"If you paid your mortgage off, it means you did not manage your funds efficiently"

[jeffrey]

As they happily watch their houses swell in value, Americans are changing their attitudes toward mortgage debt. Increasingly, a home is no longer a nest egg whose equity should never be touched, but a seemingly magical ATM enabling the owner to live it up or just live.

Homeowners took $59 billion in cash out of their houses in the second quarter, double the amount in the 2004 quarter and 16 times the average rate of the mid-1990s, according to data released this month by mortgage giant Freddie Mac.

People are cashing out so quickly that the term "homeowner" may soon be inaccurate. Fifty years ago, Americans owned, on average, three-quarters of their house and the lender owned the rest. These days, it's approaching an even split.

Home Equity at Risk - Los Angeles Times

[scfr]

Thanks for the flashback.

It's a nice reminder that the so-called "conventional wisdom" that some people thought was smart can look so foolish a mere 2 years & 3 months later.

[Sporkman]

Bad news for homeowners. However, I can't also help but observe that the availability of low-cost housing (even if in the form of a depressed real estate market) isn't an entirely bad thing either.

[Aleta]

I can remember that in the year 2000 that I had had an advisor that tried to get us to get a loan on the house to invest in the stock market and it just didn't sit right with me. Of course, that was when people were buying the dot.coms. I had one advisor once say that if you have to borrow to invest, you shouldn't be investing. I don't mind telling you how relieved I was with that decision, while my husband at the time thought it was the way everyone was making money.

People who bought some years ago or bougjt a property that was undervalued is not hurting so much today. Althogh the problem is if they tried to sell, it might just take a while and probably won't see their expected gains.

Before I get any backlash from investors, I' m not talking about investing in rental or commercial properties. I'm speaking of those who invest in the stock market by using their equity in their homes.

[Caoineag]

Hmm...seems like I have heard this thought even on the saving advice forum. If you pay off the mortgage, you are an idiot because you could have invested the difference instead.

[sweeps]

Originally Posted by Caoineag

Hmm...seems like I have heard this thought even on the saving advice forum. If you pay off the mortgage, you are an idiot because you could have invested the difference instead.

No one's an idiot for paying off his mortgage. There are much worse things someone could be doing with his money.

But for someone with a long investment horizon looking to maximize his net worth, he'll likely do far better investing in stocks than prepaying a low, fixed rate mortgage. That advice hasn't changed.

[PauletteGoddard]

The entirety of the article is worth reading for some good laughs.

The man who supplied the quote used in the subject header, David Lereah, is out of a job. I bet the debt-free senior citizen Bill Brockmann, if he's alive today, is still in his fully-paid for house.

The U.S. state of focus in the article is scorching hot on a heat map of misery.

[Broken Arrow]

Originally Posted by sweeps

No one's an idiot for paying off his mortgage. There are much worse things someone could be doing with his money.

But for someone with a long investment horizon looking to maximize his net worth, he'll likely do far better investing in stocks than prepaying a low, fixed rate mortgage. That advice hasn't changed.

I second this.