Pay off the mortgage?
Question: Another risk is insufficient diversification. If your home performs > poorly as an investment, you don’t have anything else to balance out > your performance. If your home is damaged, destroyed, or otherwise > greatly reduced in value your options for a bankruptcy discharge are > reduced.
>As I mentioned in another post on this topic, I don’t think of my home >as part of my investment/savings plan. Investments generate income; my >home generates expenses and provides housing. I am not counting on my >home to provide me with any income, now or ever. How could I? I need >it to live in. I couldn’t care less if the real estate market crashes >tomorrow; it wouldn’t change a thing for me.
Answer: “Investments” don’t always generate current income. Until recently, for instance, Microsoft did not pay a dividend to its shareholders, but a lot of people did quite well investing in its stock despite the lack of “income”. On another thread, someone asked about buying vacant land with an eye to selling it off in 5 or 10 years at a profit, in other words investing in an asset that provided no income for the duration of ownership. We can flip it around – if you own a car without a loan on it, there’s no “outgo” (the opposite of income) so owning a car is free, no matter what it costs. Do you believe that?
Why do I get the impression that you’re relatively young? For most people, a house represents a big pile of money whether you pay for it in cash up front or pay on a mortgage for years. Whether you think of it that way or not, it is an investment – a place where you’ve put a lot of money and which will probably change in value over time – just as much as shares of stock, or gold bars, or a cash balance in a bank account.
And someday you (or your heirs and assigns) are going to need money for medical care, education, a nursing or retirement home, to start a business, or somesuch. Unless you’re a member of a very small minority (again, it seems doubtful the Bill Gates will need to sell his house to support him in is dotage) you (or they) are going to hope that the house has performed well as an investment.
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