Buying house out right

[TOMCAT]

I am curious to know how many people buy their homes out right with just cash and no mortgage. My tax consultant told me that most people who retire to Florida buy their homes out right with no mortgage.

[Cobh521]

I would say more than half

[Wiotte]

You could probably extrapolate that info from the last federal census.


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[dewilson58]

I am curious to know how many people buy their homes out right with just cash and no mortgage. My tax consultant told me that most people who retire to Florida buy their homes out right with no mortgage.

probably depends on if they are selling or holding onto their home "up North".

hopefully your consultant is telling you what is best for you.............not most other people.

[JoMar]

Also depends on life expectancy, cash flow requirements, returns on investment. For instance, I took this mortgage for 30 years when I was 70....I doubt that I will live till 100 and if I do it is doubtful that I will be in this house. My wife is in the same position. The math worked in our favor to take the longest mortgage possible....both my accountant and investment guys were on that page too. Everyones personal financial positions should dictate the course.

[billethkid]

It may also depend on an investment and or tax strategy.
With a 3-4% mortgage interest rate one can have the same money invested and get a higher return and a tax break.

[Aloha1]

According to the Sun today, 25% of Villagers have no mortgage.

[BoatRatKat]

It may also depend on an investment and or tax strategy.
With a 3-4% mortgage interest rate one can have the same money invested and get a higher return and a tax break.

Agree

[Chi33]

It may also depend on an investment and or tax strategy.
With a 3-4% mortgage interest rate one can have the same money invested and get a higher return and a tax break.

I agree. Mortgages are so low, a 250K home can be under 1000$ a month. However, lot of wealthy Villagers who don't show it because they saved their money all their lives and their parents we depression babies (who instilled that in them).

[manaboutown]

I agree. Mortgages are so low, a 250K home can be under 1000$ a month. However, lot of wealthy Villagers who don't show it because they saved their money all their lives and their parents we depression babies (who instilled that in them).

Plenty of Villagers were depression babies themselves or war babies. Times were difficult back then and there was little money to go around for the vast majority. Plus, old habits die hard...

[Arubagirl33]

No, 25% in the Daily Sun the other day represented the percent of increase from 2013 - 2016 of people purchasing without a mortgage. Up to 75% now mortgage free.

[rustyp]

No bills - no payments - no in indebtedness = a very comfortable nightly sleep. Put your own value on that. Your finance guy won't.

[Arubagirl33]

No bills - no payments - no in indebtedness = a very comfortable nightly sleep. Put your own value on that. Your finance guy won't.

I was just going to say that!!! Hate debt!! Finance guys push mortgaging. The Bigger the Better!! Not us!! Two homes in TV and one in NY. Mortgage Free is a beautiful thing.

[Chatbrat]

If you take your assets and divide them by the years you think you're going to live and you get to zero --you might be a winner

A prime example --age 70 $6 million --in assets if you think your not going to make it to 90, you can knock you socks off spending $300K a year without earning any income--remember the basic rule man makes plans God laughs

IMHO- enjoy it while you can

[billethkid]

I didn't see where anybody referenced a finance guy.

I do not need a finance guy to tell me where to put or take my money.

My choice? When I can make more money by having a mortgage that gives me comfort and more money to spend.

To each his own as they see fit.
There is no right or wrong. Just preference

[rustyp]

It may also depend on an investment and or tax strategy.
With a 3-4% mortgage interest rate one can have the same money invested and get a higher return and a tax break.

I keep hearing this strategy over and over. Please explain. Doesn't the bank require life insurance on a mortgage ? What would that be for 70 year old with a thirty year mortgage per thousand ? Guess that's why it's called a "mort"gage. Also does not one have to pay points and closing costs plus whatever other gimmicks (variable rates, early payoff penalties, etc.) they have come up with nowadays on a mortgage. So what are the real break even numbers ? Now put on top of that your level of comfort. I'm personally not willing to make an investment that nets 5K-10K over 30 years. Sleep is worth a lot more than that.

[Chatbrat]

Never had a mortgage- never paid one cent of interest- remember interest keeps poor people poor while it makes rich people richer==if you have to borrow for something--you don't need it

[billethkid]

I keep hearing this strategy over and over. Please explain. Doesn't the bank require life insurance on a mortgage ? What would that be for 70 year old with a thirty year mortgage per thousand ? Guess that's why it's called a "mort"gage. Also does not one have to pay points and closing costs plus whatever other gimmicks (variable rates, early payoff penalties, etc.) they have come up with nowadays on a mortgage. So what are the real break even numbers ? Now put on top of that your level of comfort. I'm personally not willing to make an investment that nets 5K-10K over 30 years. Sleep is worth a lot more than that.

I don't know anybody that would.

If one has the equity in the property and the annual income that the bank requires for the principal, age is not a factor.

No life insurance required.....the equity is the banks insurance/assurance.

[tuccillo]

Mortgages provide financial leverage and can be of value. Also, the tax structure can be beneficial for holding a mortgage. Your binary conclusion doesn't apply to a great many situations. It is not nearly as simple as you present. People need to evaluate their own situation. Advice presented without consideration of the details is worthless. Unfortunately, a significant amount of "advice" on ToTV falls into this category.


Never had a mortgage- never paid one cent of interest- remember interest keeps poor people poor while it makes rich people richer==if you have to borrow for something--you don't need it

[Ecuadog]

... Advice presented without consideration of the details is worthless. Unfortunately, a significant amount of "advice" on ToTV falls into this category.

Free advice is usually worth what you paid for it.

[rustyp]

I don't know anybody that would.

If one has the equity in the property and the annual income that the bank requires for the principal, age is not a factor.

No life insurance required.....the equity is the banks insurance/assurance.

Interesting. I did not know this. What is the percentage of equity and income requirements in general for a bank to not require life insurance ? Most people in TV I suspect have Citizen's as an example. The rest of my question still applies - what are the unforeseen costs of a mortgage typically ? However being the real skeptic that I can not seem to loose ever my gut tells me most people in TV with a mortgage simple did not have the money - but would never admit it.

[missypie]

Never had a mortgage- never paid one cent of interest- remember interest keeps poor people poor while it makes rich people richer==if you have to borrow for something--you don't need it

Although I personally agree with you, but our children and grandkids don't necessarily have the option nowadays. On the other hand, they can still make very wise decisions money wise that they have learned from us.

[asianthree]

OPM.. Other People's Money. (The banks money). Our interest rate is 2.25% for mortgage. We definitely make more on our investments than that.

[OpusX1]

Haven't had a mortgage since 1991. It's great.

[dewilson58]

Never had a mortgage- never paid one cent of interest- remember interest keeps poor people poor while it makes rich people richer==if you have to borrow for something--you don't need it

Or, leverage can make you rich.

[Wiotte]

If you take your assets and divide them by the years you think you're going to live and you get to zero --you might be a winner



A prime example --age 70 $6 million --in assets if you think your not going to make it to 90, you can knock you socks off spending $300K a year without earning any income--remember the basic rule man makes plans God laughs



IMHO- enjoy it while you can



Must be nice [emoji15]


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[Villagevip]

I payed cash, b/c I could...Don't like all the financial mumbo gumbo, placing large selling commissions into the hands of the advisors...There is no such thing, as a fiducial responsibility anymore...

[Wiotte]

It's nice to have homestead and no mortgage, piece of mind is priceless.


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[manaboutown]

It just depends. As long as the interest is deductible in some way and one can make more on one's investments mortgages make sense at today's artificially low rates. Historically I preferred as close to 100% financing as I could get or no loan whatsoever.

[justjim]

Interesting. I did not know this. What is the percentage of equity and income requirements in general for a bank to not require life insurance ? Most people in TV I suspect have Citizen's as an example. The rest of my question still applies - what are the unforeseen costs of a mortgage typically ? However being the real skeptic that I can not seem to loose ever my gut tells me most people in TV with a mortgage simple did not have the money - but would never admit it.

Generally 20% down on a mortgage and you don't need the insurance. In some cases, it can be less. The decision to take a low interest loan and invest is a personal decision and an excellent strategy to build money for retirement. However, as you age, many decide to pay cash and "tidy up their debts" for peace of mind and to take time to enjoy what time they have left. :beer3:

[CFrance]

Also depends on life expectancy, cash flow requirements, returns on investment. For instance, I took this mortgage for 30 years when I was 70....I doubt that I will live till 100 and if I do it is doubtful that I will be in this house. My wife is in the same position. The math worked in our favor to take the longest mortgage possible....both my accountant and investment guys were on that page too. Everyones personal financial positions should dictate the course.
Ja. Our financial advisor/broker was going to throttle us if we paid cash for our house. Much better return on investments than the interest rate on our mortgage.

[Wiotte]

I will get a cash out mortgage when I hit 95. World watch out !


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[manaboutown]

Outright or left out, that is the question.

[Wiotte]

Outright or left out, that is the question.



Huh ? [emoji848]


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[Topspinmo]

Also depends on life expectancy, cash flow requirements, returns on investment. For instance, I took this mortgage for 30 years when I was 70....I doubt that I will live till 100 and if I do it is doubtful that I will be in this house. My wife is in the same position. The math worked in our favor to take the longest mortgage possible....both my accountant and investment guys were on that page too. Everyones personal financial positions should dictate the course.

Not really, you will be paying interest, taxes, and insurance for about 10 years and about 30 bucks month against the loan if your lucky? Your investment guy want his hands on your money, so he can invest it and milk the fees off it. Leaches everywhere including assisted living that's popping up like mushrooms around here.

[patfla06]

no bills - no payments - no in indebtedness = a very comfortable nightly sleep. Put your own value on that. Your finance guy won't.

Exactly how we feel!

[rustyp]

Well I slept on it and I can't believe it. I lived my life well within my means (one house, one wife) and saved 15%-20% of my income for 30 plus years for retirement. Now I discover the banks were giving out mortgages to people who worked at McDonald's and to seventy year olds on vacation homes no less without being backed by life insurance. Then the market crashes - I loose - my finance guy says don't pull out. Yes it did - it will come back. Took a while - quite a while. The aforementioned groups get financial assistance or better yet get to walk away from paying on their obligations. Boy was I a jackass. Shame on me.

[Bay Kid]

I do not believe in owing money. If I can't pay for it then I wait until I can. Just the way I was raised.

[CFrance]

I do not believe in owing money. If I can't pay for it then I wait until I can. Just the way I was raised.
Ours was a purely financial decision. We could pay it off tomorrow if we wanted. It has more to do with where to put our money where we feel we would get the best return. We don't feel that real estate is such a secure investment these days, especially in a location that keeps growing and growing. There will always be new housing that old housing has to compete with.

But I understand that some would feel more secure owning their home outright. Different strokes for different folks.

[tuccillo]

I generally believe in the same but real estate has traditionally been a bit different. The laws are stacked in favor of home ownership. For many young people, without a mortgage they would never be able to "get into the game" and would be left behind paying rent for the rest of their lives. While home ownership via a mortgage has been problematic at certain times, overall it has provided the financial leverage for many people to start accumulating wealth and increase their standard of living. As with any financial vehicle, the individual circumstances need to be considered.

I do not believe in owing money. If I can't pay for it then I wait until I can. Just the way I was raised.

[dewilson58]

I generally believe in the same but real estate has traditionally been a bit different. The laws are stacked in favor of home ownership. For many young people, without a mortgage they would never be able to "get into the game" and would be left behind paying rent for the rest of their lives. While home ownership via a mortgage has been problematic at certain times, overall it has provided the financial leverage for many people to start accumulating wealth and increase their standard of living. As with any financial vehicle, the individual circumstances need to be considered.


Agree....................I hate debt. "In my young'r days", I did have mortgage and got into the game. Enjoyed paying that off. Never borrowed for an auto.........hated to see my children jump into car loans.

[tuccillo]

Yes, auto loans, IMHO, are only be used as a last resort. Borrowing money to buy a depreciating asset is something to be avoided if at all possible.

Agree....................I hate debt. "In my young'r days", I did have mortgage and got into the game. Enjoyed paying that off. Never borrowed for an auto.........hated to see my children jump into car loans.

[valuemkt]

Tomcat, not sure what you were trying to get from your "simple" question regarding "To Mortgage or Not To Mortgage", but so far you've received (IMO) a somewhat representative sampling from Village people that come from all walks of life, experiences and economic backgrounds. Made me think of the Bell Curve, which I will use to provide my input / response. For those of you not familiar with the Bell Curve, see Bell Curve (http://www.investopedia.com/terms/b/bell-curve.asp)
for a pictorial view of what I'll be talking about.

I choose to break my answer into three segments of the curve, the left tail, the right tail, and the populous middle. In a perfect distribution of people, the left and right tails have an equal representation. I'm not here to argue that the Villages maybe represent a skewed to the right curve .. the answers are still the same.

The left tail regarding buying a home with or without a mortgage doesnt have a choice. Based on their economic situation, they have a mortgage out of necessity, for many reasons that are beyond this scope. Their answer to your question is very simple: we wouldn't be here if we didnt have a mortgage. The right tail is the direct opposite: they have now, or more likely have had for most of their lives, the means to buy whatever they want whenever they want and perhaps view a mortgage as something "lower class" people do because they can't pay cash like us. While most of this tail aren't quite as arrogant as that, and "hide their wealth", not all of them are. They also aren't qualified to answer your question without bias. By the way, the curve can be drawn with tails of 1, 2 or five per cent on each side, depending on how you;d like to classify the data.

So that leaves the middle centered around the mean, whatever that might mean in this discussion. Obviously, we don;t know what population your tax consultant considered, and whether this population reflected your economic situation. That's important for you. We also don't know if your tax consultant also has financial planning skills, as the two arent necessarily interchangeable.

So now we finally have the base to ask the question. I'm of a certain age, financially in the middle of the bell curve, and I have the means to pay cash for my house, but I'm not sure I want to do that vs take out a monthly mortgage at X% for 10, 15 or up to 30 years (even though my life expectancy is less than the length of my mortgage). (BTW, I am intentionally going to ignore any discussion of reverse mortgages).

So, Choice ONE - What are your thoughts on DEBT ? If you are of the school that both DEBT and DEVIL start with the same letter for a reason, your choice is simple - PAY CASH and be DEBT FREE. If you would like to feel good about that decision, become a disciple of Dave Ramsey and read or re read TOTAL MONEY MAKEOVER - Dave, also starting with a D has made a living helping people get out of debt .. and others never getting into it .. Regardless of the answer to the question above, that book is a good read - for you and your children.

If you are open to debt, then the choice becomes much more complex: Is this your last house ? Are you planning to leave a nest egg to your heirs or spend your last dollar coincident with your last breath ? What is your comfort level regarding CASH on hand vs debt ? After all, SWAN is very important to all of us .. and each of us have different comfort levels of CASH and DEBT to allow us to SLEEP WELL AT NIGHT.

Some folks in this middle of the bell curve are (or consider themselves to be) very skilled at applying financial concepts. Some rely on financial planners, others consider themselves bandits and do their own planning, or ask well intentioned but perhaps lesser skilled children, friends or relatives to do it.

Many in the middle will make this an ROI (return on investment) discussion. For example, if I can get a 15 year mortgage at 3% and make 5% on my money (guaranteed ?) then it's a no brainer to take the mortgage. (If I die and still owe 90% of the homes value (LTV) do I care or not care - does that affect what I leave my heirs ?), OR if I pay cash will I feel good about NO DEBT, but be shackled from a cash availability basis and NOT be able to take those lifetime dream trips, visit the kids many times a year etc etc ..

If you are in the middle, you most likely have a an IRA or 401K that will give you a "pleasant" problem to have after AGE 70 - RMDs .. Required Minimum Distributions .. some in the middle might not need that income, but decide thats an easy way to pay that mortgage .. Others might have moved all that money to ROTHs, where RMDs dont apply ..

My attempt here is to acknowledge the diversity of the population, and certainly to refrain from what is very common on nearly every topic on these blogs .. and that is ..

SIT BACK AND LISTEN FOLKS - THE SMARTEST PERSON IN THE VILLAGES HAS JUST ANSWERED YOUR QUESTION - NOT SURE WHY THE REST OF YOU EVEN BOTHERED ..

Sorry for the length of the response .. I hope you found it just a bit informative and thought provoking .

[TOMCAT]

My husband and I do not have the means to buy a house out right and need to take a mortgage. My brother, who is a CPA, and does my taxes said it would be better to buy my house with cash because of the tax situation. My husband is not worried about taking a mortgage as he thinks expenses will be lower there then where we are now in Long Island. I just want to get like a poll of who had a mortgage or not.

[Nucky]

Thurston Howell III here, Lovey and myself hate debt. We usually go the no debt route whenever possible. Simple old school rules run our finances. Our children talked us into electronic bill pay but other than that I like interest paid to me.

Our young ones love to be in debt and spend their money on fancy cars. A nice Ford, a beautiful Golf Cart, No Mortgage, it's a Beautiful Thing.

[xNYer]

Ja. Our financial advisor/broker was going to throttle us if we paid cash for our house. Much better return on investments than the interest rate on our mortgage.

The return is only better if you take risk. It is likely you can earn more than the mortgage rate with minimal risk, but the risk is still there. A fixed income investment will not yield more than the debt incurred.

if you pay cash for your house you are reducing your available investable assets. This reduces the potential income of a financial advisor.

[manaboutown]

Don't think this aspect has been comprehensively discussed yet in this thread - Mortgage Interest Deduction Limit and Income Phaseout (https://www.financialsamurai.com/mortgage-interest-deduction-limit-and-income-phaseout/)

[ColdNoMore]

Tomcat, not sure what you were trying to get from your "simple" question regarding "To Mortgage or Not To Mortgage", but so far you've received (IMO) a somewhat representative sampling from Village people that come from all walks of life, experiences and economic backgrounds. Made me think of the Bell Curve, which I will use to provide my input / response. For those of you not familiar with the Bell Curve, see Bell Curve (http://www.investopedia.com/terms/b/bell-curve.asp)
for a pictorial view of what I'll be talking about.

I choose to break my answer into three segments of the curve, the left tail, the right tail, and the populous middle. In a perfect distribution of people, the left and right tails have an equal representation. I'm not here to argue that the Villages maybe represent a skewed to the right curve .. the answers are still the same.

The left tail regarding buying a home with or without a mortgage doesnt have a choice. Based on their economic situation, they have a mortgage out of necessity, for many reasons that are beyond this scope. Their answer to your question is very simple: we wouldn't be here if we didnt have a mortgage. The right tail is the direct opposite: they have now, or more likely have had for most of their lives, the means to buy whatever they want whenever they want and perhaps view a mortgage as something "lower class" people do because they can't pay cash like us. While most of this tail aren't quite as arrogant as that, and "hide their wealth", not all of them are. They also aren't qualified to answer your question without bias. By the way, the curve can be drawn with tails of 1, 2 or five per cent on each side, depending on how you;d like to classify the data.

So that leaves the middle centered around the mean, whatever that might mean in this discussion. Obviously, we don;t know what population your tax consultant considered, and whether this population reflected your economic situation. That's important for you. We also don't know if your tax consultant also has financial planning skills, as the two arent necessarily interchangeable.

So now we finally have the base to ask the question. I'm of a certain age, financially in the middle of the bell curve, and I have the means to pay cash for my house, but I'm not sure I want to do that vs take out a monthly mortgage at X% for 10, 15 or up to 30 years (even though my life expectancy is less than the length of my mortgage). (BTW, I am intentionally going to ignore any discussion of reverse mortgages).

So, Choice ONE - What are your thoughts on DEBT ? If you are of the school that both DEBT and DEVIL start with the same letter for a reason, your choice is simple - PAY CASH and be DEBT FREE. If you would like to feel good about that decision, become a disciple of Dave Ramsey and read or re read TOTAL MONEY MAKEOVER - Dave, also starting with a D has made a living helping people get out of debt .. and others never getting into it .. Regardless of the answer to the question above, that book is a good read - for you and your children.

If you are open to debt, then the choice becomes much more complex: Is this your last house ? Are you planning to leave a nest egg to your heirs or spend your last dollar coincident with your last breath ? What is your comfort level regarding CASH on hand vs debt ? After all, SWAN is very important to all of us .. and each of us have different comfort levels of CASH and DEBT to allow us to SLEEP WELL AT NIGHT.

Some folks in this middle of the bell curve are (or consider themselves to be) very skilled at applying financial concepts. Some rely on financial planners, others consider themselves bandits and do their own planning, or ask well intentioned but perhaps lesser skilled children, friends or relatives to do it.

Many in the middle will make this an ROI (return on investment) discussion. For example, if I can get a 15 year mortgage at 3% and make 5% on my money (guaranteed ?) then it's a no brainer to take the mortgage. (If I die and still owe 90% of the homes value (LTV) do I care or not care - does that affect what I leave my heirs ?), OR if I pay cash will I feel good about NO DEBT, but be shackled from a cash availability basis and NOT be able to take those lifetime dream trips, visit the kids many times a year etc etc ..

If you are in the middle, you most likely have a an IRA or 401K that will give you a "pleasant" problem to have after AGE 70 - RMDs .. Required Minimum Distributions .. some in the middle might not need that income, but decide thats an easy way to pay that mortgage .. Others might have moved all that money to ROTHs, where RMDs dont apply ..

My attempt here is to acknowledge the diversity of the population, and certainly to refrain from what is very common on nearly every topic on these blogs .. and that is ..

SIT BACK AND LISTEN FOLKS - THE SMARTEST PERSON IN THE VILLAGES HAS JUST ANSWERED YOUR QUESTION - NOT SURE WHY THE REST OF YOU EVEN BOTHERED ..

Sorry for the length of the response .. I hope you found it just a bit informative and thought provoking .

Excellent post! :thumbup:


In a nutshell...one size does not fit all. :ho:

[Kahuna32162]

It's killing me right now to be paying almost $1,000 a month in interest. I will be gathering the funds from multiple sources and paying off the balance in October.

[graciegirl]

I payed cash, b/c I could...Don't like all the financial mumbo gumbo, placing large selling commissions into the hands of the advisors...There is no such thing, as a fiducial responsibility anymore...

About half the buyers here pay cash for home.