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. I can certainly relate to the freedom that living debt-free can provide, but I would also argue that there is good debt 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.
The reality is that paying off your house early creates a liability for you. The money that you spent paying down the mortgage is money that could have been invested for your retirement.
Is the equity in your house and investment? No. Investments pay a rate of return. Investments are liquid. If I own a stock or a bond, it will pay me a dividend or interest that I in turn have to pay taxes on at the end of the year. If I need my money back, I can sell my stocks fairly easily and convert the investment 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 a gain in home values is to sell your house. And who wants to sell their house when all of the other houses around you have also been increasing? At the end of the day we still need to replace the house you sell 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. My good friend Mario Henry wrote a book outlining a strategy to teach people “how to hire your house” so that it works for you. This is a great strategy for new homeowners to quickly pay off their houses and turn the equity into tax-free retirement income.to learn more about this strategy go to website.
By strategically harvesting the equity and paying down your mortgage in concert, you may successfully repeat this cycle again and again before you retire and create a substantial amount of tax free income for retirement. There are several ways to do this and it is important that you seek the assistance of a qualified financial professional.
