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Posted on 05/02/2025 9:30:32 PM PDT by where's_the_Outrage?
When we hear money experts talking about how the accumulation of debt seriously hinders our ability to build wealth or comfortably retire, they’re usually talking about high-interest debt, like that associated with credit cards. Usually, they’re not talking about mortgage debt, which many money experts go so far as to call “good debt.” Why?
Mortgage debt is sometimes called good debt because it’s associated with an investment that is expected to appreciate in value over time. Additionally, the vast majority of mortgages in the U.S. (92%, according to the Federal Reserve Bank of St. Louis) are fixed-rate, meaning the interest rate remains the same over the life of the loan and don’t, for example, change when inflation goes up.
The general consensus may be to not be in a hurry to pay off your mortgage — unless, of course, you have a ton of excess cash and are already well ahead of your retirement savings goals. Rachel Cruze is one of the few famous financial experts who doesn’t agree with this thinking. And actually, her father, fellow financial expert Dave Ramsey, doesn’t either. They both passionately argue the importance of paying off your mortgage ASAP. Why does Cruze, in particular, believe you should pay off your house early?
In a recent video posted to her social media channels, Cruze shot down the common retort she hears when advising people to pay off their mortgage early. They say something along the lines of, “But why not invest that cash in the market and make 10, 11% returns on it?”
This argument seems to make sense if you locked in a low-rate mortgage for, say 2% or 3%. But there’s a flaw in it that Cruze sums up perfectly in her reply.
(Excerpt) Read more at msn.com ...
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Thank you very much and God bless you.
But note, just because you pay off the mortgage doesn't mean you're home free. You still have to pay insurance, taxes, maintenance, etc.
>> “But why not invest that cash in the market and make 10, 11% returns on it?”
tax on gains, but also deductibles on the mortgage interest so the margins and risks will vary
We paid off our thirty year loan in seven. Countrywide let you pay extra every month, and I paid as much as I could. Having a paid for house enabled us to save a lot more afterwards.
I paid off my current house in 4 (months). The house I was living was paid off, but I needed a house with a ground floor master bedroom, we found and bought. Did not have to wait until my old house sold. It sold in 2 months using Zillow, and I used the proceeds to pay off my new house.
I was empowered because my house was paid off.
Same.
I paid cash and have never had a mortgage. So grateful I was able to do this.
It would be foolish to pay off a 3% fixed rate mortgage early instead of using that money to buy the 5.9% government bonds available right now. This woman is an idiot or a fraudster. Only the banks are better off whem these below market rate loans are paid off early.
I was 38 with prior degrees and with a brand new degree in pharmacy, and recently divorced and a son and financially on my ass. I had a few thousand dollars in credit card debt and wisely paid this off as soon as able as Dave Ramsey says you should. I did. I also had my son.
I bought a house when interests rates were low and sold it to buy a nicer house. But I was still paying interest on a low interest loan.
Oddly I used my credit cards for virtually all my daily purchases about 2500 a month. I paid them off each month. I have not had an interest payment on a credit card in 30 years. Also made a lot of travel points for several trips to Europe. The credit card companies call us “Dead Beats” Mr.Dave Ramsey calls us wise.
I retired with good retirement plans and was actually gaining income in excess of the debt on my house. I wrote the mortgage company a check for the pay off. That was a good day!
I and my wife owe nothing to anybody and have a good income stream. We are not extravagant in our vacations and spending. We just do what we want to do. Our vacations may be to western USA or a country in Europe when we want.
Well, if you can find somewhere to get that rate it may work, but.......
EXACTLY!
Those too greedy for gain often end up losing big time.
My scenario: 15 year mortgage at 2 1/8%.
Plenty of money to pay off the house note sitting in 4-week T-bills at around 4.25%.
Yes, the house is debt.
I focus on net worth. My net worth grows more quickly earning a higher return than the interest on my debt.
4-week Treasury bills are the safest investment out there. No risk.
I'd be an idiot to pay off the house. I also have complete peace of mind that I CAN pay off the house at any time I so choose.
If the Fed takes us back to 0% then I'll pay off the debt, since the 2 1/8% would then be more than I could safely earn other ways.
PS: I’m earning enough interest in T-bills every month to pay for my house payment.
I’m nearly the same, although my mortgage is 3.75% (no pmi VA loan). I have been aggressively paying down the 30 year mortgage I took out in 2022, and now have 9 years left on it if I just made the normal payments(but will continue to pay it down aggressively). I have been retired since 2022 and have a decent pension which I live off and a fairly decent IRA which I have still been growing, but skimming a bit off the top while trying to stay out of the 22% tax bracket(its not a Roth IRA). I could easily draw my remaining mortgage out of my IRA and pay it off and still have plenty in my IRA to supplement my pension when I need it. If I were to to that though, I would be paying 22% federal tax on the money I drew out of the IRA. So not only would I lose out on the difference between mortgage interest and investment earnings, I would lose an additional 22% due to the federal taxes on the IRA drawdown. Nope.
He’s got a hatred for banks and credit cards that’s beyond reason. Points are just another currency to pay for things.
Other than that I like his advice to stay out of debt.
Would also like to know what funds he invests in, he never tells us. Probably Berkshire Hart - they seem to survive every market downturn.
“It would be foolish to pay off a 3% fixed rate mortgage early instead of using that money to buy the 5.9% government bonds.
Could you point me to this bond yield. I’m not finding it, at least not US Gov. Bonds. State, city bond?
“... deductibles on the mortgage interest ...”
Mortgage interest is only deductible if one itemizes on their Fed Tax forms. Itemization requires substantial expenditures in many areas such as medical, etc. Absent major financial outlays, the standard deduction is usually a better option.
Most homeowners find the standard deduction is higher than the result of itemization hence mortgage interest is of no value for Fed tax purposes.
So pay off your mortgage and invest in higher yield products. Also put your assets into a trust and contribute to it’s value. Your kids will thank you. And if they follow your example, your family can build generational wealth.
Illogical. How do you have peace of mind when your monthly property taxes and insurance is more than your mortgage payment? If you invest in an aggressive index fund, your money will double every 7 to 8 years, so if you have a very low interest rate it would be foolish NOT to invest. I did exactly that, and have absolutely no regrets. I could have easily paid off my remaining balance at any time for many years now, so I still have “peace of mind”, but not paying it off was also a hedge against extreme inflation... that was on target too after Bidenflation.
Do you buy direct from the treasury or through a financial institution?
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