I'm curious, how many of you have your place paid off? Show of hands. How many are working on it? How many of you never even consider it?
About 15 years ago, my mother was in the market for a house. She could well afford it, so Dan and I encouraged her to buy it outright. The realtor talked her out of it. The reasoning was that without a mortgage, she wouldn't get a write off on her income taxes.
Anyone who's ever looked at an amortization schedule, knows that with a 30 year mortgage, one ends up paying approximately triple the purchase price of the home. For a $250,000 home, one pays back not only the $250,000 borrowed, but also an additional $500,000 in interest. That's assuming it takes the full 30 years to pay it off. It can be considerably less if the principal is paid off early. Our question about my mother's situation was, would she get $500,000 worth of write offs on her taxes? The answer to that was no. Yet neither my mother nor the realtor got it, and my mother did indeed get a mortgage she didn't need.
I think about it on a more personal level. If it were you, what would you rather do with $500,000? Give it to the mortgage company for the privilege of a pennies on the dollar tax write off? Or use it for something else?
There's an odd logic out there about debt. Debt is considered normal. Debt is considered desirable. But who does it really benefit? When considering whether or not to buy something on credit, my first husband would only look at whether or not we could afford the increase in the monthly credit card payment. I tended to look at the true cash outlay for the item, including interest, and how long it would take to pay it off. When I realized that the monthly minimum payment was less than the interest owed, I also realized that even if we never purchased another item on credit, that minimum payment would guarantee a lifetime of increasingly deeper dept.
Our mortgage is the first debt Dan and I have had together. This is because were willing to make sacrifices and do without things many folks take for granted, not because we could afford to pay cash for everything. And no, we have nowhere near a $250,000 home. We don't have that kind of income, which is why we bought an old fixer-upper. Of course, this means that any extra monies have to be put into repairing and upgrading the house, rather than making significant payments on the mortgage principal. On the other hand, if we'd bought a home that didn't need repair, our mortgage and monthly payments would be a heck of a lot higher.
Our number one goal is to get our mortgage paid off. We do pay extra on the principal each month, but I wish very badly that we could just be done with it. I confess that debt is a source of insecurity for me. Debt gives other folks rights over our money and over our lives. Not only does our home not truly belong to us, neither, in a sense, does our income. In the end, they have the right to take it from us, without regard to our circumstances nor the situation it might leave us in.
From time to time we talk about a money making blitz to pay it off. Right now Dan's job gives him days off at a time. The trade-off is less pay, but more time to get things done around here. It's why we can make the progress we do. If he has 3 or 4 or 5 days before going out again, we can get a lot done. There's a trade-off with my time as well. I don't bring in a monetary income, but the garden, animals, and general running of the household fall to me. Little if any of that would get done if I worked full time.
This has been on our minds more and more lately, as the outlook for this nation's economy gets gloomier and gloomier. I know we all wish it were just a matter of electing the right people to get things back on track, but I believe that's a vain hope. The problem, I believe, is the modern consumer/profit mindset, which was always doomed to fail because human nature is never satisfied.
So, where exactly is this post going? Nowhere I reckon. I just think that mortgage debt is the biggest obstacle there is to making an honest go at family farming or homesteading. It takes the better part of most folks' income to keep the piggy bank fed. All we can do is to chip away at it, a little at a time.