I like to watch the Suze Orman show. I know some people don't like her, but most of what she says makes sense to me. Anyway, she started a show that I saw this weekend with one of the most clear explanations of why it is good to own your own home that I have seen in a long time.
She gave the following example. If you plan to live in your home for the rest of your life, then it generally makes sense to own it outright. In the later years of a mortgage, the tax deduction is much smaller than at the beginning of the mortgage. However, the payment amount stays the same. In a scenario that you retire early, and then find yourself still paying a mortgage, you will have to ensure your retirement savings are enough to nut each and every month.
She gave as an example a 200K mortgage over 30 years that had been paid down for 20 years to a principal of 100K. This would be a 1200/month mortgage payment. And with some estimating at a reasonable return of 5% on retirement savings, you would have to save 400K to make enough at 5% after taxes, to cover the mortgage.
Obviously there are some major variables in there, but the point is straightforward. Which is easier to save, 400K or 100K? Personally, this has given me some real food for thought. I like the idea of owning where I live. And considering that the monthly mortgage payments accounts for between 30-40% of my monthly expenses, cutting that out makes a huge difference.
She gave the following example. If you plan to live in your home for the rest of your life, then it generally makes sense to own it outright. In the later years of a mortgage, the tax deduction is much smaller than at the beginning of the mortgage. However, the payment amount stays the same. In a scenario that you retire early, and then find yourself still paying a mortgage, you will have to ensure your retirement savings are enough to nut each and every month.
She gave as an example a 200K mortgage over 30 years that had been paid down for 20 years to a principal of 100K. This would be a 1200/month mortgage payment. And with some estimating at a reasonable return of 5% on retirement savings, you would have to save 400K to make enough at 5% after taxes, to cover the mortgage.
Obviously there are some major variables in there, but the point is straightforward. Which is easier to save, 400K or 100K? Personally, this has given me some real food for thought. I like the idea of owning where I live. And considering that the monthly mortgage payments accounts for between 30-40% of my monthly expenses, cutting that out makes a huge difference.
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