Pay Off the Mortgage or Not?

Just my opinion, but.... this hotly contested question is really the wrong question to ask.  Which is why there is so much debate about it, perhaps. 
   

The important question to ask is "how much does housing cost me every year?"  And the answer tells you whether or not you can and should pay off the mortgage, or if you should have a big juicy mortgage the rest of your life.   

What?  NOT pay off the mortgage -- ever??? 

The idea of not paying off my mortgage came from Ric Edelman in his book The Truth About Money," 4th edition.

He outlines great reasons to carry a big, long mortgage.  

• A mortgage is cheap money. 
• Greater liquidity.  
• You can sell without selling (get your equity back by refinancing your mortgage). 
• The list goes on.  Most telling is the story about the widow who had a lovely $500,000 home - paid off.  But had no cash to maintain it, travel, etc.  It's an important read.

Whether you pay off your mortgage or not, you still have monthly maintenance, taxes and insurance.  You'll never be without housing expenses.  And these expenses are subject to inflationary pressures.   Just a few years ago in my state a law was passed that allow insurance companies to charge you up to a 2-3% of the home value as a deductible for damage from a "named storm," i.e., Hurricane.    Hmm..

Escape From the Cube: Financial Independence Next Steps - Rental Income Big Gamble

You may have followed my last downsizing saga to improve my financial situation.  I moved from my 2500 square foot beautiful family home in lovely university area with 100 year old oak trees....to an apartment.   Traumatic?  Seemed so at the time.   As someone, maybe like you?  Who is  more left-brained than right-brained, my environment is very important to my creativity -- and hence my sense of well-being and safety.

The move was scary.  Here is a from back then with helpful moving tips if you are moving soon.  But I pocketed $50,000, helped pay off $5,000 of my daughter's school loans at Ivy League University, and had a 1 and 1/2 year vacation in a luxury rental condo.  Instead of desperately searching for handymen while trying to finish reports at work?  I went to picking up the phone to say  "Hello, maintenance?  Could you change my air conditioner filter today?  Great, thanks!"  I'm now a BIG fan of renting.

From that apartment, thought, I bought a town home.  To Rent or Buy was the question..and one of my most popular blog posts.  The initial ask was driven by my $50,000 nest egg going from a 4% return each year to a 1% each year.  Then there were those incredibly low interest rates on property.  Pushing me forward was that monthly rental "vacation" that cost $1,100 per month.  So I bought again in 2010.  And got a $6,000 first time home owner's credit.  Which I put into the new townhouse.


Now, 3 years later -- I'm ready to turn my townhouse into a rental income property -- gaining about $200 per month in passive income while paying off my equity --  and go back to renting (at only $975 per month).  Crossed fingers!

But to rent my place, I need to go through the transition again of moving and resettling.  I'm using the skills I developed during the previous moves in the last 5 years.  And would love to hear your tips and tricks to making moving easier.

I'm into the new space on July 13th, 2013, and will need to rent my town home out to someone else, with the right amount of rent, by August 1st.    It's a gamble.

I'll be posting every week -- let the Gambling Begin! 

First Steps in Downsizing

What the financial gurus don't tell you about downsizing...

• 
  1) It's easy to getting sucked into an emotional tail spin while moving, signing closing papers, etc., which could affect my judgement leading to....
  
  2) Wasting money on items I don't foresee, but crop up as emergencies.
  
  3) Pretending that there won't be any emergencies!
  
  4) Panicking and renting a place that is too expensive, wiping out my gains and making me wonder -- what did I go through all this crap for? To live in less of a house, in a neighborhood I don't like, for exactly the same expense? Could be VERY depressing.
  
  5) All of which would imperil my job performance, relationships with friends and my daughter, my mental health...YUK.
  
  Keep reading this blog to find out how anyone downsizing can overcome these issues. Have you downsized recently and have tips? Please post and share in the comments box.

A psychologist reminds us here that downsizing, and moving, are expected to be stressful. "Of course you will feel like this!" is the mantra here...http://fearfreeselling.com/Moving%20Stress.htm

A way to avoid major losses of furniture, etc., in the move here: http://www.hrmreport.com/pastissue/article.asp?art=268450&issue;=172

Here's a way to reduce your emotional stress, with hypnosis relaxation tapes, http://www.hypnosisdownloads.com/downloads/stress_management/moving-house.html