They Were Promised Help With Mortgage Payments. Then They Got a Foreclosure Notice.
They Were Promised Help With Mortgage Payments. Then They Got a Foreclosure Notice.
Homeowners enrolled in Nevada’s mortgage assistance program have received foreclosure notices when the money fails to make its way from the federal government to the loan providers on time.
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Stupid is the wrong word. You might be losing money, but is the peace of mind is worth tens of thousands of dollars, or whatever the difference is, that’s a decision you should make.
But for you (or anyone reading this), the decision isn’t between paying off your mortgage and buying a car. It’s between paying off your mortgage and putting the money into something with a higher expected return than you’d be paying on your mortgage.
Let’s say you owe $1M on your mortgage, and you have $1M cash. If your mortgage is at 2.5% interest and your investments are bringing in 10% per year, you’d be better off leaving the money invested. The closer the two rates get, the smarter it is to just pay it off. If you’re facing financial uncertainty you might be more comfortable paying it off, but if you have a solid amount of money put aside, again you might be better off having the savings to spend on multiple expenses rather than just sinking it into the house.
The best thing is to play out a few different scenarios and go with what lets you sleep easiest at night, but realize that, if you were to lose your income (for instance), you’d be depending on cash because you’re unlikely to secure a loan against your realized house value without having income.
Based on the fact that she apparently needed to buy the place with her mom and that the palm in the background is likely worth north of $10k by itself, I’m going to guess that they got a bit overextended by going off of her (commission-based?) income. Anyone can find themselves in trouble if they lose their job and this sounds like a horrible set of circumstances which I hope get addressed, but you have to go off of the scenarios relevant to you.
It’s between paying off your mortgage and putting the money into something with a higher expected return than you’d be paying on your mortgage.
I saw a discussion on this recently that gave an interesting perspective. It said that people often aren't rational. As such, it might help to first mostly pay off the mortgage. This as that'll give peace of mind. Which then helps with investments. It's much easier to take risks when someone is at ease. The ease might result in higher returns, though being comfortable is already a good return.
Eventually someone mentioned a book plus a summary of that book. See https://www.sloww.co/psychology-of-money-book/.
I think this perspective is very important to think about. Very, very important.
A human being's ability to be rational and logical is highly tied to their emotional state. We are naturally emotional creatures--and that's not even necessarily bad, that's just a fact. We are not Spock with inhuman emotional control, we are not Data, androids without emotions.
It's only logical to ACKNOWLEDGE that, and put into place plans that take into account one might be pretty emotional about something, and it's better to do something to help with the thing that's upsetting you if you notice that thing is hindering you from acting logically, so that you can fix it and THEN go on to make other logical plans that you might have been prevented from making before because the one thing was weighing heavily on your mind.
Sometimes getting "peace of mind" gives mental room to be able to act coherently on other issues. And that can snowball into good returns, good choices.
I think the people who pretend you can magic emotions away without actually dealing with them are very likely the ones who make tons of decisions emotionally--without realizing that's exactly what they do. Then they strut around thinking they're so logical and maybe even write posts and articles wondering why other people "aren't" logical on Topic of Interest, while their partners and family members with a higher EQ pick up the pieces around them from their emotional reactions to things.
(I see guys in particular do this, because guys don't get much encouragement or education on handling their emotions, so they're often transmuting them all into anger, or just ignoring they exist--then the emotions pop out at the worst possible time because they're never dealt with.)
(But I've also run into women too.)
(This behavior is very common for nerds, male and female alike. You're not really "mad" if you can browbeat people with "facts" and "logic" right? You're logical, not emotional, right? But it's not exclusive to this group, it pops up everywhere.)
(For the record, I tend towards this too when I'm upset, although I've tried very hard to mellow with age.)
The people that'll tell you not to pay off a house before the end of your mortgage are the same ones that're first in line to buy up houses in recessions as quick as they can.
Are there other things that might be better investments? Sure, but having your home paid off is a solid investment in your future too.