Never Pay Off Your Mortgage!

The American Dream: Home Ownership. How many of us spend our whole lives wanting or paying for a home? Well, maybe we got it all wrong...Is home ownership something we should all aspire to? Should we save and sacrifice to pay off our mortgage balances? Here's the simple reality for those of us who choose the path of home ownership: You really never truly own your home, you simply borrow your home for specific period of time so it really does not matter if you EVER pay off your home!

Don't believe me? Well, don't pay your real estate or school taxes and watch your home be confiscated and/or auctioned off. To me, if you truly own something, no one can take it away. Yet, even if you totally paid off your mortgage, you could still lose your home if you don't pay yearly taxes on it. So, your home is only yours under certain conditions...and if you do not adhere to those conditions, the government can take your home!

Even more, is it a wise choice to pay off your mortgage or even pay it down significantly? Consider the following example:

Both Jim and Sam sold their respective homes and each received $150,000 in profit (after closing costs, real estate agent fees, etc.)

Each purchased a home in similar neighborhoods for $300,000.

Being very wary of any debt, Jim put down the entire $150,000 profit from the sale of his previous home, leaving him with a monthly mortgage of $1,200.

Sam, on the other hand, put down only 20% (the minimum required to avoid paying PMI) $60,000. Sam's mortgage was $1,700 per month ($500 more a month than Jim's). He put the remaining $90,000 in a high interest savings account (4%).

Both ended up being laid off their jobs, receiving less than $1,200 a month in unemployment.

Neither of their unemployment checks was enough to cover their entire monthly mortgage payments.

However, here's the difference:

Jim had over put over $150,000 into his home so that he would have a significant amount of home equity. However, due to a poor housing market, the value of both of their homes decreased to around $270,000 (a $30,000 loss in home equity). (Note: Never forget that your home is worth only as much as someone is willing to pay for it! And if there are no buyers, how much is your home worth then?)

Because Jim was unemployed and had lost equity in his home, Jim did not qualify for any home equity loans or personal loans to help him cover the mortgage and other household bills until he found a job. He had no savings or liquid assets. Within 6 months, Jim was eventually forced to sell his home (at a significant loss) to avoid foreclosure.

On the other hand, although Sam had a higher mortgage than Jim, he had over $90,000 plus interest (enough to cover his entire mortgage for almost 5 years) in savings.

Sam was able to comfortably pay his mortgage, take a vacation to relieve some stress, and eventually found a new job. In fact, because of his unemployment income, he only had to use $15,000 of his savings in the year and a half he was unemployed.

What's the lesson learned here? Having liquid assets (cash readily available) is more important than having a low mortgage or no mortgage payment at all!

So, according to your monthly income and budget, pay your mortgage just down low enough to have comfortable mortgage payments. Then, save, spend and enjoy your hard earned money.

Never pay off your mortgage! Never pay your mortgage balance down too low!

ALWAYS make sure you have cash available (liquid assests) and you will be financially comfortable for the rest of your life.

Even more, once you die, your home is no longer yours anyways! (Unless you live in an alternate reality where dead people still own their homes!)

Plan to die with a mortgage balance! (And if you were really smart, you would get enough life insurance to pay off the remainder of your home's mortgage balance upon your death, leaving your loved ones with a truly "mortgage free" home on loan...well, that is, as long as they pay the yearly taxes!)