I’m 32, we own our home. Market value is 700k, we own 375k at 2% with 28 years left. Original purchase price was 472k. PITI is $1921+300/m maintenance expenses. If we sell, we take 343k and invest in the index. We have about 70k already invested. Then, we rent a home for 2500 for the next ten years, adding $2000 monthly to our investments until FIRE in 10 years. How does that look?
I think it is an awful idea The 375K 2% loan is an amazing gift, do not pay it off. We have made some progress but we have not killed inflation. I can't guarantee anything in investing, but I can almost certainly tell you that in 10 years you won't still be paying $2,500 to rent a house. A house I bought 10 1/2 years ago was renting for $850, I'm now renting it for $1,600 and it is still a bit below the market. This was during a time of low inflation. If inflation remains at 6% like it was for the past 12 months, your rent will be $4,500, I'm forecasting a 4% rental increase on my properties, which would mean a rent of $3,750 at the end of ten years.
Second, you've neglected selling costs. Traditional they've averaged about 7% for the house, and the seller buys the huge majority of the cost. Even if you want to sell it by yourself not recommended,or using a discount real estate broker, worth considering. You are looking at a minimum of 25K and more like $35K to sell the property. Meaning you'll be invest closer to 300K than 340K
Next, we need to consider the stock market appreciation. Traditionally stocks have appreciated at 9% per year over ten year period, but there are a lot of smart people thinking the next decade will be worse, in part because the market went up too much too fast, and also because inflation is bad for the market.
But your house price is not likely to remain static. Yes, housing prices like all asset classes became overvalued. So it is likely they will pause, and even go down in the hottest markets. But over the next ten years, they will almost certainly go up, probably at a rate near inflation say 3-4%.
I'd highly recommend sitting down with a spreadsheet and experimenting with different assumptions, of inflation, stock market, and housing gains. I think you'll find with all but the most optimistic stock market assumption, you are better off not selling.
Finally, as somebody who retired at 39 and I'm now in my 24th year of being retired. I'd say one of the keys to a financially successful retirement is to minimize the number of unknowns. Having a fixed mortgage or paid-off house, is just one less thing you need to worry about, and makes it easier to sleep at night.
