Didn't hear anything like that - sorry.

Sounds somewhat like CBC Radio - and I'm a CBC radio addict (when not on internet). Actually - those activities can go hand-in-hand.

I'm not very conversant with so-called status symbols, as I'm fairly sure that you've gathered.

I'd prefer to have the home all mine - than have a BMW ...

... can any of you who ha ha have come to know me well envision me in a BMW - unless it were at least 10 years old? [looks like perverse keyboard problems, again].

I'd prefer not to use equity in the home to borrow to buy a plain car, let alone a BMW - that type of asset's value deteriorates too rapidly.

I might use it as collateral to buy equities, e.g. stocks or mutual funds, where I had the possibility of some growth, over time, and perhaps some ongoing income to help pay the interest on the loan, especially if the latter were tax advantaged, and the interest on the loan deductible - which it is, for me.

But I don't have the home.

I do own stocks and mutual funds that I can use in similar capacity, if I so choose.

And I have a (stock/mutual fund backed) LOC ...

... which has been unused for a time, as I figure that our markets have been going up too long, with minimal correction, and due for a substantial correction.

I prefer to borrow to buy equities when the markets are low ... then pay off the loans when the markets are higher.

Trouble is - when's low?

When's high?

Maybe I'll have more info by morning - the investment group meets tonight ...

... frugal me's about to call a member to see if he'd like a ride. The guy, for those who heard me refer to it elsewhere, who retired last year with no pension, who borrows at 6% and tries to invest at about 12% ... you can see why I want to pick his brains!

When we go around the group asking, "What did you buy ... what sell ... this month?" ... my usual answer is, "No buy - no sell".

Hope you're all enjoying your week - even if you're on a cruise (do the ships carry internet-capable computers? - oh, yes ... I understand, now: cruisers are too busy!).

ole joyful

Sounds like Dave Ramsey. I hear the phrase almost every day when I listen to him but I can't repeat it back word for word. Doh!

Here is a link that might be useful: Dave Ramsey

Oh no!

I've paid ours off for our anniversary (DH will find out 3/24). He is so contrarian and fiercely anti-status, if he starts hearing this kind of thing, I swear he will take out another mortgage!

Shhh.

I second Dave Ramsey.

Yep. Dave Ramsey. Good sound advice to be had by listening to him. His mantra is to pay off all debt, have good cash reserves, save for retirement, save for kids' college, and eventually pay off the house and invest freely to build wealth. This is a very simplistic summary, but his plan is pretty simplistic. That's why it works for so many folks -- fewer options to trip you up.

Interesting....ours has been paid for awhile....we're not into status symbols but we do seem to often be ahead of the curve on some things. I'm into that simplistic approach - even though all kinds of people say you shouldn't have your mortgage paid off.

The O.P. spoke of hearing the message on Windsor station. I don't think that Dave Ramsey is heard on Cdn. radio - but Windsor is a law unto itself.

For Canadians, interest on mortg. not deductible (we have no tax on capital gain on owner-occupied home).

But when mortg. paid off, may choose to re-mortg., use loan to invest in quality stocks, making int. deductible for Canadians.

Have you read elsewhere my thread on how to borrow to invest in quality (high div.) stocks at almost no cost?

Borrow at 6%, deductible reduces cost to 4.5%, div. about 3%, low tax cost, reduces cost to about 2%, gain 2% due to inflation. Net cost - approx. 0%.

Have a good week - what's left of it.

Smile at everyone you meet, today ... they'll figure that you're up to something!

ole joyful

I wasn't implying that status symbols are important. In fact, I feel just the opposite. Thanks for the Dave Ramsey tip. I'll have to look him up.

I have two concerns with the anti-early-payoof, pro-leverage camp. Aside from the risk and tenative returns in alternative investments. And BTW, I do agree that retirement savings and emergency funds are critical financial bases to cover. That said,

First, when and how exactly will these highly leveraged folk ever end up clear of a mortgage? Someday they will have "enough" to drop several hundred thousand or more into a home? Or they will contentedly "downsize" to plainer and smaller digs? I can't quite see either happening. On a psychological or a practical level.

Second, it troubles me that owning a home outright is no longer a primary life goal. Seems like people are content to own part, then take the equity and run to bigger and better. And that reinforces the trends toward a more transient, consuming and disposable culture.

I miss the 50's, sigh.

Hey celticmoon, I'm not really anti-early payoff, more pro leverage, but I doubt I will ever pay off my own home mortgage. nor do I plan to downsize, well maybe in my eigthies, but I'm not there yet. LOL But no mortgage is not a primary life goal, that is my point. I am happy to own part, but I also have no plans to take the equity and run to bigger and better. I don't know what that makes me?? A consumer, yes that I am.

I think I agree with cmarlin, although I'm not against paying off the mortgage if it is feasible given your overall financial situation. However, if you own your house outright but are broke, what's the point?

--First, when and how exactly will these highly leveraged folk ever end up clear of a mortgage? Someday they will have "enough" to drop several hundred thousand or more into a home?--

If you do it right, yes, that's exactly the idea. By "right", I mean taking that extra $100/month (or $500 or whatever) that you could be using to pay extra on your mortgage and investing it. At some point, you will have grown your wealth such that it is greater than your mortgage and you can just plop it down and pay off the house if you want. If (and yes it's a really important if) your investments are making more than the mortgage interest, that point in time will actually come faster than if you put the money directly to your mortgage every month.

obviously, if you just spend the money on fancier cars, it won't work that way. Whether you are putting the money into investments or directly toward the mortgage, you still need the discipline to actually do it.

Definitely Quirk, the discipline is key. Also the investments performing as expected.

But I'm thinking people will meanwhile get kinda attached to that investment ownership too. And it might be hard to then slice off a huge chunk of the portfolio to clear out a mortgage.

Killing off some proverbial geese might not be so easy if you're liking those golden eggs a whole lot.

The result is more contentment with leverage (using debt to grow assets), even as an endless mode. And it becomes normal not to expect or prioritize home ownership, as others have said here.

So nobody else sees that at problematic on a large scale? Geez, I am becoming an old biddy...

Using debt to grow assets pretty much is the American way anymore. Businesses do this all the time, and look at the money they're making. And an economy propped up by people buying ever-bigger ever-more-expensive "stuff" depends heavily on people being comfortable with the idea of being in debt perpetually. The kind of "stepping up" that you mention is key to letting people have the things they want: if you can get used to always having a car payment, then leasing does not look like a bad idea and it lets you drive a much fancier car than you otherwise could afford. If you're willing to take the proceeds from previous house sales and plow them into a new house, you can live in a much larger, (sometimes) fancier house than you otherwise could afford. Doing this, though, gives people a false sense of security -- they think they can fall back to the cheaper car, the smaller house. But they'll find out they have no equity and no money left.

It is problematic that people would rather spend money on things than save the money. Unfortunately, I think it is "the new normal" and only signs of sanity among corporate officers and opinion leaders will change that, I believe.

All I know is that before we refinanced our mortgage from 30 to 15 years, we had enough cash to pay for anything we wanted. For example, we did some remodeling projects (kitchen, room addition) and paid cash, without borrowing the money. But when interest rates went down, we bought into the idea of paying off the house earlier, refinanced to the shorter term, and now feel somewhat house poor.

We are certainly not living the high life! Our cars are small, old, and paid for, we don't buy a lot of fancy clothes or furniture, and we don't take big vacations -- and we wouldn't change any of this if we did have more money (except maybe the vacations). We only use credit cards as a convenience (pay them off every month). We don't want or need a bigger house -- in fact, we would probably be fine in a smaller space, but we couldn't even buy a one-bedroom condo here now for what we paid for our house.

Being highly leveraged probably works fine as long as you have no blips in your income and/or lots of savings to deal with the debt if you do have a blip. Knowing the American savings rate is now less than zero, that probably isn't the case for most people. Having been through a few unexpected periods of unemployment due to illness and downsizings, I was very happy not to have a house payment. Made it much easier to weather that time without any major financial issues - we didn't sacrifice other savings to pay off the house. We have always been pretty conservative in terms of how much of a house payment we were willing to have so paying off was never a financial hardship.

I'm also not savvy enough or risk tolerant enough to invest house payment $ to get a better return. And I'm just not convinced I'd be better off after paying a chunk of $ to someone else to invest my money - that is if I were to find someone I trusted to tell me what to do with it - which hasn't been the case so far.

Celtic - I'm with you - I really like not having that debt.

"But I'm thinking people will meanwhile get kinda attached to that investment ownership too. And it might be hard to then slice off a huge chunk of the portfolio to clear out a mortgage."
That is probably more like me also, my investments for than pay for my mortgage, if I sold an investment to pay off my mortgage, I'd lose the gain on that investment. Actually, though, it wouldn't be a huge chunk of the portfolio, just doesn't figure out right when I put it on paper. I do manage my own investments (with DH), I don't pay anyone else to do that. When using my money for investments for future income I don't view it as spending money on "things", like cars or vacations. But since I own cars and take vacations, maybe others do. Would I own a car and take a vacation if I paid off my house, probably. I really don't think of myself as very risk tolerant, but another person would?? Interesting...

I meant to say my investments more than pay for my mortgage, I shouldn't post when Im tired... and they should have an edit feature.

No worries, cmarlin, what you meant was clear enough.

And what you have going makes perfect sense. The investments are throwing off enough income to cover the mortgage payment, so you have a positive net situation as is. And the mortgage eventually does get paid down. That works.

It is the mortgage scenarios with no future prospect, goal or even intent of ownership that I have trouble getting my head around. Like credit card debt becoming so "normal". Basically, one can have pretty much anything without really ever owning it.

The OP noted home ownership was 'the new BMW' and that captures how unusual (unattainable?) ownership has become. Huge culture shift.

--It is the mortgage scenarios with no future prospect, goal or even intent of ownership that I have trouble getting my head around. Like credit card debt becoming so "normal". Basically, one can have pretty much anything without really ever owning it.--

I definitely see your point. I have a friend who thinks Donald Trump is the bomb. I once pointed out that he's had a bankruptcy or two... her response was something along the lines of that being not such a bad thing in a business situation, actually sort of a kind of business plan. Mind you, this is someone who's very responsible with her own finances and wouldn't dream of cheating someone she owes money to. Somehow she didn't make the connection that when businesses go bankrupt, there are people who are not getting paid. Mr Trump uses other people's money to finance his deals, then doesn't pay them back. ugh. Ok, maybe he didn't plan it, but how can he be a good business man if his investors lose money (and why do people keep investing with him)?

On the other hand, I think there's a big difference between that kind of thing and on the personal scale credit card or other unsecured debt, vs. mortgage or other secured debt. I did have a couple thousand in credit card debt at one point in my life (ironically because I was trying to avoid debt; I underestimated what I would need to survive my last year in college and didn't take out enough on my student loan. ha.) but at this point in my life, it would take a very dire emergency to take that on again. I suppose it was a fairly dire emergency at the time (I needed to eat), but if it hadn't been temporary, I would have found other solutions (cheaper living situation, fewer classes to pay for, etc). Meanwhile, I do have a mortgage and I do pay the minimum while investing about $1000/month in mutual funds. I have about half my outstanding principle saved (not counting retirement accounts). Will I pay it off when I have the full amount? I actually don't know. Partly that will depend on mortgage rates at the time (right now I have an ARM that makes its first adjustment in a couple years). Partly, it will depend on what I'm doing in my life. It would be wonderful to have a paid-off house, on the other hand, it would also be wonderful to have enough money in savings that I could quit my job, go to grad school, travel for a year, etc, if I got the urge. However, regardless of whether or not I keep the mortgage, having debt against an asset, you at least still have a positive (or neutral at worst) net worth. Using a credit card to buy consumables, you end up with just the debt. I don't know. Maybe the average person doesn't make the distinction and the idea that debt (including mortgage) is normal feeds the inclination to run up credit cards, etc.

Excellent point, Quirk.

The average person may not make any distinction between secured and unsecured debt. Pay on the mortgage, pay on the car, pay on the credit card. No difference really.

We are adapting to debt in all forms. Eliminating it is increasingly unthinkable. So given that some debt is now so "normal", why distinguish secured from unsecured?

"We are adapting to debt in all forms. Eliminating it is increasingly unthinkable."

Not everyone is! We know plenty of people with no mortgages and no CC interest payments (and we are among them). It just depends on your priorities I guess.

I DO have a car payment, but since it is 0%, I really don't see that as debt. (I had the cash to pay for it, but with all the incentives and with the 0%, I invested the cash instead....)

western pa - I think people like us are rare. I just bought a new car and I did manage to force myself to borrow the money for three years since they had 0.9% financing. In fact I said to myself - self, you should borrow as much of that money as they're willing to give you as long as you have no problem making the payment. So now I have an $845 car payment which kind of blows my mind but I keep telling myself this is the correct thing to do.

Hi Celticmoon,

First, when and how exactly will these highly leveraged folk ever end up clear of a mortgage?

When their safe investment account grows beyond the mortgage balances, of course.

Someday they will have "enough" to drop several hundred thousand or more into a home?

Theoretically... however, if you're staying safe and liquid, and the mortgage is costing you less than you earn from your assets, why would anyone of sound mine destroy that?

Or they will contentedly "downsize" to plainer and smaller digs? I can't quite see either happening. On a psychological or a practical level.

Right, usually not. No need to.

Second, it troubles me that owning a home outright is no longer a primary life goal.

Oh, you misunderstand the strategic equity outcomes then! Owning a home outright is ABSOLUTELY still the primary outcome... it's simply the fear of leverage that is being grown beyond. Having a side account with more funds than the value of your home means you ahve a zero-net-debt home, no matter what the lien structure is.

Seems like people are content to own part, then take the equity and run to bigger and better. And that reinforces the trends toward a more transient, consuming and disposable culture.

I see validity in your comments here... but you're accidentally confusing this last statement as relevant with the equity management conversation. They aren't related at all. Equity management is a very adult, mature conversation... not an "immediate gratification" childish conversation which you are accurately recognizing in the consumer culture.

I miss the 50's, sigh.

Well... we're stuck in a hopeless war, and I am seeing more and more short-short miniskirts coming back... would you settle for the 60's? ;~)

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner