Investing 102

[Bucketlist2012]

Originally Posted by GregWeld

Yes -- a guy would probably have more money NET in his pocket if he had no payment... but most people have to live somewhere.... and that has a 'cost' attached to it. If you're house is paid for - but that cash is tied up and so is not earning your anything either.

Obviously the best scenario is to have no payment and no taxable income and have enough to live on... but for about 99% of the population that just isn't how it works out.

I keep a mortgage to offset some income that I have that puts me in a higher bracket... and the invested cash earns more than I pay out... but that is NOT the normal situation.

I agree. I could pay off the house, but at 4% interest, why ? I make more being invested..

I am also the 30 year loan type of guy...I don't need a paid off house and less investments. But that is a personal choice.

Plus the write off, and inflation, and I am paying 3%... I can make that throwing darts to pick my stocks..

Also a side note..We just got back from the Ahwahnee Hotel in Yosemite...

That is how I like to camp....Presidential suite...

[ErikLS2]

This can get complicate real quick and Greg makes some good points. Another thing you have to consider is what your return is on the principal part of your payment as this money is essentially a re-investment in the house, kind of like a company buying back it's own stock. If the house was bought right, meaning probably relatively recently, then there's a chance it might see some decent appreciation in the next few years in which case the higher principal payment of a 15 year note might pay off. But, like Greg said, you can accomplish this by adding to your payment each month too if you have a 30 yr. In the end though I think it's good advice to not look at your house as an investment and looking back a few years from now any loan you get these days at these rates will be a killer deal.

The only thing we know for sure is what we don't know. We don't know what's going to be tax deductible in coming years. We don't know what the value of houses or stocks are going to be in the future. We don't know anything at all about the future for sure really or if there will even be one.

What we do know is this is one helluva good discussion.

[GregWeld]

Here's a very interesting informative article I stumbled on regarding what the SUPER RICH pay in taxes... and some interesting % numbers that just might surprise you... and it's not the % on the super rich that surprised me!

http://www.cnbc.com/id/47704712

[takid455]

A thought on the long term mortgage. I have always been tought to pay off debt a quick as possible so you dont pay interest. While interest is tax deductible, its still more interest than tax savings.

You would have less principle invested in house or property if paid off sooner than later.

Ex
house = 300k
interest say 6% (taxes, fees included)
you would pay almost 600k at the end of 30yrs

Guess is your other investments are yielding greater than the loan interest, that would be a reason to hold off on quick payment.