no-mortgage

No Mortgage

no-mortgage

How would you like to have a house with no mortgage? While you don’t have to be Living in a Tiny Home – With No Mortgage to actually have a home with no mortgage, you may be surprised with the square footage that you could be comfortable with, and the advantages that go along with not having a large debt over your head.

Modern survival includes figuring out ways to get out of debt, to get out from under the oppressive system that tries to keep you in debt, and ultimately to have NO MORTGAGE.

As a society, I believe we have passed the point of excess and living ‘high on the hog’ so to speak. As we struggle to deal with our debt, we are faced with downsizing and living within our means. Except for the small percentage who can really afford a large home or McMansion, the vast majority of everyone else should really consider buying a home such that they could realistically have no mortgage after a time (a time much shorter than 30 years).

The median and average square feet of a new single family house in the United States peaked during 2007 just prior to the financial crisis. The median (same number of houses above and below) square footage was 2,277 and the average was 2,521 according to data collected by the U.S. government (census.gov).

The most recent data from 2010 shows the median at 2,169 and the average at 2,392 square feet for new single family homes. Now, in 2013, those numbers have likely shrunk a little more…

Now consider this… A home of 2,000 square feet or more is a very large home compared to generations gone by. Naturally, the number of people in the household plays a significant role into the equation of what is acceptable or comfortable. But here’s the thing… you PAY for the big house. It’s a big mortgage, and it’s for a long time.

The realities and consequences are somewhat hidden in that today’s mortgage rates are SO LOW and the monthly payments are much less than what they were not that long ago. They are at record lows. This is a potential trap because you are potentially able to take on a bigger loan because the payments are less.

Whether you realize it today or not, debt is one of the biggest anchors or chains holding you down, keeping you from real freedom. It is a freedom that is unimaginable to many, but it can be yours. All you need to do is to be smart. While debt is often a necessary part of business and enterprise, when it comes to personal debt it is usually a bad thing. The banking system of course wants you in debt, because that is how they make their money (the interest on your loan). The problem is, the marketing is so intense to keep you buying bigger and better, that it is difficult to overcome.

If you want no mortgage, you have to sacrifice your big desires and convince yourself that the long term result will be better for you (living debt free).

 

How To Have No Mortgage

If you haven’t purchased a house yet, good! Take your time to consider choosing a home that is far less than your ‘maximum’ amount that you can borrow. So many people go for the max. Probably not the best idea if you want to become debt free in a shorter period of time.

There are many, many homes on the market today due to the real estate downturn. Seriously consider buying a smaller and older home. A challenge is to convince your partner (if you have one) that it is a good idea to live lower than your means and buy something smaller for less money.

Take a 15 year loan instead of a 30 year loan. This makes a HUGE difference in what you will pay (and save) over time… Debt free in 15 years while you still have significant life left, will be one of the best decisions you have made.

If you are already straddled with a big loan in a big house, consider selling it and downsizing. This may be difficult if you are underwater in your mortgage though, but you should check it out anyway just in case a professional can pull it off for you.

Look into refinancing and compare your existing mortgage rate with what you could get today. You need good credit to get the best rates. Use that extra money to pay down your loan until you have no mortgage.

It is also possible to save enough cash to buy a home. This may sound unachievable, but it is possible if you put your mind to it and sacrifice for a number of years. If you have a halfway decent paying job, you could rent on the cheap, don’t spend excessively, and save save save. Granted, today you basically get zero interest for saving, but on the other hand with a mortgage you’re paying many hundreds a month on interest. If you could save $200 (or $500) a week, $10K ($26K) a year, how many years do you need to save in order to pay cash for a small house and be with no mortgage? Sure, housing prices depend on where you live, and it will take years, but you get the idea. So long as you are not already saddled with debt to your limit, you could pull this off. It would be difficult, but possible, although probably not for everyone.

Move far away if the prices are far less there. This will depend on your job opportunities, however consider relocating, or commuting further to enable you to live in a less costly region. Instead of buying a bigger house in the urban-rural market, buy a cheaper house and set your goals on becoming debt free with no mortgage.

 

This is modern survival, figuring out ways to get out of debt, to get out from under the oppressive system that tries to keep you in debt, and to have NO MORTGAGE. It will take some sacrifice, some time, and some changes in your way of life, but you can do it if you want to. Buying a house will be the biggest purchase of your life. Be smart about it.

 

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8 Comments

  1. All good advice. I would change just one thing. Don’t take a 15 year mortage, go with a 20 or 30. If you take the 15, you will be committed to a large monthly payment which could be a problem should one partner lose their income. This is just what happened to us. Although we had the 30 year loan we had planned on paying off with-in 15 years. After a major heart attack my husband was unable to work. It was so devastating that he had to go onto permanant disability. If we had the 15 year mortgage we would have lost our home as I simply did not make enough money to cover all the expenses as well as the monthly mortgage. Where with the 30 year mortgage your payment is lower. What we did every month was put extra toward the principal, but we were not locked into that higher payment. If you start right away, you’ll never miss it. However should you be unlucky enough to have a major life changing event you will also have the flexability to adjust. We finally did pay off the mortgage but it took a little longer than we originally planned, 24 years to be exact. Just make just that there is no penalty for early pay-off.

  2. A 15 year mortgage is a great idea if you plan on downsizing and have this home for 20+ years, but too many of us live in different homes every 5-10 years because of jobs, children, etc and have little choice. We are in between and looking to downsize, but can’t sell in this economy without taking a 10% loss. We are left with having to refinance and finding out the appraisal falls way short to qualify without paying the difference or use another loan to pay the rest.

    Regardless, just remember in most states even if you have the house paid for, if you can’t pay those property taxes ownership can and will be removed from you. Happened to an elderly couple down the street from us several years ago.

    1. That is a very good reminder… that property taxes will always be there, and may go up year after year. There are vast differences around the country regarding property taxes.

    2. “…if you can’t pay those property taxes ownership can and will be removed from you”

      This is critical for those who buy a new, or more expensive home when they retire. A divorced woman in her late 60s with a good job in Los Angeles sold their 1969 home for over $450K in 2007. And she bought in a much less expensive community in northern CA.

      BUT the home she bought was in a fancy, new, but small, gated senior community. The house was a standard size for today 3bd/2a, with teeny wraparound ‘strip’ of yard and huge garage , but still was probably too big for her needs.. and the cost was $400K…she had a pension and social security after working all her life, but no savings.

      The taxes on the home seemed affordable, and she had the $50K sale difference to to use for landscaping, new furniture, moving, etc.

      Then the housing crash in 2008. ..and NOW the home she’d been in for a short few years was valued at half…$200K.

      Selling was out of the question, she was unable to consider a room mate (both her age, unwillingness, grandkids, and too much ‘stuff’ made that impossible and so she ended up signing up for a reverse mortgage, which also complicated her life.

      All I’ve heard from her was fretting over money, not being able to afford to buy meat for dinner, on and on.

      So she started with an amazing cash pile by selling the 1962 house they paid ~$27K for..and wound up at over age 70 totally stuck financially and very, very unhappy every day.

      So being wise on cost of housing in retirement is also a biggie…

      1. What a great example. Thanks for sharing that story.

        Just ONE very bad decision can change your life, maybe forever. Be careful what you choose to do.

  3. Peanut is right. Committing yourself to 15 years is only a good idea if you have a really secure job. You can still make extra payments on a long-term plan.

    1. Good point. If you are disciplined, you could simply apply the extra money towards the balance each month while not having a payment that by itself is higher. I agree with that. However, one should also have a close look at the difference in interest rates of a 15-year versus 30-year mortgage. A 15-year will offer a better rate which in turn means you will pay less to the bank. However as you said, this will also come with a higher mandatory payment each month.

  4. If you want it done right, do it yourself.

    We bought land, paid it off, then built on it. We knew an architect so we saved some money there, and the construction loan wasn’t much of a problem as we had the land as collateral. Once we sold the current house, we put the profit on the new mortgage and recast the payments to lower the monthly payment. Lots of home builders looking for work now, and lots of rural property for sale cheap. Our bank knew about ICF homes, so the 10-15% higher cost per sq ft wasn’t a shock to them for the construction loan. If we ever sell, and we don’t plan to, we’ll probably put it up on Rawles’ son’s survival real estate site as a bulletproof survival bunker.

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