I bought a bit bigger\better property for my family,sold old one(paid in cash long time ago). should i pay off my mortgage or invest the money from sale of an old house,to play with inflation rate? hoping that someday rate of return of other investments will be higher than fixed mortgage rate? the problem is that i did not see any "safe" investments,where i can park my money and get a decent return. on other hand i can't dismiss Japanese type of scenario,where rates can stay @ zero for next decade,while property value go down. i have no intention to speculate on this property,bought to live in it. have no problem to pay off mortgage in full,never had any debt and hate to pay interest on any loan... Appreciate any suggestions! Thank you!
Well, normally it's not a bad thing to hedge your bets like this. However, with a mortgage I think folks should either own it all outright or have a mortgage with just above 15% (or whatever the cutoff is for PMI insurance). I am not an expert but tell me if this makes sense: The reason is, if you can't make payments at some point, they take your house. This is whether or not you own 20% or 90% -- they just take it. At least, that is my understanding. It's not like they cut you a check for the portion that you own. If you owned 90% and fell on hard times and couldn't make payments, that would really suck.
the tax deduction from your mortgage and the liquidity of having the cash/investments is something I wouldn't let go of in your situation.
well, they don't "take it". They kick you out, sell it, and if there's any cash left from the sale after they pay off your debt, you get it back.
There isn't a right or wrong answer here. But as someone who has been there, done that and now entering retirement, I can't tell you how crucial being debt free in my younger years has been to my financial well being and success. And when I say debt free, I mean just that - no mortgage, car payments, credit cards, etc. Good luck.
As was said, they auction it off, pay the 1st mortgage. If there's anything left, they pay the 2nd and subsequent leins. If there is money left after that, yes they actually do send you a check. But remember, the lender doesn't give a fig if you get anything once they have to foreclose. They aren't *stealing* your house, they are just preventing you from stealing the money they loaned you. If you had 90% equity, there would be someone out there that would be happy to cash you out. The refi market is not dead, it's just not retarded anymore.
I stand corrected. However, what incentive do the banks have to pay you off after they've paid each other off? I guess the auction could really result in 100% of the theoretical value of the house but it seems like it would be "dumped" ASAP. And who would refi you if you don't have an income, for example?