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We moved from Chicago to Tennessee, and in a "county" rather than "city." Our property taxes on a 4,000 sq.ft. home are $1,800 a year. We have no mortgage. Tennessee does not have an income tax. Not working, etc. etc.

Those property taxes are amazingly cheap indeed. Mine will be over $10,500 for my 4700 sq ft home in California purchased last year. The taxes is based mostly on purchase value, not size. I'm also still paying about $3,400 in property taxes on my 1150 sq ft townhome until it's sold.

OK. Not paying the mortgage interest is a guaranteed 6% return (or whatever the rate is), and it's safer than any corporate or muni bond these days. But for some the leverage is good, so everybody makes their own decision.

It would be 4.375%. Marginal tax rate about 35% combined, so really only 2.84% guaranteed after-tax return since I would be itemizing regardless of having a mortgage.

There is also the fact that I don't like to have all my eggs in one basket. We already put $165k for the downpayment, and I made over $100k of improvements, the majority of them for energy efficiency which will return money like zoned HVAC and solar.

Property values do fluctuate widely though, as we know, so putting a lot of cash into equity is not always a smart thing. You would have to bet that the equity goes up more in value than other investments you could put your cash into. Also, in the case of California, the home can be in a big earthquake which is a risk we can't afford to insure, and most Californians can't either. In that situation, depending on the cost to repair/rebuild, having too much equity in the home is not necessarily a good thing, as walking away from the mortgage might actually make more sense. If the home was a total loss in an earthquake today, the cost to rebuild would be $1.3M. Even with $270k into it already, I would walk away from the $660k mortgage.

I choose to put all the extra cash into IRAs/401k . Cash in these accounts is also conveniently shielded from creditors, so if there is a mortgage default, medical bankruptcy, or other adverse event, I would still get to keep that money. And the return in those accounts is likely to be above 2.84%.
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