Investing 102

[GregWeld]

WATCH HOUSING FOR EARLY SIGNS OF DETERIORATING ECONOMY or for strength -- ditto AUTOS.... these are early "tells" for the consumer. The consumer is 2/3ds of the economy. Everything lives or dies based on "sentiment" -- and what folks feel like going forward. You don't buy a house or new car if you're not "feeling it" -- so check your own pulse first.

[glassman]

I hear ya. Loud and clear.

Whats the other 1/3? government being the majority of that portion of the remaining 33%?

[GregWeld]

Originally Posted by glassman

I hear ya. Loud and clear.

Whats the other 1/3? government being the majority of that portion of the remaining 33%?

The way this country is headed -- with more and more losers waiting for handouts --- the government (which is really US!) is probably 50% by now.... and that's why you can't buy as much as you really want to! LOL

[captainofiron]

Any tips for paying a mortgage early?

I have been reading about Home Equity Lines of Credit (HELOC) and "Velocity Banking"

I was skeptical when I first read about it, but after running the numbers

So as it stands we have a 30 yr mortgage (payoff in 2046) and are paying "3.875%" interest and if we change nothing will end up paying $135k in interest

After running the numbers with a 4.5% HELOC and using 65k for that Velocity banking scheme, we will pay it off in 2025 and only pay 40k in interest (both on the HELOC and Mortgage)

Thoughts?
Opinions?
Advice?

The only CON I can think of is the variable interest, but my calculation has the interest rate going up in a curve with max .45% increases and .20% decreases

[Flash68]

Originally Posted by captainofiron

Any tips for paying a mortgage early?

I have been reading about Home Equity Lines of Credit (HELOC) and "Velocity Banking"

I was skeptical when I first read about it, but after running the numbers

So as it stands we have a 30 yr mortgage (payoff in 2046) and are paying "3.875%" interest and if we change nothing will end up paying $135k in interest

After running the numbers with a 4.5% HELOC and using 65k for that Velocity banking scheme, we will pay it off in 2025 and only pay 40k in interest (both on the HELOC and Mortgage)

Thoughts?
Opinions?
Advice?

The only CON I can think of is the variable interest, but my calculation has the interest rate going up in a curve with max .45% increases and .20% decreases

Have you factored/calculated the interest deduction benefit on your tax return for each year?

What about the opportunity cost of that money being spent to buy down the mortgage? That answer is different for everyone, but you should consider what you would do with that money if you didn't pay it off.

Personally, unless I am sitting on Weld type of cash.... I won't pay off my 3.75% 1st mortgage early. I'll invest that money elsewhere.... or buy cars/car parts.

[Vegas69]

Originally Posted by captainofiron

Any tips for paying a mortgage early?

I have been reading about Home Equity Lines of Credit (HELOC) and "Velocity Banking"

I was skeptical when I first read about it, but after running the numbers

So as it stands we have a 30 yr mortgage (payoff in 2046) and are paying "3.875%" interest and if we change nothing will end up paying $135k in interest

After running the numbers with a 4.5% HELOC and using 65k for that Velocity banking scheme, we will pay it off in 2025 and only pay 40k in interest (both on the HELOC and Mortgage)

Thoughts?
Opinions?
Advice?

The only CON I can think of is the variable interest, but my calculation has the interest rate going up in a curve with max .45% increases and .20% decreases

Right now is the last time you want to get a variable rate on your primary residence in my opinion. I've seen many get caught with their shorts around their ankles doing just that.

[GregWeld]

No way I'd refi or have a HELOC or any other "extra" loan on my house....

You have a great low interest rate.... if you choose to save on your total interest paid -- just pay additional on the principal only when you choose to. That way you don't HAVE to pay anything extra -- or if you want to you can pay one extra payment each year and cut that 30 year to a 20.....

Altria (MO) pays over 5%.... just to pick one super simple investment...

I'd invest in almost anything over paying that mortgage rate down.

[captainofiron]

Thanks for the advice guys.

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

luckily we were able to put a giant down payment from the last house we bought/sold (got lucky and bought after the recession bottomed out)

I have calculated the tax deduction, but generally come out ~1-2k above the standard deduction

It would just be awesome to be mortgage free

but like pointed out, we have a low rate and that variable interest scares the hell out of me

[Flash68]

Fixed rate is the way to go in these times. It's the main reason the current RE market is on pretty solid ground (although near or at the peak) all things considered.

Do not forget about the time value of money (TVM) when it comes to long term financing. The primary residence interest deduction is just a little icing on the cake.

[Vegas69]

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

luckily we were able to put a giant down payment from the last house we bought/sold (got lucky and bought after the recession bottomed out)

I have calculated the tax deduction, but generally come out ~1-2k above the standard deduction

It would just be awesome to be mortgage free

but like pointed out, we have a low rate and that variable interest scares the hell out of me

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.