The Ramsey Show Highlights: Get Another Mortgage After Paying Off the House?
Release Date: February 11, 2025
Introduction
In this episode of The Ramsey Show Highlights, hosted by the Ramsey Network, George calls in to share his recent achievement of paying off his mortgage just before Christmas. With six children ranging from 10 months to 12 years old, George seeks advice on whether it makes sense to take on another mortgage to upgrade to a larger home within the Ramsey Plan framework. The discussion features insights from Dave Ramsey and Ken Coleman, providing practical guidance on managing debt and family finances.
Celebrating Financial Milestones
George enthusiastically announces his success in paying off his $270,000 mortgage, celebrating this significant milestone with Dave Ramsey and Ken Coleman.
- George: "Right before Christmas I paid off my house. So I'm officially on baby step six, seven. Way to go." ([00:06])
Dave Ramsey and Ken respond with congratulations, acknowledging the hard work it took to eliminate the mortgage.
- Dave Ramsey: "Strong golf clap for that one right there." ([00:16])
Evaluating the Need for a Larger Home
George expresses his desire to upgrade to a larger home to accommodate his growing family. He contemplates taking on another mortgage to purchase a 3,000 square-foot house in the $400,000 range, up from his current 1,800 square feet.
- George: "Would it ever make sense under the Ramsey plan to upgrade to a bigger house with another mortgage? Or is it better to just stick drinking this debt-free Kool-Aid and eventually pay cash?" ([00:38])
Ken Coleman advises that while Dave Ramsey typically discourages taking on new debt, it isn't a "sin" to return to baby step six temporarily to pay off the new mortgage aggressively.
- Ken Coleman: "As long as you're doing it, you know, 15-year fixed rate, the payments, no more than a quarter of your take-home pay... and try to minimize the mortgage and then knock it out quickly." ([00:49])
Setting Realistic Financial Goals
The conversation shifts to practical steps George can take to achieve his goal of upgrading his home without deviating significantly from the Ramsey Plan.
- Ken Coleman: "Set a goal with your wife... take all of your equity plus the savings and throw it at the next one. And then there likely will be a gap of, let's say, 50 to $100,000. And here's how we're going to tackle that." ([04:38])
Dave Ramsey emphasizes the importance of saving for a substantial down payment to reduce the need for a large mortgage and to pay it off quickly.
- Dave Ramsey: "Be aggressive and get rid of it and get back to baby step seven. No time." ([05:27])
Balancing Family Growth and Financial Stability
The hosts delve into the dynamics of George's large family and the impact it has on financial planning. They discuss the possibility of having more children and how that might influence his housing and financial decisions.
- George: "No, no. If the Lord wants me to have more kids, I'll have some more." ([02:59])
Dave Ramsey suggests seeking professional advice on family planning to align family growth with financial goals.
- Dave Ramsey: "Maybe you should seek a family planner as a side of this call." ([02:38])
Maintaining Financial Discipline
George admits that his savings are currently limited due to his focus on paying off the mortgage. The hosts encourage him to continue maintaining an emergency fund while planning for the new mortgage.
- Ken Coleman: "Don't let this linger and don't do a 30-year with as little payment as possible. Get aggressive and get rid of it." ([05:05])
Dave Ramsey praises George's financial discipline and positive attitude, reinforcing the importance of staying committed to financial goals despite life's challenges.
- Dave Ramsey: "You're very cheery for a guy with six kids. I'll be honest with you." ([02:44])
Conclusion and Encouragement
Dave Ramsey and Ken Coleman conclude the discussion by encouraging George to pursue his goal of upgrading his home responsibly. They reassure him that taking on a second mortgage is permissible within the Ramsey Plan if managed diligently and with a clear, aggressive payoff strategy.
- Ken Coleman: "You have Ken and I's blessing that you're not... temporarily in baby step six." ([05:27])
Dave Ramsey commends George's determination and highlights the importance of financial flexibility when planning for a growing family.
- Dave Ramsey: "He sounds like you're a young family. You've got a 10-month-old." ([05:27])
Key Takeaways
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Aggressive Debt Repayment: If considering a new mortgage, do so with a clear plan to pay it off quickly, ideally within 15 years, and ensure payments do not exceed a quarter of your take-home pay.
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Substantial Down Payment: Saving for a significant down payment can minimize the mortgage amount and reduce financial strain.
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Family Planning Integration: Align family growth with financial goals to maintain stability and avoid overextending financially.
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Maintain an Emergency Fund: Even while pursuing new financial goals, it's crucial to have an emergency fund to cover unexpected expenses.
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Flexibility Within the Ramsey Plan: While the Ramsey Plan emphasizes debt-free living, there is room for flexibility when significant life changes, such as upgrading a home, are planned and managed responsibly.
Notable Quotes
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George: "Would it ever make sense under the Ramsey plan to upgrade to a bigger house with another mortgage? Or is it better to just stick drinking this debt-free Kool-Aid and eventually pay cash?" ([00:38])
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Ken Coleman: "Set a goal with your wife... and here's how we're going to tackle that." ([04:38])
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Dave Ramsey: "Be aggressive and get rid of it and get back to baby step seven. No time." ([05:27])
This episode provides valuable insights for families considering upgrading their homes while striving to remain debt-free. By balancing financial discipline with practical planning, it's possible to achieve significant life goals without compromising long-term financial stability.