Living without a Mortgage

If you've had a mortgage for longer than you can remember, would you know what life is like without it? There would definitely be quite a few differences with your life!


First of all, you will need to think about an escrow account. While you had a mortgage, the money that you paid went to the principal and interest, but a portion of that went to your taxes and insurance. That money, called escrow, is simply a guarantee that you can pay off your property taxes and your home insurance premiums.


If you don't have a mortgage, then this job falls to you. It would be wise for you to maintain the same habit and create an escrow account of your own. Deposit the same amount to this account so that when payment time comes around, you'll have the money on hand. And it earns interest, too!


Once your mortgage is paid off, you'll still have that same amount that used to go to the lending institution. Now what can you do with it? It gives a lot of flexibility since it's now up to you to choose where you will invest this monthly windfall.


Gather together this “free cash” and make a steady investment every month. This is the great difference instead of paying the money out, you're paying the money to an account that will pay you back 100% when it comes time to cash it in.


A great place to put this cash is in an index fund. This will earn you about 10% every year, much bigger than just keeping the money in savings. With as little as $250 to make an initial investment, keep on adding money in without having to pay more in additional fees or commissions. You're a direct purchaser now, so there's no middleman or broker to pay.


And you are instantly diversified! Index funds track the S&P 500 so you'll be having a portfolio on 500 companies. Nothing wider than that.