# Mortgage-free the best way to go?



## joncnca (Jul 12, 2009)

I was speaking to a friend and this raised a discussion between us about his situation . Since this is a finance forum, I can already anticipate the response, but I'll pose the question anyway. 

If one had the opportunity to be mortgage free from their early 30s with a nice 2000 Sq ft town home and small family, would this be preferable to chasing the detached house with 4 in/out parking spots and big back yard? I imagine the savings could go well towards other investments, perhaps even real estate. 

Seems like there is a lot of societal pressure to eventually end up with a big house, especially for those of reasonable earning ability. Vain, surely. But vanity is human, haha


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## My Own Advisor (Sep 24, 2012)

I think most people buy what they want instead of what they need, especially true when it comes to RE.

I know my wife and I live in a great house, it's more of a want than need and we're in $200k mortgage debt because of it. Another 8 years the mortgage should be gone, that will be in our 40s, and we'll have 10 years to save and invest for our financial freedom.

Personally, the sooner I'm debt free the sooner I keep more of my money. I'm not sure everyone except most CMFers see it this way.


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## MoneyGal (Apr 24, 2009)

Option A is preferable for me, for sure; but this is a very personal decision. I have a semi-detached old Toronto home, with a short commute time and a highly walkable neighbourhood. Every single other person I work with commutes a minimum of 3 hours per day in order to get the detached house yadda yadda at an affordable price. That's three hours I can spend ignoring my children!


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## Ihatetaxes (May 5, 2010)

We were mortgage free at 41/40. 2,700 sf home with pool and private backyard on a ravine, value around $875,000. First house I bought in the early 1990's was a 1,600 sf townhouse. Paid $169,000. Ended up hating the tiny back yard and listening to neighbours on both sides. Did not own it long.

So I would say perhaps a larger home without breaking the bank. If you can handle a shorter amortized mortgage so you can have it paid off long before retirement it might be worth it from a lifestyle perspective.


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## Just a Guy (Mar 27, 2012)

I was mortgage/debt free at a fairly early age for several years...I regret it now.

Don't get me wrong, I'd encourage everyone to pay off their mortgage on their principle residence as soon as possible (there's not tax advantage to having one) but after that, I'd get a HELOC and invest the money while deducting the interest. Heck, it might even be wise to start earlier and refinance every once in a while to pay down the primary mortgage.

Investing is what increased my net worth and allowed me financial security at a young age. Living debt free for several years literally cost me millions in the long run...though that had to do with the unpredictable and unexpected huge run up in real estate and the bull market in the stock market. I suppose you can never be sure what will happen, you could have lost money...I still did okay, but had I invested 80% of my house value back then! I'd have done a lot better.

Having built up savings instead of cash flow made life very difficult for my family when I got injured and couldn't work for several years. Being self employed means there are no social safety nets to help out like EI, and savings get eaten up quickly with no replacing funds.

Getting injured is what forced me to turn to investing...luckily, I was pretty good at my choices, and the market was in a boom, but had I started earlier, there may never have been an issue.


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## Homerhomer (Oct 18, 2010)

joncnca said:


> I was speaking to a friend and this raised a discussion between us about his situation . Since this is a finance forum, I can already anticipate the response, but I'll pose the question anyway.
> 
> If one had the opportunity to be mortgage free from their early 30s with a nice 2000 Sq ft town home and small family, would this be preferable to chasing the detached house with 4 in/out parking spots and big back yard? I imagine the savings could go well towards other investments, perhaps even real estate.
> 
> Seems like there is a lot of societal pressure to eventually end up with a big house, especially for those of reasonable earning ability. Vain, surely. But vanity is human, haha


Thank God for choices, the needs are pretty much covered with four walls and a roof, and this for the most part can be achieved even in North Korea, thankfully we in Canada have a freedom to earn lots of money and spend it how we wish and how fast we wish.

What can be achieved by gathering personal opinions of few people?

Oh, and my answer is I choose to live comfortably and am number of years away from being mortgage free at the age of 46. Currently I am able to pay my mortgage down faster but choose to spend it instead. The house I have is bigger than what I need at 2000 but we like where we are, great neighbours, driveway can fit 4 cars easy (that's on top of two garage spaces ;-). I also most likely make less money than most on this forum, and spend less time driving than MG co-workers ;-)


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## joncnca (Jul 12, 2009)

he said the town house is actually quite nice, built only a few years, some nice upgrades. so it doesn't seem like he's really disappointed with his place.

it'd be nice to have 2 indoor garages, and he hears the neighbours sometimes but the neighbours aren't bad, that's just the nature of being attached to people. he also doesn't really care about the back yard except for the fact that people expect back yards, he and his wife aren't the type to spend time in the yard and they take their kid to the park nearby.

he said that in order to move into a nice detached in the same neighbourhood, he'd be adding about $300,000+ as a mortgage, while he would otherwise be mortgage free in the next year or so. leaving the neighbourhood is not worthwhile for family and work reasons, and much like MG, he's close to both where he lives now. $300,000+ seems like a lot for a garage and backyard that will likely go unused...but, shrugs

Just A Guy, you make an interesting point. but you couldn't have known that housing prices would go up so much nor that the market would be bullish. the feelings of optimism are much less pervasive for the future, i'd say. furthermore, investing is definitely a good idea, but wouldn't it be a good idea to pay off the mortgage first and then invest the new money that need not go to a mortgage? i guess cause he's pretty close to being done.

anyway, i told him to stay put if he likes the place. but he's antsy because like i said, seems like there's societal pressure to eventually move to a detached house with a finished basement, more space than you need, etc etc


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## Just a Guy (Mar 27, 2012)

I didn't know I'd make as much as I could have, but i believe there are still good investments out there even today, that's why I continue to buy and increase my net worth. The rentals I've bought in the last few months have all been appraised at least 25% higher than purchase price and have a huge cash flow, my stock picks are also doing well...

True, all this can change, but I tend to be very conservative with my investments...my rentals are bought well below market value and can support rents much lower than today. They are also being aggressively paid down.

I don't gamble, I invest. If your friend gambles, I'd tell him to stay out of the various markets.


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## mcoursd2006 (May 22, 2012)

It's a very personal question, as people have pointed out. You have to look at your own personal finances--what you make, job security, children, maternity leave, etc. Personally I choose the first option because we became a one-income household after we had our first child. We are still a single-income household, but we now have three children. We've managed to pay off the small mortgage we have fairly quickly and have been mortgage free for a number of years now. Sure, we'd love to upgrade to a bigger house, we are quite comfortable with what we have and it fits in with our values. There are more important things in life than having a big house and four spots on the driveway.


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## Plugging Along (Jan 3, 2011)

As others have said this is a personal question. The best answer is base on their values and beliefs, which no one here can comment.

We choose option three.

We paid off our place in our mid thirties. It's much smaller than more people we know, but a fair size, still small for us. Since we have been mortgage free, we have been saving and investing the money. When we have enough for the house we really want, we will decide if we still want it. 

We still have saved for our retirement, resp, and TSFA. The remainder is what we put towards our future house through our unregistered account. If it doesn't happen, then we have a paid for house and extra for retirement. If we still want the house, we have a little less for reitrement and the house we want.

We do know we will never have non deductable debt again.


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## blin10 (Jun 27, 2011)

can I live in 1000 sq.ft.? yes will I be happy?no
can I live with no car? yes will I be happy?no
can I sit home and not go out wasting money? yes will I be happy? no

like everyone said, it's a personal question...


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## mars (Mar 11, 2014)

I found this to be an interesting question as I have been pondering whether or not to sell my house. I am not yet debt free but have a relatively low mortgage left to pay. As a single guy I really don't need the house I have but when I had the opportunity to buy it was too good of an opportunity to pass up. Based on what I could get for my place, I could invest the amount I sell for an rent a nice condo with the income from the investment. Or I could leave the investment to grow as I am still currently working.

The reason I would think about selling is it means I wouldn't have to worry about any upkeep, snow removal, lawn maintenance, etc. Also, when I travel if I lived in a condo it would be a matter of locking the door and off I go. With my house I always try and arrange for a friend to come by and check on things once in a while and pick up the mail etc.


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## Jon_Snow (May 20, 2009)

The decision to pay off our mortgage in our 30's, and resist the temptation to buy more house than we needed (just cause everyone else seemed to be doing it) was probably the best financial decision we have ever made.

Don't begrudge anyone who wants a big house though - we just wanted the flexibility and options that life could provide by NOT having a mortgage anymore.


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## hope4wealth (Sep 15, 2013)

We are working to become mortgage free, and completely debt free by age of 35. I've always been adverse to debt no matter the amount so becoming mortgage free will be something very big for me mentally. Also, I enjoy the fact that it will provide us with the freedom of choice and not feeling like I owe anyone anything.

To me this is a personal decision, especially in this time when many feel they can get a stronger return in the markets, compared to the interest on their mortgage. For me however, and my personality, I know removing the mortgage will be something that just lifts a weight off my shoulders which is all the reward I need.

We've been fortunate to completely max our contributions in TFSAs and RRSP as well, so hopefully on our way to building some wealth and allowing us some freedom to leverage our wealth as we'd like.


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## diharv (Apr 19, 2011)

joncnca said:


> I was speaking to a friend and this raised a discussion between us about his situation . Since this is a finance forum, I can already anticipate the response, but I'll pose the question anyway.
> 
> If one had the opportunity to be mortgage free from their early 30s with a nice 2000 Sq ft town home and small family, would this be preferable to chasing the detached house with 4 in/out parking spots and big back yard? I imagine the savings could go well towards other investments, perhaps even real estate.
> 
> Seems like there is a lot of societal pressure to eventually end up with a big house, especially for those of reasonable earning ability. Vain, surely. But vanity is human, haha


Being mortgage free trumps debt every time. What is this so called societal pressure anyhow ? Is it verbal or a gun to the head? I think it is self inflicted brought on by envy an an attitude that everyone else is doing it , oh no I'll be left behind and thought less of neighbours and peers. How many people that appear to have it all are living on the financial razors edge or already have fallen over the precipice into financial ruin ? Societal pressure as an excuse for potentially crippling debt is a cop out. Grow a set , don't be a sheeple and do what you want and feel is right , who cares what people think. I know the op said reasonable earning ability but still , do it if you feel it is right , not just because you can and everyone else says so. Just my two cent rant on this issue which is very very common.


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## wendi1 (Oct 2, 2013)

I think most people buy more home than they need - but for me, having a smaller, highly functional house has been the key to being able to fund my retirement and other savings.

And since it was small and cheap, we paid off the mortgage in eight years. Such a feeling of freedom...


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## OhGreatGuru (May 24, 2009)

This is a life-style choice as much as economic, but if the cost to trade up is $300K, then certainly economics comes into it.

With only one child, a 2000 sq.ft townhome is likely large enough for their needs in the for-seeable future. Perhaps you should encourage your friend and his spouse to think about just what it is they really hope to gain with a larger home, and whether some of the perceived benefits could be obtained more economically (eg. renovations to their current home; renting a garden somewhere; renting a storage locker if seasonal storage space is a problem; joining a country club; renting a cottage; buy Smart Cars so you can park 2 in the space of 1; etc.)


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## mcoursd2006 (May 22, 2012)

It is also what you are willing to do without. For example, if you only have a one-car garage and own two cars, you'd have to scrape your windows or clear off the snow everything morning for five months of the year. Having a big house would eliminate that need. A smaller house might mean that your kids have to share a bedroom. Is that acceptable? It means you might not have a room for your library, or den, or man-cave. Or that you'd be in closer quarters with other members of your family. Are you willing to accept all these things? Are these things worth the extra $200k mortgage and ten more years chained to it?

Our 1800 sq.ft townhome was always meant to be a starter home for us, because we figured that once we had children we'd need to upgrade to a bigger one. My own family, with my parents and two other siblings, lived in a 1100sq.ft semi in downtown Toronto for most of our teenage years, and we didn't find difficult. I am willing to accept all those things mentioned in the previous paragraph. From time to time we think about upgrading, but being mortgage trumps everything, especially as a single-income household.


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## Homerhomer (Oct 18, 2010)

Homerhomer said:


> Oh, and my answer is I choose to live comfortably and am number of years away from being mortgage free at the age of 46. Currently I am able to pay my mortgage down faster but choose to spend it instead. The house I have is bigger than what I need at 2000 but we like where we are, great neighbours, driveway can fit 4 cars easy (that's on top of two garage spaces ;-). I also most likely make less money than most on this forum, and spend less time driving than MG co-workers ;-)


Seeing for how much the houses on the street have sold in the last couple of weeks it got us thinking, however if we do downsize to the point of being mortgage free or close to I am not sure if I can find something that would satisfy both of us. I like gardening so I want a bit of a space (not that much), wife doesn't want to move east of GTA.
But it's on our minds now ;-)


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## Gandharva (Jul 14, 2010)

I just became mortgage-free this week! However, my wife and I live in a 600sqft 1bdrm condo in a nice Toronto neighborhood, no kids and don't own a car. Ideally about 1200-1300sqft would be much better. An _ok_ 2bdrm+den condo is well within reach, but a _gorgeous_ one is a real stretch. To afford the gorgeous one I'd ideally need to save another 200-300k to put down. That will take more patience that we have though, I think. Damn this Toronto RE market! We might buy, or we might rent our current one out and rent a bigger one for ourselves. Cash flow is better that way but not totally sold on being a landlord, even if we use a property management provider. What to do!?


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