Its a never ending debate... where each side seems to ignore the others reasoning for why their answer is "better" while ignoring what really matters: what works for you?
People for Mortgages:
- comfortable investing large amounts of money
- confident in their ability to get a better return than "(insert interest rate here) steady for the next 30 years"
- leveraging experts... pride in making money work for them.
- have an ability to save that money, instead of spending it
People for Paying It Down:
- conservative
- no desire to chase a higher return (even if history says it is 99.9% sure you can achieve it - easily)
- comfortable with the peace of mind knowing its one less thing they owe.
- love the guarantee
Statements that sound good to one side but make no sense to the other:
"I'm debt free! There is no better feeling" (what the other side hears is... no you just decided to tie your money into a [insert current interest rate here - minus tax write off] fixed rate of return, which is foolish because you can get a much better rate over 30 years investing it in a dozen other ways)
"I just got my rate under 4%! Cheapest money I've ever gotten!" (what the other side hears is... wow, you just obligated yourself to spend $x over the next 30 years when you could have had a sure thing. In retirement, guaranteed and fixed situations are much easier and stress free to deal with.
"I'm accelerating my payoff, in x number of months I'll be ready to retire" (what the other side hears is... what an arbitrary event it is to retire on the date your house is paid off. I wish more people would look at their overall financial health and realize that if you have money in the bank, it is actually better than having it in equity in the house... because you can get to it when you want... spend it when you want... and allow it to make you more money however you want...)
"The math makes it a no brainier... keep the mortgage as high as you can for the lowest rate" (what the other side hears is... you are forgetting that some people are stressed by having that payment every month. Also, if the economy crashed, or identity theft screwed me I'd be left in a situation where I still owed a large payment on my house and I may have little or no money to pay for)
Moral of the story...
YES, historically speaking if the next few years are anything like the last 100 years it makes more sense to have a mortgage (assuming you are responsible and knowledgeable about investing it). You will end up with more money in the long run...
YES, it is safer to pay it down and there is an emotional, psychological release from getting that mortgage out from under you - regardless of if you have the lump sum sitting at a bank, or in a fund to pay it down at a moments notice. It really is a guaranteed return of the interest rate minus inflation... and although it is lower than the stock market average return over every single 20+ year period in history, it is still
guaranteed (no investment can make that same claim)
I think the problem is that people need to look at the mortgage for what is really is in retirement... a large loan. In a retirement situation, you would assume someone has the capital to pay off the mortgage since they are retired. Under that assumption the loan is really a small portion of the overall net worth... some people don't mind taking on that loan and beating the return (using money to make more money)... others would just rather not bother, moving towards simplicity in retirement: less payments = less stress.
What works for you?
we had a nice chunck of change to buy a nice chunk of land without nipping at any other funds. I then sold the above mentioned house at 155% of purchase price and we moved to the newly acquired ranch.
