Mortgages March 26, 2018

Should Your Salt Lake City Home Be Free And Clear?

Should Your Salt Lake City Home Be Free And Clear? Whether you live in Salt Lake City, or anywhere in the  USA the answer I offer is the same. It’s a lesson a mentor of mine taught when I was on staff for a real estate developer and later a retired investor. He, Bill Schoroup, was an interesting fellow. He had a select group of friends, all serious about real estate investing, who he consulted with before he made any major decision. They included an attorney/CPA who had his office next door. This attorney/CPA only developed real estate at the time, small commercial buildings. Others were experts in various segments of the field. Home Free Clear

His advice I pass on to you now: either own your primary residence free and clear or have it maxed out with loans. He shared that with me during a downturn in the market, one not so severe as we have recently gone through. His thesis is that the markets will go up and down, and he was firm on that. He said by owning free and clear his plan was to just stop real estate and do something else. Can you think of anyone who followed this past in the past real estate crunch? I can, actually the person I am thinking of started a business in a different industry. He’s doing quite well at it and won’t return to real estate sales.

Many are taught to own free and clear but how about the other part of his counsel? That of owning your home with a maximum mortgage. This other option is not often preached by others. Kathleen and I saw a need to adjust our situation just before the downturn a few years ago. We moved way down in home value, and at the time paid off hundreds of thousands in debts we incurred from a failed .com we had started. We paid a large down payment on a condo. However, we had not expected the seriousness of the downturn. Our home dropped in value by about 60%. Had we taken the approach Bill taught we would have been in a much different situation. We would have had the cash to make a better home purchase investment as the prices in our area had really crashed.

I add to Bills concepts by saying that there is a wise time to be a renter if you aren’t in your home free and clear. Our same experience illustrates that.

I am going to do a few follow up articles. The subject is on my mind as I am not convinced having our retirement monies in the stock market is a good place to be. What if it also crashes again? Where should our money or investments be. I haven’t been convinced of the wisdom of it being in gold. What would I suggest besides that on our primary residences as additional real estate considerations? I do have opinions from my experiences on options in real estate. Over the years I have had the privilege of working for or with some pretty savvy people.  I hope you are able to return for a couple of additional articles on the subject.

For now, look at your home situation would be my advice. Either own your home free and clear or have it maxed out with mortgages to the limit.

By the way, a great way to be without risk of losing your home for older people is a reverse mortgage. This only requires about half as equity. There are no payments ever and their are minimum things to do to keep your home, such as pay taxes.