How to Decide whether to Pay Off a Mortgage

pay off mortgageWhether or not to pay off a mortgage is a personal question. Are you a gold medalist, a German shepherd, or a German shepherd that wants to be a gold medalist?

These are terms that Thomas Freese uses in Secrets of Question Based Selling but are very useful here. For the gold medalist, who is striving for great performance – having a mortgage and investing the difference may be beneficial.

For the individual who only runs from a German shepherd rather than running for a gold medal, getting rid of a mortgage as fast as possible is preferred.

Then we have German shepherds disguised as gold medalists. They want the gold medal, but their temperament when they hit a speed bump suggests that they should take the more steady approach.

I had a client who was a German shepherd disguised as a gold medalist. He had a $550,000 home with a mortgage and a home equity line of credit.  As a result, he only had about 10% equity in the home, or $55,000 owned outright, the rest of the home was owned by the bank.  Between the husband and wife, they had significant income to cover the mortgage, but if something happened to either of their jobs, they would have problems paying off the debt.

He was a German Shepherd in that he really, I mean really did not like to lose money.  However, he was competitive and did not want to see people living better than him or making more returns on their investment.

As a result, they went from a home for which they could easily cover all the debt, to buying a $1.2 million dollar home, with even less equity.

Prices in Denver, Colorado have been going higher the last two years, so the thought is that they will continue to go higher, that this couple has good years in their jobs and will have more income to pay off the higher mortgage and or retain more equity in their home.

We will see.

In my next two articles, I will go through more of what we do in an analysis and then give you some examples of the process.

To learn more about James Cornehlsen, view his Paladin Registry profile.

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