Investing 102

[Flash68]

Originally Posted by Vegas69

Don't let these guys talk you out of paying your house off. It comes down to your own risk tolerance and goals. The majority of Americans should shoot for a free and clear by retirement age.

Epic Facepalm alert...

Like Greg alluded to, if you can't put your money into something and exceed a 3 or so % return (his mortgage rate MINUS a little for the net interest deduction) you are either math-deficient or unwilling to put a little effort in.

Hey, it's your money...

[dhutton]

Originally Posted by captainofiron

Thanks for the advice guys.

I just have a hard time wrapping my head around paying 170% of the loan I took out

Make extra payments on the principle. It’s just that easy and there is zero risk...

Don

[Vegas69]

Hey, I'm not saying it's a bad play, but it may not be right for him.

I've never met one person with a paid for home that told me it was a mistake and I've met more than a few. Not everybody is looking to conquer the world and all the trouble that can bring. Some like a simple life with little risk.

Plus, you need a much higher return than 3% to make the math work. I don't know what it is, but I'm guessing 10+ percent to make it worth the trouble.

Bottom line, having a paid for home puts you in a very good position to have choices and security.

[Flash68]

Originally Posted by Vegas69

Hey, I'm not saying it's a bad play, but it may not be right for him.

I've never met one person with a paid for home that told me it was a mistake and I've met more than a few. Not everybody is looking to conquer the world and all the trouble that can bring. Some like a simple life with little risk.

Plus, you need a much higher return than 3% to make the math work. I don't know what it is, but I'm guessing 10+ percent to make it worth the trouble.

Bottom line, having a paid for home puts you in a very good position to have choices and security.

Your 10+% guess is wrong. Way wrong. LOL

But I don't disagree that it is not for everyone. Not everyone has the risk tolerance to leverage and make their money work for them.

[GregWeld]

I don't think anyone would argue having a home free and clear - I know for damn sure I wouldn't.... but I'm also RETIRED.....

I think my point was that he should NOT do any fancy financing schemes to try to gain a little... and perhaps put himself at risk.... WHEN it's just so simple to throw extra at the principal.

His rate is under 4%.... fixed 30 years. You have any idea how good that could look 10 years from now? OMG.....

There are more ways than you can imagine to be SECURE and comfortable than to simply have no mortgage... and in fact -- I could argue endlessly why I would NOT want to be mortgage free prior to or even after retirement. That is all based on your ability to generate income.

People worry about their mortgage so much - they fail to realize that they NEED LIQUIDITY. A home isn't liquid if you get sick and lose your job... and having it paid for won't help you one bit when you have to take out cash or refi - when you don't have income or other assets.

Instead -- What I'd suggest is to cut your mortgage interest paid by adding extra payments to principal AND investing in other liquid assets that can be instantly and painlessly accessed should you need to.

In other words -- if you owed 100K and you have 200K in other cash based assets.... I'd say you should not be worried about making the mortgage payment. And you can borrow cash on cash for a hell of a lot cheaper than ANY mortgage should you need some.

[WSSix]

I'm doing the one extra payment per year thing to cut my 30 year mortgage down a few years. That alone saves a good chunk of change and it is very easy to do. I recommend it so long as you have your rainy day fund and retirement savings funded as well. As already mentioned, I wouldn't play games with this using different accounts.

[Vegas69]

Originally Posted by Flash68

Your 10+% guess is wrong. Way wrong. LOL

But I don't disagree that it is not for everyone. Not everyone has the risk tolerance to leverage and make their money work for them.

Tell me what it is Obi One Kenobe. Or do you want me to Google it for you? ha

[GregWeld]

Everyone loves to say they don't mind risk...... right up until they lose their ass.

[SSLance]

lol...

[Flash68]

Originally Posted by Vegas69

Tell me what it is Obi One Kenobe. Or do you want me to Google it for you? ha

I didn't give a specific number because there isn't one. Your personal tax rates and investment vehicles would dictate what the number would be. Unless you are being taxed at 150+%, it is not 10%.

Try to keep up.

Still love ya Todd.

Originally Posted by GregWeld

Everyone loves to say they don't mind risk...... right up until they lose their ass.

As you know, there's risky business and there's calculated risk.

Nothing in life is guaranteed.... except your kids getting diarrhea and puking after an international vacation.