What share of your NW is your house?

[Anonymous]

Anonymous wrote:I'm sure this will get me yelled at, but honest question... Why are so many folks here seemingly proud of having no debt/mortgage on a house? Given that we were in an extended low-interest period, we all had options to lock-in low-cost mortgages.

For example, our principle residence has a value around 3mm. We have a mortgage of around 1.6mm, at 2.75%. While we have plenty of assets to forego the mortgage, we have had that money at work in the market instead. We've done way, way better post-tax than the 2.75% we're paying to the bank. If anything, I wish we had levered up a bit. We have multiple other properties, and each has a loan roughly at 50% LTV.

Sure, there is a bit of risk here--the market could tumble. But over the next 20+ years, I think it a rather safe bet that we'll do better than 2.75% with our investments, even recognizing there will be multiple market cycles in there.

If anything, I'm kicking myself for not going to higher LTVs on our real estate portfolio while rates were low.

Because I’m old and haven’t moved.

[Anonymous]

Anonymous wrote:Now it’s down to probably around 50%, but until it was paid off, it was 100% of my net worth. I took out a HELOC so I didn’t even have to have an emergency fund. I firmly believe that once you have a paid-off house and $100K in cash, you immediately enter the upper middle class.

I now have hundreds of thousands of dollars in stocks outside of retirement accounts, but I feel no wealthier than when I had only a paid-off house and $100K in cash. They’re all just numbers on a screen that go up and down — I hope to access them one day after a lot of compounding, but nothing takes the place of a paid-off house and $100K in cash.

Don’t listen to these wannabe, pseudo-hedge fund managers telling you that a 3% mortgage is some magical, wondrous gift and your ticket to wealth. That’s just some pablum they repeat to justify buying a more expensive house than they should. If you want true freedom, pay off your house ASAP.

This is the dumbest thing I have read in a while.

[Anonymous]

Anonymous wrote:I'm sure this will get me yelled at, but honest question... Why are so many folks here seemingly proud of having no debt/mortgage on a house? Given that we were in an extended low-interest period, we all had options to lock-in low-cost mortgages.

For example, our principle residence has a value around 3mm. We have a mortgage of around 1.6mm, at 2.75%. While we have plenty of assets to forego the mortgage, we have had that money at work in the market instead. We've done way, way better post-tax than the 2.75% we're paying to the bank. If anything, I wish we had levered up a bit. We have multiple other properties, and each has a loan roughly at 50% LTV.

Sure, there is a bit of risk here--the market could tumble. But over the next 20+ years, I think it a rather safe bet that we'll do better than 2.75% with our investments, even recognizing there will be multiple market cycles in there.

If anything, I'm kicking myself for not going to higher LTVs on our real estate portfolio while rates were low.

Dave Ramsey has a lot of followers even if they won’t admit it.

[Anonymous]

Anonymous wrote:I'm sure this will get me yelled at, but honest question... Why are so many folks here seemingly proud of having no debt/mortgage on a house? Given that we were in an extended low-interest period, we all had options to lock-in low-cost mortgages.

For example, our principle residence has a value around 3mm. We have a mortgage of around 1.6mm, at 2.75%. While we have plenty of assets to forego the mortgage, we have had that money at work in the market instead. We've done way, way better post-tax than the 2.75% we're paying to the bank. If anything, I wish we had levered up a bit. We have multiple other properties, and each has a loan roughly at 50% LTV.

Sure, there is a bit of risk here--the market could tumble. But over the next 20+ years, I think it a rather safe bet that we'll do better than 2.75% with our investments, even recognizing there will be multiple market cycles in there.

If anything, I'm kicking myself for not going to higher LTVs on our real estate portfolio while rates were low.

You’re writing this from the perspective of a person living beyond their means or otherwise underinvested in the stock market to begin with. If the only way you can afford to significantly invest in the stock market is to take out a loan against your assets and invest, then you can’t possibly have a properly balanced financial portfolio. You’re taking a risk in assuming that the stock market will continue to grow at previous rates. Many people – just like you – refinanced in the 1990s at what seemed like very low rates against their suburban McMansions and then went all-in on growth stocks. The picture wasn’t pretty for these people 2000-2013. Many tried to hold out for a positive return, but were constantly being forced to sell stocks at a loss to make mortgage payments, taxes, rising insurance, and more.

Better is to have a budget that actually closes in the appropriate way. In parallel to maxing out pre-tax retirement/HSA, 529s as needed, and to incurring a monthly PITI, you should also be putting another chunk of income into a taxable brokerage account equivalent to your monthly PITI. If you can’t afford to do this, you’ve splurged on too expensive a house.

[Anonymous]

PITI is about 10% of our gross monthly income and our home equity is a bit under 50% of our net worth. We are in our thirties so the idea is to make our home a smaller portion of our NW over time. We also put down a very large down payment which factors in.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm sure this will get me yelled at, but honest question... Why are so many folks here seemingly proud of having no debt/mortgage on a house? Given that we were in an extended low-interest period, we all had options to lock-in low-cost mortgages.

For example, our principle residence has a value around 3mm. We have a mortgage of around 1.6mm, at 2.75%. While we have plenty of assets to forego the mortgage, we have had that money at work in the market instead. We've done way, way better post-tax than the 2.75% we're paying to the bank. If anything, I wish we had levered up a bit. We have multiple other properties, and each has a loan roughly at 50% LTV.

Sure, there is a bit of risk here--the market could tumble. But over the next 20+ years, I think it a rather safe bet that we'll do better than 2.75% with our investments, even recognizing there will be multiple market cycles in there.

If anything, I'm kicking myself for not going to higher LTVs on our real estate portfolio while rates were low.

You’re writing this from the perspective of a person living beyond their means or otherwise underinvested in the stock market to begin with. If the only way you can afford to significantly invest in the stock market is to take out a loan against your assets and invest, then you can’t possibly have a properly balanced financial portfolio. You’re taking a risk in assuming that the stock market will continue to grow at previous rates. Many people – just like you – refinanced in the 1990s at what seemed like very low rates against their suburban McMansions and then went all-in on growth stocks. The picture wasn’t pretty for these people 2000-2013. Many tried to hold out for a positive return, but were constantly being forced to sell stocks at a loss to make mortgage payments, taxes, rising insurance, and more.

Better is to have a budget that actually closes in the appropriate way. In parallel to maxing out pre-tax retirement/HSA, 529s as needed, and to incurring a monthly PITI, you should also be putting another chunk of income into a taxable brokerage account equivalent to your monthly PITI. If you can’t afford to do this, you’ve splurged on too expensive a house.

I disagree with this. Many wealthy people I know keep low interest mortgages on their homes because their interest rates are so low and market is doing well enough that it makes financial sense.

In business you often have to take risk to make money. You have to have the appetite for it but it doesn’t mean they’re living beyond their means. And in most of these scenarios - where you can either fully pay off your house our put half in the stock market while paying a 3% mortgage - the people are well off financially to begin with.

[Anonymous]

Our home value (here in SoCal) is 30% of our net worth; our home equity is 23% of our net worth. Our PITI (based on a 15 year mortgage@2.5%) is 25%. My income is not maxed out as I am the sole earner and work a 50% schedule (by choice).

[Anonymous]

Mine is 60%. But the equity has increased hundreds of thousands from covid and that's not my fault.

[Anonymous]

2%

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm sure this will get me yelled at, but honest question... Why are so many folks here seemingly proud of having no debt/mortgage on a house? Given that we were in an extended low-interest period, we all had options to lock-in low-cost mortgages.

For example, our principle residence has a value around 3mm. We have a mortgage of around 1.6mm, at 2.75%. While we have plenty of assets to forego the mortgage, we have had that money at work in the market instead. We've done way, way better post-tax than the 2.75% we're paying to the bank. If anything, I wish we had levered up a bit. We have multiple other properties, and each has a loan roughly at 50% LTV.

Sure, there is a bit of risk here--the market could tumble. But over the next 20+ years, I think it a rather safe bet that we'll do better than 2.75% with our investments, even recognizing there will be multiple market cycles in there.

If anything, I'm kicking myself for not going to higher LTVs on our real estate portfolio while rates were low.

You’re writing this from the perspective of a person living beyond their means or otherwise underinvested in the stock market to begin with. If the only way you can afford to significantly invest in the stock market is to take out a loan against your assets and invest, then you can’t possibly have a properly balanced financial portfolio. You’re taking a risk in assuming that the stock market will continue to grow at previous rates. Many people – just like you – refinanced in the 1990s at what seemed like very low rates against their suburban McMansions and then went all-in on growth stocks. The picture wasn’t pretty for these people 2000-2013. Many tried to hold out for a positive return, but were constantly being forced to sell stocks at a loss to make mortgage payments, taxes, rising insurance, and more.

Better is to have a budget that actually closes in the appropriate way. In parallel to maxing out pre-tax retirement/HSA, 529s as needed, and to incurring a monthly PITI, you should also be putting another chunk of income into a taxable brokerage account equivalent to your monthly PITI. If you can’t afford to do this, you’ve splurged on too expensive a house.

I disagree with this. Many wealthy people I know keep low interest mortgages on their homes because their interest rates are so low and market is doing well enough that it makes financial sense.

In business you often have to take risk to make money. You have to have the appetite for it but it doesn’t mean they’re living beyond their means. And in most of these scenarios - where you can either fully pay off your house our put half in the stock market while paying a 3% mortgage - the people are well off financially to begin with.

Sounds like you’re experiencing some recency bias. As in, <3% mortgages rates weren’t really a thing before 2020 and they’ve already disappeared. For this one very specific sequence of unusual events from 2000 to 2024, your logic is sound. But you’re then forgetting that the majority of stock purchases made with this easily acquired low-interest money has been used to acquire wildly overpriced stocks. Sell within the next 6 months, and count yourself lucky. Hold much longer and you’ll quickly be underwater in the stock market. Way to flush that home equity down the drain.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm sure this will get me yelled at, but honest question... Why are so many folks here seemingly proud of having no debt/mortgage on a house? Given that we were in an extended low-interest period, we all had options to lock-in low-cost mortgages.

For example, our principle residence has a value around 3mm. We have a mortgage of around 1.6mm, at 2.75%. While we have plenty of assets to forego the mortgage, we have had that money at work in the market instead. We've done way, way better post-tax than the 2.75% we're paying to the bank. If anything, I wish we had levered up a bit. We have multiple other properties, and each has a loan roughly at 50% LTV.

Sure, there is a bit of risk here--the market could tumble. But over the next 20+ years, I think it a rather safe bet that we'll do better than 2.75% with our investments, even recognizing there will be multiple market cycles in there.

If anything, I'm kicking myself for not going to higher LTVs on our real estate portfolio while rates were low.

You’re writing this from the perspective of a person living beyond their means or otherwise underinvested in the stock market to begin with. If the only way you can afford to significantly invest in the stock market is to take out a loan against your assets and invest, then you can’t possibly have a properly balanced financial portfolio. You’re taking a risk in assuming that the stock market will continue to grow at previous rates. Many people – just like you – refinanced in the 1990s at what seemed like very low rates against their suburban McMansions and then went all-in on growth stocks. The picture wasn’t pretty for these people 2000-2013. Many tried to hold out for a positive return, but were constantly being forced to sell stocks at a loss to make mortgage payments, taxes, rising insurance, and more.

Better is to have a budget that actually closes in the appropriate way. In parallel to maxing out pre-tax retirement/HSA, 529s as needed, and to incurring a monthly PITI, you should also be putting another chunk of income into a taxable brokerage account equivalent to your monthly PITI. If you can’t afford to do this, you’ve splurged on too expensive a house.

I disagree with this. Many wealthy people I know keep low interest mortgages on their homes because their interest rates are so low and market is doing well enough that it makes financial sense.

In business you often have to take risk to make money. You have to have the appetite for it but it doesn’t mean they’re living beyond their means. And in most of these scenarios - where you can either fully pay off your house our put half in the stock market while paying a 3% mortgage - the people are well off financially to begin with.

For sure. Take risk. If it pans out, pat yourself on the back. If not: (1) ask parents for another increment of family money, (2) take advantage of federally-subsidized loan forgiveness, or (3) file for bankruptcy protection and start over.

[Anonymous]

Anonymous wrote:I'm sure this will get me yelled at, but honest question... Why are so many folks here seemingly proud of having no debt/mortgage on a house? Given that we were in an extended low-interest period, we all had options to lock-in low-cost mortgages.

For example, our principle residence has a value around 3mm. We have a mortgage of around 1.6mm, at 2.75%. While we have plenty of assets to forego the mortgage, we have had that money at work in the market instead. We've done way, way better post-tax than the 2.75% we're paying to the bank. If anything, I wish we had levered up a bit. We have multiple other properties, and each has a loan roughly at 50% LTV.

Sure, there is a bit of risk here--the market could tumble. But over the next 20+ years, I think it a rather safe bet that we'll do better than 2.75% with our investments, even recognizing there will be multiple market cycles in there.

If anything, I'm kicking myself for not going to higher LTVs on our real estate portfolio while rates were low.

Per Zillow my two homes are worth $11 million with no debt. That’s likely 15%-18% of my NW excluding my DAF. I had mortgages for about 30+ years and decided I didn’t want the hassle of mortgages and I had plenty of money to invest. And, once they put a cap on mortgage interest deductions there was less of an incentive. I also didn’t want my wife or my estate to have to deal with mortgages after I’m gone. In 2019 I was tempted when mortgages got below 3% but when the stock market tanked in 2020 I was glad I hadn’t.

[Anonymous]

Our primary home is about 12% of NW, our second home is actually another 20% because the value has increased dramatically in the last decade. No mortgage on the primary and very small remaining mortgage on the second home so PITI is less than 3% of income (most of that is RE taxes and insurance).

[Anonymous]

63%. Long story. But, I win!! 😆

I do have a pretty expensive house for someone with my salary, but was able to put up a large DP due to previous saving and investing. Worth it to be in the right neighborhood and schools for kids.

I will likely cash out in the next few years, move somewhere cheaper, and live mortgage-free. I also still have 20 years in front of me to save for retirement, in addition to fed pension and SS and I’m low maintenance, so I will be fine.

[Anonymous]

About 12%