How can you be (semi) retired while still having a mortgage?

All the different ways of solving the shelter problem. To be static or mobile? Roots, legs, or wheels?
pacontrak
Posts: 6
Joined: Sun Apr 23, 2017 4:07 pm

Re: How can you be (semi) retired while still having a mortgage?

Post by pacontrak »

Thank you for stopping by Jacob, much appreciated.

fingeek
Posts: 249
Joined: Wed May 24, 2017 8:16 am
Location: Wales

Re: How can you be (semi) retired while still having a mortgage?

Post by fingeek »

As an opposing opinion, I choose to effectively keep my home mortgaged (low rate, less than UK inflation), and leverage that equity by investing elsewhere. It's mathematically sensible when the mortgage rate is sufficiently lower than interest-earning opportunities elsewhere. I calculate/accept the risk on both sides of the arbitrage. As soon as the UK headline interest rate creeps up to ~3-4% then I will more likely pay off the mortgage.

Things might be a little different if I had a huge cash surplus, and maybe I'd pay up opportunity in exchange for laziness (I would not have waited until I had a huge cash surplus to FIRE, however).

Others did note too that there is a more general question over "rent vs own" (or more abstractly, "consume vs own"?) - We need to pay bills for gas/electric/water, or we could opt to install solar panels/microgeneration/install a personal water treatment system. We may opt to grow our own food and "lock in your cost of living" rather than be "at the mercy" of supermarkets.

May I ask, are you working? Retired? (Could you be?)

fingeek
Posts: 249
Joined: Wed May 24, 2017 8:16 am
Location: Wales

Re: How can you be (semi) retired while still having a mortgage?

Post by fingeek »

As an opposing opinion, I choose to effectively keep my home mortgaged (low rate, less than UK inflation), and leverage that equity by investing elsewhere. It's mathematically sensible when the mortgage rate is sufficiently lower than interest-earning opportunities elsewhere. I calculate/accept the risk on both sides of the arbitrage. As soon as the UK headline interest rate creeps up to ~3-4% then I will more likely pay off the mortgage.

Things might be a little different if I had a huge cash surplus, and maybe I'd pay up opportunity in exchange for laziness (I would not have waited until I had a huge cash surplus to FIRE, however).

Others did note too that there is a more general question over "rent vs own" (or more abstractly, "consume vs own"?) - We need to pay bills for gas/electric/water, or we could opt to install solar panels/microgeneration/install a personal water treatment system. We may opt to grow our own food and "lock in your cost of living" rather than be "at the mercy" of supermarkets.

May I ask, are you working? Retired? (Could you be?)

IlliniDave
Posts: 3845
Joined: Wed Apr 02, 2014 7:46 pm

Re: How can you be (semi) retired while still having a mortgage?

Post by IlliniDave »

This one's really a matter of personal style as long as things are done thoughtfully. Having a mortgage paid off gets a lot of play in the retirement finance press because it is usually a household's largest single expense and eliminating it reduces the financial accumulation required to maintain a lifestyle (as defined by ongoing spending). But with a big enough stash a mortgage payment is just like a bigger version of the electric bill.

I have two pieces of property and no mortgages. Together they are about 27% of my net worth. Although I don't consider either to be an investment per se, I like the diversification they add to my overall financial position. If I were to spring the equity to leverage more financial investments I would feel unbalanced, so I don't, even though it's easy to find math that suggests a possibility of coming out slightly ahead over time. I'll never make myself rich owning residential/recreational property in flyover country, but having the ballast of those assets gives me a bit of a just-finished-a-hearty-bowl-of-stew-in-front-of-the-fire feeling.

That's not to say others won't find success on a different path. Logic is great so long as we don't use it in a way that makes our emotions rebel.

susswein
Posts: 138
Joined: Wed Apr 03, 2013 10:00 pm

Re: How can you be (semi) retired while still having a mortgage?

Post by susswein »

answer: By owning a multi-unit home (duplex, 4-plex, etc), living in one unit, and having the rent from the othe units pay all home expenses (mortgage, taxes, insurance, utilities, etc). Easy to find in some communities, impossible in others.

Post Reply