The love affair with our house runs deep. After months of searching for a house we purchased this one in a matter of a couple of hours. We have put so much love into this house by way of renovations and even though it’s a “starter” home I don’t have any intention of moving just quite yet even though we have a child. We have a goal to pay off the mortgage as soon as possible. Not one we talk about a lot here for some reason, but a goal. A big one.
But Will We Stay Here Forever?
If I look at this house objectively the big question is will it carry us in the long run. Between the area and the space we will have to make some compromises and in others we come out ahead. One of the biggest “issues” of this house is the lack of bedrooms. We have 3 bedrooms and they aren’t incredibly big. If we are lucky enough to expand our family further we would probably be limited to having 1 more child. We might not be able to fit 3 kids in this place. Sharing a room would be tough for 2 children just due to the size. Children don’t stay small forever, which would make space even more important. This isn’t Peter Pan where the Darling children share a room bigger than our master. These are townhouse rooms which are at most 10×10 spaces.
So if we did want to have more than 2 children we would likely need to move. Unless we are willing to drive further away from the city, which we don’t want to because long commutes suck, we would have to take on a bigger mortgage for a bigger house. So going back to the goal that we have to pay off our mortgage fast, is it in direct conflict with a possible move? Which makes me wonder, does paying a mortgage off early make sense if you are going to take on another one?
In an effort to work this out myself I decided to write about it. Our situation is unique like most people’s so don’t worry too much if this doesn’t apply to your situation.
My main concern is that if you are rushing to be mortgage free and you are going to take on another mortgage in the future you could be missing some returns from investing. Now if you are able to throw lots of money into your investment accounts or have a good pension and still can get rid of your mortgage faster than your amortization, then by all means continue what you are doing. But most people don’t have that kind of income so they usually decide to focus on one thing or another. And since lots of people rush to be mortgage free and don’t invest nearly enough you could be short-changing yourself with your investment growth.
Your House Won’t Make You Rich:
Another concern is that for many Canadians housing is the only path to wealth. Honestly if you bought a house in the 80s or 90s in Canada you have likely made a lot of money on real estate. So therefore you believe it is the bees-knees and the key to wealth. This message is constantly repeated to the younger generation ad nauseam. However a house is not money until you sell it and you have to live somewhere. Unless you make a good amount of money when you sell and downgrade to a cheaper house your house isn’t going to make consistent gains for you the way investing will.
We’ve Been Down This Road Before:
We had to make this decision when we were facing a loss of income. Your retirement savings are optional, your mortgage isn’t. Some of the thoughts we had at the time were if we were mortgage free we could invest more money into our savings so if we do that quickly it frees up cash flow to invest later in life. The downside to this is that you run out of time for compound interest and miss bull market runs and bear markets were you can have money to invest.
Unsure For Now:
After all this said I don’t think we have a solid answer however we need to decide on our family plans to make a decision on our housing. We will still review our budgets to make sure we are meeting all of our goals, including retirement and mortgage free life.
What do you think? Does it make sense to rush to pay off your mortgage when you are planning on taking on another mortgage in the future?