Your House Is Not An Investment

You’re probably making this one big financial mistake

For a lot of people, the single largest component of their net worth is the Home that they live in. A lot of people forego saving for their retirement in order to pay down their mortgages and free themselves from their mortgage. There is definitely something to be said for the freedom that living debt-free can provide, but we would also argue that there is good and bad debt. Being a slave to your house in order to pay off the mortgage to simply have the title in your own name provides no real advantages to you.  That is bad debt.

The reality is that paying off your house creates a liability for you. The money that you spent paying down the mortgage is money that could have been invested for your retirement. We unfortunately meet too many people who enter retirement with most of their net worth tied up in the equity of their homes instead of their retirement accounts. Home equity can’t pay bills or put food on the table.

Is the equity in your house and investment? Investments pay a rate of return. Investments are liquid. If we own a stock or a bond, it will pay us a dividend or interest. If I need my money back, I can usually sell my stock or bond fairly easily and convert the asset back into cash (hopefully with a capital gain!).

Houses do not pay dividends or interest. Home values in a neighborhood may increase, but they are increasing for everyone whether you have your house paid off or not. The only way to realize the gain at home values is to sell your house. And if all of the other houses around us have also been increasing, we still need to replace the house with another house to live in.

What we need is a strategy to convert the equity in your house into tax-free income that you can use to live upon in retirement. By strategically harvesting the equity by using GOOD DEBT, you can convert the equity in your house into assets that create tax-free income for retirement and that are liquid.  With the guidance of one of our financial representatives, you can learn to pay down your mortgage and successfully harvest the equity again and again before you retire. There are several ways to do this and it is important that you seek the assistance of a qualified financial professional.

 

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