Summary
There are many benefits of a paid off house. Those who disagree with this idea simply have not thought it through. A down payment is 20% of the value of the home. If you put 20% down, you can get a conventional mortgage. These mortgages are easier to get.
The typical PMI cost ranges from 0.5%-2% of the original mortgage. Let's say you pay an additional 1% in upfront fees by not getting a conventional mortgage. Most of the time, a down payment saves you fees, PMI, and interest.
Since you own the home, you don't have to pay rent. The home provides free rent. To determine the return on that $800,000, you have to determine what comparable rent would be. That's an easy process if you can find comparable homes for rent.
The second way to look at this is simply to compare it to the mortgage that you could have on the property. If you have a paid-off home and the going 30-year fixed mortgage rate is 7%-8%, you're earning 7%-7%. That's a whole lot better than other guaranteed investments are paying these days.
If you put 20% down on a house, you don't own 20% of the house. If the house goes up 20% in value, you get to keep the entire house. The house will go up and down in value whether you have a big mortgage or no mortgage.
If you don't like your job, you can leave your job. If you don’t like your boss, you’re not allowed to work. If your boss doesn’ t like his job, he can leave. If his boss doesn't like his boss, he’s not allowed work.
People with that kind of wealth don't typically get that way by screwing over people who lent them money. I've interviewed a lot of millionaires on the Milestones to Millionaire podcast, and none of them got rich this way. The same drive that causes people to save and invest enough money to get rich also seems to cause them to pay off their debts rapidly.
If you're paying 2.8% to make a profit, you're probably not doing well. If you're making a profit on a loss, you may be doing better if you're taking on more risk. If your risk is too high, you might be better off paying more.
Use your home equity to pay off your debts. Don't pay your mortgage. Don’t pay your taxes. Use your home to pay for anything you want. Don ‘t pay any taxes at all.’ Don� ’ t pay your mortgage at all.
