always. Real estate is as good a place as any to park some savings. I know many people who literally would not be able to retire if not for their home equity. It's a huge deal in terms of wealth creation.
Low interest rate give you the ability to invest that cheap cash, which has risks. But life is risks. Darned if you do, darned if you don’t
I seriously love that you all are talking and having a great conversation with differing views
2.25% zero down VA loan with about 150k in appreciation. I must have “Golden handcuffs” 🥴, poor me 🙄
If I can borrow money at 2.25 I will pull out as much money as I could. There are so many places I can put it where it will grow better than 2.25. Golden Handcuff me 10 times over please. Hahah
You ignored risk in your analysis. You just looked at the interest rate only, without factoring in the increased risk of having the debt
@@Odelle8You completely ignored risk in your assessment.
@@inertiaforce7846 these are gov backed loans. Yes there are risks, but the risks don’t seem significant at all. I’ve said it before, Ramsenians always reference risk as not being accounted for, but you know who notoriously doesn’t quantify risks? Ramsenians. How would you quantify it?
Have you considered the risk of paying a low interest mortgage down? The opportunity costs of paying a low interest loan down especially in a high inflation market (like we’ve had in the last few years) is objectively more risky. Think about it, if you’re not deploying cash/value as much as you can in a high inflation market, you’re losing value every day. If your net worth isn’t outpacing inflation, you are losing.
People pick apart each individual step, but you need to start with 1 and go up. So if u do them, they will work. For the first time we have money when our car broke down and not salvageable.
I do agree having liquidity is much better. Currently I have a 7 month emergency fund and I am going to bring that up to a year or maybe more than a year. I also have a mortgage that is at 2.7%. There is no way I am ever going to pay that off early. There's no need to, unless the balance on the house is a fraction of my investments and it wont hurt me at all.
Graham reveals his stupidity every time he makes this argument. First, the Ramsey team never recommends selling off all your stocks to pay off a house. Second, they tell you not to use your six month emergency fund for it. So you’re covered for retirement and a job loss. Third and arguably most important is people who pay off their house early have their act together and aren’t subject to being victims of the numerous non-sensical scenarios he makes up for the sake of being right.
You could say the exact same thing about all the Ramsey Solutions Team members. They'll argue that you must pay off a mortgage early because either no one ever uses that extra money to invest over 15% or it's impossible to do so. They'll also say that if you waiver in any way from the Ramsey Baby Steps, you're completely irresponsible and will wind up eyeballs-deep in debt regardless of what you do.
Who the hell has enough cash just sitting around to pay off a mortgage that isn't in equities?
Otherwise you'd have to look at it from monthly contributions to pay it off faster, but then you have to consider that adding money for a
@@tcgtpl All fair points but, embarrassingly, as someone who has listened to every word out of Dave’s mouth, people misconceive their advice and intentions. Their advice is always to put money over 15% into the house for two reasons: peace, and so retirement is not under-funded nor over-funded. And they are also okay with wavering from the baby steps just as long as people don’t claim to be doing the baby steps. For example, they tell people “you’re doing your plan, not our plan, and your plan isn’t working, that’s why you called us.”
@@ericcarlin So retirement is not over-funded? An over-funded retirement? That is the silliest thing I've ever heard in my life. That's like saying your wife is too hot or your car is too fast. The biggest issue with Dave is that he completely ignores interest rates. As a thought exercise, if you had a billion dollars cash, a billion dollar investment opportunity with a 10,000% ROI, and a billion dollar loan at 0.00001% interest, strictly following his advice, he would recommend you pay off the 0.00001% interest debt instead of going for the 10,000% ROI. That's stupid.
@@BLdontM ok brokey
Bought a condo for 320g 6 years ago sold it for 530gs last year. Bought a house 3 years ago for just over a mil now its worth 1.4 - 1.5 easy. Show me returns like that ill wait...
These days you need a 1 year emergency fund. Whether it's a rent or a mortgage, you still need it - or a line of credit.
i paid off all 3 of my houses so now all my kids have their own home. it's not hard when youre rich
Damn Roy
work hard man@@ThejeffJr8
I was a big fan of Dave Ramsey. Saved 20k and put it towards my mortgage. Knowing what i know now its one of my biggest regrets. Shouldve just HYSAd it or invest. Mortgage easy to put money in hard to take money out
They’re both right but I will say being debt free is less stressful
If you don’t owe money to ANYONE you don’t have to worry about ANYTHING! You have true freedom and that level of peace isn’t something you can quantify. That’s more important for some people than others. Dave Ramsey has a great system that would work for anyone. But it’s most geared towards people who struggle with their finances. That way of doing things is a lifestyle and it’s not for everyone. But I’d say the guy worth several hundred million knows more than anybody commenting or listening on RUclips…
Unless you forget to pay your taxes and your house gets auctioned off for
@@lr7815- Why would you forget to pay taxes?
Man, say it louder for the folks in the back!!
@@smileychess You have a life and forget, miss the mail, etc... It happens to elderly people all the time
@@lr7815 You defer taxes, Paid on transfer of Title. for +65
The thing I feel like the Ramseyites never talk about is you are never debt free. Even once you pay off your house you still owe taxes and have to pay homeowners insurance. So you are always paying on that property. If you get a mortgage that you can afford at a good rate it doesn't really make much sense to pay it off quicker. It doesn't eliminate that bill entirely it just reduces it.
Bc that’s like going to the dollar store and saying “it’s not a dollar. It’s a dollar plus tax” you come across like a know it all and that’s off putting and most know you won’t be living “free” just you don’t have debt. Not that you won’t have bills
great analogy @@Enigmalake
More freedom, less shopping
Warren Buffett doesnt leverage Berkshire. That should tell you all you need to know about debt.
Let me weight in… I own 5 properties that are completely paid off. Occupied with great long term tenants. If I was given the opportunity to cash at refi at 3% I would do it. Use that cash to buy more properties.
Amortization Schedule: Know it, understand it. If the principal is greater than the interest, make extra payments. Then, do all your math, calculations, comparisons.
But if you are only knocking off $200 of principal while paying $1100 interest, you are getting taken advantage of. You could make an extra $200 payment and skip an interest payment, but people look at 10% (average s&p return) on that $200.
Would love to have Robert Kiyosaki weigh in on this conversation 💯
"Walking backwards isn't efficient, not good" 😂😂😂
Unless you have emotional issues with your money or mortgage. Keep the mortgage at 2 percent and make a 5% return on that money in treasuries.
When your debt is lower your FU money lasts longer
I think Graham is right for highly disciplined responsible people that will put money that could have been going to extra principal payments into other investment vehicles. Most Americans will blow it on useless crap, though, so paying it down early is better for them.
It’s more just a question of comfort. If you can do it nearly risk free then why not do it? More money for you