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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127809  
Subject: Re: Should I pay cash or get a mortgage? Date: 3/1/2013 7:12 PM
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sykesix:

<<<In case the OP is still reading I wanted to point out that about 30% of homes are owned without a mortgage so there are a number of people that agree with having a paid off mortage.>>>

There's nothing *wrong* with having a paid off mortgage. But the question was what is the best use of funds today? Forget the theoretical investment returns for a minute, and think about what might happen in the next 30 years. There is a pretty good chance that "life" will happen. That can mean illness, divorce, change of lifestyle, unemployment, investment opportunities, retirement....

...if any of those things happen you don't want to have the money in the house. Putting the money in the house is risk, plain and simple. The risk is hard to quantify, but real."

For a small opinion to the contrary, depending upon the state in which you live, equity in the homestead is near sacrosanct, and largely judgment proof.

Texas Proeprty Code 41.001(b) - Encumbrances may be properly fixed on homestead property [ONLY {emphasis added}] for:
(1) purchase money;
(2) taxes on the property;
(3) work and material used in constructing improvements on the property if contracted for in writing as provided by Sections 53.254(a), (b), and (c) [[i.e., home improvement loan];
(4) an owelty of partition imposed against the entirety of the property by a court order or by a written agreement of the parties to the partition, including a debt of one spouse in favor of the other spouse resulting from a division or an award of a family homestead in a divorce proceeding;
(5) the refinance of a lien against a homestead, including a federal tax lien resulting from the tax debt of both spouses, if the homestead is a family homestead, or from the tax debt of the owner;
(6) an extension of credit that meets the requirements of Section 50(a)(6), Article XVI, Texas Constitution [since roughly 1998]; or
(7) a reverse mortgage that meets the requirements of Sections 50(k)-(p), Article XVI, Texas Constitution [since roughly 1998].

Nobody else can get to it (including a bankruptcy court, under current law, IIRC), like judgement creditors (car accident, hospital, etc.). Many of the other assets classes proposed for investment do not come close to offering that sort of protection.

Such protection may also be hard to value, but it is clearly non-zero.

According to Wikipedia, certain other states have homestead protections - see: http://en.wikipedia.org/wiki/Homestead_exemption

Also ignored in the discussion so far (as far I can determine) is whether a person is disciplined enough to actually invest and not raise spending because liquid asset pool appears larger with a a mortgaeg and invest the amount in better returning assets. There has been discussion about whether the other assets are always better returning, but it seems that everyone assumed that the discipline to invest existed (without so much as a second thought).

Perhaps a reasonably assumption for most on these boards, but not necessarily, especially if one spouse posts on the boards and the other, spendy spouse does not.

No real dog in the hunt, but likes to see a full discussion.

Regards, JAFO
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