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Debt-Free Living: Do You NEED a Mortgage?

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Last week I posted my thoughts on how to go to college without debt, specifically addressing the major discussion points that came out of Stacy’s post on what the Bible says about debt.  I promised this week I’d talk about whether or not you need a mortgage to buy a house, which was the other major point of contention based on the comments from her article.  So, do you NEED a mortgage to buy a house?

Five years ago this question would have never come up.  The housing market was on fire and it looked like nothing could go wrong.  Lenders were making profits, people were flipping houses (buying and reselling quickly at a profit) and life was good.  That was then.  Now, the world of home mortgages and home ownership is much different.  Secured loans (a loan backed by some sort of asset like home or car) are still much safer to most lenders than an unsecured loan (personal loan, credit card, etc.) and a home mortgage is one of the safest bets for a lender.  Why?  Because a home generally goes up in value rather than decreasing in value over time.  So even though your loan balance is decreasing as you make payments, your home’s value is remaining stable or increasing.  But remember 2008?  The housing meltdown made a mess of what everybody thought about the mortgage market.  Things were way out of balance and now the housing market is saturated with homes worth less than the loan balance.  This scared banks (and everybody else).

Now the question is often asked of whether buying a home makes sense and if so, what about homeowner financing?  I strongly believe in home ownership.  I do not question the validity of renting in many situations (see my post about renting vs. buying), but I do believe owning your own home is a great investment.  Do you need a loan to do so?  Maybe.  Of course if you look at your bank account balance today and there is $0.32 to be found, chances are you couldn’t buy a house with cash.  At the same time, I know it is NOT impossible to buy a home with cash, even if you don’t make a huge salary.  Stacy and I are getting ready (at 30 and 31 years of age, respectively) to pay 100% cash for our next home.  So I suspect most of you reading this aren’t in a financial position to go pay cash for a house right now, but I also suspect you’d like to know how to get there.  So let’s discuss how you can eventually (if not now) buy a home without a mortgage.

First, you have to recognize it IS possible.  If you expect your first home to be your dream home, you need to adjust your thinking.  If you buy a house without debt, chances are you’ll have to lower your standards a little at first, moving up gradually over the course of some years.  In other words, be willing to live within your means and let your friends look at you a little weird for a while.

Next, you have to commit to do it.  If you don’t currently own a home, that means renting cheap, saving every penny you can for a while and eventually buying something cheaper than you would/could with a loan.  But no matter how small that house is, if you paid cash for it, it means no more rent payments.  That gives you greater ability to save for your next house.  Repeat that process a few times and you’re eventually in a nice, paid-for house without debt.  If you already “own” a home (with a mortgage), that means scraping together every extra penny toward paying it off early, and then committing to live there a while and save toward the next one.

Last, never forget the math.  In this process, you will get discouraged.  Stacy and I are currently home shopping with a cash budget and it seems there are all these beautiful homes just above our budget.  When I see them, I have to remind myself that taking out a loan costs me money in interest and adds risk to our financial situation.  About the math – consider this.  If you take out a modest 15-year, $100,000 mortgage at an interest rate of 5%, you’ll pay almost $5,000 in interest the first year you have that loan.  That’s JUST interest, and yes, that means you’d have to pay over $400 per month in INTEREST!

So let me sum it up by saying this.  You CAN buy a home without debt.  Like buying a car or any other really big ticket item, chances are you can’t do it the first time around unless you have help.  But I want to challenge you to really think about it and consider making the commitment to never have a mortgage after the one you have now (or will have with your first home purchase).  It may mean being a little weird to your friends and it may mean it takes you longer before you can say you live in the home you always wanted.  So what?

Since this is a pretty controversial subject, I’d love to hear your input.  You’re welcome to agree, disagree, and add your thoughts in any way that’s constructive.

*This post is linked at Homestead Barn Hop on The Prairie Homestead, at Frugal Days Sustainable Ways at Frugally Sustainable, at Frugal Fridays on Marsha’s Spot, and at Works For Me Wednesday on We Are That Family.

Comment Policy: I love hearing your thoughts and input on what I write. Since I write about what works at my house, what pleases my handsome hubby and darling children; I'm sure we'll disagree sometimes. In those cases, do what's right for you and yours. As with any form of communication, please only post comments that move the discussion in a positive direction.

About Barry

Barry is the husband half of the Stacy Makes Cents team, responsible for all the marketing, website development, sanity management and taste testing. Barry writes about personal finance issues, helping people get out of debt, live on a budget and make the most of every cent that comes into their hands. He is the author of From Debtor to Better: The Details of Debt and How to Get Out! and writes periodically on his own site, Debtor to Better.


  1. Our neighbor bought her home without debt about 30 years ago. She and her husband did have to wait a long time, but it was worth it for them.

    • I just love stories like that! I know it IS possible and seeing others succeed in big ways like that makes my day.

  2. That is our goal and yes most of our friends think that we are weird! Oh well, they all have something weird about them too! I would love to not pay someone $534 a month for my home. We hope to have all of our bills paid off by 2015!!! If that is the year, with a lot of hard work it can be done! Oh and a note on the college (I didn’t read that one), I told my mother-in-law that instead of spending $150 to $500 on Christmas gifts for each kid she should add to a savings account or give savings bonds and only buy 1 or 2 gifts! Then we would have to worry about going into debt for college or having a million toys that no one plays with!

    • Should say wouldn’t have to worry about going into debt!

    • As Stacy’s bumper sticker says, “Debt is Normal. Be Weird!” Great idea on the Christmas gifts. My aunt buys a few cheap, small toys for Annie to play with then puts money in her 529 (College Savings). I LOVE THAT.

  3. In order to buy a home without a mortgage, you do first have to get out of debt. I do not see how one could begin saving while paying other debts. It has to happen in the right order is that correct?

    • Thanks for asking about this, Janet. You’re right on. If you have a bunch of other debts, you probably can’t (shouldn’t) buy a house with cash. If you really have debt problems, you may not even want to try to buy a house at all (see the post I referenced in the article about renting vs. buying).

  4. I can’t wait to have my husband read this, I think your ideas & concepts (along w/ proof that it CAN work) are great!!

  5. jade baker says:

    Hey Barry! Great article and congrats to you guys! We’re currently throwing money at our car loan like crazy (last remaining debt!), craigs listing things we don’t need, rolling change, you name it! Not quite there but it’s coming off with “gazelle intensity” 😉 Currently renting and weighing our options and considering building a home and appreciate this article to keep things in perspective. Hope you three are doing well!

  6. Sound advice although we didn’t go that route. Our last home we sold for more than our current one, we are making extra payments each month on the 15 year loan with a goal of under 10 years to pay it off. Not as nice as our last one but….just saying.

  7. Mommytomany says:

    Love this article! We were able to pay off our home two weeks ago. We made extra principle payments(one I remember that was a tiny, $4.71), we “live like no one else, so we can live like no one else” and were able to own our home outright after less than 5 years. It really hasn’t set in yet but the security of having a “place to hang your hat” is wonderful. When you don’t have that peace in your life it is difficult to understand. So happy for your family and the information you are sharing with others!

  8. I very much agree with this. My husband & I built our current home from ground up. While the plans we have are complete, for now we built just what we need for us and our 4 children. It’s 3 bedrooms and 1 bath for now (my 3 girls share a room.) We are no longer paying rent, and the plans are in place to finish as we have cash to do it. It’s a simple, country, home on 1 acre but it’s our and we love it!

  9. TeresaAngelina says:

    It is a good challenge Barry. I bought my first home, a condo mind you, almost 2 years ago. And it is very modest and was bought for just under a quarter million. Yes that is what I said. I have a high ratio mortgage. Why did I do this? Because my rent was becoming a mortgage payment in itself – and it too was modest. Where I live, the Greater Vancouver area, is one of the most expensive places to live. And why do I live here? Jobs of course. But, though I read yours and the others comments in great puzzlement – because it will not happen here – I am still challenged at the thought of putting every other bit on the mortgage. The other bits will happen after the emergency fund is well established. And the budget for 2012 has been working very well and has included this essential. I however cannot imagine saving the next quarter million or more to buy the “dream home” – just becoming mortgage free is enough of a dream for now.

  10. Hi Barry,
    I am agree with your all points. I really feel buying a home without debt lead you to a lot to manage your daily life. So what I feel mortgage is like a help where you can buy a house happily, lead your as usual life and gives you more flexibility of repayment. Excellent post. Thanks.

  11. In my area, which is over-priced, my husband and I would have to save for several years (on his current salary) just for the down-payment of a home, and I’m not talking about a nice home. I’m talking about a condo or town-house with just enough room for all of us in a safe neighborhood. If we wanted to save and buy a house in cash, we’d probably be at least 50 before that could happen, lol. Rent is ridiculous, too, at least $1400-1500/month for an apartment, $2k/month for a home. So we feel really stuck w/o any good housing options, and are currently renting an OK apartment that’s well-priced because of our county’s median income housing program. We are grateful for this inexpensive place to live right now, but hopeful we don’t have to live here forever! We would love to move to a cheaper area, but so far God hasn’t opened those doors. And while buying a house is not an option right now, we’d love to consider renting, but again, not an option: too expensive. God is really teaching us contentment and waiting on him during this season!

    • It’s good you point this out, Anne. Not everyone can or should buy a home…and not just because of misbehavior or plans on transitioning to another area. Maybe it just doesn’t make good sense to buy where you are because prices are just too high! Be patient and God will provide the opportunity when He is ready.

  12. you can build a durable cob house from the material under your feet, very inexpensive method and is more durable than most conventional methods of building, research cob houses, it is amazing structure.

  13. What do you think about this?
    Our 2 oldest children are 21 and 19. Neither are attending college (their choice). We suggested they buy a full duplex and each reside in one side. We have the security of them being close, while each having their own space.
    They both have good jobs, and savings. Is this a viable option to get one out of my basement and free the other ones room for my hubby to have a home office. He works from home and we have 7 children…l

    Love your site. You are both awesome!

    • Sounds like the duplex would be an investment for them and housing (for now). As long as the math works to let them afford to do it and they get along well enough to be able to share a wall (or be willing to have a renter when (not if) one of them moves out, sounds like it could be a workable plan. My only caution: put IN WRITING everything you plan to do with the property and who is responsible for what. Even if things are perfect in their relationship now, there will be some sort of disagreement and they need to tackle these issues now, not later.

      • Thanks Barry. You make a good point.
        We will keep that idea tucked in our hat for when the time comes.

        Congrats on the little bundle of joy!

  14. We paid $460,000 two years ago for our modest suburban Vancouver house. It’s assessed at $500,000 now and would sell for more than that. Your idea here is nice but not applicable in all markets. How does a family save up half a million bucks?

    • The ideas and principles associated with saving $500,000 are the same as those when you’re saving $50,000. The process is no different, although the timeline may be. Generally speaking, when housing and other cost of living expenses are extremely high in an area, salaries are also much higher than average. Consider New York City. You’ll also notice that those who rent vs. those who buy is also much different in those areas because of the higher housing costs. As I said in my post, I don’t expect someone to be able to buy their first home debt free (although it is a nice goal to have). The point of my post is to help you (anyone) see that if you can buy a home with a mortgage, with some discipline and pretty hard-core savings for a season, you (anyone) can buy a home without one…whether it be your first or fifth house. The goal is eventually to be FREE from the chains of debt.

  15. Veronica says:

    We’re in the process of refinancing to a 15 year mortgage — which is ‘good enough’ for us because it means we’ll save $254,000 on interest (compared to a 30 year loan)! Plus, we’ll have our house paid off in just 15 years (I’ll be 39).
    A friend of mine was just telling me about a friend of hers who recently took out a 50 (FIFTY) year mortgage!!

    • Whew – a 50-year mortgage is NUTS! Congrats on your 15-year journey. I bet you’ll find you can turn up the intensity a little and be done with it in 12 or 13 (maybe less if you go a little crazy with it).

  16. I can’t see any possible way to not get a loan to buy a home unless you are already wealthy.
    Yes, I can see living way below your means and saving for it, but that would just take years and years and years.
    Maybe you can live with a relative and pay very little to live with them(experience tells me that this just doesn’t work out), but otherwise, rent (at least here) is about the same as mortgage, sometimes more!
    I’m so used to being poor….I have lived far below the poverty level all of my adult life. I don’t know what level we are on right now—I got married this past July and he earns $45,000 a year. We also bought this house and our mortgage is $613 a month. We do pay every other Friday auto pay half of the mortgage. This gives us just one extra payment per year, which they say will take 7 or 8 years off of the 30 years.
    You make me think though on how we might be able to pay at least another month extra each year as well.
    It’s hard for me to think to long term as far as saving because none of us know whether we will even be on this earn tomorrow, let alone next year, 5 years from now etc.

    • Marsha, I see where you’re coming from about the difficulty buying a house with cash when you aren’t “wealthy” or rent for years and years. I wrote this post as a challenge to shake up the popular mentality that says you always have to have a mortgage payment – because I know that just isn’t true. If you’re buying your first home, it is possibleto pay cash, but it is HARD and requires a lot of saving (and either renting or living with family while you save). My point of the entire article is to get people to think about it (which you did). Having said all that, I’ve shared before that Stacy and I bought our first home with a mortgage and just worked like crazy to pay it off quickly (we bought in July 2004 and paid it off in August 2011).
      When we bought the house, we were making $30,000 per year. You can imagine things were tight on that income. That’s what helped us forced us to get good at budgeting and living frugally. It became a way of life and, as our income has increased, we’ve been able to kill debt, save and give like we never thought possible. God has been GOOD to us. Sorry for my rambling…I want to encourage you to sett a goal to kill that debt as quickly as possible. I promise it is worth the sacrifice and once you’ve paid for your home, never look back!

  17. I am a serious frugalista, both by need and by preference. Seven years ago I found myself suddenly single (parenting), disabled, and needing to very suddenly do a SERIOUS downsize. This is when being frugal is helpful! I had a tiny long-term disability insurance plan ($12,000.00 per year), which was enough, carefully managed to support us. I use no credit and have no debt. I turned a 475 sq foot one bedroom apartment into a small stylish 2 bedroom apartment. Sewing, gardening, and cooking while avoiding meat,tobacco, alcohol, processed food, recreational shopping, and men(!) is a great way to get healthy and and live a good simple life.

    I am saving money to build my own tiny and green home on wheels (8′ x 24′) now. In 5 years I will be an empty-nester and have $8000.00 cash. With a $15000.00 loan I can complete my house and then I can redirect $500.00 per month towards debt repayment. I think it’s doable, and if I can do it on 12000.00 a year while raising a child, anyone can.

    Living this way requires planning, self-discipline, and lots of time, but it’s a good life. In fact, I really think that this is cross-culturally and historically a fairly average kind of life; it’s the post-WWII orgy of rampant consumerism which is the unsustainable (and frankly, suicidal) historical blip. I don’t think of myself as unusual, just basically as a good, old-fashioned, and careful household-manager.

    I am LOVING your blog!

    All the best,

  18. Thank you Stacy! It’s so nice that now, more and more, I am not the odd one out – the one with the funny fuddy-duddy, granola-crunchy, weird ideas. Now we are ‘frugalistas’, creative instead of cheap. And there are whole communities of us out there connected by the web! (I have to work hard to not be unconscionably smug…) Happy Mother’s Day! ~Renata

  19. I appreciate this post a lot! My husband and I live in an old house right now that he inherited from his grandfather. It is hard to heat and has a ton of problems. I’ve been wanting to buy a modular home and move onto our property but worry about having a mortgage. It will be so different from owning a home. I think I will take it slow and save up to buy the home. It will be better that way, because I don’t want to be indebted to anyone.

  20. No one should get a mortgage. Get rid of those and property taxes and the country will be on a better path to sound finances.

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