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Discussion in 'Personal Finance' started by famousbrownbear, Feb 3, 2019.
Your good words echo like distant thunder, Brontide.
It all depends on your individual finances. Many options. You could, in theory, buy the house in cash. That would free up your cash flow from paying rent or mortgage. You could then draw against the equity in the home, depending on interest rates, then put that money to work for you. A friend of.mine, not me, leveraged his house, bought a rental, the tenant's rent pays his debt, and he writes off interest payments on a loan which tenants pay for. He's living in his own house, technically for free, gets a free house paid by tenants, writes off interest he doesn't pay, and has increased free cash flow after writing off interest and depreciating the real estate.
I certainly do not have the stomach for playing landlord. The horror stories. And my and mine are steadfast against any kind of equity tap. My house will never be a bank account. Except when we sell it to downsize for retirement, in which case the new home will be paid in cash from the proceeds, and the leftovers, to travel and play on.
But as you suggest, a topic such as this topic requires everyone to know their own situation. That is most important.
What would you call it?
it may not be retirement yet, but its a path to it, and better than a 9 to 5 plan.
Lol. Omg this is comical. Sorry guys.
I came from the another investment forum (no name mentioned out of respect for this site) and over there people are so conservative. For them it's not investment if it is not 100% ETFs. If you talk about stocks you get burned at the stake. So I sought and found this forum, hoping to find more liberated like minds.
This topic did come up a few times in the other forum. What I find funny is that over there people seem to advocate holding on the mortgage and using that money to invest. Here it seems we advocate paying off that debt first. It's just the reverse. Not saying who's right and who's wrong. I myself prefer no debts so I paid off my mortgage. It's more from the peace of mind sleeping at night and one less thing to worry about. But it's up to each individual. There is no right or wrong here.
It really depends on your situation, if it was me I would pay my mortgage so I don't have to pay interest.
In my opinion, Invest is the best option.
If the rate on your mortgage is higher than what you might make by investing the cash, it's often better to pay down your debt before investing
I think that a mortgage is a good thing, because it allows you to have a house not for the full price, and when you have a stable income, you can pay for this house every month and be happy. So, I also wanted to buy myself a house on a mortgage, but I wanted to find an experienced person who would help me in this matter. I decided to google it and came across this site Mortgage Broker Newcastle . On this site, I found an experienced person who helped me with the purchase of my house and also generally helped with all the documentation that I had to complete.
It's a multi-faceted decision. It's not as simple as "mortgage free = more pocket money".
For example, it depends on where you are at with the mortgage (e.g., before or after the "flip" on interest). Take that information in conjunction with how heavy is your monthly payment.
If your monthly is low, you are after the flip then you might want to keep the mortgage to take the tax write-off if your investments are otherwise doing well.
You'll make your own call but beware any internet input that simplifies something like this down to low, low level. It's a multi-faceted decision and there's number crunching that you can do to justify the action.
Suppose you have a low mortgage rate and accumulated a large amount of money. It is best to invest this money somewhere to increase your capital later and thus pay off the mortgage faster. It's simple, my friend. By the way, I was able to get a mortgage only a year ago, although I tried to do it for 5 years before that. I was lucky that I could find a good Mortgage Advisor Manchester who advised me on mortgage issues and helped me draw up and prepare some documents that are needed when applying for a mortgage.
I mean, technically speaking if you think the percentage of return you'll receive from your investments will beat your mortgage rate, then mathematically it would make sense to invest that money.
That said, not having a car, student loan, or any other debt payment besides a mortgage payment is pretty sweet....so I can imagine not having a mortgage payment would feel even better, since mortgage payments typically dwarf your other debt payment plans.
When I did it, I didn't care about cashflow. I've always lived really, really cheap.
I cared only about net worth. After calculating it several ways and considering the risks, we decided to keep the mortgage and invest the money, instead of retiring the mortgage (the original plan and one of the reasons behind selling the property).
A company that distributes >8% can make the entire payment on a reasonable mortgage length, including principle. I had the payment set to the monthly distribution. It literally amortized to 12 years initially. When the distribution bumped up, I bumped the mortgage payment to match at renewal.
The REIT I chose slowly went up (about 30% in three years), while paying just under 10%. Most months, the value of the shares went up a bit while the mortgage shrank just a little bit. A double whammy but I only had to pay tax on the distribution minus the mortgage interest.
The idea is not a panacea. You have to be prepared to carry the entire mortgage. That's a considerable load. In my case, I was super confident in the company as I was very familiar with the people involved.
In Canada, there is a way to transfer your mortgage to a tax deductible state, over time, using a HELOC and a mortgage. This is called the "Smith Maneuver". Anyone in Canada should consider looking it up.
I'd only buy to let these days. I prefer to rent where I live and invest the rest into REITs or mortgage P2Ps. I've done ok on the latter over the last decade, but they can be pretty volatile. I have a couple of US based REITs that do consistently well that I hang on to.
That move was a rocket engine on an aircraft that was already flying high and fast. A genius move! If we had made that same move in 2020, we would have been funding that mortgage from other sources of money because two of our big three REITs cut their distribution (one cut it in half). In that case, we would have been morons who obviously don't know a thing about finance.