How Much Money Should I Put Into My House?

I’m sorry to break it to you, but you’ll never know the definitive answer to this question. It is the ultimate unanswerable question, and it’ll haunt you throughout your life as a homeowner. Tough breaks, but that’s just how it is.

See, when you first find your dream home, the question is: how much should you put down? Then, it becomes: how much should you spend on renovations? Then: should we pay off the mortgage faster or invest our money? Then, when your house is paid off: should we take a home equity loan to finance such-and-such project/business?

And the most frustrating thing is that the only answer to all these questions is: It Depends.

I know. Frustrating, right?

Everyone grapples with this question, partially because it just seems so nice not to have a mortgage hanging over your head. But then you start to realize how much you’d have to give up in your everyday life in order to offload that mortgage, and it starts feeling less desirable.

My general position is this. You have to look at your real estate holding as an investment. And what are you supposed to do with investments? Diversify! Therefore, you don’t want to put all of your money into real estate. Not only is it one of the least liquid assets (meaning it’s hard to access your cash), putting money into a house can potentially imprison you there. If you’re not sure you want to live in that house the rest of your life, you may want to reconsider tying up all your money there.

But that’s just me.

A reader recently sent me an interesting story of one man who was so committed to a debt-free life, he paid off his 2nd mortgage in three years. Despite his single-minded commitment, he still notes that aggressively paying down a mortgage isn’t the smart choice for everyone.

For an excellent rundown of the popular wisdom on the topic from personal finance heavyweights, check out Get Rich Slowly’s expert advice redux.
So readers, what do you think? Are you planning to pay down your debt fast and furiously, or are you ok paying interest in exchange for flexibility?