Should you Pay off your House?

Introduction

Welcome back to another episode of Black Girl fly. I'm your girl Tanisha Nepal. And I'm Shana Dixon. In so today we're going to talk about a pretty, I don't want to call it controversial, but if you are part of the Dave Ramsey fan, this is baby. Step number six, I think which is pay off your home. And so we want to talk about it. So I don't even think it just about Dave Ramsey, though. Like, I think I grew up thinking that you had to pay like, you're like, I'm gonna pay off that mortgage.

Really? You heard that? I never heard that I buy houses.

I mean that I was too young to really even know what's going on. Like

I do. I do feel like I always thought you always paid off your house. Absolutely. Never thought about very concrete.

Like, like, people think if I'm doing the right thing, I'm paying my bills. I'm paying off the debts that I owe. And that's doing the right thing. Right?

I mean, it makes sense, right? Like now I when I think about it, I guess but when I was a kid, I never thought about it. I just thought you have bills every month and your housing is just, this is just a static item in your budget until you die. This is a very important note here folks like I am a renter and thoughts about this conversation. But But I honestly think it's okay to rent. Right?

I do. I'm learning. Well, let me rephrase it. So everything I just said was about like, what I was trained to believe it's not what I believe now. Right?

But I think now but so. So now

Money is a game

I'm like, do this, this whole money thing?

Yeah, the things that I've been learning, and I'm just like, there's so much more that I don't even know. It's crazy, like basic stuff, too. Like I was thinking, That sounds really bad. But I was thinking the other day like I was like last Monday, right? Like it was like my kids clothes. I only buy them clothes when they need them. Like, I remember growing up, it was a seasonal thing. You got new clothes at this time you get new clothes this time, but this time cool clothes.

Yes, Lord. Now we get clothes every like two months.

But but no. So so it really came down. I was thinking about my doing the same way. And I think that is really fundamental in this whole money thing that I thought before pay your bills on time and everything right? But something recently that happened, Charles wanting to apply for a big loan for somebody. And he's, he's not credit. Like that's not his thing. And so he was just like, I'm just gonna hold tight. So he applied. And I was like, What did you apply? We need to plan for you. I just applied it was cool. It is very easy. They just run your credit tell you yes or no. Like very simple.

No. And like he literally looked at me, he's like this dude. And I was like, Well, okay, let me explain this. Let me back up. I was like, you know, your credit scores made a lot of things. And some of the things you can manipulate fairly quickly. But you got to know, like, you got to know I'm flying to the stadium and go do this stuff, and then go apply to the thing. And so, so we sat down, so he actually by the way, he got rejected, and also he got rejected because we just maxed out the credit card. Right. And we I was gonna pay it off on Thursday, but you didn't tell me you were doing this thing. And, and he was like, Oh, he's like maxed out a credit card. Does that? I do. That's 50 to 60 points.

Yes, yes. Oh, it's just I mean to money wise. It's

okay. That's a game. And it's going back to the question about should you pay off your home? I don't think you should.

Access to Money gives you Power

Yeah, I mean, it and I mentioned Dave Ramsey. Because y'all whenever I get into something, I become an avid into something. And so I was an avid Dave Ramsey follower for about, you know, two weeks. Okay. levelogger the day might have been to see but I'm just saying like, I really believe like that was the right thing to do. But the more that I learned about real estate, I was like, like, access to money, gives you so much power and opportunity in the world that we live in right now in probably They have always lived in, we just didn't realize it. And so when I think about, you know, renting versus owning, first of all, I'm just like, number one, I asked my landlord for light bulbs, like, I'm not a person who should have a house.

Because if ever light bulb goes off, who she gonna call?

Oh, like, right, I will have a landlord who can change my light bulbs, but I pay people to do my line. And she was like, something that looks like a lot of work.

That was a lot of work made me do it one time. One time, though.

It was picking up leaves. And that was so so I get that. So everybody should know you just gotta know, like, West for you. I think but but that's not about the home. It's about home ownership period. But I also have a financial reason behind it. But I want to go back to well, yeah, so like, for me,

I think he said something that is so profound that I didn't realize before, but access to cash. So so it's not that I don't believe like so. Hear me clearly pay your bills on time, pay your bills on time, because that stuff will impact your credit also, so So pay your bills. But what I found is I learned about interest rates. And I learned about like, like tax deductions and whatnot. So intrinsically, like access to cash is key. And an example that I'll give you is when we just had, because I had cash in the bank, I could get this house for X amount of dollars. Whereas if I had to get a loan, I wouldn't believe that same house in that same house would cost me 40%. More. Right. And I just had the scenario a couple months back, and it would take you much more time. Yeah, to have to get it. Right. Like if you had to make a quick decision with cash in 10 days, yes, it with a mortgage, I think it's a minimum of like 60 days, now they have rules. And that's such a great example. So we did just go through this with a property. But coming out of that I actually revamped my money philosophy for my business. Yeah. And so the way that I look at money for business is like you have cash cash, like physical cash dollars that are available to you in liquid, you have low interest cash that you can access pretty easily. But the interest rate isn't very high. Some things that fall into that could be a HELOC. Could be your retirement credit, equity line of credit is that he like it could be your retirement account, it could be some government loans have very low interest rates, right. And then there's high interest rate cash that you have credit cards, lines of credit, like these things, which you can probably get more of, but there's also a higher cost to have those Yeah, right. And so when I looked at those three forms of cash, which I was like, Man, I actually never thought of, like, they're three different types of cash, they're probably even more, but I was like, well, you would probably use these different forms of cash for different things. And in different scenarios in this in this scenario, I was gonna say even even to that's also on cash King, right? So you have cash, you can get things. And I put that across the board. I'm getting cars for much cheaper because

I walked in there with some cash,

right? That's a low interest, like formal cash as well. Car interest. Yeah, car loans,

like I said, before houses, and all these things are guys going back our principles, our asset that can make you money. So what I'm getting to with low interest rate and mortgage ally, and that'll be my mortgages had the lowest interest rate out there. And not only that, but the interest is tax deductible, right? Meaning that if you pay an interest on your house, whatever your tax rate is, you actually deduct that additional money, right that you save in tax consequences out of what you're paying the government. So it means that that 4% interest rate, you just went down to 3% interest rate because your tax savings on it. And so you're getting money in your home, that you're borrowing for 3%. Now, let me tell you a little bit about about the investment game. You can go buy a car and put it on what's that car with? Toro, Toro, and you make 20% Exact money that you borrowed at 3% out of your home right away. But every month you're paying that mortgage. Yeah, paying the mortgage. You still live there. They didn't take any rights away from you. Exactly. Every month. You're paying that you're paying 3% And you're putting your car on Turo because you were able to get 20 Extra 1000 out and get a car making 20% on that. So that's that's gravy, that 70% is gravy. Yeah. And those are just some things I never thought about when you pay off your home. Right? Homeownership is good, but you want to pay it off.

And that and that's it. So I think what we're both saying is like, no, it's actually not good to buy to pay off your home, if you can out earn the interest in other areas. And I would say the most recent revelation that I had is in my business My percent, like, return on investment is like 1,000%. Right? So literally investing back into myself and into my business is going to out earn all those three forms of cash that we talked about in any other form of cash, right? And so in this case, it's actually just better to bet on myself rather than to put all that money into a home. Right? And so whenever you can out earn your interest, you always want to do that.

Well, I was gonna say another thing. So I thought I told you that people who use the different forms of money, they're different circumstances. Right. And so I think I think it's important talk about, yeah, that if you have cash in the bank, by the way, yeah, the banks will loan you more money.

Yeah, they like there's a reason to keep some cash in the mail, like,

actually her, you don't keep money on high interest credit cards, which means the rounds are low, and she's not paying interest on that money. She got money in the bank. So if something happens, and we can just grab that money out, so she is less risky. And so we're going to give her a better interest rate, we're going to give her more cash, because we think that she has the ability to repay us. And that's a different decision than somebody who don't have any cash in the bank, and your car breaks down. And you need to get a credit card now to cover that they're gonna be like, Oh, she got a buddy. Yeah, no, let me get rid of this 21% interest credit card, and it creates a cycle. And then that thing that you were doing that emergency that you wrote me that credit card from that interest, that 21% interest is outpacing the, the ROI on that car repair

that you just did. Exactly. Does that make sense? Yeah, that makes complete sense. I hope we didn't lose y'all on that one. You got to know, you just got to know how the money works. So that might be like 202.

But, guys, I think it's important. But when you stress when you tighten you struggling, people know us tight and struggling, and they are going to use you they are going to get as much out of you as they can because you know, they know that you're compromised, that you're going to do things now because of the situation that you're in, that you wouldn't have done if you weren't in this situation.

Absolutely. Payday Loans,

payday loans. Yeah, like a great example.

I mean, it's predatory. And we said in the last episode, though, is that people will use you, they will get what they can, it is an opportunity for them. Absolutely, to make some money.

How can you Play the Game?

And so I would I would ask you, what do you think are some things that people can do to kind of put themselves in the right position? To really, y'all play the game? And have fun with it? Because it is

to have you out on this? Because I think we touched on it with our own situation. But I do think it's more than say, I don't think homeownership isn't for everybody, like I used to think it was. But it actually was a little realization to myself that I wouldn't be doing so well. It was just speaking with homeownership, but you have to be prepared for the purchase. People say oh, you can get a home a little money down. But there are situations that can really put you in a bad place by taking on a responsibility like homeownership. So I'd say the first thing is is guys, homeownership is not for everyone. And I'd say you know, people will always load you more money for home than then what you can probably actually afford, right. So be conscientious of the amount of home that you take on and also have an emergency fund because stuff will happen. And it's almost always unexpected. Right? In the homeowner situation. I didn't want to I did want to say that because I think that's important. But getting to the financial benefits. That's you're asking, right?

I mean, I would say How should people position themselves, you know, to take advantage of the benefits that we're talking about?

Yeah, I think there's a lot that you can do. So I think I think the things I said just now really stay into that is make sure you're in the right position to purchase. So and then when you do purchase. There are important things to consider. There's a high correlation between school district and home value and appreciation of your homes. I hate to say this, but it is true. So I want you to know that predominantly black neighborhoods do not appreciate as much as other neighborhoods do. It's true, sad fact. But it is reality. So keep that in mind. Also when you purchase a home, like the majority of the benefit, and in this and I want you guys to think about this is that it's another way to earn money. And the cool thing about it is you can earn two One is that you're paying down that debt. So every, every month that you're paying your mortgage payment, a portion of that goes to so what they call your principal, or that's like the amount you borrowed. And then the other thing is appreciation that as time goes on, you have to acknowledge that prices go up. And in the housing market, I want to say this, because I think people don't always be truthful. And it's so emotional. It's so like, the polars is what people get like polar opposites of what people really understand. But on average, houses have continued to grow steadily. Over time, there's never been a huge decline that has not rebound to a trajectory that is positive for appreciation and home value. And so those are ways to earn money and put in layman's term, you go to work every day, you get 1000 bucks, your home can grow in value by five bucks a day, and you did nothing but live there and pay your mortgage every month. So it's just another way for you to earn value. So I was gonna say, utilize that. And, and do it because

Summary

yeah, I think the only thing that I would, I mean, it's not really add to that, but kind of summarize and saying, your home is an investment. And I think a lot of people think a home is just a home to live in. And it's just the residents but we should really be thinking about it as one of the largest assets that we will ever acquire in our lifetime. The other biggest investment I think that exists in your life is your partner. But we're not gonna go there but that's it yourself as well. Yeah, definitely yourself. I think. Okay, we get it was one Yeah, it was like we get into another episode now. So we're gonna we're just gonna close it down. Here, guys. So remember your home is an investment, not just a place to live in and leverage that cash that you have in your home? Yes, don't pay it off. So folks, until next time, listen to us. You gotten used to Nicole and we are a black girl.