The Automatic Millionaire by David Bach - Chapter 6 - Automatic Debt-Free Home Ownership

David Bach gives the third of his secrets to financial security in this chapter of The Automatic Millionaire. The first two were 1) Pay Yourself First 10% of your pretax income and 2) Make it Automatic. The third secret is to Buy a Home and Pay It Off Automatically. Bach gives reasons you should buy a home, reasons you should pay it off, and reasons you should do it automatically.

He begins by saying that the first landlord you should become is your own. Turning some statistics on their head to say what he wants, he points out that since homeowners are 31 times richer than renters you should become a homeowner so you can be richer. He gives 6 reasons why your first step should be to buy a home: forced savings, leverage, OPM - Other People’s Money, tax breaks, pride of ownership, real estate has been a great investment.

He then discusses paying the mortgage off early either by using a biweekly payment plan or by sending in extra money with each payment. I have never understood the biweekly plan. Unless the homeowner is paid biweekly, where are they going to get the money to make the extra payment and how do you budget for it? Much more reasonable to pay extra with each payment. Also, earlier in the chapter Bach talks about the advantage of using leverage and OPM as positive reasons for buying a home, why is he now advocating paying the home off early rather than investing in more real estate?

And finally he advocates setting up your mortgage payment to be paid automatically by your bank each month so that you don’t have to think about it and you won’t be tempted to send in just the regular payment instead of the extra.