The problem with paying off your house and owning it to avoid rent is many fold, at least in California. Let's say your house is worth $500,000 and you pay it off and keep it 25 more years. At 7% interest, that $500,000 would have gotten you to $2,713,716 without adding an additional penny to it. If your house is worth $600,000 it's even bigger at $3.25M you could have had. There is no way a $500k house is appreciating to $2M in 25 years. On top of this you have all the repairs, the $5-6k in property taxes a year, etc.
If you could get 10% returns a year (which is easy using REITs) you would make $6.5M in 25 years due to compounding.
Buying a home is a good way to save money. It's a forced bank. However, when you have a ton of equity, it's really, really bad to leave it in a home. Houses don't compound. They appreciate, which sounds nice, but over time you are literally leaving millions on the table.
People then reply, "But rent is throwing money away!" Well, if you cash out your $500k from your house and rent a $3k house, you will still break even after dividends or be up $14k a year since you have no repair bills, no taxes, etc.
A lot of people keep their house as their 'retirement fund', but really, as Ric Edelman says, "The day you pay off your house you should put a sign in the front yard that says "I have $600,000 and I can't buy a cup of coffee with it."
My theory and strategy was to simply to get to the place where your dividends pay for all your yearly budget so you don't have to touch your capital. Then you're golden.
