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I hope you will excuse the naivety of youth but could you elaborate on this? Clearly you are worried about something. I just don't understand what the issue wit

I hope you will excuse the naivety of youth but could you elaborate on this? Clearly you are worried about something. I just don't understand what the issue with going underwater is IF AND ONLY IF you have the assets to pay off the loan in its entirety. I don't understand why having 100K house + 120K mortgage + 120K assets is worse than having a 100K house.

deleted 5y ago
[deleted]
theandrewbailey 5y ago
I'm not the parent commenter, but here's my reasons for wanting to pay my mortgage off early: 1. Not having to be reminded to pay the payment every month, or making sure the automatic payments keep going. No more mortgage payments safely frees income for other purposes. 2. The satisfaction of fully owning my house and land. 3. Most millionaires pay off their houses early.[0] Who doesn't want to be one of those? > Clearly you are worried about something. Didn't you notice the millions of people who lost their jobs last year? Haven't you noticed that the economy isn't in the best of shape lately? > I don't understand why having 100K house + 120K mortgage + 120K assets is worse than having a 100K house. The reason is: if you had a fully paid off house, would you borrow 120K against it? [0] https://www.businessinsider.com/everyday-millionaires-pay-off-mortgage-strategy-build-wealth-2019-2 https://www.businessinsider.com/everyday-millionaires-pay-of...
- bhelkey 5y ago
  > 1...2 These make a lot of sense to me. I can certainly see many non financial reasons to do it. Decisions often have a variety of components (financial aspect, social aspect, how stressed it makes you, ...). These are great reasons to make the decision. I still have trouble understanding the financial aspect though. > Didn't you notice the millions of people who lost their jobs last year? Haven't you noticed that the economy isn't in the best of shape lately? I'm not sure what that has to do with this. 120K in assets provides a whole lot of security in case one loses their job. It is certainly better from a financial standpoint to put extra money into your mortgage than it is to spend it. But I still don't understand why you are viewing a low interest rate mortgage as the best investment. > The reason is: if you had a fully paid off house, would you borrow 120K against it? My impression is that one could have a mortgage rate as low as 2.7%. I bonds currently return 7.12%. Taking money out at 2.7% and putting it in very safe investments that return >2.7% seems like a great deal to me. Maybe this boils to me not getting burned by the market yet.
glouwbug 5y ago
Try Vancouver! The average detached 3 bedroom 2 bathroom house from the 80's is $1.4 million
- bhelkey 5y ago
  The 100K was just for example purposes. The same example with different numbers: Is 1.4MM house + 1.6MM 30-year mortgage + 1.6MM in assets worse than 1.4MM house?
silexia 5y ago
Read the book The Great Crash of 1929, written in 1955. Our current market is similarly speculative as that one. If the federal reserve reacts by tightening up monetary policy, a lot of existing assets can go to zero and you will still be holding that debt.
- bhelkey 5y ago
  Basically, you are saying: 100K house + 120K mortgage + 120K assets could become 100K house + 120K mortgage if the market you invest in craters? I get where you are coming from. I don't share your conclusions, but I understand the reasoning. You are looking at this though the lens of what is the most stable possible asset in case of a crash. I get investing in something physical that provides value to you. Thank you for the insight.
  - saltcured 5y ago
    Right, the owned house is somewhere you can live even while the numbers on paper go haywire for a while. Related to this, the same market crashes that can dip the asset values and put someone underwater can also affect other income streams, making it difficult to continue to make payments. If people feel at risk in such circumstances, they might liquidate those other assets in an attempt to protect the house, and in the worst case still fail later and have to surrender the house too. The more rational behavior migth be to walk away from the house and possibly see the other assets recover, but that depends on being able to secure other living arrangements in a difficult time.

deleted 5y ago

[deleted]

theandrewbailey 5y ago

I'm not the parent commenter, but here's my reasons for wanting to pay my mortgage off early: 1. Not having to be reminded to pay the payment every month, or making sure the automatic payments keep going. No more mortgage payments safely frees income for other purposes. 2. The satisfaction of fully owning my house and land. 3. Most millionaires pay off their houses early.[0] Who doesn't want to be one of those? > Clearly you are worried about something. Didn't you notice the millions of people who lost their jobs last year? Haven't you noticed that the economy isn't in the best of shape lately? > I don't understand why having 100K house + 120K mortgage + 120K assets is worse than having a 100K house. The reason is: if you had a fully paid off house, would you borrow 120K against it? [0] https://www.businessinsider.com/everyday-millionaires-pay-off-mortgage-strategy-build-wealth-2019-2 https://www.businessinsider.com/everyday-millionaires-pay-of...

bhelkey 5y ago
> 1...2 These make a lot of sense to me. I can certainly see many non financial reasons to do it. Decisions often have a variety of components (financial aspect, social aspect, how stressed it makes you, ...). These are great reasons to make the decision. I still have trouble understanding the financial aspect though. > Didn't you notice the millions of people who lost their jobs last year? Haven't you noticed that the economy isn't in the best of shape lately? I'm not sure what that has to do with this. 120K in assets provides a whole lot of security in case one loses their job. It is certainly better from a financial standpoint to put extra money into your mortgage than it is to spend it. But I still don't understand why you are viewing a low interest rate mortgage as the best investment. > The reason is: if you had a fully paid off house, would you borrow 120K against it? My impression is that one could have a mortgage rate as low as 2.7%. I bonds currently return 7.12%. Taking money out at 2.7% and putting it in very safe investments that return >2.7% seems like a great deal to me. Maybe this boils to me not getting burned by the market yet.

glouwbug 5y ago

Try Vancouver! The average detached 3 bedroom 2 bathroom house from the 80's is $1.4 million

bhelkey 5y ago
The 100K was just for example purposes. The same example with different numbers: Is 1.4MM house + 1.6MM 30-year mortgage + 1.6MM in assets worse than 1.4MM house?

silexia 5y ago

Read the book The Great Crash of 1929, written in 1955. Our current market is similarly speculative as that one. If the federal reserve reacts by tightening up monetary policy, a lot of existing assets can go to zero and you will still be holding that debt.

bhelkey 5y ago
Basically, you are saying: 100K house + 120K mortgage + 120K assets could become 100K house + 120K mortgage if the market you invest in craters? I get where you are coming from. I don't share your conclusions, but I understand the reasoning. You are looking at this though the lens of what is the most stable possible asset in case of a crash. I get investing in something physical that provides value to you. Thank you for the insight.
- saltcured 5y ago
  Right, the owned house is somewhere you can live even while the numbers on paper go haywire for a while. Related to this, the same market crashes that can dip the asset values and put someone underwater can also affect other income streams, making it difficult to continue to make payments. If people feel at risk in such circumstances, they might liquidate those other assets in an attempt to protect the house, and in the worst case still fail later and have to surrender the house too. The more rational behavior migth be to walk away from the house and possibly see the other assets recover, but that depends on being able to secure other living arrangements in a difficult time.