Does it make sense to pay off the house?
estreya
16 years ago
Featured Answer
Sort by:Oldest
Comments (10)
kkny
16 years agoRelated Discussions
Does being my own general make sense?
Comments (14)With respect to background, it sounds to me as if you're about as prepared to be your own GC as anyone. I know there are folks on this forum who will insist that you should "let the professionals do it" but... As far as I know, there are no colleges or trade schools that teach how to be a general contractor. Nor do I know of any formal apprenticeship programs anywhere although there may be a few somewhere. Many states don't require that GCs even be licensed. Some require a license but getting one is a matter of sending in a form with your name and address, a signed avowal that you don't have any felony convictions, and a small licensing fee. That means pretty much every "professional GC" out there learned on the job. Many of them started out as laborers in a particular branch of construction, decided they could run a business in that branch for themselves so started up their own painting/framing/roofing/foundation/whathaveyou business, and from there branched out to general contracting. Basically the GC's job is to keep the work flowing along, he pull permits, secures insurance, schedules inspections, hire subcontractors (and, IMHO, SHOULD make sure the subs work is done correctly), order materials and make sure they're on site when needed, handles the cash flow, and keeps records. If you need financing for your build however, you will need to find out if your bank will work with an owner-builder. Many won't. A few will. If your bank won't work with an owner-builder, find out what you must do, if anything, to get licensed as a builder in your state. Then set up a "building company" and contract with your own building company to do your build. As for whether it is a good idea to be your own GC... ARE YOU AN ORGANIZED PERSON? Can you keep up with names, addresses, sales slips, bids, contracts, warrantys, timelines, material's lists, etc. Do you know how to make and use spreadsheets? Are you willing to spend time learning everything you can about housebuilding? Are you willing to spend time checking references of potential subs? Are you willing to spend time everyday at your site checking the work of subcontractors and keeping up with use of materials so stuff doesn't "walk off" - at least without you knowing it? Will your real job suffer from neglect while you build? Can you be tough when necessary without getting emotional? Can you deal with people who lie to your face without losing your cool? Have you ever fired anyone? Have you ever run a complex project of any sort? Have you ever supervised a dozen people all at once? If you can answer yes to the above questions, I'd say go for it. It sounds as if you have a support system in place (parents) who can help guide you thru the order in which things need to be done and figuring that out is one of the more intellectually difficult parts of being a GC. Having worked in many phases of construction yourself, you probably know enough to at least be able to tell when most jobs have been done correctly but you might look into hiring a GOOD third party inspector with experience inspecting new builds at various phases. Getting subs is NOT that difficult and my experience when I took over GC-ing my own house after firing my sorry-a55 builder was that subs/suppliers were as willing to give me builder discounts as they had been to give them to my builder. After all, unlike my builder, my credit scores are good and I was willing to actually PAY for materials when they were delivered and pay the subs as soon as the job was completed. And the money I saved stayed in my pocket instead of going into my builder's. I found that the most difficult aspect of getting subs was getting them to actually show up when they said they would. When you're a homeowner building a single house, subs will often put off finishing your job in order to go start a job with someone else. Basically, they want to "lock in" all the work they can and they figure that once they've started your job and have some of your money in their pocket, you have no option but to wait for them to finish the job. The way to handle that is to make sure they never ever have any of your money in their pocket and that your agreement with them gives you the right to rescind the contract without notice to them and hire a replacement if they fail to show up. Email me and I'll send you a list of the terms that I started insisting be into every Sub's contract when I got fed up with being the "lowest priority job."...See MorePaying off the house vs BMW is the new status symbol
Comments (24)--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....See Morelow interest rates: Any reason to pay off home?
Comments (9)Just a heads up (with no political comment intended and please no political comments in response). One of the things proposed in the debt ceiling negotiation are lower rates but with a reduction or maybe elimination of certain deductions including the home mortgage interest deduction. I have no idea whether that shakes out or not, but If it does happen, it would favor paying off home mortgages earlier. Now, regardless of what happens, my opinion is that in general -- and there are always exceptions -- paying extra towards a home mortgage when you can is good fiscal discipline even though when you run the numbers their may be a slight advantage the other way. The only things that probably should come first, other than are higher interest rate debt ( if any) emergency reserves and retirement savings. As others have said, a debt free home is very liberating. It's also an emotional disincentive to overextending by trying to keep up with the jones. It's easy to rationalize moving into something more expensive if you've got a mortgage and moving up will only cost x dollars a month more, it's much harder to go from no mortgage even to a small one. Now this is where exceptions come in especially depending on where you are in life like a growing family that really need more room, but generally I think folks are happier with a mortgage free home, than one that may be slightly nicer/bigger. Kymike does make a good point on flexibility. That's why when we bought a second home, after our primary was paid and the kid was out of college and with 45 percent down, we went with a 30 year mortgage, but ran a second amortization schedule for a ten year payoff. We're ahead of the ten year track slightly, but have the comfort of knowing that if bad times hit we will be okay. This also disciplined us not to over extend inthe first place and will have it paid for 4-5 years prior to retirement. It's also kept us more frugal on other nonessentials but those are sacrifices we can live with....See MoreHome improvements that make sense on an entry level house?
Comments (18)I wanted to do an update. We were wondering if we should do some updates on our home even if we planned to move in a couple of years. We decided to go ahead and make our home more comfortable and pleasant for use to live in. I realize we might not get the money back, but in the mean time we are enjoying our house a lot more. We got a new heatpump and AC a year ago, it cost $4,100. I noticed our electric bills have been lower and the system works very well. We also got the kitchen cabinets refaced, and all new full extention drawers and knobs. That cost about $4,500. We updated our old range and OTR microwave for about $1,000. We had done the countertops, backsplash, sink, faucet, and floor about 5 years ago. In the bathrooms we got granite countertops, undermount sinks, and new faucets, and put frames around both mirrors. That cost $2,000. My husband raised the height of the countertop in the masterbath and built a large drawer with an electric stip in it for my hair dryer and flat iron. I stained the cabinets a deeper color to finish updating the look. We had replaced the floors with heated floor tiles in a travertine looking tile earlier. Lastly, we replaced all the windows (I decovered several of them were mildly fogged). That cost $4,800. We also replaced a couple of ceiling fans. We paid cash for everything and I think we got good value for what we did. I am much happier with my home now....See Moreduluthinbloomz4
16 years agoestreya
16 years agofandlil
16 years agoJonesy
16 years agokkny
16 years agoJonesy
16 years agoLc Jones
6 years agoal_w_lee
5 years ago
Related Stories
VACATION HOMESMake Your Vacation Home Pay Off
Renting your vacation house when you're not using it makes good financial sense. These tips can help
Full StoryHOUZZ TOURSMy Houzz: Family Efforts Pay Off for a 1915 Home
Everyone from the kids to the grandparents helped renovate this Montreal house — and the results show how much they care
Full StoryMOST POPULAR5 Remodels That Make Good Resale Value Sense — and 5 That Don’t
Find out which projects offer the best return on your investment dollars
Full StoryCONTEMPORARY HOMESHouzz Tour: Foresight Pays Off in Atlanta
Seeing the growth potential leads to a couple’s creative live-work space in a newly desirable neighborhood
Full StoryROOM OF THE DAYRoom of the Day: Patience Pays Off in a Midcentury Living-Dining Room
Prioritizing lighting and a bookcase, and then taking time to select furnishings, yields a thoughtfully put-together space
Full StoryHOUZZ TOURSMy Houzz: Treasure Hunting Pays Off in Maryland
Artfully layered accessories and patterns plus an eclectic furniture mix make for intriguing decor with vintage flair
Full StoryHOUZZ TOURSMy Houzz: Patience and Resourcefulness Pay Off in Dallas
Unhurried remodeling lets a growing family stay within budget and get exactly the look they want for their Texas home
Full StoryLIVING ROOMSRoom of the Day: Dark and Daring Pay Off in a Den Redesign
Indigo walls and woodwork, textured furnishings, task lighting and a media center turn a neglected room into a family hangout
Full StoryHOUZZ TOURSMy Houzz: Vision Pays Off in a Vibrant Live-Work Space
A plain box becomes a creative, eclectic home at the hands of hardworking homeowners and their remodeling team
Full StoryVACATION HOMESPatience Pays Off for Owners Renovating Their Beach Condo
A Jersey Shore unit gets a bright new look, a more functional layout and increased space for extended family
Full StorySponsored
Jonesy