Mortgage Free or Mortgage

[Madman]

Originally Posted by darklord700

Some people'll just waste away their mortgage payment when they become mortgage free.

I look forward to that day.

[Locke]

Originally Posted by darklord700

I think having a managable mortgage is a good thing. First the gain is sheltered by principle resident deduction. Second, you are forced to save by paying down the mortgage. In these crazy low rate environment, having a $150K mortgage isn't a bad thing.

Some people'll just waste away their mortgage payment when they become mortgage free.

While I was mortgage free for a while, I bougth better cars like a brand new CRV. Normally, I would have bought a slightly used CRV instead.

Whoa there, dont get carried away!

[ranchlandsselling]

Originally Posted by Bring_Back_Shantz

I don't see the point of buying a new house just becasue it is bigger.
To me a bigger house isn't worth the money.
What is worth the money is the lifestyle you want.

That's interesting becuase generally comparing properties of similar finishing in the same area it's usually cheaper on a per SF basis to buy the bigger house. With that in mind value actually gets worse the smaller the place.

I doubt the OP is thinking about buying a bigger house when they don't want it and would prefer smaller but more expensive in the inner city. That post might be more along the lines of "should I take out a mortgage to buy something I don't want or should I not spend any money to live somewhere I'm generally happy"

[Bring_Back_Shantz]

Originally Posted by ranchlandsselling

That's interesting becuase generally comparing properties of similar finishing in the same area it's usually cheaper on a per SF basis to buy the bigger house. With that in mind value actually gets worse the smaller the place.

I doubt the OP is thinking about buying a bigger house when they don't want it and would prefer smaller but more expensive in the inner city. That post might be more along the lines of "should I take out a mortgage to buy something I don't want or should I not spend any money to live somewhere I'm generally happy"

I wasn't saying to the OP that he should go buy something smaller instead. You completely missed the point of my oost.
I was trying to make the point that a house purchase isn't just about the space you physically live in, but the lifestyle that comes with it.

He obviously doesn't have the same needs, preferences, or goals as me, I was pointing out that for me, the decision point wasn't the house itself, but the lifestyle that came with it.

What he needs to consider is whether the lifestlye he'll be getting by sticking with a mortgage (more space, or being closer to work, or whater comes with the new house), is worth the mortgage free lifestyle (and whater comes with that) that he'll be sacraficing to get it.

[HockeyIlliterate]

Debt restricts your choices, opportunities, and cash flow.

Avoid it.

[Bring_Back_Shantz]

Originally Posted by HockeyIlliterate

Debt restricts your choices, opportunities, and cash flow.

Avoid it.

The right home, in the right area provides choices, opportunites, and potential increase in quality of living, and comes with debt.

Blanket statements about the value of one vs the other are useless.

[HockeyIlliterate]

Originally Posted by Bring_Back_Shantz

The right home, in the right area provides choices, opportunites, and potential increase in quality of living, and comes with debt.

Blanket statements about the value of one vs the other are useless.

Who says that the "right home" has to "come[] with debt"?

[Bring_Back_Shantz]

Originally Posted by HockeyIlliterate

Who says that the "right home" has to "come[] with debt"?

I suppose you're right, but typically, buying a home comes with debt.

My point though, as it's been this whole time, is that it's important to weigh the quality of life you're gaining with the right house, vs the impact that the associated debt (or lack there of) will have.

Blanket statemetns like "Debt restricts options and choices" aren't always true, as taking on a mortgage may offer/open other options and choices that are worth much more than the restrictions that a mortgage comes with. And thus you're advice to avoid debt, is pretty one sided.

In my case, taking on debt has freed up a ton of time (reduced commute) freed up some cash (less gas/transportation, which offsets some of the mortgage), and brings me a lot closer to several friends and activities that I enjoy (inceased qualtiy of life). I could have avoided debt by staying in the burbs, but the trade off for me was worth so much more than the financial restrictions I now have.

[bizaro86]

Originally Posted by HockeyIlliterate

Who says that the "right home" has to "come[] with debt"?

The vast majority of people who couldn't pay for a house (any house) with cash.

[HockeyIlliterate]

Originally Posted by Bring_Back_Shantz

My point though, as it's been this whole time, is that it's important to weigh the quality of life you're gaining with the right house, vs the impact that the associated debt (or lack there of) will have.

I can agree with this statement, to a degree.

Originally Posted by Bring_Back_Shantz

In my case, taking on debt has freed up a ton of time (reduced commute) freed up some cash (less gas/transportation, which offsets some of the mortgage), and brings me a lot closer to several friends and activities that I enjoy (inceased qualtiy of life). I could have avoided debt by staying in the burbs, but the trade off for me was worth so much more than the financial restrictions I now have.

I realize that I'm making quite a presumption here, but by taking on the debt, you must now service the debt, and the service of the debt likely requires you to either (i) become (or stay) employed at a job that pays at a particular wage or higher; (ii) reduce the amount of discretionary income that you receive from your investments; and/or (iii) increase the level of risk that your investments undertake in order to maintain the same net income, after giving effect to the amount required to service the debt in order to "break even."

There are, quite possibly, knock-on side effects as well, such as increased property taxes (because the house that you have now is more expensive than the house you previously had, and thus the property tax is higher on the new house as well), increased maintenance costs (either because a more expensive house might have more expensive fixtures that cost more money to maintain or because the house is in a more expensive area and thus contractors charge more because, rightly or wrongly, they believe that the clientele can afford the increased charges), and/or increased lifestyle expenses (because living in a more expensive area may subject one to a greater "keep-up-with-the-Jones" feeling, thus causing one to increase their conspicious consumption expenses).

I guess my main point is that I'm a big proponent of living below one's means, keeping one's options open, and not being obligated or beholden to anyone. I tend to believe that having debt doesn't allow one to maintain those tenets or ideals as easily as not having debt does (or would). That's all.

[Bring_Back_Shantz]

Originally Posted by HockeyIlliterate

I can agree with this statement, to a degree.



I realize that I'm making quite a presumption here, but by taking on the debt, you must now service the debt, and the service of the debt likely requires you to either (i) become (or stay) employed at a job that pays at a particular wage or higher; (ii) reduce the amount of discretionary income that you receive from your investments; and/or (iii) increase the level of risk that your investments undertake in order to maintain the same net income, after giving effect to the amount required to service the debt in order to "break even."

There are, quite possibly, knock-on side effects as well, such as increased property taxes (because the house that you have now is more expensive than the house you previously had, and thus the property tax is higher on the new house as well), increased maintenance costs (either because a more expensive house might have more expensive fixtures that cost more money to maintain or because the house is in a more expensive area and thus contractors charge more because, rightly or wrongly, they believe that the clientele can afford the increased charges), and/or increased lifestyle expenses (because living in a more expensive area may subject one to a greater "keep-up-with-the-Jones" feeling, thus causing one to increase their conspicious consumption expenses).

I guess my main point is that I'm a big proponent of living below one's means, keeping one's options open, and not being obligated or beholden to anyone. I tend to believe that having debt doesn't allow one to maintain those tenets or ideals as easily as not having debt does (or would). That's all.

I understand what you are saying here, but I can assure you I am not living beyond my means. I could afford a larger mortgage than I took on, but I went with a mortgage, and home, which was well within my ability to do so, and had minimal impact on my financial situation. In return I have vastly improved my quality of life, thus, in my case the impact of reasonable ammount of debt I took on, is FAR outweighed by the advantages it has provided for me.

You started by pointing out that "The right house" doesn't necessarily come with debt, which is true. But to defend this point, you are saying that taking on debt makes it difficult for one to live within their means, and that is no more universally true than your advice to avoid debt. Too much debt can, and will, do that, but a reasonable ammount of debt is not necessarily a detriment to doing that.

The way I saw it I had three options:
1) stay in the burbs debt free
2) take on a modest mortgage in the inner city and enjoy a greatly increased quality of living (as I see it)
3) take on a crippling mortgage in the inner city, and erase any increased standard of living by reducing my financial ability to take advantage of my new location

My point is, that your comment that debt should be avoided isn't true in all circumstances.
Of the above choices, #3 is obviously stupid, and if someone is predisposed to make that choice, then they absoultely shoud follow your advice.

Of the remaining two choices, #1 follows your advice, but in my case #2 has made me much happier, and has had minimal impact on my fiancial situation. In my case, debt is an important and manageable tool in obtaining the quality of life that best suits my goals/desires.

[BigNumbers]

Those are some personal choices, not financial ones... NOT having debt in this insanely-low-rate environment is a bad choice from a purely financial perspective.... You want to have some leverage - Choosing to have none because you are a quasi-freeman is bad financial advice.

[HockeyIlliterate]

Originally Posted by Bring_Back_Shantz

I understand what you are saying here, but I can assure you I am not living beyond my means.

And I'm not suggesting, nor intending to suggest, that you aren't.

[darklord700]

Originally Posted by BigNumbers

NOT having debt in this insanely-low-rate environment is a bad choice from a purely financial perspective....

What do you suggest we should leverage on? TSX is almost at 15K which is high. And everyone and their uncle are landlord in this town so revenue properties are expensive. I am willing to leverage and take resonable risk but just doesn't know what to invest in.

[Bring_Back_Shantz]

Originally Posted by HockeyIlliterate

And I'm not suggesting, nor intending to suggest, that you aren't.

I realize that, and I wasn't taking exception to any preception that you were.

My point is that you think it's important to live within, or below one's means, something that I strongly agree with, while also making the blanket statement that debt limits people's choices/options and should be avoided, something that under the proper circumstances, using my own as an example, I strongly disagree with.

Taking on debt, and living within your means are not mutually exclusive, and under many circumstances, prudently taking on debt can offer greater options/choices than the restrictions that come with it.

[1stLand]

Diversify.
Stay in your current house and start buying mutual funds.

[ranchlandsselling]

Originally Posted by HockeyIlliterate

I can agree with this statement, to a degree.



I realize that I'm making quite a presumption here, but by taking on the debt, you must now service the debt, and the service of the debt likely requires you to either (i) become (or stay) employed at a job that pays at a particular wage or higher; (ii) reduce the amount of discretionary income that you receive from your investments; and/or (iii) increase the level of risk that your investments undertake in order to maintain the same net income, after giving effect to the amount required to service the debt in order to "break even."

There are, quite possibly, knock-on side effects as well, such as increased property taxes (because the house that you have now is more expensive than the house you previously had, and thus the property tax is higher on the new house as well), increased maintenance costs (either because a more expensive house might have more expensive fixtures that cost more money to maintain or because the house is in a more expensive area and thus contractors charge more because, rightly or wrongly, they believe that the clientele can afford the increased charges), and/or increased lifestyle expenses (because living in a more expensive area may subject one to a greater "keep-up-with-the-Jones" feeling, thus causing one to increase their conspicious consumption expenses).

I guess my main point is that I'm a big proponent of living below one's means, keeping one's options open, and not being obligated or beholden to anyone. I tend to believe that having debt doesn't allow one to maintain those tenets or ideals as easily as not having debt does (or would). That's all.

You know the majority of wealth created in the world has been on the back of debt? That said, destruction of plenty of wealth has also been on the back of debt but far less than the former.

[Mean Mr. Mustard]

Originally Posted by Sylvanfan

A former co worker of mine in Sylvan Lake has probably lived in 12 houses over the past 14 years all brand new. He has never spent a cent maintaining a house.

That sounds f'n horrible, just absolutely horrible in every respect. I can't imagine wanting to move every single year. The fees associated with moving would be astronomically high, just the movers and time aspect, plus how would you ever get comfortable living somewhere when you finally unpack, it would be mere months until you have to pack everything back up again, that is assuming he has more than a bindle and stick setup.

[Sylvanfan]

Originally Posted by Mean Mr. Mustard

That sounds f'n horrible, just absolutely horrible in every respect. I can't imagine wanting to move every single year. The fees associated with moving would be astronomically high, just the movers and time aspect, plus how would you ever get comfortable living somewhere when you finally unpack, it would be mere months until you have to pack everything back up again, that is assuming he has more than a bindle and stick setup.

He works for a home builder, and his father inlaw is a realtor. So it costs him nothing to sell his houses. Plus there is no rule that you have to hire movers. In town moving can still be done for a pretty reasonable amount, especially since he can access company truck. His moves never cost him more than $150 plus a day of his time. Painting two rooms in my house costs me that much. Plus it's incentive for him to not collect a bunch of worthless crap.

This would not work for regular people. But for him it's worked brilliantly.

[red sky]

Originally Posted by Sylvanfan

He works for a home builder, and his father inlaw is a realtor. So it costs him nothing to sell his houses. Plus there is no rule that you have to hire movers. In town moving can still be done for a pretty reasonable amount, especially since he can access company truck. His moves never cost him more than $150 plus a day of his time. Painting two rooms in my house costs me that much. Plus it's incentive for him to not collect a bunch of worthless crap.

This would not work for regular people. But for him it's worked brilliantly.

What about the buyers' realtor fees?