Isn't it interesting that a sophisticated investor such as yourself doesn't feel they can make a reasonable return with 5% money
no, it is instead the case that the value of my house is small compared to my portfolio. i don't have all my money in stocks anyway, because i believe in some degree of asset allocation and the most basic allocation decision is the split between fixed income and equities.
since i don't have all my funds in equities, it follows that i have a fixed income allocation. if one is allocating to fixed income, obviously one of the first steps is to pay off any debt, such as a mortgage, since mortgage debt will obviously have a higher yield than a like govt bond.
this is what is known in the business as a "no-brainer."
in a state like Texas, with fairly conservative homestead laws, there is another benefit to owning your home outright--it is protected to a large degree from legal confiscation, as long as one pays one's taxes. this is probably more important to people in categories that have a high likelihood of being sued. like doctors. i know a few who have bought extremely expensive houses and put all their cash into it, then they scrimp on or skip medical malpractice insurance. i believe this is done in Florida as well, and is called "going naked" or something like that.
and oh, that quaint thing--"peace of mind"--that's priceless.
but, most simply, paying off one's home as part of a fixed income allocation strategy is something that makes sense imo. there aren't too many other good deals in fixed income.
What you don't say is what drives you to live in a fully paid off house. You are risk averse.
you should look at a person's portfolio before making a blanket statement like that. i don't think i could have had the returns i have had if i'd been risk averse. i find it very curious that you consider paying off one's house risk averse. |
