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I've never read any of Dave Ramsey's books in entirety, so I was hoping someone could answer this question for me. It seems like he offers some really sound advice, but I'm having a hard time understanding why it would be financially beneficial for you to pay off your mortgage early.
For example, if you have a low interest rate in the 5-6% range, plus get tax advantages for holding a mortgage, why wouldn't you invest the extra money in something such as mutual funds or a stock portfolio that could conservatively average 9-10% year??
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My husband listen to him everyday and argues with me about this. I don't have an answer for you but I don't think it is a good idea to payoff your mortgage early.
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He's about being completely debt free. Once you pay off your bills you can put ALL that money towards investing/saving.
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Originally Posted by stacia
He's about being completely debt free. Once you pay off your bills you can put ALL that money towards investing/saving.
Aren't you missing out on quite a bit of compounding interest time by waiting to invest until your mortgage is paid off?
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Ramsey rejects arguments about keeping your mortgage for the tax deduction or the low interest rate, opting instead for the guaranteed return and risk reduction that come with paying off a mortgage early.
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Originally Posted by Bekki
Ramsey rejects arguments about keeping your mortgage for the tax deduction or the low interest rate, opting instead for the guaranteed return and risk reduction that come with paying off a mortgage early.
Interesting...I wonder if it still applies if you have enough net worth to pay off your mortgage in full should something unforseen come up?
It seems a little too conservative for my tastes...especially since interest rates are so low. My fixed rate from 5 years ago is 5.25%. Even extremely conservative investing will most likely net you a return of 6-8%. My CD earns me 5.5% and that is no risk. I could see where this would be applicable in the 80's when interest rates were 10-17%, or more, but I wonder if it is really relevant now...
Interesting take on things though.
Thanks for the info!
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I think that his point is more that ANYTIME you are paying someone else interest you are losing money. He also doesn't say don't save for retirement while paying extra on house. He says that once you have paid off ALL other debt besides house, that the average home of $40K should be able to this - pay max to retirement and extra on house.
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Well, I haven't read Dave Ramseys books (I think I'd like to though) but our mortgage is paid off. My DH put a huge downpayment on it right before we got married and when we got married, all my paychecks went to groceries and my CC debt (which was huge - $7800). His checks went to the utilities and mortgage payments. This is the way he wanted to do it until both things were paid off. Granted our house wasn't that expensive but it was paid off in a few years. Just the way DH wanted it to be -- now ALL of our extra money goes into savings, money market account, CD's, his IRA (mine is at work) or the kids savings accounts. There is no question and no extra payment -- I like it that way.
And, once our truck is paid off we will be debt free!!! (until my Jeep dies )
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I am working very hard to pay off our mortgage. I agree with what the other ladies said pro-dave. I also think it is part of a lifestyle. To be completely debt-free. To not owe anyone any money. I hate the idea of paying interest to the mortgage company...regardless of the tax break.
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I am in the midst of reading his book Total Money Makeover and so far I have enjoyed his straight foward approach in his book. I am looking forward to using is snowball method of paying off debt. Haven't got to the pay off mortgage chapter in the book but I will let you know.