If passive income covers mortgage as well, is this considered FI?

[Hudson]

When you cross the point where your passive income exceeds your living expenses , in a general sense I understand this to mean you are FI.

However if your living place (house/apartment etc) isn;t paid off yet but the passive income still covers it , do you consider this FI ? or must the mortgage be cleared before truly being FI ?

[Beric01]

For sure it does!

I plan to FIRE while renting. As long as your passive income covers your housing expenses, you're FIRE'd. Just make sure as a homeowner you have some buffer to maintenance/repairs.

[RetiredAt63]

I'm retired.  Due to various circumstances I still have a mortgage, but my income covers all my living expenses including the house.  So yes.  If I didn't have the house I would still have living expenses.  And for me the house means low-cost entertainment, since I garden, can go cross-country skiing out my door if the weather cooperates, have lots of space for my relatively low-cost hobbies, etc.  If I were in an apartment I might save on rent, but I can certainly see other costs could go up.

[Bob W]

Having a low interest mortgage is smart at these rates.  Right sizing your house even smarter.

[Calvawt]

yes, it does!  While many pay off the mortgage, if you have the cash flow to cover it then congrats!

[Retired To Win]

When you cross the point where your passive income exceeds your living expenses , in a general sense I understand this to mean you are FI.

However if your living place (house/apartment etc) isn;t paid off yet but the passive income still covers it , do you consider this FI ? or must the mortgage be cleared before truly being FI ?

You would be FI even if you still owed on a mortgage (or were paying rent.)  In my view, the threshold you need to cross to reach FI is to have your passive income exceed your basic living outgo.  If you've got more passive cash coming in than going out, my friend, you are FI. :)

[Davids]

I would say yes while many may say you need to be debt free to achieve FI if your passive income can cover your mortgage as well in addition to your living expenses then yes you are FI. Obviously make sure you have a buffer for any unforeseen circumstances (i.e. repairs).

Me personally though I am working to pay off my mortgage as quickly as possible. I bought my house in 2010 and my intention is for my mortgage to be paid off in 2018.

[soccerluvof4]

When you cross the point where your passive income exceeds your living expenses , in a general sense I understand this to mean you are FI.

However if your living place (house/apartment etc) isn;t paid off yet but the passive income still covers it , do you consider this FI ? or must the mortgage be cleared before truly being FI ?

You would be FI even if you still owed on a mortgage (or were paying rent.)  In my view, the threshold you need to cross to reach FI is to have your passive income exceed your basic living outgo.  If you've got more passive cash coming in than going out, my friend, you are FI. :)

This +1. Definitely want more than your total costs for fluctuations etc.. but yea in theory you have it

[tomsang]

I would go back to the 4% rule. If your diversified portfolio is 25 - 30 times your annual retirement expenses then you are FI. You need to add health insurance, taxes, and other retirement type expenses when you are figuring out your true retirement expense number. By looking at purely a point in time that you generated more passive income then expenses you are potentially at risk based on the market fluctuations. The fact that you were able to cover your mortgage as well gives you a cushion.

[skunkfunk]

My grandparents-in-law are retired for 15 years now (young family, they retired in their 50s.) They also have several mortgages, and carry loans for houses they sell at around 7-10% interest. It works for them.

[arebelspy]

Agree with all the yes votes, and having a buffer/cushion is generally a good idea.

I would go back to the 4% rule. If your diversified portfolio is 25 - 30 times your annual retirement expenses then you are FI.

Mostly irrelevant when talking passive cash flow, especially if cash flow should continue (more or less) indefinitely, and will somehow increase with inflation.  If either, or neither, of those are true, one has to project and adjust (get more of a buffer up front and reinvest that to cover the shortfall in later years).

4% SWR is a great rule of thumb for people investing in stocks, not so much for people getting income streams otherwise.

[Spartana]

Agree with all the yes votes, and having a buffer/cushion is generally a good idea.

I would go back to the 4% rule. If your diversified portfolio is 25 - 30 times your annual retirement expenses then you are FI.

Mostly irrelevant when talking passive cash flow, especially if cash flow should continue (more or less) indefinitely, and will somehow increase with inflation.  If either, or neither, of those are true, one has to project and adjust (get more of a buffer up front and reinvest that to cover the shortfall in later years).

4% SWR is a great rule of thumb for people investing in stocks, not so much for people getting income streams otherwise.

Like a pension.

I would also consider a person FI if their passive income/cash flow covered all their expenses - whether renting or buying. That plus a cushion for any potential expenses that may arise.

I will add though, that one of the benefits about having a paid off mortage is that means you need less money to live on each month, can probably retire earlier, and can probably lower your income taxes as well as qualify to get higher ACA subsidies if you are getting those. I'm able keep myself in the zero to 10% tax bracket for both state (Calif) and Fed income taxes primarily because I no longer need the extra monthly income to cover a mortgage. This will change if I sell my place and rent though as I might need much more monthly income then I currently do with a paid off house with low prop taxes.