Reply to If paying off your mortgage is dumb, why do so many rich people do it?

Forum Index » Money and Finances

Reply to "If paying off your mortgage is dumb, why do so many rich people do it?"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]I have about $1 million in my retirement account, plus another $500,000 in Vanguard mutual funds, plus enough in 529s to pay for my kids' college.

My monthly principal and interest payment on my mortgage is $1,750, and I have a $428,000 balance.

And with those number,  I feel a lot more secure and free with $500,000 of liquid funds and a monthly mortgage bill of $1,750 than I would if I paid off my mortgage and had no monthly payment but only $80,000 of liquid investments[/quote]

What if your 500k dropped to 250k in a deep recession amid layoffs and you still owed 400k? [/quote]
[b]
If this happens I will deal with the situation.[/b] As long as I owe the $400k at an interest rate lower than what I can make with my $250k on the market, I’m fine because I know it’s the better position from a pure financial angle. I’m able to put emotions aside.

[/quote]

Can you care to elaborate how to the non-savvy folks who are paying off their mortgages ? IMHO this is the missing piece why folks pay off the mortgages as they dont how how to handle such scenarios 
[/quote]

I dealt with this during the 2008 recession. The value of my investments dropped. I lost my job and I had a mortgage. My emergency fund allowed me to pay my bills until I found another job 3 months later. In the worst case scenario I would have sold some stocks to pay my bills. It’s that simple.

Fear, panic and overreaction are your worst enemies when it comes to financial and investment decisions. Be greedy when others are fearful. This is one of Warren Buffett’s recipes for success.
It’s hard to do for most people and even harder for risk averse people because they can’t deal with fear.

Folks who pay off their mortgages don’t want or don’t know how to deal with fear of potentially losing their home if something bad happens. This is ok. That’s who they are and they are comfortable with it. Everyone can’t be a warrior. 
[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics