Hacker News new | comments | show | ask | jobs | submit login

>bought a home for $200k in Western Massachusetts. Paid in cash so I no longer have to pay rent/mortgage

Don't take this the wrong way, I'm sure you considered this, but... why put all that cash down when you almost certainly could have got a low interest mortgage and made more by putting that money in... well anything really?






Because of the federal real estate capital gains exclusion of half a mil, 20% marginal long term cap gains tax rate, and the difference between historical real estate appreciation vs SP500 returns being maybe 2% at absolute most, an average rate of increase of about 5% on a house, the average transaction cost of obtaining a mortgage is maybe 2% (stock transactions are practically free in comparison), S+P return after inflation is about 7% the median duration of owning a house being about nine years, extremely sloppy back of envelope calculation for $200K would be (200e3 * 9 * 0.07 * 0.8) - (200e3 * .02) or 96K for owning more stock with a mortgage for $200K and a 200e3 mortgage at this time would cost 9 * 12 * 946 in payments (assuming no PMI) or 102K for owning less stock with no mortgage so in the big scheme of things "not having a mortgage" saves about $6K over nine years or $55/month. (Edited, sorry I had to mess with this ten times to get it right)

You gotta look out for people who argue real estate transactions are as cheap and frictionless as stock market transactions, or insist on weird date ranges in historically bubble economies or rapidly changing demographic economies, or insist tax policy does not exist. Not everything is fundamentally an income stream and you need a plan when a simplification to that fails and you take a massive capital hit. If the error bars on the numbers are large enough, the same number can be interpreted to prove anything. Finally look out for people who confuse average/median with "everyone". All of those are HUGE effects when making financial decisions.

I'm not OP, but I have no mortgage and its worth pointing out that my personal break-even income is obviously twelve times the monthly payment lower than someone with a mortgage, and given a realistic 1/3 of income going to mortgage for most folks, obviously my runway is 1/3 longer than everyone with a mortgage. Also immensely lower stress.


I just learned so much right here, I think I might take a nap now. Thanks for the thorough reply.

Mainly it was just that I didn't want that much debt hanging over me. I could theoretically invest in other stuff, but if there's a recession that affects all of my investments, I don't ever want to have to worry about foreclosures or selling investments at a huge loss to pay my mortgage.

It was also convenient for making offers. I don't have to jump through the hoops of involving a bank in the process. And for most sellers, a cash offer is more attractive because there's no chance of the bank stalling or killing the deal.

The house I bought, I saw it the morning it came onto the market and offered cash on the spot to seal the deal. Seller might have accepted with a mortgage anyway, but I think cash was good incentive for them to proceed with me immediately instead of waiting a couple days to gauge interest from other buyers.


Not having debt can be very, very freeing. Same goes for expenses. I'm still a software developer because it pays well, not because I really want to be slinging code anymore. If I didn't have a mortgage and child care to worry about I would have a lot more freedom to switch jobs to do something I would enjoy but pays significantly less.

Sure, that's certainly valid, but it's an emotional perspective. From a financial perspective I'd rather have my money working for me.

A lot of times the emotional impact trumps the financial impact. If thats one less thing I stress about then that makes more room in my mind to make more money if I wanted to.

"Life is to be spent, not saved."

TL;DR - there are other things to optimize for than the maximum amount of money possible. It might not even be a sensible goal.

An extremely common theme heard from people with a lot of money is to get your money working for you.

Another extremely common theme is you hear from the same people is after a while they realized it just didn't make them happy like they thought it was going to.

Theoretically there is a certain maximum level of feeling good that's possible in a day. My goal these days is to optimize for that. I'm not there yet, but I can see a path to it. At some point the pursuit of money puts pressure against some of that happiness in one form or another. At least that's been my experience and observations. It's not an absolute rule but a reasonable hueristic.

If from an emotional perspective it wasn't possible to feel any better than you did, what would more money actually do for you?

IMO a lot of people need to dig much deeper on their 'why' for chasing the maximum amount of money possible. It's not 'wrong' to do so, nor am I judging anyone for doing it, I just think it's quite a one sided perspective that that should be the goal and that alone.

It's mostly about status and getting laid at an instinctive level. I realized this after already having a child, so I've technically passed on my genes and recently a vasectomy, so I can't even pass on any more genes. Yet my instincts are still the same. Chase after status, position yourself to be the fittest mate possible. We just can't turn those drives off, so once we've earned enough money and our happiness is no longer increasing as a function of getting more money at some point after that we actually hit an inflection point and things start to go the other way.

I can totally see how a roof over your head that can't be taken away from you and low AF overheads makes life feel like a breeze. That's actually worth a lot, just not in Dollars.


A mortgage (or the lack thereof) has a guaranteed rate of return. Any investment that would beat most mortgage rates doesn't.

Two years ago a CD would have beat it. Today it's not quite there, but there are very safe invenstments out there that will almost certainly beat a mortgage rate.

That would only be true for non-traditional loans (ARM etc). I don't believe you could have obtained a CD APR > 3% two years ago.

I've never had a mortgage so can't speak for OP, but I would imagine for some people the stresses of debt and recurring repayments outweigh having a bit of extra money from investing elsewhere.

It's not about the extra money, it's about the opportunity cost of not doing anything with all that cash. Mortgage rates are still relatively low, you could easily beat it with most any investment.



Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact

Search: