Hi there, Mrs. 1500 today.
The roar of the crapcycles
A couple weeks ago, we asked what we should do about our new neighbors. A small
band army of people moved into the rental home across the street. They brought with them a battalion of vehicles and a platoon of animals. There are new developments.
About a week ago, a bunch of the people moved out. With them went at least half of the cars and most of the yapping dogs. Great! However, the fun wasn’t over.
These people are Craigslist addicts and a couple days ago, they pulled up with a load of very sorry looking motorcycles. No idea whose backyard pile of junk these things came from, but they’ve all seen much better days. We call them crapcycles. Anyway, the yap-yap-yap of the barking dogs was replaced with the revving of motorcycle engines in the driveway. When it started, it didn’t bother us too much. After all, how long can you sit in your driveway and rev up a motorcycle engine? Turns out that this activity can occupy some people for hours and hours. Also turns out that we weren’t the only annoyed ones. Another neighbor called the cops and the roar of crapcycles has been silenced.
For now, all is calm. We have no idea what other unpleasant surprises our new friends have in store for us (fireworks? rudimentary experiments with gasoline? death metal band practice in the backyard?). At least life isn’t boring.
Last week’s question
Last week we asked should you pay off your mortgage early or keep the loan and pay it according to the original terms?
This is a fairly common question on the early retirement blog front. If you plan to retire early, you need to be financially free. Less income and all that. Our mortgage rate is something absurd like 3.25% We make a MUCH better return in the stock market, on P2P lending, pretty much anything we put our money into besides savings accounts. So why would we pay it off early? Our original plan was to retire when the kitty reached $1 Million, but careful readers know we are almost there right now. So we decided to up that to $1 Million PLUS whatever else is left on the principal of our mortgage.
Some of you agreed with us, and some of you didn’t.
Jeff from Sustainable Life Blog recommends paying it off if you have a rate more than 4.25% Good point. A ridiculous rate would get me to at least refinance.
Debt Debs recommends not buying any house you can’t pay off in 15 years.
Reader Danny had possibly the best idea. I’m not going to butcher his words, so here is his response, word for word:
I think every situation is different, and you need to run the numbers to see what works best for you. That said, I am definitely going to pay my mortgage early. My basic strategy is instead of making extra payments monthly, to put that extra money in an investment account and try to make it grow as much as possible. For me, it helps in 3 ways:
1) I always have access to the extra payments should I need it in an emergency situation, as compared to when the extra payment(s) are made to a mortgage, it’s gone.
2) There will be some compound interest occurring (In my case it will be a 5 year period).
3) Provides more options when the remaining balance of the mortgage equals my investment account total.
I really think that either way you go, you can’t lose! You will either have an investment account with a considerable amount in it, or a mortgage free home.
A really great idea! Thanks for reading, Danny!
Now for this week’s question:
Is it a good idea to own a home at all?
One year ago, my town and much of northern Colorado was hit with torrential rains, resulting in massive flooding, property damage and even death. A tragic event for all hit. We were extremely lucky – we got the evacuation order, but it turned out the flood waters had about 10 more feet before it would have hit us. All neighbors on our street were untouched by the floodwaters, but one did suffer damage from the rain itself.
Kay and Jay live 3 doors down. When they first moved into their house four years ago, they hired a fence company to install a perimeter fence because they are dog owners. During the installation, one of the hole-diggers went right through a PVC pipe. Not a huge deal, and would have cost $5 in parts to fix. Except it either wasn’t noticed or wasn’t mentioned out of fear.
Fast forward three exceptionally dry years to the flood. Kay and Jay get their basement carpets cleaned on Monday, the same day the rains started. On Thursday the area flooded, and so did their basement. Attributing it to the monsoon-like weather, they pulled up the carpets, turned on industrial fans, and dried out the basement. The rain stopped, they carpets were relaid, and life went on.
Then the water heater burst, flooding the carpets again. Then they had sod installed in the backyard, which requires watering for it to flourish. Basement flooded again. And again and again and again. They finally pulled back the wallboard to find mold, which must be remediated and cannot be removed with bleach. It was about this time they started talking about selling their house.
Kay is my absolute best friend on the block. I do not want her to move. Her stance is that if this happened in a rental, the owner would be responsible for the cost, rather than her.
Which is true, but I still believe in homeownership. My first (and only) apartment cost me $410 a month. (It was a loooong time ago.) Every month I wrote out the check, but felt like I was throwing my money away. When that lease ended, I moved back in with my parents to save up a little bit for a downpayment on my new condo, which cost me $49,900. (Again, it was a loooong time ago.) I lived in that condo for 6 years, finally selling when Mr. 1500 and I got married. I sold it for $76,000 and was hooked on homeownership. Mr. 1500 and I have bought and sold 6 houses since then.
At a recent conference, I met up with Jim Collins, and we touched a bit on his stance on homeownership. Jim is firmly on the side of renting. Jim makes a lot of great points, but I still believe owning a home is a good idea. So, what do you think? Please give a general location so we can take into consideration the ridiculous housing market (looking at you, San Francisco) or amazing tax rates (Colorado…)
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