Get Another Mortgage After Paying Off the House?

Summary

The Ramsey Show Highlights: Get Another Mortgage After Paying Off the House?

Release Date: February 11, 2025

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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.

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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])

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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])

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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])

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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])

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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])

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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])

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Key Takeaways

1. 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.

2. Substantial Down Payment: Saving for a significant down payment can minimize the mortgage amount and reduce financial strain.

3. Family Planning Integration: Align family growth with financial goals to maintain stability and avoid overextending financially.

4. Maintain an Emergency Fund: Even while pursuing new financial goals, it's crucial to have an emergency fund to cover unexpected expenses.

5. 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.

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Notable Quotes

• 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: "Set a goal with your wife... and here's how we're going to tackle that." ([04:38])

• Dave Ramsey: "Be aggressive and get rid of it and get back to baby step seven. No time." ([05:27])

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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.

Transcript

[Dave Ramsey]

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[George]

Hey, George. Hey, Ken. Thanks for taking my call. Guys, I'm really excited to say that right before Christmas I paid off my house. So I'm officially on baby.

[Ken]

Six, seven, Way to go.

[Dave Ramsey]

Strong golf clap for that one right there.

[Ken]

You got how many kids?

[George]

I got six kids ranging from 12 years old all the way down to 10 months living in this beautiful 10 paid off house.

[Ken]

Good for.

[George]

Question is why? No, I could save up for another eight years and pay cash for a bigger, better house, but by then my kids are going to start graduating, they're.

[Ken]

Going to move out, then you'll be downsizing.

[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?

[Ken]

Well, in a perfect world, if Dave was on air, he'd say, well, I wouldn't want you going back into debt. But also, it's not a sin to go revert back to baby step six for a few years and knock out the mortgage. And so 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 with all the 100% equity you have in the house, roll that into the next one, plus any savings and try to minimize the mortgage and then knock it out quickly. So what are we talking? What would it take for you guys to upgrade to a home that's like, all right, we got six kids, we got room for all eight of us with room to spare, but for all.

[George]

Eight of us, it looks like if we hit something in the $400,000 range, based off of our location, we'd be stepping up from 1800 square feet to somewhere approaching 3,000 square feet, like 2,829.

[Dave Ramsey]

How many bedrooms?

[George]

That's what our market's looking like. Four bedrooms. At least that's what we've got right now. There's tiny bedrooms, but do you need.

[Ken]

Five bedrooms, six bedrooms?

[Dave Ramsey]

Well, you got multiple boys?

[George]

No, one boy. The rest are lovely girls.

[Dave Ramsey]

Oh, I was going to say, because if it was, if it was mostly boys, Pile them on top of each other, they don't care. They live like rats anyway. I got two boys. I could live under a bridge. Yeah, yeah. I literally was going to go that direction. But the girl thing, I only have one girl and I don't know, I feel like I'm on thin ice if I recommend that.

[Ken]

But you know, But I think you're still going. All right, for the. For the house that we would want. What's your current house worth?

[George]

Our current house is worth 2:70.

[Ken]

2:70. And let's say the next house was 450. Right. And let's say you want to do that. How long do you have? Is this a year from now? What's the urgency?

[George]

You know, the urgent.

[Ken]

Yesterday.

[George]

I'm living my best life. Now it's just close quarters.

[Dave Ramsey]

You're very cheery for a guy with six kids. I'll be honest with you.

[Ken]

How do you have time to make this call?

[George]

I got no payments.

[Ken]

Okay, that's.

[Dave Ramsey]

Yeah, but you also don't have any sleep either. Are you. But, oh, here's a question America wants to know. I know this. Are you done having kids or there more on the way?

[George]

No, no. If the Lord wants me to have more kids, I'll have some more.

[Ken]

God bless the Catholics. There we go.

[George]

Whoa.

[Ken]

I'm kidding. I'm kidding.

[Dave Ramsey]

Wow.

[Ken]

Thank you, Grant, for that.

[Dave Ramsey]

You just dropped Catholicism on him.

[Ken]

I just thought maybe, you know, they're like, let's have more babies. More and more. But, hey, I'm happy for you guys. He's living his best life.

[Dave Ramsey]

So you think there's a possibility that more kids are coming?

[George]

Well, everybody tells me, like, you know, what causes that, right? And I say, yeah, and I'm not willing to give it up.

[Ken]

Well, you got a 10 month old.

[Dave Ramsey]

Wait a second. You're getting partial information. No one says you got to give it up, but there are other things you can do. Maybe you should seek a family planner as a. As a side of this call.

[Ken]

Ken will give you advice off air for that one.

[Dave Ramsey]

Yeah, hang on the line. I'll give you a couple tips when. When we go to commercial break.

[Ken]

Thank you for that. All right, Grant, let's talk.

[Dave Ramsey]

I'm willing to give it up.

[Ken]

Let's talk fast.

[Dave Ramsey]

That's the best thing I've heard in a long time.

[Ken]

You're in baby step seven. Do you guys have a bunch of money in savings outside of your emergency fund?

[George]

So not a bunch of money in savings. Why? Because I got a little gazelle intense on paying off the house there at the end. I have three to six months of expenses because I have no expenses, but yeah, so savings are a little low right now. I got 6,000 in the bank.

[Ken]

How much could you save up in 12 months for, you know, as a kind of a down payment? Plus your equity.

[George]

Plus. Plus equity. I would be approaching 2285.

[Ken]

So you could save up, you're saying 15 grand in the next 12 months?

[George]

I think so.

[Ken]

Okay, so just set a goal and you're married. You have a wife.

[George]

I am.

[Ken]

Okay.

[Dave Ramsey]

You didn't know the thought I had that.

[Ken]

You never know thought we had covered that earlier, but I would set a goal with her and say, hey, here's what we're wanting to do. We want to upgrade about a year from now. Here's how much I think we can save. We're going to take all of our 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. We're going to attack that two years or three years, whatever it is, just set a goal and 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 and get back to baby step seven. No time. Yeah, yeah, yeah. But you have Ken and I's blessing that you're not, you know, it's not going against the Ramsey plan to, to get another mortgage and to be temporarily in baby step six. You guys have done such a great job. You sound like you're a young family. You've got a 10 month old. How old are you? Two?

[George]

Yeah, so I'm 36.

[Ken]

Amazing. And so if we say, hey, by 40, we're going to be debt free again. Back in baby step seven, the house will appreciate. And so I would go down that path. You got. That's a lot of kids to, to bunk in a 1800 foot helmet.

[Dave Ramsey]

He's a better man than I. I.

[Ken]

Tell you, you'd be out of there.

[Dave Ramsey]

I, well, I reached my max capacity as a father at three. I, I readily admit that I'm glad we have three boys.

[Ken]

I do think people are hardwired for a certain number.

[Dave Ramsey]

Like there's no question that guy right there was born and created to father a lot of kids. He's very, very bubbly, very positive young man.

[Ken]

I'm a curmudgeon with one child.

[Dave Ramsey]

No, you're a curmudgeon, period.

[Ken]

Without children.

[Dave Ramsey]

Right. We were hoping that your sweet little princess knocked off some of the mudgy she has.

[Ken]

She brings me joy.

[Dave Ramsey]

Yeah, she's a sweet girl. Create your free every dollar budget today. The simplest way to budget for your life.