Straight Talk from Al Jacobs
IN HOCK FOR THE DURATION
Do you have a mortgage loan on your home? Prominent financial advisor Ric Edelman approves. He advocates that “. . . you should have as big a mortgage as you can get and never pay it off.”
Though I admire Mr. Edelman’s broad range of financial expertise, we disagree on this subject. Many people reach their golden years with too few assets to live comfortably. I contend that you should own your residence free and clear, and the sooner the better.
When your paycheck becomes a relic of the past, you’ll want your mortgage loan to join it into oblivion. It’s easily accomplished. Early in your life purchase a house with whatever down payment you can afford. Choose a long-term, fixed-rate, fully amortized mortgage, and make the regular monthly payments until it’s paid in full.
As the years pass and your equity grows, avoid any temptation to dip into it for such things as schooling for the kids, the long-awaited vacation you’ve always wanted, or the surefire investment your brother-in-law guarantees will put you on Easy Street. Consider your residence a sacrosanct element of your retirement years, not to be further encumbered or compromised in any manner.
Many a retiree who bought an inexpensive tract house with a minuscule down payment thirty or more years ago, and systematically paid off the mortgage, one installment at a time, is today able to get by with little else than social security. But for a residence free of debt, this might not be possible.
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