When we purchased our first home, we did so using a 15-year fixed rate mortgage. During our three-year stint in that home, we signed up for a bi-weekly mortgage payment plan and made additional payments to reduce the amount that we were paying in interest on our home.
While we lost money when we sold that home in 2011, we still managed to have enough in equity to buy our next downsized home outright. This means that we have quite a bit of home equity, but to us, it's about more than that.
Home Equity, Sure it's Great, but…
Don't get me wrong, having 100 percent equity in our home is great. It acts as a wonderful financial cushion and available reserve should we need to take out a loan on it or sell our home to recoup the cash. This is a great feeling and having no mortgage is a wonderful weight lifted from our shoulders; however, there is more to owning our home outright than just the stress relief it provides.
No Home Payments
So equity is one advantage, but so is not having any mortgage payments. This is a huge financial perk for us since it allows us to cut our overall monthly family expenses my about 50 percent compared to when we were paying a mortgage. This is also a time and money saver as it cuts out time checking our mortgage balance, insuring payments arrive on time, and eliminates a bank managed escrow account for property taxes and insurance that always seemed to be over or underfunded.
More Freedom and Options
Without regular mortgage payments, we're provided with more options and opportunities when it comes to our money. Since we don't have to put thousands of extra dollars each year toward our home, we can put this money elsewhere. Whether it's toward retirement savings, college savings for the kids, car repairs, home improvements, a vacation, or an emergency fund, without a mortgage we're given more freedom over how we use our money and for what.
Asset Protection
It's kind of nice having a large portion of our personal assets tucked safely away in our home equity. This money is out of reach and not easily accessible were it to be sitting in a savings or checking account. And I don't tend to worry about it as I would if this money was in stock market investments. Therefore, it's a relatively protected asset both in the form of investment as well as keeping it out of sight and out of mind. We know it's there if we really need it, but it's kind of a pain to get to since it would either require taking out some sort of loan against it or selling our property to obtain it, which are both certainly detractors both in the way of time and effort to us touching our home's equity.
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