So who carries debt?
09-02-2007, 03:11 PM
#101
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Mag - you don't get it.
Why would you want to pay off the house or put that much money into a house? So you can brag that you have equity in the house???
The old man in my example had ZERO reserves left. Imagine what he could have done with that $180,000 still sitting in an investment account? He could have paid his mortgage automatically and not have to work.
In the end, at his age, he could foreclose on his house and still be renting a place WITH all his money in his pocket.
The money you put INTO a house is very difficult to get back out and is very costly to do so. If you keep the money in your pocket, you ALWAYS have the option of putting INTO the house.
The bottom line is, money in hand is much better than money in a non-liquid asset(?) like your house.
Why would you want to pay off the house or put that much money into a house? So you can brag that you have equity in the house???
The old man in my example had ZERO reserves left. Imagine what he could have done with that $180,000 still sitting in an investment account? He could have paid his mortgage automatically and not have to work.
In the end, at his age, he could foreclose on his house and still be renting a place WITH all his money in his pocket.
The money you put INTO a house is very difficult to get back out and is very costly to do so. If you keep the money in your pocket, you ALWAYS have the option of putting INTO the house.
The bottom line is, money in hand is much better than money in a non-liquid asset(?) like your house.
I agree that at the age of 60 he did a stupid thing, but to have a house paid off when your 40 gives you a nice placement for the rest of your life. Think about it this way, pay off a house at 40 with kids. At the age of 60 when the house is "too big" you sell the house for say 300K and then buy a house for 150K and have a 150k to live off plus your retirement money.
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09-02-2007, 10:31 PM
#104
At 45 I'll have a paid off house and $500K in investments. My FICO score will probably be close to 0 at that time (it drops every year). That 60 year old man lived his life the wrong way but I would bet you anything that paying money down on his house instead of paying interest to a bank wasn't his problem. It was years of living the lie that you have to keep up with the Jone's and NOT paying any money off on his previous houses. Yeah, he screwed up royally at age 60 but that was just the last financial screw up he made. My wife and I spent our first 15 years in a 900 sq ft house (we have since moved up) while all our friends lived in "mansions" with new cars. She hasn't worked during all those years but somehow we ended up with more money than her parents who together make double what I do. They both have new cars, a pool, a boat, etc and a rental investment property while we live well within our means. I've lived my life knowing that if you owe money to someone (a bank in this case) you are screwed. It is the wrong way to do it. Our two Miatas have 105K miles and 220K miles on the clock. We drove our last pickup truck until the engine blew. I did buy her a new pickup truck (first new car I have ever bought in my life) but I had it paid off in 3 months. I would have paid cash but we had not been planning on buying anything so it took a while to scrounge up the money.
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09-02-2007, 10:34 PM
#105
That's your problem. You make a living in the mort biz so you have been brainwashed into thinking about it the wrong way. I paid off my first house in 1999 when all my friends were saying to put the money into the stock market. I don't have to tell you what a huge mistake that would have been.
At 45 I'll have a paid off house and $500K in investments. My FICO score will probably be close to 0 at that time (it drops every year). That 60 year old man lived his life the wrong way but I would bet you anything that paying money down on his house instead of paying interest to a bank wasn't his problem. It was years of living the lie that you have to keep up with the Jone's and NOT paying any money off on his previous houses. Yeah, he screwed up royally at age 60 but that was just the last financial screw up he made. My wife and I spent our first 15 years in a 900 sq ft house (we have since moved up) while all our friends lived in "mansions" with new cars. She hasn't worked during all those years but somehow we ended up with more money than her parents who together make double what I do. They both have new cars, a pool, a boat, etc and a rental investment property while we live well within our means. I've lived my life knowing that if you owe money to someone (a bank in this case) you are screwed. It is the wrong way to do it. Our two Miatas have 105K miles and 220K miles on the clock. We drove our last pickup truck until the engine blew. I did buy her a new pickup truck (first new car I have ever bought in my life) but I had it paid off in 3 months. I would have paid cash but we had not been planning on buying anything so it took a while to scrounge up the money.
At 45 I'll have a paid off house and $500K in investments. My FICO score will probably be close to 0 at that time (it drops every year). That 60 year old man lived his life the wrong way but I would bet you anything that paying money down on his house instead of paying interest to a bank wasn't his problem. It was years of living the lie that you have to keep up with the Jone's and NOT paying any money off on his previous houses. Yeah, he screwed up royally at age 60 but that was just the last financial screw up he made. My wife and I spent our first 15 years in a 900 sq ft house (we have since moved up) while all our friends lived in "mansions" with new cars. She hasn't worked during all those years but somehow we ended up with more money than her parents who together make double what I do. They both have new cars, a pool, a boat, etc and a rental investment property while we live well within our means. I've lived my life knowing that if you owe money to someone (a bank in this case) you are screwed. It is the wrong way to do it. Our two Miatas have 105K miles and 220K miles on the clock. We drove our last pickup truck until the engine blew. I did buy her a new pickup truck (first new car I have ever bought in my life) but I had it paid off in 3 months. I would have paid cash but we had not been planning on buying anything so it took a while to scrounge up the money.
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09-02-2007, 10:46 PM
#107
You're not alone, but there aren't many of us out there. The couple across the street from me are getting married. They are 25 years old, have a 30 year mortgage, two new cars, two jet skis, a 4 wheeler, and are getting ready to spend $10K on a wedding. I will bet you anything that 40 years from now they will still be in debt. This means that they will still be paying on the jet skis (probably $20K worth by that time) or the dinner out that they ate last week (probably $1K in interest by that time). I've talked to them but they just don't seem to get it. But at least they are driving the economy for us!
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09-02-2007, 11:08 PM
#108
That's your problem. You make a living in the mort biz so you have been brainwashed into thinking about it the wrong way. I paid off my first house in 1999 when all my friends were saying to put the money into the stock market. I don't have to tell you what a huge mistake that would have been.
My whole point is that by NOT paying off your house, you have options. Like that old man, he no longer had any options but to work to pay his bills.
Also, if you had put your money into the stock market in the form of Index Funds or even any of the Blue Chip stocks, you'd have even more money than you would by putting it into your house.
Buying stocks on speculation is nothing more than gambling - that is not what I meant. IIRC, in 1999, the Dow was somewhere around 10,000. Today it's at 13,000 +. How can you lose in the long-run???
Again, YOU have options - that old man has none. That was my point.
As for your neighbor across the street, yeah I talk to people like that all the time too. :(
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09-02-2007, 11:27 PM
#110
If I've been brainwashed by the mortgage biz, than surely you've been brainwashed by your parents (or by people of the depression era) who held mortgage burning parties.
My whole point is that by NOT paying off your house, you have options. Like that old man, he no longer had any options but to work to pay his bills.
Buying stocks on speculation is nothing more than gambling - that is not what I meant. IIRC, in 1999, the Dow was somewhere around 10,000. Today it's at 13,000 +. How can you lose in the long-run???
Again, YOU have options - that old man has none. That was my point.
As for your neighbor across the street, yeah I talk to people like that all the time too. :(
My whole point is that by NOT paying off your house, you have options. Like that old man, he no longer had any options but to work to pay his bills.
Buying stocks on speculation is nothing more than gambling - that is not what I meant. IIRC, in 1999, the Dow was somewhere around 10,000. Today it's at 13,000 +. How can you lose in the long-run???
Again, YOU have options - that old man has none. That was my point.
As for your neighbor across the street, yeah I talk to people like that all the time too. :(
- In 1999 the Nasdaq was 5000, it is now 2600. The only guaranteed money is the money you SAVE paying off a mortgage. It is a perfect "investment". Just for the record, I got my *** cut buying stocks on margin in the late 90's. I still consider myself an investor, but I only mess with index funds now.
- Again, the old man's problem is not that he paid off his house. It is that he bought too much of a house. If he had paid off his $75K house what would be the problem? He would have had a ton of options right now AFTER paying off his house. A house payment doesn't equate to more options but a huge house payment does equate to fewer options.
- Yeah, the young couple across the street is screwed. My mother-in-law (not the same person I was talking about before - divorces, etc) didn't buy the house she lives in (here father did), didn't buy the car (10AE Miata) she drives, and owns absolutely nothing. I couldn't think about being 58 years old and having nothing to my name. That would really suck! She spent most of her adult life making payments on a mobile home that was worth nothing. What a waste...
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09-02-2007, 11:57 PM
#115
Blame the subprime lender tossing credit on 1/4 to half million dollar houses to people makeing 20-30K a year. They over blaoted the market and now with all the foreclosures and balloon payments we are seeing a market correction. I have noticed land that local land companys bought for 500-1500 an acre go down from its 10K $ prices to the 5K$ range so far and i am sure it will continue unless el presidente grants solvency to all the bad debt that this country has thrown itself into. Wich is a horrible idea. It is nice for people to have options but letting someone who can't afford a house into a contract they can't complete is a lose lose situation for everyone even the bank becouse when those laons default and the people declare banckruptcy who pays the bill Peoople like you and me that is who. Granted they have stiffened the rules on bankruptcy but still. Being 60 yrs old and having no ownership of your home, and making a payment to someone is a horrible thing. The depression is real, and it just might happen agian if we over spend this country agian chuck. + tell me something if you wanted that 13K you made of stocks tommorow how much would you actualy have, when it hit your bank account. The penalty's and fees etc make, those things pohibative to the average investor. Health insurance is tax deductable to but you dont see me forking over 100+$ a month on that great deal either. Im healthy and if i die then oh well. **** happens.
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09-03-2007, 12:16 AM
#116
You guys really need to start using paragraphs.
First, yes the subprime lenders are partly to blame for the current mess we are in. However, what about the borrower who absolutely want that loan/house? How about the investors who were willing to overlook the risk involved in buying a block of subprime mortgages on the secondary market? (I'm assuming you know how mortgages work)
My point is that there is plenty of blame to go around.
I have three kids and two houses and plenty of tax deductions because of it. I pay very little in income taxes.
First, yes the subprime lenders are partly to blame for the current mess we are in. However, what about the borrower who absolutely want that loan/house? How about the investors who were willing to overlook the risk involved in buying a block of subprime mortgages on the secondary market? (I'm assuming you know how mortgages work)
My point is that there is plenty of blame to go around.
I have three kids and two houses and plenty of tax deductions because of it. I pay very little in income taxes.
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09-03-2007, 12:34 AM
#117
living within your means is the lesson.
liquidity vrs equity is a matter of philosophy.
phillip, good luck, that's a crappy deal to get stuck like that.
wife and i sold our home in charlotte last year. we moved to orange county. double the income (both of us) and i STILL don't want to buy a home out here. we plan to move back to the southeast, but the home loan fallout has shaken the house market and i don't think i want to buy again until it stabilizes again. i'm happy to rollover the money on the our last house and let that grow.
do i have debt? sure, but i have a handle on it and i don't have any credit cards.
liquidity vrs equity is a matter of philosophy.
phillip, good luck, that's a crappy deal to get stuck like that.
wife and i sold our home in charlotte last year. we moved to orange county. double the income (both of us) and i STILL don't want to buy a home out here. we plan to move back to the southeast, but the home loan fallout has shaken the house market and i don't think i want to buy again until it stabilizes again. i'm happy to rollover the money on the our last house and let that grow.
do i have debt? sure, but i have a handle on it and i don't have any credit cards.
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09-03-2007, 12:35 AM
#118
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I know this will make you laugh chuck: the 40 year mortgage! 
a house is generally like any other investment. unless you live where you can reasonably afford a house (<1 yr salary). you have to research the liklihood of a net gain over the time you own the investment.
unfortunately a house is less lucrative as an investment lately. but until last month the stock market was a great place to be. I think up til august my IRA was pushing 20% returns for the last 12 months. and that's purely unmanaged index funds. it's down now but so what. in 30 years it'll still return 10-12%.
the funny thing? my parents house in the mid 60s was like 30,000 dollars. right in the heart of silicon valley. now it's around 800k. what's the percentage growth on that over the long term--even in a "depressed" housing market?
a house is generally like any other investment. unless you live where you can reasonably afford a house (<1 yr salary). you have to research the liklihood of a net gain over the time you own the investment.
unfortunately a house is less lucrative as an investment lately. but until last month the stock market was a great place to be. I think up til august my IRA was pushing 20% returns for the last 12 months. and that's purely unmanaged index funds. it's down now but so what. in 30 years it'll still return 10-12%.
the funny thing? my parents house in the mid 60s was like 30,000 dollars. right in the heart of silicon valley. now it's around 800k. what's the percentage growth on that over the long term--even in a "depressed" housing market?
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09-03-2007, 12:43 AM
#119
on a side note, the lending companys that gave some of my neighbors in charlotte the money for their homes made me want to punch babies.
o down? interest only? cripes. it was a beautiful neighborhood, but people go in on these crazy mortgages that they can barely make.
this is great until you start to see some of the homes go unkept because they can't afford to do simle maintenance, the homes go into forclosure which screws it for the rest of us hard-working stiffs who lose value on our home when it goes 20% under it's value so the bank can recoup.
it's farking stupid.
o down? interest only? cripes. it was a beautiful neighborhood, but people go in on these crazy mortgages that they can barely make.
this is great until you start to see some of the homes go unkept because they can't afford to do simle maintenance, the homes go into forclosure which screws it for the rest of us hard-working stiffs who lose value on our home when it goes 20% under it's value so the bank can recoup.
it's farking stupid.
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09-03-2007, 12:52 AM
#120
on a side note, the lending companys that gave some of my neighbors in charlotte the money for their homes made me want to punch babies.
o down? interest only? cripes. it was a beautiful neighborhood, but people go in on these crazy mortgages that they can barely make.
this is great until you start to see some of the homes go unkept because they can't afford to do simle maintenance, the homes go into forclosure which screws it for the rest of us hard-working stiffs who lose value on our home when it goes 20% under it's value so the bank can recoup.
it's farking stupid.
o down? interest only? cripes. it was a beautiful neighborhood, but people go in on these crazy mortgages that they can barely make.
this is great until you start to see some of the homes go unkept because they can't afford to do simle maintenance, the homes go into forclosure which screws it for the rest of us hard-working stiffs who lose value on our home when it goes 20% under it's value so the bank can recoup.
it's farking stupid.
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