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Subject:  Re: Do you have a rational home equity policy? Date:  1/27/2005  4:41 PM
Author:  2gifts Number:  44233 of 97415

The FACT that 95+% of the time through history I would have been better off NOT paying down my mortgage helps me sleep quite well at night.

Then you must not have lived here in MA during the 1990's when the market tanked, people were being laid off left and right and couldn't find new jobs, and real estate prices dropped like a stone. My next door neighbors both got laid off from two different companies in the same week. They had plenty of investments, but those tanked as well, and they had to sell lots of stuff at a loss to pay the mortgage. That only lasted so long til the husband finally had to take a job, any job, and it turned out to be in CA. The wife stayed here with the kids to sell the house, which they finally did at a $100k+ loss, and they just barely squeaked by not having to declare bankruptcy. Here we are 13 years later, and I think they have finally purchased another house out in CA where they still are.

This was not an isolated incident. There were many more folks like this, some of whom I knew personally.

So although your data may be a fact for 95% of instances, I don't happen to be willing to take that 5% risk. What's a 5% risk, you say, since the chances of it happening are so very small? Well, I'll tell you. I happen to have a 13-year-old son who only had a 10% chance of surviving infancy. Someone had to make up that 10%, and I am eternally thankfull he fell into that side of the statistic. Similarly, someone makes up that 5% statistic, and I would prefer it not be me.

Again, I do not need to have a huge pile. I need a sufficient pile with some safety factor. I have that.

You may prefer a much larger pile, and may find that 5% risk to be well within your risk profile. For me, however, that is simply too much chance for me to take with the roof over my head, particularly when I don't need to do it and will not suffer any adverse consequences for it.
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