don't own your own home! ???

[Paul Wheaton]

So I met this woman that is a successful real estate person. She sounds really savvy in all sorts of finance stuff. Way over my head.

She tells me something I've never heard before that is kinda spooky. She says that people should always carry a big mortgage on their home. Otherwise, somebody will sue you and take it all. If you have a big mortgage, you don't own anything worth suing you for - so the jerks leave you alone.

She seems to know of lots of folks where this has happened. And she herself keeps a mortgage.

Does this sound like truth to anybody else?

[midkiffsjoy]

Sounds like a loon to me!!! Where do you live that everyone is THAT sue happy??? Personally sounds like she's two paychecks from living on the street. Hand to mouth. shake head.

[LisaInN.Idaho]

Doesn't filing a homestead exemption prevent that?

[Helena]

I don't know about the sueing bit but..my sister and brother-in-law have always kept a large mortgage on their suburban home. They re-mortgage to buy a car, update the house and even their daughter's wedding. They figure in another few years they will retire ..sell the house at a huge profit...and move into a smaller home or adult community. They can now sell their house for way over their $125,000 mortage..(gasp!!) ...and they figure they have done without nothing over these many years as we have done without it seems. Sometimes it sounds like a good idea but we have always thought if the bottom falls out of this economy or you lose your job..what then ?? But even when my brother-in-law did lose his job for over a year their "financial advisor" had him re-mortgage and buy a new car ! Go figure. Perhaps we just don't think like the "modern" man does today. When my husband was hurt and out of work for over a year at least I could manage the bills and the mortgage with my very part time job. Didn't worry too much over $$$..just really watched what we spent and came through OK. Sometimes as I'm patching up the old car with 220,000 miles on it my sister's way of thinking seems better than mine. I just don't know sometimes ?? (wouldn't your homeowners or car insurance protect you to an extent with someone sueing you ??)

[chamoisee]

Uhhh...north Idaho isn't all that sue happy, from what I've seen. Either this lady is from southern California or....people have reason to want to sue her? I would wonder just why she she perceives being sued as such a prominent possibility?

I think the whole thing is kind of strange and demented...you could just as easily have the land in a trust for your kids or grandkids or tied up otherwise so it'd be safe, without risking losing your home- where you live, for godssake- to a mortgage company if you should happen to lose your job or have medical problems, etc....

[bare]

I think I know that gal! Scumbag real-estate person! Matter of fact, she gets sued all the time.

[bare]

While I don't subscribe to it, there can be some seriously good tax advantages in keeping a mortgage, since for the moment, mortgage taxes are deductable.

For folks involved in frequent real estate deals too, there may be good reason to avoid out right ownership. Much of the real estate market involves "trading paper", using one or more holdings to leverage other deals.

Heck, I don't own my 110 acres either, but I do own my home. All I'm sayin' is there is more than one way to skin a cat.

[clovis]

She sounds like a moron and lives in a fantasy world.

Cash and paid for homes will always be the king of the market.

If I had the cash, I would get a speeding ticket on the way to the bank paying my place off.
clove

[Jenn]

I have a bit of money; not in a home bec we move so much, and also bec we hope to live better in retirement than SS would provide. It's because of that that I paid out $14,000 in '02 for 'tail' (for all suits originating from the year I worked FL) malpractice coverage (hope that insur. co. hasn't folded yet). DB said don't waste my money- and now 4 years out (no lawsuits) guess he was correct- but I couldn't gamble with DH and my retirement savings which would've been drained probably just to punish me for not carrying malpractice coverage. And I make sure I stay covered for any professional liability. Won't go naked unless I'm broke.

We also carry umbrella insurance in case someone decides we're rich and asks for more than our regular car or renter's insurance if something occurs. Some do argue that carrying insurance makes you a magnet for lawsuits but I figure having anything they can take away from you in court could do the same. Rather have them aim at the insur co. first.

Re carrying a maximal mortgage: when we last sold a house we lost some money on the sale and I do believe if we hadn't paid down the mortgage a bit we might not have, or not lost as much. I don't know if it's true or not but the buyer can find out usually how much you owe on it and I expect the realtors would feel unable to tell us- had I not paid anything extra off- 'bring $10,000 check to the closing' instead of the $1000 or so we had to spend to sell the house. As we can get a VA 0% down loan this is especially so. Next home I own I'll probably consider that belief of mine in the equation of whether or not to pay it down more quickly and won't happily pay it down unless we are pretty sure we won't be selling it anytime soon. And might get a big 2d mortgage right before we DO sell it if much equity in it!

[Jenn]

Originally Posted by bare

While I don't subscribe to it, there can be some seriously good tax advantages in keeping a mortgage, since for the moment, mortgage taxes are deductable.

Just remember spending $1000 in mortage interest to save $200 or $300 in taxes leaves you $700-800 down! I will be in the situ soon that mortgage interest probably means I can profitably itemize on 1040 formA instead of not but not a situation I envy esp with such a high standard deductible.

[legacy]

Assuming someone is thinking of suing you, they (their lawyer) is going to determine if you are worth suing, and they'll find out, too. So if you have a million bucks free and clear (in real estate, an umbrella insurance policy...whatever) they are gonna come after it.

Having said that, I think it's pretty paranoid and silly to not pay off your mortage or have appropriate insurance, for example, just because there's a possibility someone could sue you sooner or later. In that case, you really wouldn't want to own much of anything, would you?

To me, being debt free (mortage-free being a big step to getting there) brings enormous piece of mind--well worth the small if not tiny possibility I could have it all sued out from under me. Besides, there's nothing to say that someone who wins a suit against you can't have your wages garnished for the rest of your life.

There can be good reasons for carrying a mortage but I don't consider her reasoning to be one of them.

[culpeper]

The woman is NUTS. Having a mortgage means paying lots of interest. Paying off your mortgage faster reduces the interest you pay, and removes that axe that hangs over your head! She knows nothing about finances - but she sure knows how to convince gullible people to take out another mortgage and buy more property through her, so she gets her commission!!

[gilberte]

Radio financial guru Bruce Williams was always an advocate of carrying a mortgage on any equity in a home. His reasoning was why not pay 6-8% interest on a mortgage when you can make 10% interest in investing that money. The stock market was doing well at the time, don't know if he is still touting that advice or not as I haven't listened to him in a while.

Me, I just feel better having a home that's all paid for (except for the rent I pay to the town in taxes).

[bare]

It's obvious that advice for one person isn't going to fit for someone else, but as I mentioned, there can be very good reasons not to pay off a mortgage. The only way you'll know is to check out the possibilities with a good financial advisor.

[dmckean44]

Originally Posted by gilberte

Radio financial guru Bruce Williams was always an advocate of carrying a mortgage on any equity in a home. His reasoning was why not pay 6-8% interest on a mortgage when you can make 10% interest in investing that money. The stock market was doing well at the time, don't know if he is still touting that advice or not as I haven't listened to him in a while.

Me, I just feel better having a home that's all paid for (except for the rent I pay to the town in taxes).

When the econmy is good, that's completely true but it's also gambling with your home.

[bare]

Originally Posted by dmckean44

When the econmy is good, that's completely true but it's also gambling with your home.

Not necessarily, they may just opt to use the appreciation the property has accrued since they initially purchased it.

[greenboy]

I own my home, is not a huge house with acrage, is just a "row home" old and small, with a stamp side back yard, even when my relatives "own" huge homes in Florida and they even make fun of my house, they have the independence of traveling and try different things, they can't take a trip outside of Florida, we are no rich and our weather is uggly 50% of the time, but if I want to get my car right now and take my dear wife to eat in a restaurant I can do that, and not to worry. They can't do this, even when they invite you for dinner, ( and I never point this out) the "dinner' is always at home and they abundance does not exist on the table. I don't know but no mortgage is always better, I think economically we are doing good right now. But the future is not as good as you think. Greenboy from Pennsylvania.

[astrocow]

I went to a few banks for a loan and was declined. Apparantly the "F" word is a bad word to banks. I'm referring to the word "farm". So I bought acreage with my $11,000 in savings and we lived and froze in a 19 foot trailer. We both work and in our spare time and with our paychecks have done everything our selves. A little at a time as we could afford it. Cleared land for a driveway, cleared for a spot to put the house etc. We built a house, a workshop and did some fencing. As soon as our house had a roof and 4 walls we moved in. We began in 1999 and this year we got the last of the important stuff done.....plumbing.
My husbands parents live in a mobile home that the bank owns and the guy hates my guts, litteraly, because we didn't take the route he did. We think he's jealous. He's in his 60's and can't honestly say he owns anything. All we have left to do now is put up 8 more sheets of drywall, mud and tape and put up kitchen cupboards.
We will be putting up this place for sale and whats left after paying sales commission is in the clear for us to buy somewhere else.
Neither of us by the way are skilled in any of the trades needed in home building. The internet and books are the way to go most of the time.

[orangehen]

A "successful" real estate person? What's her idea of success - that you always have to be afraid of getting sued? I'm afraid she's bought the package that banks and "financial advisors" are always trying to sell; "Keep your home mortgaged to the hilt and invest any extra money elsewhere (the stock market)." Doesn't that sound like they want you to give your money to everyone ELSE to "manage" for you? And then, whatever you "have" is only on paper - no liquidity, no cash in hand, just paper that won't do you any good if property values or stocks go down. "Just keep giving your money to us, folks, we gotta keep it circulating!!" Doesn't that sound kinda irresponsible?

I subscribe to Acres USA, which always gives a pretty good idea of what's going on in the financial, as well as the farming world. Their underlying philosophy is STAY OUT OF DEBT, and heal the earth.

Some of the articles I've read lately in various magazines hint that the real estate market may bottom out in a year or two. California did, a few years ago, when some properties were worth much less than the mortgages that were due on them. My broker remembers the eighties, when seemingly overnight, land that had sold for $3,000 an acre (here in Illinois) was then only worth about $300 an acre, and some interest rates were 18%. Not a good feeling!

I think people on this forum have the right idea - get out of debt and take care of what you have. People like that real estate person seem to belong to the "gimme, gimme, gimme more" mindset. That's not my idea of success.

[bergere]

[QUOTE=astrocow]I went to a few banks for a loan and was declined. Apparantly the "F" word is a bad word to banks. I'm referring to the word "farm". So I bought acreage with my $11,000 in savings and we lived and froze in a 19 foot trailer. QUOTE]


Ya, I was suprised by that. When we bought this place the Oct before last, it has enough acreage on it the bank was having a cow,and if we said we where going to "Farm" it, we wouldn't of gotten the loan! Now how brain dead is that. Sheesh..
So we had to do some talking and said we just wanted a Buffer from other people. Which is also true.
We are slowly getting up to speed with the Fruit trees and all that. We are going to Farm of sort's but at our age it will be just for ourselves.
Find it sad that banks do not want to issue loans to people that want to farm, even when you have a plan spread sheet.

Wish we could of not had a mortage. But we couldn't afford any land around here now if we didn't. Hubby has a hours drive into work, which is much better drive time than at the old Farm up north.
No way could we afford even a nickled sized amount of land closer to his work.

As for that Realestate lady... she more than likely says that, so she can make more sales and get people to believe buying more than they really can afford is better. That way she gets a bigger profit. Pretty slimmy in my books.