The Death Pledge Over Time

“Mortgage” comes from the Old French words mort (meaning “dead”) and gage (meaning “pledge”). It originated in medieval England, reflecting the idea that the pledge (the property itself) would become “dead” or void—either because the loan was repaid in full, ending the obligation, or the property was taken through foreclosure. Thus, you’d see references to a “dead pledge” since either outcome would terminate the agreement.

My grandfather passed away at 83, leaving behind a legacy of laughter, love, and… an unpaid mortgage. It always makes me chuckle. He was a character. After graduation from college, I told him I’d become a financial advisor and then a mortgage broker. Later that year, I received the above postcard from him while on a fishing trip to Daytona Beach, FL. It was a silly thing that I’ve kept tucked away all these years. It was his way of acknowledging the often humorous, sometimes stressful, reality of homeownership.

His situation, though, got me thinking. We talk a lot about the dream of homeownership, the white picket fence, and the idea of security. But we often gloss over the reality – the sheer weight of the mortgage, the shade of that commitment that lasts longer than 50% of marriages…the years of payments stretching out before you like an endless road. It's a huge decision, one that balances the desire for stability with the potential for financial strain. You have to understand the pros and cons and play the long game for sure! You’ll pay a mortgage either way, either yours or your landlords.

There's also the initial hurdle of deciding to take the plunge. When am I (are we) ready? The agonizing over interest rates, down payments, and whether you're truly ready for such a massive commitment. Am I making the right decision to buy? Then comes the actual paying it off. The sacrifices, the budgeting, the constant awareness of that monthly payment looming. It can feel like a marathon with no finish line in sight. Good to have a guide you trust…

My grandfather's postcard wasn't a commentary on financial irresponsibility. It was a wink. A knowing nod to the fact that life is complicated, and sometimes, even at 83, he still hadn’t quite conquered that mountain of debt. It reminds me that homeownership is a journey, not a destination. And sometimes, the best we can do is keep moving forward, one payment at a time, with a little bit of humor along the way.

a BORROW SMART CONCEPT
Like Puzzles? This is what I call ‘The Big LAG

Typical Home Tenure After Leaving Parents' Home

1. Renting (Early 20s to Early 30s) – 12 to 15 Years Per Location

2. First Home Purchase (Mid 30s to Late 30s) – 5 to 10 Years

3. Second/Move-Up Home (Late 30s to 50s) – 10 to 15 Years

4. Empty Nester/Retirement/Vacation Home (50s to 70s) – 15+ Years

This is not an exact science. I read several articles, and I used Perplexity and ChatGPT for an outline - but a typical person will live in 4-5 different homes before retirement, spending an average of 60 years making housing-related decisions on their own. That’s an 80-year life lived, hopefully - indoors.

Now, for the puzzle.

In today’s terms, the average mortgage payment in the US is $2,648 to buy a $400k house, and the owner's equivalent rent for that house is $2,000. Again, do your own math and research; this is to get you thinking out of the box.

We often discuss the rent-vs-own dilemma, but let’s look at another one. If you lock in and pay $2,648 a month for a house, most of us don’t pay our house off in 30 years, we move and refinance, and the typical age for repayment is closer to age 60, so we’ll pay a mortgage over 40 years of our life (on average).

Let’s say you end up spending an average of $2,648 in rent and house payments for 40 years… that means you spend about $1.27M to live indoors… but here’s the puzzle, if you invested $2,648 per month in the stock market at 10% over that same period of time, it grows to almost $17M. Most of us won’t buy a $400k house that will be worth $17M… that’s the puzzle - how do you recapture some of that $17M in lost opportunity cost or LAG?

You may say, hey, it’s ok, I’ll spend $1.27M over my lifetime to live in a house, but the cost of that money being somewhere else is $17M… so that’s a LAG (liability asset gap) of $15.7M… if you can recapture just 10% of that, that is $1.57M extra you have in retirement! Or to help with the mental offset - that covered my cost of living in doors - that ‘better decision making’ that comes with borrowing smart.

Play around with it yourself!

LIABILITIES
What’s Happening?

Great Video on Taxes: https://www.diddel.com/resource-center/tax/the-fact-about-income-tax

REAL ESTATE
What’s Happening?

ASSETS
What’s Happening?

ON BEING HUMAN
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DOPAMEMES
And Other Happy Moments…

AI
and The Future of Work…

Borrow Smart University || National Institute of Financial Education