7 ms·

Can you elaborate on your reasoning?

by thetrumanshow 9y ago

pcwalton 9y ago
Tax advantages, and the fact that you shouldn't put your entire net worth into a single illiquid asset.
- telchar 9y ago
  What tax advantages? I'm going to get exactly zero benefit this year for all the mortgage interest I've paid; I'm probably going to take the newly increased standard deduction whereas last year I saved thousands by itemizing.
  - pcwalton 9y ago
    In my comment above, "tax advantages" is short for "tax advantages that may or may not apply depending on your individual financial situation, but should be carefully considered before making a huge financial decision like paying off a mortgage".
rgbrenner 9y ago
1. Housing doesn't grow as fast as other asset classes. 2. You're concentrating all of your assets into a single object. Instead of paying off your mortgage, you could put that money into other asset classes that grow faster, and you can distribute it to reduce your risk. If you were laid off, you would have more money than if you had paid off your mortgage. Then if you wanted to get rid of your mortgage, you could and you would still have more money than if you had paid it off earlier. (Although even in that case, it's still generally better to leave the money invested, and just draw it down to pay the monthly payment.) If you're really intent on exposing your savings to the real estate market, invest it in a REIT.. at least they can distribute your risk over a larger area and more buildings. And they'll invest it in markets that are growing faster than the average house.
- yuhong 9y ago
  Though the S&P 500 is beginning to finally decline now and interest rates are rising (even bitcoin is not rising all that fast now), so this advice may be getting outdated.
  - pcwalton 9y ago
    There are more asset classes than a primary residence, stocks, and bitcoin. As the parent comment stated, a REIT is typically a less risky investment than a single house, even if you want to invest in real estate.

Can you elaborate on your reasoning?

pcwalton 9y ago

Tax advantages, and the fact that you shouldn't put your entire net worth into a single illiquid asset.

telchar 9y ago
What tax advantages? I'm going to get exactly zero benefit this year for all the mortgage interest I've paid; I'm probably going to take the newly increased standard deduction whereas last year I saved thousands by itemizing.
- pcwalton 9y ago
  In my comment above, "tax advantages" is short for "tax advantages that may or may not apply depending on your individual financial situation, but should be carefully considered before making a huge financial decision like paying off a mortgage".

rgbrenner 9y ago

1. Housing doesn't grow as fast as other asset classes. 2. You're concentrating all of your assets into a single object. Instead of paying off your mortgage, you could put that money into other asset classes that grow faster, and you can distribute it to reduce your risk. If you were laid off, you would have more money than if you had paid off your mortgage. Then if you wanted to get rid of your mortgage, you could and you would still have more money than if you had paid it off earlier. (Although even in that case, it's still generally better to leave the money invested, and just draw it down to pay the monthly payment.) If you're really intent on exposing your savings to the real estate market, invest it in a REIT.. at least they can distribute your risk over a larger area and more buildings. And they'll invest it in markets that are growing faster than the average house.

yuhong 9y ago
Though the S&P 500 is beginning to finally decline now and interest rates are rising (even bitcoin is not rising all that fast now), so this advice may be getting outdated.
- pcwalton 9y ago
  There are more asset classes than a primary residence, stocks, and bitcoin. As the parent comment stated, a REIT is typically a less risky investment than a single house, even if you want to invest in real estate.