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And paying off a mortgage improves your ability to move when you need to or respond to legal/health/family/etc issues. You're now "ahead" on mortgage payments a

And paying off a mortgage improves your ability to move when you need to or respond to legal/health/family/etc issues. You're now "ahead" on mortgage payments allowing you to miss several without incurring penalties, giving you more flex while not incurring proportional loss from inflation as you would with near-cash holdings.

lotsofpulp 7y ago
By definition, paying off a mortgage reduces liquidity. As a store of value, real estate is less liquid than cash, and many other types of assets. There is no way that exchanging a more liquid asset for a less liquid asset (giving up cash to gain equity in a home) improves one's ability to "move when you need to". Also, there is no reason to assume home values in general protect against inflation better than savings accounts or other "safe" investments".
- Someone1234 7y ago
  Only if you completely ignore the mortgage itself. The mortgage puts you into effectively negative liquidity as you have to meet the liability using liquid assets. By paying it off and gaining a home you can sell you've increased your liquidity relative to the mortgage but not relative to raw cash. But as I said above raw cash (or near-cash) is even more conservative than mortgage repayments. > Also, there is no reason to assume home values in general protect against inflation better than savings accounts or other "safe" investments". History gives us a good reason to believe that. Cash depreciates. Homes on average appreciate.
mariojv 7y ago
I believe most lenders require you to make a payment each month regardless of whether you've paid extra or not. I don't have a mortgage yet but have read this. Really odd, in my opinion. I agree that paying early improves your ability to move, though. You're less likely to be "underwater" (lose money) selling the house with more equity.

lotsofpulp 7y ago

By definition, paying off a mortgage reduces liquidity. As a store of value, real estate is less liquid than cash, and many other types of assets. There is no way that exchanging a more liquid asset for a less liquid asset (giving up cash to gain equity in a home) improves one's ability to "move when you need to". Also, there is no reason to assume home values in general protect against inflation better than savings accounts or other "safe" investments".

Someone1234 7y ago
Only if you completely ignore the mortgage itself. The mortgage puts you into effectively negative liquidity as you have to meet the liability using liquid assets. By paying it off and gaining a home you can sell you've increased your liquidity relative to the mortgage but not relative to raw cash. But as I said above raw cash (or near-cash) is even more conservative than mortgage repayments. > Also, there is no reason to assume home values in general protect against inflation better than savings accounts or other "safe" investments". History gives us a good reason to believe that. Cash depreciates. Homes on average appreciate.

mariojv 7y ago

I believe most lenders require you to make a payment each month regardless of whether you've paid extra or not. I don't have a mortgage yet but have read this. Really odd, in my opinion. I agree that paying early improves your ability to move, though. You're less likely to be "underwater" (lose money) selling the house with more equity.