Comments on: Dave Ramsey’s 7 Baby Steps: Step 6 – Pay Off The Home Early!

By: Joanne K. Morse, Ph.D.

Joanne K. Morse, Ph.D. — Thu, 22 Oct 2009 18:17:29 +0000

Hi Dave,
My church has us preparing for the possibility of a financial collapse. They believe if you can be debt free you will be able to handle whatever happens. Apparently during the depression, those that did well owned their homes and were able to grow some food items.

As a church we are all trying to stock up with 6 months worth of food for ourselves and 6 months worth to give to those who aren’t prepared.

I figure if I can pay off my house I can save the money until needed and I can share my home by offering someone a place to live if needed.

It’s a little scary taking all that money out of retirment acts but in the end I think I will feel safer.

Joanne

By: Waldopepper

Waldopepper — Fri, 20 Mar 2009 13:19:06 +0000

My wife and I bought our first house in June 2002 which was right before the price of houses went up dramatically. We put more than 20% down. We both work in an industry where we are at constant risk of being let go so for peace of mind we more than doubled our house payment which allowed us to pay of our house in December 2007. I read so many articles and blogs about why paying off the house early was not a good idea but I knew that for us it was the right decision. Most of those articles and blogs said that it wasn’t a good idea because you are tying up your money in a house and that it would be better to diversify. Of course, when they say “diversify” they mean to spread your money out in various kinds of mutual funds. Well, had I listened to them my money would be sitting in a mutual fund somewhere right now and would have lost half it’s value. But paying off our mortgage early has allowed us to save cash unbelievably fast and that gives me and my family a peace of mind in this terrible economy. I don’t have to worry about losing my house. I don’t have to worry about losing my job but even if I do we can continue to send our kids to a Christian school. Living without a mortgage is just “right” in so many ways. I don’t want to be perceived as a nut but after maxing out my 401k for years and years and seeing it drop it’s value so rapidly so many times I’m only contributing what my employer matches now. I know there are tax consequences for doing that but it just seems to me that the whole stock market thing is a big scam – they’ll tell you that the market has averaged over 10% growth… really? It sure doesn’t look like it when I get my 401k statements. The bottom line is that the bulk of my money is going in to CDs and some in gold because at least there I know my money isn’t going to vanish. And I know that I never have to worry about taking care of my family. I’m not convinced that I’ll realize a higher rate of return by investing in the stock market and even if I would I wouldn’t trade the peace of mind that I get by having my money in cash. I understand that by making less than 3% on a CD that I’m actually losing money when you take in to consider inflation but if I lost half of my 401k (or mutual funds) from a bad economy would I not be way ahead if that money was in cash? Lastly, and most importantly, I believe that God put it in my heart to pay off our house early and it’s truly been a blessing from Him. He’s been so loving and wonderful to my family (even when I haven’t been very lovable). Thank God for the work of Jesus Christ and the grace he has given us!

By: The Dave Ramsey Plan: Debt Snowballs | Weakonomi¢s

The Dave Ramsey Plan: Debt Snowballs | Weakonomi¢s — Mon, 09 Mar 2009 14:09:13 +0000

[...] 6: Pay Off That Mortgage In the Dave Ramsey plan, debt is your enemy. The final loan you must clear is that mortgage. [...]

By: How to pay off a home mortgage early | Personal Dividends

How to pay off a home mortgage early | Personal Dividends — Wed, 04 Mar 2009 18:10:50 +0000

[...] are for it. Bible Money Matters provides an excellent summary of both sides of the arguments and makes a case for paying off the mortgage early. I suggest you read this article to understand the arguments from the both [...]

By: Ryan Loos

Ryan Loos — Tue, 24 Feb 2009 18:14:38 +0000

I am in favor paying of the home early. Remember that when it comes to personal finance it is not always about the returns on investment but we must let our heart lead us and 9 times out of 10 our heart will lead us to the paying of the home early. As far as not being diversified enough, if you are at this baby step you have 3-6 months of expenses in cash and you are investing 15% of you income in good growth stock mutual funds for investing. As Dave says the best investments are real estate and mutual funds!

By: Kathrn

Kathrn — Tue, 24 Feb 2009 15:18:27 +0000

I am all for paying off the house as soon as you can; as long as its where you want live for a very long time!

We have moved from Florida to CA to Nevada to Texas to Georgia to Indiana; all in the last 10 years because of my husband’s job; and have own/sold our home each time. After many years of doing that, we have finally decided to buy a home – where we want to live and retire – and pay it off.

It will be sooo nice to have that burden lifted from out shoulders; knowing we have a place to live; no matter what happens in this economy.

By: Chris

Chris — Tue, 24 Feb 2009 14:53:42 +0000

I too fall on the side of pay it off ASAP. About the last argument against paying off early, if you are following the Baby Steps, then you are already putting 15% toward your retirement, so by paying off the house you are diversifying your portfolio further (adding real estate to the mix) rather than being un-diversified.

By: Arohan

Arohan — Tue, 24 Feb 2009 03:14:10 +0000

What price do you place on the 'peace of mind' because ultimately that is what it comes down to. Let's say you have a 30 year mortgage and you decide that you can afford to make additional $x payments every month and payoff the mortgage in 20 years, at let's say, 6% rate of interest. Also, let's consider the alternative of investing $x everymonth in a S&P index fund in a separate 'paying of house in 20 years' account and realistically expecting 12% average return over the same period of 20 years. In this scenario, I would recommend to invest these excess dollars and at the end of 20 years, payoff the remaining mortgage using your investments. You will still have money left over in your investments this way as you earned a higher return than the rate of interest you are paying on the mortgage. End result is the same, you paid off your house in the same amount of time either way. You probably had greater peace of mind when you invested as your money was more liquid. Arohans last blog post..Retirement investing options under 401k plans under Senate scrutiny

By: The Happy Rock

The Happy Rock — Mon, 23 Feb 2009 21:06:22 +0000

I think the point is tied to some of the other positives, but cash flow is a major win. Instead of shelling out thousands a month, you are free to direct that money anywhere you want. It is like getting a $20,000 a year raise. You can also consider the tax benefits of mortgage interest too, although often that is a misleading 'disadvantage'. You can get the same write off by giving the money to a charity rather than the bank. I fall completely on the pay it off ASAP side. I want to use my money and my stress/energy for things that serve others and bring me joy. The Happy Rocks last blog post..Screw Saving Money…I Want a Snowblower!

By: Harry Inslee

Harry Inslee — Mon, 23 Feb 2009 20:12:31 +0000

Thanks for these helpful real estate tips. Real estate purchases go all the way back to the time of Genesis. Abraham insisted on paying the full price for the plot of land that would be his wife Sarah’s burial site, even though he could have gotten it for free. The full citation is at bibleconomy-dot-com