Tuesday, February 4, 2014
To Debt or Not to Debt?
My very wise uncle, is a firm believer (and promoter) that if they’ll loan it to you, borrow! Especially, if they’re loaning it for less than you’ll make on it. I should note that he is not a professional money guy, he’s a lawyer, so we take everything he says with a grain of salt.
That being said, I agree.
But then I hear some money guy (it always seems to be a guy) on the radio telling the world: Pay off your debt now! Pay off your house now! Live debt free! And it reignites a yearly discussion between me and my husband. Which of course is a good thing. Just because we’ve done something for years, doesn’t mean that it’s still the right decision…So we discuss.
Should we pay off our mortgage early?
The answer was “no” when we bought our house and it’s been “no” every year since. We pay a little extra every month, but we don’t have any plans on paying it off early. Our answer is based on our circumstances: we bought a small fixer upper in a good enough neighborhood, close to the bottom of the market, for a low price and locked in a low interest rate.
When we bought the house, we decided to get a 30-year fixed loan rather than the fashionable 15-year with a lower interest rate because we wanted to lock in the rate for as long as possible, because you just never know what the future holds and we can always pay off the 30-year sooner, but we can’t extend a 15-year.
In addition, we plan on buying another house during the next recession and we can’t do that if our money is tied up in our first house.
At the end of the day, everyone’s circumstances are different. It’s up to each of us to determine what’s best for ourselves. And I’ve found that the best way to figure something out is a good old-fashioned conversation over a massive cup of tea.
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