With the economic crisis being what it is, I wonder if the old rules of home ownership have changed. In the past, the conventional wisdom was not to pay off your house, to maintain a mortgage, and instead invest those funds at a return greater than your mortgage interest rate. Obviously that is not an option today, nor is it likely to be any time soon. There has also been a camp who have believed that you should not look at your house as an investment, that it is a place to live, and that paying it off assures you of a place to live and provides peace of mind. The financial experts have balked at this thinking saying, that if times are tough, you no longer have that cash in hand, and that "you can't eat your house". They would also add, that when the market does recover (assuming it does as it always has), you will no longer have that capital available to invest.

Some of you may recall the saga of my Ohio house sale from last year. I had a deal fall through at the last minute due to an appraisal that was $56k less than the agreed upon sale price between me and the buyer. I guess that appraiser knew something the rest of us didn't. Anyway, I've accepted I'm going to have to sell at a loss, and I'm going to re-list it. I'm currently renting it, and making about 4-5K profit doing that. However, I want/possibly need, the cash from that sale. IF it sells, the net proceeds will be roughly what I would need to pay off this house I live in. So I was thinking of paying this one off.

Now that the economy and the rules have changed, would you pay off your mortgage or not? I realize there are other variables involved, ie. how much other cash/investments you have to live on, etc., however, I'm looking for general opinions on what you would do.

 

Just a basic train of thought, paying off the house would ensure that you have a place to live. The mortgage payment would add to your daily living expenses and not make the purse strings so tight.

 

I believe in paying off as soon as possible. This way you can use your money somewhere else. I just don't like debt and I feel better knowing that my wife and kids will have a roof over their head if something happen to me (life insurance will take care of that anyway).

We have a fifteen years mortgage at 4.5% and we have about 56 more payments until we are done. When this happen, we can invest this fund into something else and hopefully the return will be better than 4.5%.

 

Carmen,

I faced a similar decision when I retired last year: Do I take some of my 401K and pay off my mortgage, or leave it invested and continue the mortgage? After looking at the tax considerations, and not having a crystal ball regarding the market and home values, I decided to keep the mortgage. I realize this is different from your situation, and not knowing the tax implications and your future business plans, my first impression is to take the $'s and pay off your current mortgage. As the previous posters have said, it would take a load off knowing you're living in a house free and clear.

This advice is worth what you paid for it!

Wishing you the best.

 

We never had a large mortgage, having stayed in a starter home, and we're not in the same financial league as some folks here, but our mortgage is paid off. We like not having the monthly bill. We have no pensions where we work, so we acted responsibly and instead of going to the Caribbean twice a year, the mortgage payment amount was diverted to the IRA savings and IRA retirement savings plan at work. We know what happened with that cash. We should have gone to the Caribbean.

We have a home equity line should we need emergency home repairs and a rainy day fund.

Neither of us has job security at the moment. If the economy gets worse, I'm glad we won't worry about paying a mortgage.

PS Carrying a mortgage just to write off interest on taxes was not enough incentive to obtaining a mortgage.

In summary, the choice depends on what makes you sleep better at night.

 

[QUOTE=poorshoesless,Mar 7 2009, 09:04 AM] I believe in paying off as soon as possible.

 

I thought about paying mine off, i have a LLC, so the intrest is useless.
If things were better i would, but we may need that money to live on
if things continue to get worse.

 

IMO, paying off the mortgage is the way to go.

 

Funny, my wife and I both Accountant....

 

If the house is making money for you, don't sell. Put the profit towards the house payoff, and use that mortgage deduction to lower your taxes.

If you gotta sell, you gotta sell.