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A radical idea most people don’t implement
For most, this works, but it also takes longer to pay off the house, which many don’t mind…A large group of people focus on the resale value of their home more than the value they could receive from paying it off and renting it out.
A Radical Idea: Before you buy your home, have 50% of the home value in financial assets.
This might not make sense to many, but here’s why it might to others:
1. Your Networth Is Back To Positive Faster
If your home is worth 500k, and you have 250k saved, you could quickly bring your net worth out of the red in a matter of 10 years or less. Many will be able to do it much faster.
After paying 50% of your mortgage, not only will your house have 50% left to pay, but you will have 50% home equity (not including additional equity as the property value increases).
You will also have half of the original home price stocked away in your financial portfolio, plus any additional savings you accumulated while paying 50% of your mortgage off.
You really can’t lose.
2. Decrease Your Financial Risk
When you have 50% or more of your home value in financial assets, you decrease your financial risk.
Let’s say you lose your job or a primary income source; by having 50% of the home value in savings, you don’t have to feel the unnecessary pressure many homeowners feel when they lose income.
Instead of being “stuck” with a mortgage, you have a mortgage you can manage with or without your primary income source for a reasonable amount of time.
3. Buy Your Next Piece Of Real Estate Faster
The more capital and equity you have, the more you can invest in other real estate.
If you decide the real estate game is for you, having a significant amount of capital creates more investment opportunities for you to explore.
4. Get Out Of Debt Faster
Mortgages have frequently been classified as “good” debt, but debt is debt.
There is a way to leverage debt for your benefit. One way to do this is with home equity (i.e., investing in another property with your home’s equity).
Two primary routes people take with their home:
Sell their home.
Wait 30+ years to pay off their home.
Both options perpetuate the length of time people stay in debt.
Other options to explore:
Keep your home, and obtain more property.
Pay off the home in less than 30 years to earn income on the property sooner.
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This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.