Now let's say your house is paid off and it's worth $300,000. How much money do you have? None, unless you can take it out. Maybe when you need it, the bank won't let you have it because your injured or unemployed.
What if there was a natural disaster or a fire and the insurance company gave you $100,000, but it cost $200,000 to rebuild. The bank won't give you the other $100,000.
Let's say the market goes down and now your house is worth $200,000. You lost $100,000 when you could have protected about $80,000 and made money compounding.
Equity is not safe or liquid and it has no rate of return.
Let's say you put $100,000 into an investment paying over 7% tax free compounding. In 12 years you'd have $200,000. The 12th year you'd make $14,000 and the cost of the loan would be a net of 4%, so you pay $4,000. Pay 4 and make 14. How much do you want?
Let's say you can't sleep because you have a mortgage and can't stand making more than you owe. Take the money out and pay off the loan.
Oh, and there's a death benefit.
“Now let’s say your house is paid off and it’s worth $300,000. How much money do you have? None, unless you can take it out. Maybe when you need it, the bank won’t let you have it because your injured or unemployed.”
I know what you are saying, nufsed, here and in your other excellent points. As I said, mine is a life goal. To sum it up, the idea is to have enough liquid assets to not have to borrow or rely on your home’s equity. Again, I might not ever reach my goal, but I am working on it.