Save Almost Everything, Spend Virtually Nothing

I paid off my house one month before I turned 30, [which was my second house]. Poured it all into a nice log home on ten acres, [which needed finishing]. The X got it. I won't live long enough to pay off this one, no way. I was a little surprised a bank loaned me the money to get this one?

We didn't want to rent, so put down a few thousand dollars to be able to decide what colors we want on the walls. Didn't think property would escalate as fast as it has. Right now I'm sure we could sell this house for at least 30% more than the purchase price.

This is how I look at it, and these numbers are hypothetical. Purchase price 300k, down payment and closing equal 10k. Sell house ten years later for 400k. Payments of 1k monthly includes everything, insurance etc.

How would you consider the profit? If you pay 300k at closing total, sell for 400k, thats about 1/3 profit. But if a person finances and puts down say, 10k, and sells for the same price, is that not multiples of the down payment percentage wise? One hundred thousand profit on the total value of the home, with only putting down 10k, is ten times what the original equity is, isn't it, if the payments are looked at the same as rent, and the interest which is the bulk of the payment [rent] is deducted from taxes? Loosely, that is my thinking.

I think of paying off a home at this time, as "stranded capital". I feel more secure having a sack of cash than another deed, especially after sacrificing plenty of property in the past.

Quote: odiousgambit

...property taxes
...insurance payments
...upkeep

If you think all of those combined
even approach the cost of a mortgage
payment, you've never paid off a
mortgage. People have parties
when they pay it off, for a reason.
The proverbial stone has been lifted
off your chest.

My property tax alone exceeds my mortgage payments by 35%.

If there is a mortgage there is a lawyer somewhere watching to see there are no liens ... one woman with a paid off mortgage had her house sold for a five dollar sewer lien some lawyer bought on spec.

Better off investing in a large plot and a small house.

Quote: odiousgambit

*those on my side of the thinking have to refinance until you get a good rate, which will finally come; short of this, the other side has a point
*no one has "no more house payment" ... perhaps little will be monthly, but you'll still have house payments, which are
...property taxes
...insurance payments
...upkeep
...probably something else I've forgotten at the moment

and another thing, you don't lose your house because of a mortgage [assuming the interest rate isn't crazy]. You can lose your house because you don't have the money. These things are not the same.

You pay those things indirectly if you rent and direct if you do not pay off, so it does not matter. What does matter is the size of the payments.

Quote: JimRockford

My property tax alone exceeds my mortgage payments by 35%.

You either have very small mortgage
payments or high property taxes.
I live 200 feet for the urban/rural
line, on the rural side. I pay $1500
a year in taxes, $125 a month.
When I had a mortgage the taxes
and insurance were included in the
$450 payment. But that was the 80's,
my taxes were a lot lower.

Quote: Evenbob

You either have very small mortgage
payments or high property taxes.

Both actually. I'm at the tail end of my mortgage, I'll probably write a check to pay it off in January. My area has grown exponentially. Valuations and tax rates have gone up over the years while my mortgage payment has not.

No one has mentioned one of the major costs of owning a home. As you pay down your mortgage the equity increases. If this equity was not tied up in your home you would be able to invest it and have it earn income for you. Most homes rent for less than a full mortgage payment, taxes etc. If your timing is right and you hit a big run up in real estate prices you do good. If you hit a flat stretch or a falling real estate market a renter probably does better if you take in your loss of equity.

Quote: kenarman

a renter probably does better if you take in your loss of equity.

I've always sided with the Jewish
philosophy that being the landlord
is far better than being the tenant.
In fact, one of the roots of antisemitism
in Europe is that all the landlords
were Jews. They wanted their rent
in good times and bad, and came
to be hated for being smart enough
to control the property and the banks.

Quote: kenarman

No one has mentioned one of the major costs of owning a home. As you pay down your mortgage the equity increases. If this equity was not tied up in your home you would be able to invest it and have it earn income for you. Most homes rent for less than a full mortgage payment, taxes etc. If your timing is right and you hit a big run up in real estate prices you do good. If you hit a flat stretch or a falling real estate market a renter probably does better if you take in your loss of equity.

In my area, apartment rental is about 50% more than my total house payment (for an apartment that is smaller than my house) and a quick look at comparable homes for rent in my area, those are at least double and some triple what I am paying.