I never thought I’d buy a property cash. Yet this is my second one. Right out of college, I had $25K in savings, thanks to a lot of student jobs, and the French system’s cheap tuition. I wanted to put the money down for a flat, but since my work contract was ending with the company that had paid for my master’s degree, and I planned on traveling the world for a year, the bank was not too fond of the idea.
So I went looking, to see what $25K saved up would buy me. If I wanted something near Paris, the answer was almost nothing, but a 20sqm studio flat in one of the worst neighborhoods of the country, about 15 miles from the center. I did way too little research, blinded by the perspective of passive income, and listened too much to what the realtor was saying.
He said the neighborhood had reached the bottom, what used to be a working class residence was now overcrowded with illegal migrants but thanks to a lot of public funds, it would get better in 3-5 years. In the meanwhile, I would get a rental return of nearly 10%, something unheard of in the center of Paris.
I went for it. Had I done ALL my homework, I would have learned that the council AND the homeowners’ association were deeply in debt, that they were poorly administrated and both local taxes and condo fees were among the highest of the country, basically to pay interests on the debt.
I have to admit I freaked out a little, but I went traveling anyway, and for 10 years the property was managed professionally, so I didn’t have to worry about anything. I had an insurance to cover the rent which proved useful since the tenant was not so inclined to pay, then died, then his widow squatted for a while until the police got her out in March 2012.
Let’s not digress. Having no mortgage gave me peace of mind for those 10 years. I could afford the condo fees thanks to the rent and anything on top was for me. No budget stretch, no ”what if the tenant leaves”, to be honest I barely reviewed the statement the rental agency sent over, I just waited for my quarterly money transfer to kick in.
Then I spent a stressful six months looking for a buyer after the widow was evicted, but finally sold the place at the end of 2012. The proceeds allowed me to buy a place cash in Guatemala. I should say a home. My residence. For the first time, I am living in a place that I fully own. And it has a lot of benefits.
- I don’t have to pay a mortgage so all my would-be rent money can go into repairs and improvements to turn the place into a home.
- I can sleep at night knowing that even if I go broke I will still have a roof over my head. And some land to grow food, since the property came with 90 acres of land.
- I could take a loan against my home in case of financial hardship. Although I hope I will never have to, and will certainly not take a loan to buy a new car or take on some kind of consumer debt, my cash is invested in an appreciating asset (since we are working like crazy on it), and can be partially withdrawn to cover an emergency. Mortgage rates here are around 9-12% so it is a pretty healthy return on investment.
- I can rent it without asking my mortgage provider for an authorization, or them changing the rate to a buy-to-let mortgage.
- I can brag about it and paint the parcel red in Google Maps and say ”that little corner of the world is mine”.
Yes, that is exactly what I did!
- Even though monthly expenses are crazy at the moment with all the improvements, the ”survival” mode budget would be very low, I would say we can live with $250 each a quite basic life with no luxuries.
- It makes the financial future bright. Knowing I could weather any storm makes me want to take more risks, try to grow, start a business, invest… with a comfortable safety net in the form of a home. I admit it is not as liquid as a cash emergency fund although many people with emergency funds still have mortgages so it kind of evens out.
There are lots of mortgage options but the best one I think is having none.
Any other pros to having no mortgage?
This post was featured on The Frugal Farmer, Mom and Dad Money, Carnival of Wealth, thank you!
I salute your strategies of investing into real estate or parcel of land. Yes, you are correct without paying mortgage monthly, you have the peace of mind and worry free. It will not a big burden to your monthly budget.
I know you have a better financial future for all your sacrifices and investment endeavor.
I have definitely thought about what it would be like to have no mortgage and NOT having that cash outflow each month. It would be so much easier to save! Guess I better keep working on my side hustles until I get there 😉
I can’t wait to be without a mortgage. We will have so much more freedom to do…well…anything we want! That giant bill will be gone forever!
I also am mortgage free and it has allowed me to travel more and pay for a stupidly expensive daycare (which isn’t even that expensive compared to what my sister has to pay on the east coast!). To me it is really nice to know I only have to pay $1200 a year in property taxes to live in my home. It allows me to take on greater risk in my investments and maybe I’ll grow a pair and invest in something alternative like you have done with a coconut farm!
well, you have a carwash. maybe expand with other local businesses? laundromats aren’t too bad if you find a cheap (but good) location.
I would love to someday be mortgage free, well, I’m mortgage free right now but I’m still paying rent. I plan on saving up for a giant down payment so that I can become mortgage free as soon as possible. I think your strategy worked well for you!
We have talked a lot about what it would look like to not have our mortgage, so I can imagine how great it feels to not have one. I really the flexibility and not having that outflow would be two of the biggest benefits. As our business grows, this is something we’re definitely looking at doing.
Great stuff, and good work being able to afford your place with cash. Ridding yourself of that monthly obligation is so freeing, and like you said really allows you to use that money for other things. Holly and Greg have talked about this before too in terms of paying down their mortgage early. Though they may be able to get better returns elsewhere, the peace of mind of being debt free is worth it to them. I’m looking forward to getting there someday.
it is weird at first not to have to pay rent or mortgage to anyone but kind of awesome at the same time! and yes, doesn’t make financial sense.
Since we are still renters, we have no mortgage. But we are planning to get a house soon with a mortgage. I hope life treats us right, so we don’t have to have a mortgage. I don’t believe in having a mortgage forever. And think it’s an excuse for people when they say it’s smart to have a mortgage forever.
We definitely don’t want to have a mortgage forever. We’re aiming to have no mortgage by 30, we just have to buy the next house first!
Hello Pauline!
I hopped over to visit you after seeing your comment on GetRichSlowly.
You go girl.. I think it’s SMART to pay cash for your home.. and at your age! Wow.
~ darlene 🙂
Hi Darlene, welcome! Houses are cheap in Guatemala but still, if I upgrade I hope I can keep having a paid for roof over my head.
Leslie and I plan on living without a mortgage for many of the reasons you’ve listed above. We love the idea of not having to worry about losing a house if something happened to one of our incomes.
I certainly looking forward to the day we’re mortgage free. Being able to redirect that payment towards other things will be incredibly nice. And I love the google map with your land marked. It’s nice to truly own your own piece of land. 🙂
Being without a mortgage payment would be huge for us since it represents are biggest expense. We just refinanced for a 15-year, super-low interest rate loan and are discussing ways to get it paid off even sooner. We have yet to commit fully to a bare-bones lifestyle in order to make it happen, but it’s definitely appealing! Kudos to you for such a sweet spot in Guatemala.
I wouldn’t go bare bones for the sake of paying a super low mortgage. With inflation and tax credit, chances are the money is almost free. Sure it is a nice feeling but not worth extreme sacrifices imo.
Unfortunately I have two mortgages right now. As soon as we stop paying for adoptions we will be aggressively paying them down though. I can’t wait for the day I am in that place with no mortgage!
I find it really sad that adoption is so costly. In France it is 100% free, you only have to pay sometimes for a psych evaluation and well, the cost of travel if the kid is in another region. Surrogacy is forbidden too, you only know you are having a child once he is born and given away, whether it is a closed or open adoption, it avoids a lot of drama and disappointment when the birth mother changes her mind at the last minute.
We are lucky enough that our church subsidizes a large portion of the adoption costs, so it isn’t as expensive for us as most other people in the states.
I know a lot of people like the concept of no mortgage, but I like the idea of my money working for me. he homes in my area average a half million dollars. That is a lot of money just sitting there. If you can afford rent, a mortgage is not so much. Just keep your mortgage payment the size of rent. I did, although I will have it paid off in time for my retirement.
I am fully aware it makes no financial sense. I still have a mortgage on a rental and don’t plan on paying it off sooner. In Guatemala we are talking $50K for my share of the house and 90 acres of land (BF owns the other half) so it is not a big sacrifice to have that money sitting idly. Half a mil I would probably reconsider.
I like the freedom that would come with no mortgage and no debt. What a smart investment that first purchase turned out to be, even if you had some interesting things happen along the way!
beginner’s luck, really. Just when I started selling, the HOA happened to recover, sue bad debtors, clean the accounts… it helped reassuring the potential buyers it was not such a bad investment!
This is such a neat story and I completely agree that a paid off mortgage gives you peace of mind and a ton more freedom. Unfortunately, I think it’ll be a while before my wife and I are debt free, but we’re going to work really hard to get there sooner rather than later. Your place sounds awesome, by the way!
Thank you Jake, it is :). I love how peaceful and close to nature the house is, it is not for city dwellers but perfect for what I need.
Well done. Finding a home that you can be comfortable living in, and being able to stay there with no mortgage, is something most people should aspire to.
I think the key to your success is Guatamala, and the relatively cheap comparative prices to money you ‘earnt’ in France (from the sale, and working there before you bought, I’m assuming). Did you ever live in the apartment in Paris?
It’d be a long time til I’d be mortgage free, given my ‘taste’ (ie, being picky!) but I’m ok with it too. Instead, I need to have an emergency fund should I lose my job :s
no, I never lived there, it is really a bad area and it was rented for about $500, which covered most of my living expenses in nicer places. During that time I was mainly living abroad, Guatemala, Spain, UK, Morocco and back to Guatemala. My house here cost less than the Paris property, together with the 90 acres of land it comes out to about the same for my share of it (BF owns the other half), so for the price of 20sqm I got much, much more!
Wish I had my mortgage paid off. The truth is I’m only just beginning on mine, so I have a long way to go. Sigh!
Well done Pauline. They say we learn from our mistakes not our wins. I’m sure you won’t make that mistake again because you know research is very important in anything financial. We’re just waiting for my money transfer to pay it off now as you know but knowing we are pretty much mortgage free is a good feeling.
I love the idea of being mortgage free, but it’ll probably be around 20 years before that happens. If all goes well this will be around the time we can retire (early/mid 50’s). We could definitely retire sooner if we stayed in the condo, but we’d like to have a larger place so we can have family stay with us when they visit instead of camping or staying in a hotel. Although there are investments that could return more than we’d pay in mortgage interest I would prefer to have the peace of mind of not having a mortgage. Congrats!
thank you! Having extra space for occasional guests is something I did while living in the UK, but if you put together the cost of the extra room to buy, extra heating,taxes, maintenance, etc. it comes at a pretty high cost. It is a personal decision some people value highly because family drops by all the time, if I had to do it again, I would look for a house with an independent basement or unit I can rent short term to travelers in between family visits to offset some of the costs.
I didn’t realize your place was right on the water. That’s awesome! I applaud the European countries for their super low cost higher education systems. More people can complete their degrees and aren’t starting their lives out buried in debt. Nice job being mortgage free.
Thank you Sydney! Yes, I have my own little private beach, that is pretty neat 🙂
Great story. When I bought my first place, I let me realtor talk into buying too much of a house. Over 50% of my income was going towards the house. I ended up having a friend move in and pay rent just so I could make ends meet.
I think you pointed out of the biggest pro’s to not having a mortgage: a much lower cost of living. If you pay your mortgage off, that frees up thousands of dollars each year that you no longer need, making the amount you need to retire that much smaller. I can’t imagine going into retirement and still having a house payment.
I took my mum to the bank to pay off hers at 61 and she is so happy now. She had the cash in a low savings account but didn’t realize she could get rid of the mortgage. Now she saves the mortgage payment to rebuild savings and be debt free in retirement.
I can’t wait until we are mortgage free. People often say you should invest your money instead, especially if your mortgage rate is low like ours, but to us, the peace of mind trumps the possible money we could make. That peace alone, for us, is worth it!
Ha! I love the bit of humor that you can “brag about it.” Your humor is subtle, so one must read the post in its entirety or lose out! Tammy and could tell you a million cons of having a mortgage. Is there a downside of NOT having one? I am sure someone smart enough could twist words enough to make an argument for it, but they’d have to go way out the way to do so. We are making a plan to pay our townhouse off about 13 years early. It would save us over $32,000 in interest and we could then enjoy all those juicy benefits of which you speak!
There is a downside when you can get a very low rate on your mortgage. My UK mortgage is at 2.29% and I have a savings account at 3%, so if you add up inflation I would lose money by paying that mortgage early, better have the cash in savings. But there is no price tag on the awesome feeling of not owing your home.
Pauline, with the money you will save by not having a mortgage, perhaps you could coach people like CJ and I who prefer writing and guitar playing to finances??? 😉
Oh yeah, that’s what you’re doing right here on RFI for free. We are lucky ducks indeed!!! Thank you!
I think guitar playing and finances go hand in hand, like I wrote in a post about financial literacy. The better you become with your finances, the less money you need to achieve the same comfort and quality of life. Because you are not paying things on credit with outrageous rates, because you got rid of the clutter and items that do not bring you value, because you have minimized the waste in your life, you need less money, and can play more guitar, as you have more free time instead of working to pay for all those non essential things. To me money buys freedom and I want to preserve it, make it
I think guitar playing and finances go hand in hand, like I wrote in a post about financial literacy. The better you become with your finances, the less money you need to achieve the same comfort and quality of life. Because you are not paying things on credit with outrageous rates, because you got rid of the clutter and items that do not bring you value, because you have minimized the waste in your life, you need less money, and can play more guitar, as you have more free time instead of working to pay for all those non essential things. To me money buys freedom and I want to preserve it, make it last so it keeps buying me freedom. I don’t particularly like finances beyond the point where I maximize the value of my hard earned money.
Aha!!! Had not considered that. Thanks for your reply, Pauline.
Really? I’d rather be in debt for EVER than have any property in a country with such human rights violations. Sounds like blood money to me.
blood money? I bought the property to its rightful owner and have a legal deed, I did not expropriate poor people or bribed the land registry office to get a property title.
Being mortgage-free is not something I can imagine for myself in the near future – first up for me is getting rid of the student loan. So yes, definitely brag about it – it’s a huge accomplishment! If I were mortgage free, my bills would decrease dramatically and I would have a lot more flexibility in terms of work. I’d probably switch to doing short term contracts and using my free time to travel and enjoy my hobbies!
An internet marketer knows how to promote a
product or services in the world of social media so that they can get huge amount of traffic.
If you don’t want to devote your time moderating remarks, you might want
to disable them completely. As discussed earlier,
traditional marketing is less effective and expensive.
This is my first time visit at here and i am really pleassant
to read everthing at alone place.
I had a stroke this year (at 51 yrs old) and bought my dream home with cash last year. As I own disability insurance, my income is covered. I am so grateful I own my house! It has made life bearable economically and I don’t have to worry about economic downturns.