Rice Dellman
Rice Dellman has 11 reasons why you should have a mortgage.
Dave Ramsey
Dave Ramsey has an opposing view. He says pay off your mortgage as soon as possible.
With the 2017 tax changes, deductible mortgage interest may not be as much as it used to be.
The direct math is pretty simple. Let’s say you have a $200K mortgage at 3% mortgage and you have enough money in the bank to pay it off earning 1% interest. Clearly, from the pure numbers, paying it off makes more sense. You are paying out more than you take in, so why not get rid of that negative flow.
But, what if you could put some of the money in stocks and get an average return of 4% or more? Then, it would be better to have the mortgage. But, of course that investment would have some risk.
I think a big one is Rice’s #10, ‘Mortgages give you greater liquidity and flexibility.’
Consider the scenario where you lose your job. If you have no mortgage and limited savings because you put most of your money in the house. You are not going to be able to get a new mortgage to access the value stored in your house. Now you may not be able to pay your bills and need to sell the house. If you went the other route and took out a mortgage and left a big chunk of money in the bank, you can ride out the hard times with your savings.
There is an old saying, ‘would you rather die with $1,000,000 or owing $1,000,000. Maybe we need a third choice of dying with $0 cash and $0 debts. Since you can’t take it with you, what good does a paid off house do for you when the end comes? Wouldn’t you rather have used that money to live more comfortably. Leaving an inheritance comes in to play here and that will depend on individual circumstances. Leaving an investment account would be much easier for heirs than leaving a house. If your house is paid off, then your heirs may end up selling it anyway. If you have a mortgage, this would not be a burden on your heirs as they can sell the house to pay off the mortgage. In our example, having the mortgage gave you the opportunity to have more money invested. That money could go to your heirs.