On a scale of one to Demogorgon, how uneasy does your mortgage make you feel? If it’s close to the flower-faced monster, you’re not alone. For many people, a mortgage is more than just a number — it’s the most money they will ever borrow, and it’s for a basic human need: shelter.
No surprise we can feel anxious, uncertain or even fearful when it comes to managing a home loan. But it’s important to keep those feelings in perspective.
Problems come when homeowners don’t think about the emotional reasons they’re making a decision, as well as the actual math, says Christine Hargrove, certified financial therapist and assistant director of the Love and Money Center at the University of Georgia. “That’s when people really get stuck … not being fully honest, even with themselves, about why they’re making the choices they’re making with the mortgage.”
Getting to the root of why you think a certain way about your mortgage can unlock a more objective mindset — one that frames your home loan as a workable financial tool that serves you, not the other way around.
Mindset 1: “Once bitten, twice shy”
In the years that followed the housing crisis, millions of Americans had no choice but to foreclose. And when the market fails, you lose more than just your home.
“You lose your trust in the system; you lose trust in your own judgment; you lose that ability to relax,” Hargrove says. “Suddenly, what you thought was a form of safety has actually become a major risk for you and a source of pain.”
While these lived experiences are a valuable resource — and shouldn’t be dismissed — the fear may not be your most reliable decision-maker.
If you see your mortgage as one big financial liability that needs paying off as fast as your paycheck allows, you may be closing yourself off to more fruitful paths.
The bottom line? There are other ways to create financial security besides clearing your mortgage.
Mindset 2: “Because I said so”
“Financial trauma can sort of ripple down through the generations,” Hargrove says.
Perhaps your parents think owning a home free and clear is the ultimate sign of success, and a mortgage balance is a sign of failure. This mindset may no longer be applicable to the current economy or your personal homeownership journey.
The housing market was very different 40-plus years ago. In the early 1980s, the country had officially entered into a recession, and mortgage rates reached as high as 17%. Since 1986, the median house price has increased by over 350% ($86,800 to $403,200), but the minimum hourly wage has risen by only about 115% ($3.35 to $7.25). Needless to say, buying a house back then required different math.
While this sounds a little macabre, it’s a reminder that mortgages are not a one-size-fits-all product. Your homeownership goals are not going to look like your parents’, and neither should your mindset.
If you bought a home later in life, it may benefit you to think of it less as a means to an end and more of an end in itself.
Mindset 3: “I can’t die with debts”
Many homeowners fear dying with a mortgage, which can fuel some aggressive payoff strategies that may not be necessary.
In general, people won’t inherit debt if it’s not theirs. So, if you don’t pay off your mortgage, and your heirs are not co-signers or co-borrowers on the loan, they have options: They can accept the inheritance and sell the home, or they can refuse the inheritance and the debt will be settled by your estate. This typically means the bank sells the house to cover the loan. If there’s not enough money to pay it off, next steps vary by state, but heirs aren’t responsible for any remaining debt, and it will go unpaid.
If your heirs accept the inheritance, they can also continue making payments on the same loan. In general, lenders must transfer the loan to the heir without conditions, which means an heir with minimal credit or little savings can get access to a powerful credit-building tool. Plus, by keeping your mortgage payments low and your other investments thriving, you may set up heirs with a cushion for unexpected costs along the way.
A mortgage isn’t the only cost associated with homeownership. Property tax, homeowners insurance, utilities and maintenance costs don’t disappear with your last payment.
“You need to estimate at least about two to three percent of your home’s value every year in just straight-up maintenance costs,” Hargrove says.
Mindset 4: “My home is the only asset that matters”
Regardless of how you see your mortgage, being hyper-focused on your home and its value doesn’t leave room for much else.
“You’ve got to keep it in perspective,” Hargrove says. “Make sure that you’re going to have enough money to go do things that you love to do.”
Next step? Sever your connection to the home loans Mind Flayer. Having a healthy mortgage mindset means acknowledging your leanings, not shaming yourself for having fears, and being open to new ways of thinking about homeownership.
“A mortgage should never mean that your home now owns you,” Hargrove says.
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