Paying Off Your House Early is a Mistake

If you’re looking to pay off your house, you may want to listen closely to what James Johnson has to say about the controversial approach to paying for your house. Johnson believes that you should pay for your house as fast as you possibly can, and always have the largest possible mortgage right up until the day you die. In this article, we’ll explore the mathematics behind house payments, the concept of house payment, and the three types of money.

Understanding assets and liabilities is key to Johnson’s approach. He demonstrates how paying off your house won’t necessarily cause it to appreciate in value any faster, and how any equity you put into your house is currently losing money due to inflation and opportunity cost. He also challenges common beliefs about paying off your house, and compares different home financing strategies.

Key Takeaways

Paying off your house as fast as possible and having the largest possible mortgage can be a controversial but effective approach.
Understanding assets, liabilities, and the three types of money is key to this approach.
Comparing home financing strategies is important in making the most of your money.

The Controversial Approach to Paying for Your House

According to retirement and estate planning expert James Johnson, the most controversial subject when it comes to housing is how to pay for it. He suggests that you should aim to pay for your house as fast as possible and always have the largest possible mortgage until the day you die.

Johnson explains that the rate of return on equity for a house is zero and always will be. This means that any equity you put into your house is currently losing money based on inflation and opportunity cost. Instead, Johnson suggests keeping your money in a bank account or investing it elsewhere.

To illustrate his point, Johnson uses an example of a $500,000 house with a $500,000 mortgage. He explains that the house will appreciate or depreciate regardless of how much money you put into it. Therefore, paying off the mortgage will not affect the rate of return on equity.

Johnson suggests keeping the money in a bank account and having a mortgage on your house. This way, you can invest the money elsewhere and still have the ability to pay off your house at any time.

Johnson argues that having a house payment is the most important thing that can happen to you in your life. He claims that people who are in a hurry to pay off their mortgage are missing out on the opportunity cost of investing the money elsewhere.

Johnson also challenges common beliefs about home financing strategies. He asks a series of true or false questions, such as whether a large down payment will save more money over time than a small down payment. He argues that comparing home financing strategies is crucial because, besides the home itself, the most important decision is how to finance it.

In conclusion, Johnson’s approach to paying for your house may be controversial, but he argues that it is financially sound. By keeping a mortgage on your house and investing your money elsewhere, you can avoid losing money on equity and take advantage of opportunity cost.

Demonstration: The Maths Behind House Payments

Paying off your house as fast as possible might seem counterintuitive, but let’s take a closer look at the maths behind it. According to James Johnson, a retirement and estate planning expert, paying off your house as fast as possible is the way to go.

Here’s a demonstration to help you understand why. Imagine you have a $500,000 house with a $500,000 mortgage on it. You also have $500,000 in your bank account. Your total assets are currently $1 million.

Now, if you were to take $100,000 from your bank account and put it into your house, your house would still be worth $500,000. But since you’ve paid off $100,000 of your mortgage, you now have $500,000 in assets and your house is paid off.

The key takeaway here is that any equity you put into your house is currently losing money due to inflation and opportunity cost. By keeping the largest possible mortgage on your house, you can invest the money elsewhere and potentially earn more than what you’re losing on your mortgage.

But what about the common beliefs about home financing? Let’s test your knowledge with a quick true or false quiz:

A large down payment will save you more money over time than a small down payment.
A 15-year mortgage will save you more money over time than a 30-year mortgage.
Making extra principal payments saves you money.
The interest rate is the main factor in determining the cost of a mortgage.
Having your house paid off is more secure than having it 100% financed.

Now, let’s talk about the three types of money: accumulated money, lifestyle money, and transferred money. Transferred money is the money we unknowingly and unnecessarily transfer out of our lives. One of the ways we do this is by how we pay for our mortgages.

Comparing home financing strategies is crucial, and besides the home itself, the most important decision is how you choose to finance it. By understanding the maths behind house payments and the different financing strategies available, you can make informed decisions that will benefit your financial future.

Understanding Assets and Liabilities

When it comes to paying for your house, it is important to understand the concept of assets and liabilities. Assets are things that you own that have value, while liabilities are debts or obligations that you owe to others.

In the case of a house, the house itself is an asset, but if you have a mortgage on the house, that mortgage is a liability. The value of the house may go up or down over time, but the mortgage will remain the same.

According to retirement and estate planning expert James Johnson, it is best to pay for your house as fast as possible by always having the largest possible mortgage, right up until the day you die. This may seem counterintuitive, but the mathematics behind it support this strategy.

Johnson explains that any equity you put into your house is currently losing money based on two fronts: inflation and opportunity cost. Inflation means that the value of the dollar is becoming worth less and less every day, while opportunity cost means that if you had that money available, you could invest it elsewhere and potentially earn a higher return.

To illustrate this point, Johnson provides an example. Let’s say you have a $500,000 house with a $500,000 mortgage and $500,000 in your bank account. Your assets total $1 million. If you were to take $100,000 from your bank account and put it into your house, your house would still be worth $500,000, but your assets would decrease to $900,000.

However, if you were to keep that $100,000 in your bank account and continue making mortgage payments, your assets would remain at $1 million. This means that having a mortgage actually increases your assets, rather than decreasing them.

In summary, it is important to understand the difference between assets and liabilities when it comes to paying for your house. While it may seem counterintuitive, having a mortgage can actually increase your assets over time, as long as you continue to make payments and invest your money wisely.

The Concept of House Payment

When it comes to paying for your house, the concept of having the largest possible mortgage is a controversial subject. However, according to retirement and estate planning expert James Johnson, you should pay for your house as fast as you possibly can and always have the largest possible mortgage right up until the day you die.

Johnson explains that any equity you put into your house is currently losing money due to inflation and opportunity cost. Therefore, the rate of return on equity is zero and always will be. Instead, Johnson suggests having a $500,000 house with a $500,000 mortgage and $500,000 in your bank account. This gives you a total of $1 million in assets, with the house under liabilities.

Johnson demonstrates that the house will appreciate or depreciate regardless of how much money you put into it, so paying off the mortgage won’t affect its value. He also shows that having a large mortgage allows you to move money from your bank account to your house at any point in time, instantly paying it off.

Johnson emphasizes that having a house payment is actually the most important thing that’s ever happened to you because it allows you to keep your money in your bank account, where it can earn interest or be invested elsewhere.

In summary, Johnson’s concept of house payment involves having the largest possible mortgage and keeping your money in your bank account to earn interest or invest elsewhere. This allows you to have more assets and financial security in the long run.

Breaking Out of the Box

When it comes to paying for your house, you may have heard conflicting advice. However, according to retirement and estate planning expert James Johnson, the best strategy is to pay off your house as slowly as possible and always have the largest possible mortgage until the day you die.

Johnson argues that any equity you put into your house is losing money due to inflation and opportunity cost. Instead, he suggests keeping your money in a bank account or investing it elsewhere, where it can potentially earn more money.

To illustrate his point, Johnson uses a hypothetical example. Let’s say you have a $500,000 house with a $500,000 mortgage and $500,000 in your bank account. Your total assets are $1 million. If you were to take $100,000 from your bank account and put it towards paying off your mortgage, your house would still be worth $500,000 but your assets would decrease to $900,000.

Johnson argues that paying off your mortgage early is not always the best financial decision. Instead, he suggests keeping your money invested and earning returns while using a mortgage to pay for your house.

However, Johnson acknowledges that many people may be hesitant to have a mortgage payment for their entire lives. He encourages people to break out of their limited thinking and consider different financing strategies. By doing so, you may be able to save money and achieve your financial goals.

True or False: Mortgage Beliefs

When it comes to paying for your house, there are many beliefs out there. However, not all of them are true. Let’s take a look at some common mortgage beliefs and determine if they are true or false.

Statement	True or False?
A large down payment will save you more money over time than a small down payment.	False
A 15-year mortgage will save you more money over time than a 30-year mortgage.	False
Making extra principal payments saves you money.	False
The interest rate is the main factor in determining the cost of a mortgage.	False
Having your house paid off makes you more secure than having it 100% financed.	False

It turns out that many of the beliefs surrounding mortgages are actually false. For example, putting a large down payment on your house may seem like a good idea, but it doesn’t necessarily save you more money over time. In fact, you could be losing money due to inflation and missed investment opportunities.

Similarly, a 15-year mortgage may seem like a smart choice, but it doesn’t always save you money in the long run. Making extra principal payments may also seem like a good idea, but it doesn’t necessarily save you money either.

When it comes to determining the cost of a mortgage, the interest rate is not the main factor. There are other fees and costs associated with a mortgage that can add up quickly.

Finally, having your house paid off doesn’t necessarily make you more secure than having it 100% financed. In fact, having a mortgage can actually be beneficial in some cases.

In conclusion, it’s important to be aware of common mortgage beliefs and to determine if they are actually true or false. By doing your research and making informed decisions, you can save money and make the most of your mortgage.

Three Types of Money

In retirement and estate planning, it is important to understand the three types of money: accumulated money, lifestyle money, and transferred money.

Accumulated money refers to assets such as stocks, bonds, equity, and your house. This is everything you have managed to accumulate up to this point in your life.

Lifestyle money is the money you currently live on. It is important to live like you’re going to die tomorrow and plan like you’re going to live forever, because you just might.

Transferred money is the money that we transfer unknowingly and unnecessarily out of our life. This happens in about six different ways, including how we pay for our mortgages, fund our qualified plans, fund our college education, pay taxes, protect ourselves, and make major purchases.

When it comes to mortgages, it is important to compare financing strategies. Besides the home itself, the most important decision is how you choose to finance it. Many people transfer money unknowingly and unnecessarily when paying for their mortgage.

Remember, understanding the three types of money can help you make informed decisions about your retirement and estate planning.

Transferred Money: Unknowingly and Unnecessarily

When it comes to paying off your house, you may think that paying it off as quickly as possible is the best route to take. However, according to retirement and estate planning expert James Johnson, this may not be the case. Johnson argues that you should always have the largest possible mortgage right up until the day you die.

To understand why, let’s take a look at some numbers. Suppose you have a $500,000 house with a $500,000 mortgage on it. If you were to pay off the mortgage, the house would still be worth $500,000, but you would instantly have $500,000 in assets instead of a million dollars in assets. This is because any equity you put into the house is currently losing money due to inflation and opportunity cost.

So, what does this mean for you? Johnson argues that having a mortgage on your house is actually the most important thing that’s ever happened to you. By having a mortgage, you can take the money you would have used to pay off the mortgage and invest it elsewhere, potentially earning a higher rate of return.

However, many people unknowingly and unnecessarily transfer money out of their lives through their mortgage payments. This happens in about six different ways, including how they pay for their mortgages, how they fund their qualified plans, how they fund their college funding, taxes, protection, and major purchases.

Comparing home financing strategies is crucial to avoid unknowingly transferring money out of your life. Besides the home, the most important decision is how you choose to finance it. So, before making any decisions, make sure to do your research and consider all of your options.

Remember, the goal is not to pay off your mortgage as quickly as possible, but rather to make the most of your money and investments. By having a mortgage, you can potentially earn a higher rate of return and avoid unknowingly transferring money out of your life.

Comparing Home Financing Strategies

When it comes to financing your home, there are a variety of strategies available to you. It’s important to compare these strategies and determine which one is right for you. Here are some key points to consider:

Paying off your mortgage as quickly as possible may not always be the best strategy. While it may seem like a good idea to have your home paid off, you may be losing money due to inflation and missed investment opportunities.
Equity in your home doesn’t necessarily provide a rate of return. The rate of return on equity is zero, so any equity you put into your home is losing money due to inflation and missed investment opportunities.
Having a large mortgage can actually be beneficial. By keeping a larger mortgage, you can invest the money you would have used to pay off your mortgage elsewhere and potentially earn a higher return.
The interest rate is not the only factor to consider when choosing a mortgage. Other factors, such as the length of the mortgage and the size of your down payment, can also have a significant impact on the total cost of your mortgage.
There are three types of money: accumulated, lifestyle, and transferred. Transferred money is money that you’re unknowingly and unnecessarily transferring out of your life. When it comes to mortgages, it’s important to consider how you’re financing your home and whether you’re transferring money unnecessarily.

By considering these factors and comparing different financing strategies, you can make an informed decision about how to finance your home. Remember, the most important decision besides the home itself is how you choose to finance it.