A Follow-up From AFM Reader, Toni

It’s always nice to get emails like this:

Hello JLP,

I wrote to you well over a year ago (almost two years ago!) asking for advise. I wanted to know if I should pay off the house or sock away for retirement, as I was starting late in life. Dave Ramsey rocked my world and because of the advise I received from your readers I paid off the house in mid January 2010. I am happy to report that I feel very secure because of this. Thank you so much.


Carpe diem

Here is the post she is referring to: What Do You Think of This Reader’s Plan?

It’s nice to know that this blog and its readers helped someone.

8 thoughts on “A Follow-up From AFM Reader, Toni”

  1. i never understood why people feel secure paying off their house early. you are then house wealthy but not very liquid. if the current econ situation teaches us anything, being house rich isn’t a good retirement plan. anyways, congrats on paying off your home. i’m starting a new 30 year fixed mortgage and i hope i never pay it off before retirement. so long as i have a certain percentage of my overall portfolio in house equity, i’m fine with that, but I don’t believe i ever want to be in a situation where i am 100% equity in a home over weighted against other assets.

  2. JLP, I’m aware of people’s reasons for paying off a mortgage early. However, I believe people forget to offset the cost of tapping into the equity in the house vice having the cash liquid. I think these times are definitely new and we have to rethink just about everything. Also, interest rates have no where to go except up from here. People ought to consider just how much tapping home equity will cost in the future, let alone now (that is, if you can even get home equity line). If you sell, then you have to buy a new place or rent. If you buy, then you are either in the mortgage game again or you have tied up x% of your equity. If renting, then you revert back into the reason why you bought instead of rented. let’s also not forget in general home appreciation has been relatively flat, and in many cases barely keeping up with inflation or not, and this is before the bust.

    I also revert back to home equity should be a percentage of your entire portfolio allocation, just like any other asset.

  3. Let’s not forget that a house represents real wealth in a way that cash does not. I’m with you, Toni! Congratulations!

  4. “Let’s not forget that a house represents real wealth in a way that cash does not.”

    ??? I can’t eat the house if I’m hungry or wear it if I’m naked. It won’t get me to and from my job or mend a broken leg or transport me to another state to visit a dying relative.

  5. Perhaps Chaz was thinking that a house’s value would increase w/inflation whereas cash wouldn’t.

  6. Congratulation Toni on sticking to you plan to pay off your house.

    Toni, I’m curious, would you mind telling us what you are now doing with the extra money? Are you putting it all towards retirement?

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