5 ms·

At my current ~2% mortgage interest rate, why do I want to pay off my house? I make more putting that money into investments returning me much better than that

At my current ~2% mortgage interest rate, why do I want to pay off my house? I make more putting that money into investments returning me much better than that. I don't think the super wealthy keep their money needlessly tied up in real estate like that.

celticninja 5y ago
Because you are in a position to get a low interest mortgage, not everyone is. Then you have to consider that giving someone ₱250k to buy a house is different to buying someone a ₱250k house.
zsmi 5y ago
The super wealthy keep their money tied up in lots of things, including real estate. It's called diversity and investing in lots of things is significantly easier when you're... super wealthy.
- WalterBright 5y ago
  If you invest in an S&P 500 index fund, you're diversified into 500 companies. Very easy to do.
  - ghaff 5y ago
    The S&P 500 is certainly more diversified than individual stocks. But it's still only the largest US companies. By itself, it's only a somewhat diversified portfolio.
    - WalterBright 5y ago
      There are plenty of other index funds for whatever floats your boat. Even real estate funds. There's no problem being diversified.
  - zsmi 5y ago
    Unless of course you invested in 2016 and it's Mar 2020 and it turns out you need the money now. You'll have no gain and fours years lost. Diversification: It's All About (Asset) Class https://www.investopedia.com/articles/financial-theory/08/asset-class.asp https://www.investopedia.com/articles/financial-theory/08/as...
throwaway210222 5y ago
> why do I want to pay off my house? Because its the poor-man's version of F-You money. It instantly and dramatically lowers the monthly takings to have to make to keep your household going, and noticeably shifts the balance of power in all financial negotiations in your favour. Try it. Trust me.
- tehjoker 5y ago
  It's kinda crazy that people think you can only get this by being rich. Why don't we just eliminate the market in housing and make it super cheap to live? We have more houses than people.
  - throwaway210222 5y ago
    > Why don't we just eliminate the market in housing … we have more houses than people/ Sure tavaresh, I'd like a mine to be pied á terre in the Hamptons. You know, since there's no shortage. Please try debug your suggestions first.
  - vikingerik 5y ago
    Housing exists at a particular place, so there is always scarcity of location. More people would want to live across the street from (say) Disneyland than can physically fit, so a market will exist no matter what. If you mean cheap or free housing should exist as a public works project, that is possible... and what you get without a profit motive is Soviet style apartment cinderblocks.
    - tehjoker 5y ago
      Soviet apartments were constrained by resources (the economy was balancing guns and butter for a long time). I think we can do better. Also worth mentioning, much of our housing stock, especially rentals, are totally falling apart and unmaintained. Soviet housing was of higher quality to at least some of our existing stock -- especially in poor areas.
- bittercynic 5y ago
theandrewbailey 5y ago
Debt is risk. You told the bank/lender that you would pay $x every month for n years. How do you do plan to meet that? Pretend you lose your job in an economic recession. You can't make your mortgage payment anymore, and because recession, your investments aren't worth anything either. Lets pretend you have rental properties, too: there's an eviction moratorium, and small businesses are closing left and right, so almost no one's paying rent. https://en.wikipedia.org/wiki/COVID-19_recession https://en.wikipedia.org/wiki/COVID-19_recession OH F**K.
zozbot234 5y ago
Those investments and returns are not risk free. You just can't equate getting out of an obligation, like a mortgage, with returns on a risky investment that you aren't otherwise involved in.
ghaff 5y ago
At 2%, especially if I was getting a tax deduction, I probably wouldn't be in a big hurry to pay off a mortgage if I had otherwise available investment capital. But that's paying off 2% guaranteed. I'm not going to earn that today with a risk-free investment. I'll probably earn more than that on a diversified investment, but it's not a given.

celticninja 5y ago

Because you are in a position to get a low interest mortgage, not everyone is. Then you have to consider that giving someone ₱250k to buy a house is different to buying someone a ₱250k house.

zsmi 5y ago

The super wealthy keep their money tied up in lots of things, including real estate. It's called diversity and investing in lots of things is significantly easier when you're... super wealthy.

WalterBright 5y ago
If you invest in an S&P 500 index fund, you're diversified into 500 companies. Very easy to do.
- ghaff 5y ago
  The S&P 500 is certainly more diversified than individual stocks. But it's still only the largest US companies. By itself, it's only a somewhat diversified portfolio.
  - WalterBright 5y ago
    There are plenty of other index funds for whatever floats your boat. Even real estate funds. There's no problem being diversified.
- zsmi 5y ago
  Unless of course you invested in 2016 and it's Mar 2020 and it turns out you need the money now. You'll have no gain and fours years lost. Diversification: It's All About (Asset) Class https://www.investopedia.com/articles/financial-theory/08/asset-class.asp https://www.investopedia.com/articles/financial-theory/08/as...

throwaway210222 5y ago

> why do I want to pay off my house? Because its the poor-man's version of F-You money. It instantly and dramatically lowers the monthly takings to have to make to keep your household going, and noticeably shifts the balance of power in all financial negotiations in your favour. Try it. Trust me.

tehjoker 5y ago
It's kinda crazy that people think you can only get this by being rich. Why don't we just eliminate the market in housing and make it super cheap to live? We have more houses than people.
- throwaway210222 5y ago
  > Why don't we just eliminate the market in housing … we have more houses than people/ Sure tavaresh, I'd like a mine to be pied á terre in the Hamptons. You know, since there's no shortage. Please try debug your suggestions first.
- vikingerik 5y ago
  Housing exists at a particular place, so there is always scarcity of location. More people would want to live across the street from (say) Disneyland than can physically fit, so a market will exist no matter what. If you mean cheap or free housing should exist as a public works project, that is possible... and what you get without a profit motive is Soviet style apartment cinderblocks.
  - tehjoker 5y ago
    Soviet apartments were constrained by resources (the economy was balancing guns and butter for a long time). I think we can do better. Also worth mentioning, much of our housing stock, especially rentals, are totally falling apart and unmaintained. Soviet housing was of higher quality to at least some of our existing stock -- especially in poor areas.
bittercynic 5y ago

theandrewbailey 5y ago

Debt is risk. You told the bank/lender that you would pay $x every month for n years. How do you do plan to meet that? Pretend you lose your job in an economic recession. You can't make your mortgage payment anymore, and because recession, your investments aren't worth anything either. Lets pretend you have rental properties, too: there's an eviction moratorium, and small businesses are closing left and right, so almost no one's paying rent. https://en.wikipedia.org/wiki/COVID-19_recession https://en.wikipedia.org/wiki/COVID-19_recession OH F**K.

zozbot234 5y ago

Those investments and returns are not risk free. You just can't equate getting out of an obligation, like a mortgage, with returns on a risky investment that you aren't otherwise involved in.

ghaff 5y ago

At 2%, especially if I was getting a tax deduction, I probably wouldn't be in a big hurry to pay off a mortgage if I had otherwise available investment capital. But that's paying off 2% guaranteed. I'm not going to earn that today with a risk-free investment. I'll probably earn more than that on a diversified investment, but it's not a given.