Thanks to your feedback, I realized that one financial initiative that wasn’t on the top list of financial initiatives to reduce stress was paying off your home.
I thought long and hard about what to put on the list, but the housing repayments weren’t really bulleted, just an addendum.
For those looking to pay off their home as soon as possible, here are some perspectives from someone who paid off two mortgages and still owns the property.
Experience paying off a mortgage
We all have different opinions, experiences and prejudices. These differences are why I enjoy reading about different points of view. Here are some feedback from two readers who have paid off their housing.
I think paying off a major mortgage is definitely number one for me. If your mortgage pays off and you die prematurely, your spouse and children won’t be forced to downsize to secure a home. Also, having to move to a smaller home or neighborhood won’t make the trauma of your death even worse.
In this situation, children are likely to be expelled into the new school system and lose contact with their friends. It’s too traumatic. You can avoid it if you don’t have a mortgage payment.
The number one thing for me was paying off the house. Financially, nothing is more stress-relieving and happier.
The second is to pay off the business credit line.
The third is to pay off the business.
Number 4 Do Will and Trust
Fifth is to pay cash for my daughter’s college
Why paying off your mortgage doesn’t relieve stress
I personally paid the rent for the vacation rental I used as my primary residence and purchased the primary residence with cash.
After hearing feedback from two readers, I wondered why I didn’t specifically bullet about “home repayments” in my post. In fact, until reading these two comments from her, I forgot that he lived in paid housing from 2019 to 2020.
Here’s why you might be disappointed after paying off your home.
1) Ongoing Property Tax
Even if you pay off your mortgage, you still have to pay property taxes forever. Otherwise, your home will eventually be foreclosed on.
For example, in 2019 the Fixer I purchased with cash has an annual property tax bill of approximately $23,000. Half of the amount is due on his December 10th and the other half is due on his April 10th.All Property Tax Notices I Receive reduce My joy that I paid for and got a house.
Then when I read about it San Francisco Building Inspectorate Corruption And the city is about to fine homeowners for building small libraries, which irritates me. There are bigger issues for the city to focus on.
Even if you invest in a personal real estate fund, you will continue to pay property taxes. However, costs are just numbers embedded in spreadsheets that other people work with. So no property taxes or maintenance stress. When you sit back and enjoy life, all you care about is the net profit.
2) Ongoing maintenance issues
Whenever a maintenance issue occurs, my stress level goes up instead of down. The two and a half year repairer has already had cracked kitchen pipes, blown out fences, and mysterious fire alarms that have been hilariously resolved.
We ended up spending about $18,000 on replacing the roof and another $3,000 on replacing the second floor furnace. Maintenance is all part of owning physical property.
I just started living in the main residence in 2020. However, they had already had to replace the door handles, rotten deck planks, and repair the leaks that had occurred during the heavy rains. Over time, it is inevitable that more maintenance issues will arise.
3) Negative Real Mortgage Rates
I’ve never regretted paying off my mortgage early, but paying off a real negative interest rate mortgage isn’t the best move financially. The higher the negative real interest rate, the harder it will be to pay off your home.
For example, my primary mortgage interest rate is 2.125%. There is currently no way to actively repay additional principal, as risk-free investments generate payouts of 5% or more. Being able to arbitrate the difference and live for free is much less stressful.
But if my mortgage rate was 6% and I was only getting a risk-free return of 2%, paying off my mortgage early would definitely reduce my stress. But you need to pay off your mortgage in full to free up cash flow. Otherwise, you’ll continue to pay the same mortgage payment, just by splitting the percentage of principal and interest change.
In normal times, most mortgage rates will be higher than the 10-year Treasury yield. However, it is not normal time, so please use it! An inverted yield curve doesn’t last forever.
Being free makes me feel like I won the lottery. You are already borrowing cheap money to live in a better house than cash can buy.
4) Invest in FOMO
Negative real interest rates and low mortgage payments mean less freedom to live, which can be a little worrying. But stronger means you could miss out on a bigger investment return when you pay off your mortgage.
FOMO in investing is hard to overcome. That is why the rich still take unnecessary investment risks.
During bull markets and economic recovery, you need as much risky asset exposure as possible. So you’ll feel better if you paid off your mortgage just before the bear market hits. Of course, timing the market is very difficult.
For example, right now we have artificial intelligence geeks here in the San Francisco Bay Area. If you can’t find a way to get some exposure, you may feel even more insecure because you’re missing out on opportunities.
Instead of paying off the house to save 2%-6% on the interest burden on the mortgage, you may be more likely to allocate capital to investing in AI and get a higher return.
I don’t want to miss the boat, which is one of the reasons I wrote How to Invest a Million Dollars Today for a Better Tomorrow. Writing these posts has forced me to think more deeply about allocating capital.
5) Financial wins don’t increase happiness for long
Sadly, hedonic adaptation causes us to quickly return to a steady state of happiness, no matter what success we achieve.
When you pay off your house, you will feel even happier. perhaps Up to 6 months, but probably closer to 1-3 months. Then you’ll take it for granted that you won’t have to pay your mortgage. Additional safety feels marginal due to ongoing property taxes and sporadic maintenance issues.
The biggest boost in security you get when owning a home is when you first buy it. If you keep paying your bills, you’ll have peace of mind knowing that no one can raise your rent or kick you out.
You’ll feel happier because you worked hard and paid off your mortgage. deserve of a completed house. The more worthy you feel, ironically, the less financial pleasure you feel. I wrote about this in a post titled Overcoming the Valley of Sorrow.
Paying off a house is a big achievement. But most people won’t appreciate it for long once it’s done.
Permanent and Temporary Financial Trends
Paying off your housing will definitely give you more peace and less financial stress. However, the financial relief may not be as great as expected, as taxes and maintenance fees are paid permanently.
For peace of mind about paying off your home, think of it as a permanent way to stop paying rent. Telling yourself that might make you feel better.
Of the 10 economic actions I recommend people take, more durable The more you move financially, the less stress and anxiety you will experience.
For example, creating a revocable living trust and death file will keep you and your heirs insured for life. Don’t worry so much about your dependents not having access to your funds when they need them. Also, there are no ongoing costs. Oh, it feels so good.
With investments that generate permanent passive income that can cover basic living expenses, I feel like I can take on the world without too much fear. wonderful!
But investing can feel like a full-time job, so someone needs to keep control of it. So you need to have a backup person to manage your money accordingly.
Expiration Date vs. Lifetime
It felt like the best thing for me was to get an affordable 20-year term life insurance policy. One reason is that it gives you 20 years of peace of mind. I’m pretty sure in 20 years I won’t be in any more mortgage debt. Moreover, my children should be mature enough to live independently at the ages of 23 and 26.
However, given what we just said about the importance of permanence, it’s logical to conclude that whole life insurance (that lasts for life) will give you extra peace of mind. This is especially true for those who have family members who may be struggling with mental and/or physical health conditions.
Yes, whole life insurance is more expensive than term insurance. For most people, it’s better to get term insurance like I did. However, if you have anxious dependents and want to increase your wealth to the highest level, then whole life insurance may be a better choice.
In retrospect, I should have purchased whole life insurance when I was 30-35. The cash value of my whole life policy would now be worth six figures. As a compromise, tell yourself that you’ve been saving and investing as much as you can since college.
If you’re looking for affordable life insurance quotes, check out Policygenius. Get multiple real world quotes in one place.
Paying off your housing is fine
If you want to pay off your housing early, do so. If you have already paid off your mortgage, congratulations. Low cost of living makes life much easier.
My warning is that you may be disappointed if you are currently trying to pay off your housing sooner. The harder you work and the more sacrifices you make, the less satisfaction you may feel after finally paying off your home.
Based on the comments on this post, I learned another important thing about housing repayments. The higher the value of your home as a percentage of your total net worth, the greater the joy of paying it off. This is not surprising given that there are more risks.
Bottom line, I’m not going to focus my efforts on paying off the house as soon as possible. Instead, make financial decisions dynamically based on the economic situation at hand. Diversify your financial movements to bring greater peace of mind.
Whether permanent or temporary, give it enough time and everything will be temporary. Try to make the most of each day.
Reader Questions and Suggestions
How long did that joy last if you paid off your home base? Or were you disappointed after paying off your mortgage? Even if the family is wealthy, if cash is scarce, stress builds up.
For a more strategic real estate investment, check out Fundrise. The Fundrise Real Estate Fund invests primarily in low-value, high-yielding Sunbelt residential properties. I have personally invested $810,000 in private real estate funds to diversify and earn 100% passive income.
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