Completely inappropriate question about financial matter
July 27th, 2010 at 4:16:13 PM
permalink
I currently own a home worth about $XXX. I carry a mortgage on it at 5.25% for about $YYY, which is much less than $XXX(the rest is equity). I have the cash to pay it off.
Is it better to own the house outright or to have a mortgage -- essentially borrowing money from a bank -- for other investments?
The choices I have are ...
Stay as-is.
Refinance entire amount for 30 years at 4.25%.
Pay some cash and refinance for a lesser amount, for 15 years at 4%.
Pay it off.
What should this little Kansas gal do?
P.S. I'm worried that my house might be destroyed by either a bad witch or a tornado.
--Dorothy
Is it better to own the house outright or to have a mortgage -- essentially borrowing money from a bank -- for other investments?
The choices I have are ...
Stay as-is.
Refinance entire amount for 30 years at 4.25%.
Pay some cash and refinance for a lesser amount, for 15 years at 4%.
Pay it off.
What should this little Kansas gal do?
P.S. I'm worried that my house might be destroyed by either a bad witch or a tornado.
--Dorothy
"Who would have thought a good little girl like you could destroy my beautiful wickedness!"
July 27th, 2010 at 4:23:08 PM
permalink
Assuming you will still have enough liquid assets (@2 - 3 times your annual expenses) after paying it off, PAY IT OFF. You are currently getting .25% (if that) on any cash in the bank. Paying your mortgage completely gives you 5% instantly, a huge credit boost, and flexibility for any future moves. There are tax implications to not having a mortgage interest deduction, but you'll live (and thrive).
Simplicity is the ultimate sophistication - Leonardo da Vinci
July 27th, 2010 at 4:25:27 PM
permalink
I've owned my house outright for over 20 years and theres no way I would ever have a mortgage again. Being debt free should always be your goal. It gives you a lot of power and a lot more options. And you sleep better. I'm at a point now where if I can't pay cash for something, I don't need it.
"It's not called gambling if the math is on your side."
July 27th, 2010 at 4:43:13 PM
permalink
Go ahead and pay it off. As stated, the only thing you might miss out on is the tax benefit of deducting your mortgage. This isn't as much of a benefit when you can afford to pay off your home, and thus not pay anymore interest. The amount of interest you pay is a lot more than the deduction you receive.
Further, paying off your home will allow you to use that money which is normally directed to your mortgage payment is a number of ways. My personal recommendation would be to look into buying additional, income-producing homes and/or income-producing commercial property. This way, the same mortgage payment that you are making now, you will still be making, along with the tax deduction, and cash income.
Further, paying off your home will allow you to use that money which is normally directed to your mortgage payment is a number of ways. My personal recommendation would be to look into buying additional, income-producing homes and/or income-producing commercial property. This way, the same mortgage payment that you are making now, you will still be making, along with the tax deduction, and cash income.
July 27th, 2010 at 5:11:39 PM
permalink
Quote: AyecarumbaAssuming you will still have enough liquid assets (@2 - 3 times your annual expenses) after paying it off, PAY IT OFF. You are currently getting .25% (if that) on any cash in the bank. Paying your mortgage completely gives you 5% instantly, a huge credit boost, and flexibility for any future moves. There are tax implications to not having a mortgage interest deduction, but you'll live (and thrive).
These answers are great. OK then ...
Question though. I will have about 2 years in backup cash after it is paid off, but does that really matter? I mean, if I need cash, can't I just get a mortgage?
Altogether the outstanding balance on my mortgage is about 1/3 of my total net worth. Does that change anything?
I can't wait to march in and pay it off ...
--Dorothy
"Who would have thought a good little girl like you could destroy my beautiful wickedness!"
July 27th, 2010 at 5:19:42 PM
permalink
Personally, I would not recommend getting another mortgage and/or line of equity on your home once you have paid it off. The freedom of being out from under your mortgage on your primary residence is very uplifting, and to go right back under one is kind of depressing.
2 years of living expenses in quite a bit to have in "backup cash", but the question I would have is what kind of investments and retirement monies do you have? I'm not asking you to answer that question here. But it is something to think about.
If you have any reason to believe that you would need extra cash, beyond the 2 years of living expenses, within the short term, then definitely not paying off your mortgage is the way to go. On the other hand, if the 2 years of living expenses should hold you, then I would recommend looking into either a whole life insurance policy and/or short-term cash-producing investments, all dependent on your age and future outlook.
Speaking with a financial advisor would be a good idea to determine what you should do. Look for someone who is fee-based, rather than one who receives a cut of what you invest and/or a kickback from specific companies. A good financial advisor can outline your future, dependent on what you currently have, and what you'll need for the future.
2 years of living expenses in quite a bit to have in "backup cash", but the question I would have is what kind of investments and retirement monies do you have? I'm not asking you to answer that question here. But it is something to think about.
If you have any reason to believe that you would need extra cash, beyond the 2 years of living expenses, within the short term, then definitely not paying off your mortgage is the way to go. On the other hand, if the 2 years of living expenses should hold you, then I would recommend looking into either a whole life insurance policy and/or short-term cash-producing investments, all dependent on your age and future outlook.
Speaking with a financial advisor would be a good idea to determine what you should do. Look for someone who is fee-based, rather than one who receives a cut of what you invest and/or a kickback from specific companies. A good financial advisor can outline your future, dependent on what you currently have, and what you'll need for the future.
July 27th, 2010 at 5:22:46 PM
permalink
Quote: DorothyGaleThese answers are great. OK then ...
Question though. I will have about 2 years in backup cash after it is paid off, but does that really matter? I mean, if I need cash, can't I just get a mortgage?
Altogether the outstanding balance on my mortgage is about 1/3 of my total net worth. Does that change anything?
I can't wait to march in and pay it off ...
--Dorothy
Mortgage's take time to fund. You may find yourself in a situation where you need ready cash to pay unexpected expenses. Tornado damage to your home or car, unexpected medical emergency, bail...
Also, you may not qualify for a mortgage (loss of job, disabled, ill...) Hopefully, you will never need to dip into it, but if you ever do need it, you will be glad to have it.
The 1/3 total does not change anything. Assuming home prices have bottomed out, you are moving your worth from one area (cash) to another (property) while increasing your ready cash by cutting out the mortgage interest expense. Still a winning move.
Simplicity is the ultimate sophistication - Leonardo da Vinci
July 27th, 2010 at 6:03:58 PM
permalink
Well, golly. I didn't think I'd be the only person taking this side of the argument, but here goes. Refinance. Refinance and cash out.
If you can refinance the entire mortgage at 4.25%, you should do that up to 80% Mortgage-to-value. Then you should take the resulting cash (if xxx-yyy>.8XXX) and buy the most aggressive portfolio of bonds that you can stomach. You can basically create a situation where the bond income pays the incremental mortgage payments plus a little extra.
In addition to freeing up more cash to invest at a rate higher than the one you're paying on the mortgage, you're also protecting yourself if your home is destroyed by lions, tigers, or bears. If your insurer refused to pay for some reason, you could (kill your credit rating and) stick it to the bank.
Even if you do opt to pay off the mortgage, I HIGHLY recommend opening a HELOC at the best rate you can find. That way, if you want/need to tap your equity the line is there waiting for you. It'll give you access to your equity much faster than applying for a new mortgage at that time, and presumably you'd only want to tap the equity in an emergency/time-sensitive situation.
If you can refinance the entire mortgage at 4.25%, you should do that up to 80% Mortgage-to-value. Then you should take the resulting cash (if xxx-yyy>.8XXX) and buy the most aggressive portfolio of bonds that you can stomach. You can basically create a situation where the bond income pays the incremental mortgage payments plus a little extra.
In addition to freeing up more cash to invest at a rate higher than the one you're paying on the mortgage, you're also protecting yourself if your home is destroyed by lions, tigers, or bears. If your insurer refused to pay for some reason, you could (kill your credit rating and) stick it to the bank.
Even if you do opt to pay off the mortgage, I HIGHLY recommend opening a HELOC at the best rate you can find. That way, if you want/need to tap your equity the line is there waiting for you. It'll give you access to your equity much faster than applying for a new mortgage at that time, and presumably you'd only want to tap the equity in an emergency/time-sensitive situation.
"So as the clock ticked and the day passed, opportunity met preparation, and luck happened." - Maurice Clarett
July 27th, 2010 at 6:31:35 PM
permalink
Quote: rdw4potusWell, golly. I didn't think I'd be the only person taking this side of the argument, but here goes. Refinance. Refinance and cash out..
In these uncertain times, its much better to own your home and hunker down than to expand your portfolio. Just my opinion. Peace of mind means a lot.
"It's not called gambling if the math is on your side."
July 27th, 2010 at 7:15:04 PM
permalink
Quote: EvenBobI've owned my house outright for over 20 years and theres no way I would ever have a mortgage again. Being debt free should always be your goal. It gives you a lot of power and a lot more options. And you sleep better. I'm at a point now where if I can't pay cash for something, I don't need it.
I hear that happens when you get old....
July 27th, 2010 at 8:03:45 PM
permalink
I'd tell you to pay it off, but since I could pay mine off and I don't, my advice is perfectly worthless.
(My reason is simple; I like having the money, and the mortgage doesn't stress me.)
(My reason is simple; I like having the money, and the mortgage doesn't stress me.)
A falling knife has no handle.
July 28th, 2010 at 12:10:22 AM
permalink
Quote: rdw4potusIf you can refinance the entire mortgage at 4.25%, you should do that up to 80% Mortgage-to-value. Then you should take the resulting cash (if xxx-yyy>.8XXX) and buy the most aggressive portfolio of bonds that you can stomach. You can basically create a situation where the bond income pays the incremental mortgage payments plus a little extra.
Now, that's one of the things I was thinking ... but then, isn't the bond income taxable? Doesn't the fact that I'm in the top tax bracket imply that I need at least 5% bonds? And is there any offset to this by the fact that I no longer get the tax deduction on the interest?
Quote:you're also protecting yourself if your home is destroyed by lions, tigers, or bears. If your insurer refused to pay for some reason, you could (kill your credit rating and) stick it to the bank.
Another thought I had. Owning the home outright gives me a lot of cash in one investment (I am investing in the appreciation of the property) with a lot of risk. The risks include every act of god for which I am not insured, together with being sued, together with insurance not paying their debts.
Quote:Even if you do opt to pay off the mortgage, I HIGHLY recommend opening a HELOC at the best rate you can find. That way, if you want/need to tap your equity the line is there waiting for you. It'll give you access to your equity much faster than applying for a new mortgage at that time, and presumably you'd only want to tap the equity in an emergency/time-sensitive situation.
And surely a HELOC is available in the < 2% range.
The true cost of paying $3000 per month as a mortgage payment is about $1000. To see why ...
Of that $3000, $2400 is interest so that I get about $800 less in taxes. Also, $600 goes into equity in the house. Further, I have the outstanding mortgage balance to invest in high quality tax exempt state muni's giving me about a 3% return, for another $600/mo return. This leaves the true cost of the mortgage at about $1000 on a $3000 mortgage payment. Isn't that a good deal?
For that true cost of $1000 per month, I'm buying "insurance" on the mortgage amount, and pretty cheap rent.
Still thinking ... I need more convincing one way or the other.
Glad to see someone with the same thoughts ... it's complicated ...
--Dorothy
"Who would have thought a good little girl like you could destroy my beautiful wickedness!"
July 28th, 2010 at 3:27:54 AM
permalink
hi Dorothy, i agree with others here and pay off the mortgage. however, and sorry if i missed this if you mentioned it, but other factors like your age, if you have children (heirs), where you would like to see yourself in 5, 10, 20 years, etc. would play a part on what you decide.
yes, big decisions like this often are complicated. alot to weigh. at least it doesn't seem like you are pressured for time.
.
yes, big decisions like this often are complicated. alot to weigh. at least it doesn't seem like you are pressured for time.
.
July 28th, 2010 at 6:20:46 AM
permalink
Quote: DorothyGaleNow, that's one of the things I was thinking ... but then, isn't the bond income taxable? Doesn't the fact that I'm in the top tax bracket imply that I need at least 5% bonds? And is there any offset to this by the fact that I no longer get the tax deduction on the interest?
Yes, the bond income is taxable. You'll need to pick higher-interest (but not outlandish) bonds to effectively lock in a return against a mortgage at 4.25% (effective rate of about 3% after the interest deduction). I'm not sure of your appetite for risk, but I've had good luck with organized peer-to-peer lending at a higher return. You could check out something like www.prosper.com as an alternative to the bonds.
Quote: DorothyGaleAnother thought I had. Owning the home outright gives me a lot of cash in one investment (I am investing in the appreciation of the property) with a lot of risk. The risks include every act of god for which I am not insured, together with being sued, together with insurance not paying their debts.
To me, it makes a lot of sense to be mortgaged to the hilt with an equal amount of cash quietly earning whatever return your risk tolerance can bear in the background. You can always change your mind and pay off the mortgage, but for whatever time period that you enact this system, you come out ahead. Plus, you can turn the house back to the bank if the unthinkable happens. Just don't forget that doing so will limit your ability to do just about anything financially for several years. That's still probably preferable to taking a huge loss on the house in a disaster, but it's also a big consequence.
Quote: DorothyGaleAnd surely a HELOC is available in the < 2% range.
It'll depend on the amount of the line, and the position of the mortgage. 2% is about right for right now if it's in first position and less than 80% of the value of the home. But it's a variable rate product, so you'll be subject to changes in the prime rate (possibly the LIBOR depending on the product). There's nowhere to go but up on those rates, but with the HELOC version of the plan I think the idea is to have no balance on the loan so the effect would be minimal.
"So as the clock ticked and the day passed, opportunity met preparation, and luck happened." - Maurice Clarett
July 28th, 2010 at 7:22:27 AM
permalink
There is something mildly entertaining about watching people who gamble away money discussing financial strategy.
I have no particular "debt strategy". The only bill I carry is my mortgage and that damn monthly AMEX bill that gets 100% paid off each time. I don't purchase cars unless I can pay cash for them, which I recently did.
I will bet anything that a good 75% of people who post here are over-extended. Just like most Americans are with their credit cards leading the way, and cars they can't afford and shouldn't have coming in a close 2nd.
I have no particular "debt strategy". The only bill I carry is my mortgage and that damn monthly AMEX bill that gets 100% paid off each time. I don't purchase cars unless I can pay cash for them, which I recently did.
I will bet anything that a good 75% of people who post here are over-extended. Just like most Americans are with their credit cards leading the way, and cars they can't afford and shouldn't have coming in a close 2nd.
July 28th, 2010 at 7:25:07 AM
permalink
I tend to side with rdw4potus. It is not terrible to be in debt. There is good debt and bad debt. Credit card debt is bad debt. A nice low interest home loan is good debt. A loan on an income producing property or to start up a company is great debt. It is great to be free and clear of all debt but not necessary; it's as much a function of one's personality than anything else. You're a gambler, why not take the risk on the bonds or something similar? My father always called stocks "legalized gambling." It is, but you can get better returns. ;p
-----------------------------------------------------------------
rdw4potus, do you have any experience buying corporate bonds, e.g. Ford? What do you think of the risk/return for that?
-----------------------------------------------------------------
rdw4potus, do you have any experience buying corporate bonds, e.g. Ford? What do you think of the risk/return for that?
"Dice, verily, are armed with goads and driving-hooks, deceiving and tormenting, causing grievous woe." -Rig Veda 10.34.4
July 28th, 2010 at 8:44:12 AM
permalink
Quote: JerryLoganThere is something mildly entertaining about watching people who gamble away money discussing financial strategy.
How can you gamble by discussing? It is only after making unwise decisions with negative expectation that gambling takes place. A loan, by definition, has negative expectation, but may NOT be unwise, hence the question.
Quote:I have no particular "debt strategy". The only bill I carry is my mortgage and that damn monthly AMEX bill that gets 100% paid off each time. I don't purchase cars unless I can pay cash for them, which I recently did.
Obviously you have a debt strategy. To carry a mortgage and to pay AMEX bills (carry no CC debt). If you paid off your mortgage you may not have enough to pay your full AMEX debt each month and therefore pay a higher interest rate on a lesser amount of money. This is definitely a strategy.
Quote:
I will bet anything that a good 75% of people who post here are over-extended.
I will assume that "overextended" means having debts that exceed your total cash assets. If so, it sounds like you are overextended with your mortgage. I, for one, am not in the ballpark of overextended. My only debt is my mortgage, which I could walk into a bank and pay out in full today, with a lot of cash left over. The question on the table is "should I?"
Quote:
Just like most Americans are with their credit cards leading the way, and cars they can't afford and shouldn't have coming in a close 2nd.
I don't know what that has to do with this thread.
I am giving you the benefit of the doubt. So, say something smart!
--Dorothy
"Who would have thought a good little girl like you could destroy my beautiful wickedness!"
July 28th, 2010 at 8:50:14 AM
permalink
Quote: teddys
rdw4potus, do you have any experience buying corporate bonds, e.g. Ford? What do you think of the risk/return for that?
I tend to think that the market is much too conservative when they evaluate the risk of companies. The risk premium assigned to some company's bonds vastly outweighs the probability-weighted incremental risk (to a point. Junk is junk...). In the case of Ford, the company is profitable and becoming more stable every day. They're no more risky than most other heavy manufacturers, but their bonds have a higher yield.
If you were going to add the manufacturing sector back into your holdings, and you wanted to buy bonds, Ford would be a great pick. Institute for Supply Management industrial and manufacturing data shows a fairly robust recovery in that sector, so this might be a good time to make the move back into this segment.
Disclaimer: While I don't work in the manufacturing sector, most of my company's customers do. None of the info shared is privileged in any way. Also, I'm a B-school student and NOT an investment advisor, so please consider this opinion to be devised from somewhat of a sheltered position.
"So as the clock ticked and the day passed, opportunity met preparation, and luck happened." - Maurice Clarett
July 28th, 2010 at 9:01:18 AM
permalink
1. Gamble by discussing? Huh? + or -EV is gambling either way because most people do it over so short a period of time that it has nothing to do with ever getting to a point where it matters. Wise decisions or not, it is gambling. Those who claim playing only in +EV situations is not gambling, have a definite gambling problem.
2. I do not have a "debt" strategy because I am able to pay off my mortgage if I want to. A debt strategy comes into being only when an individual has to carry debt to live, and then has to have some kind of plan to pay off that debt....or else.
3. No, overextended has nothing to do with assets vs. debts. It has to do with spending more than you make. Lots of people have high-asset properties they can't sell right now and they have a high net worth, so they have to struggle paying their debts. But I am perplexed as to why you avoided the point I made about my belief that 75% of those who post here are overextended, and in fact, made an assumption that I am one of them after explaining my financial situation. It is that type of paranoia that leads me to believe you are not being honest.
4. Again, you are personally injured when I bring up credit card debt. I sense a hint of denial in that.
2. I do not have a "debt" strategy because I am able to pay off my mortgage if I want to. A debt strategy comes into being only when an individual has to carry debt to live, and then has to have some kind of plan to pay off that debt....or else.
3. No, overextended has nothing to do with assets vs. debts. It has to do with spending more than you make. Lots of people have high-asset properties they can't sell right now and they have a high net worth, so they have to struggle paying their debts. But I am perplexed as to why you avoided the point I made about my belief that 75% of those who post here are overextended, and in fact, made an assumption that I am one of them after explaining my financial situation. It is that type of paranoia that leads me to believe you are not being honest.
4. Again, you are personally injured when I bring up credit card debt. I sense a hint of denial in that.
July 28th, 2010 at 9:22:36 AM
permalink
Quote: JerryLogan... ignorant, baiting, self inflating, meaningless stuff ...
You have nothing valuable to add ... go troll some other thread.
--Dorothy
"Who would have thought a good little girl like you could destroy my beautiful wickedness!"
July 28th, 2010 at 10:05:56 AM
permalink
Quote: DorothyGaleYou have nothing valuable to add ... go troll some other thread.
--Dorothy
Usually happens when a direct hit is made on someone who loathes direct hits!
July 28th, 2010 at 10:17:13 AM
permalink
Quote: JerryLoganUsually happens when a direct hit is made on someone who loathes direct hits!
Yes, of course. And, as we all know, getting "direct hits" is the point of life! Or, barring that, the point of this forum. Oh, wait. That's wrong, too? Well darn.
"So as the clock ticked and the day passed, opportunity met preparation, and luck happened." - Maurice Clarett
July 28th, 2010 at 10:31:29 AM
permalink
Quote: rdw4potusYes, of course. And, as we all know, getting "direct hits" is the point of life! Or, barring that, the point of this forum. Oh, wait. That's wrong, too? Well darn.
I guess this thread is over, oh well, it was valuable while it lasted. Now that Logan has ruined yet another good thread ... I have an appointment with two separate financial advisers lined up today ... I appreciate the advice given here by those capable of giving good advice.
It's fine with me to end threads in the face of trolls. I can cite Godwin's law here, if need be.
--Dorothy
"Who would have thought a good little girl like you could destroy my beautiful wickedness!"
July 28th, 2010 at 11:07:44 AM
permalink
Quote: DorothyGaleI guess this thread is over, oh well, it was valuable while it lasted. Now that Logan has ruined yet another good thread ... I have an appointment with two separate financial advisers lined up today ... I appreciate the advice given here by those capable of giving good advice.
It's fine with me to end threads in the face of trolls. I can cite Godwin's law here, if need be.
--Dorothy
Ha! If you needed the advice of people here on your financial matters, what's that say about where you go for spiritual advice!
July 28th, 2010 at 11:13:26 AM
permalink
pay off the mortgage. post your house as collateral to finance a whole life insurance policy putting in the maximum premium you can each year probably for a period of 10-15yrs. as your policy accumulates cash value, you can use up to 90% of the surrender value of your policy as collateral instead. when the policy accumulates enough cash value, pay back the loan. the longer you live the more your policy is worth. from that point on whenever you need money borrow against the policy.
basically the whole idea is to get free life insurance. the policy earns a higher return than the interest you pay on the loan. insurance companies typically earn at least 8% on the money they pool together while the cost of the loan lets assume will be around 5%. so you make 3% off of the loan and are covered in case you die. the death benefit is then used to first pay back your creditor and the rest is given to your beneficiary. typically the loan rate will be less when the bank knows where your money is going since they are protected by the death benefit of the insurance policy in case you happen to die.
if you borrow all the premium payments up front. you can then invest that money elsewhere while paying the premium each year and paying back interest and part of the principal on the loan.if you borrow the whole amount up front, the more collateral you will have to post. if you borrow it year to year, the less collateral you will have to post.
basically the whole idea is to get free life insurance. the policy earns a higher return than the interest you pay on the loan. insurance companies typically earn at least 8% on the money they pool together while the cost of the loan lets assume will be around 5%. so you make 3% off of the loan and are covered in case you die. the death benefit is then used to first pay back your creditor and the rest is given to your beneficiary. typically the loan rate will be less when the bank knows where your money is going since they are protected by the death benefit of the insurance policy in case you happen to die.
if you borrow all the premium payments up front. you can then invest that money elsewhere while paying the premium each year and paying back interest and part of the principal on the loan.if you borrow the whole amount up front, the more collateral you will have to post. if you borrow it year to year, the less collateral you will have to post.
July 28th, 2010 at 1:30:16 PM
permalink
Quote: JerryLoganHa! If you needed the advice of people here on your financial matters, what's that say about where you go for spiritual advice!
Your replies have the tenor of a well known troll -- a man by the name of Ray Cagno, a.k.a. "Stalker." He delights in doing just what you are doing. Nice guy otherwise.
--Dorothy
"Who would have thought a good little girl like you could destroy my beautiful wickedness!"
July 28th, 2010 at 1:54:52 PM
permalink
Quote: DorothyGaleYour replies have the tenor of a well known troll -- a man by the name of Ray Cagno, a.k.a. "Stalker." He delights in doing just what you are doing. Nice guy otherwise.
--Dorothy
You shoulnd't waste your time arguing with JerryLogan. It's like arguing with an angry, bitter wal.
Donald Trump is a fucking criminal
July 28th, 2010 at 2:16:06 PM
permalink
Quote: NareedYou shoulnd't waste your time arguing with JerryLogan. It's like arguing with an angry, bitter wal.
Of course ... no need to even say it ...
Here is my answer ...
I am refinancing down to a conventional loan at $417k, 0 points, 15 years, 4.00% interest rate. Formerly I had a 30 year jumbo loan for $548k at 5.25%. I will pay the difference in cash.
It turns out that this re-fi creates positive cash flow with my current investments -- in other words it makes more money for me to have this loan than if I had no loan at all. The math took me several hours, but I figured it out, with the help of a financial adviser. I visited two advisers. One of the advisers couldn't keep up with me, so I walked out on him in about 10 minutes, the other was pretty good. Neither completely understood the math. Balancing taxes, investments, equity, liability and future earnings is tough.
But, it's also very helpful to have the opinions given here ...
[edited addition -- the re-fi is on hold... pending a conversation with yet another adviser...]
--Dorothy
"Who would have thought a good little girl like you could destroy my beautiful wickedness!"
July 28th, 2010 at 2:49:04 PM
permalink
Here's a flash Dorothy. No one not in your household really cares a lick about your finances, so what kind of advice are you dumb enough to listen to from a group like this anyway. It's like that stupid "Traffic rules" thread that is just a way for posters to to kill time they'd probably use for more productive reasons. I thought this forum was for gambling advice and not to help solve someone's personal problem who's deep in debt and is looking for a way out of being over their head.
July 28th, 2010 at 3:01:56 PM
permalink
for my two cents, I do not recommend paying off a mortgage with a low rate like 5.25%... if you can refinance at about 4.25% do so.
Since you get a tax break, you are really borrowing 5.75% money at something like 3.75% with the tax break and IMO you should borrow as much as you can afford at that rate. If, however, you are not an investor and just put your money into CDs, I might change my mind.
If you don't like to gamble that earnings on your investments can't beat 3.75%, even *after* you *do* pay taxes on that, then you shouldnt be coming to a gambling site [vbg].
Since you get a tax break, you are really borrowing 5.75% money at something like 3.75% with the tax break and IMO you should borrow as much as you can afford at that rate. If, however, you are not an investor and just put your money into CDs, I might change my mind.
If you don't like to gamble that earnings on your investments can't beat 3.75%, even *after* you *do* pay taxes on that, then you shouldnt be coming to a gambling site [vbg].
the next time Dame Fortune toys with your heart, your soul and your wallet, raise your glass and praise her thus: “Thanks for nothing, you cold-hearted, evil, damnable, nefarious, low-life, malicious monster from Hell!” She is, after all, stone deaf. ... Arnold Snyder
July 28th, 2010 at 3:48:57 PM
permalink
Quote: DorothyGaleOf course ... no need to even say it ...
"The thing about things that go without saying, is that someone innevitably says them." (or words to that effect) Isaac Asimov, Fantastic Voyage II.
Donald Trump is a fucking criminal
July 28th, 2010 at 4:49:24 PM
permalink
No, THIS forum is for casual questions. The WoV forum(s) are in general for gambling advice, but goshdarnit, there's at least some discussion around other things as well. I see no evidence either that the OP is 'deep in debt'.
Thanks for playing.
Thanks for playing.
"Then you can admire the real gambler, who has neither eaten, slept, thought nor lived, he has so smarted under the scourge of his martingale, so suffered on the rack of his desire for a coup at trente-et-quarante" - Honore de Balzac, 1829
July 28th, 2010 at 5:03:22 PM
permalink
Quote: Nareed"The thing about things that go without saying, is that someone inevitably says them." (or words to that effect) Isaac Asimov, Fantastic Voyage II.
That's one great quote!
Here are some others -- what a man he was ...
Asimov' rel='nofollow' target='_blank'>http://www.goodreads.com/author/quotes/16667.Isaac_Asimov"]Asimov Quotes
--Dorothy
"Who would have thought a good little girl like you could destroy my beautiful wickedness!"
July 28th, 2010 at 5:39:25 PM
permalink
Quote: thecesspitNo, THIS forum is for casual questions. The WoV forum(s) are in general for gambling advice, but goshdarnit, there's at least some discussion around other things as well. I see no evidence either that the OP is 'deep in debt'.
Thanks for playing.
If the "OP" isn't, the "OP" wouldn't make such an amateurish move as asking a bunch of unknowns advice on how to run her finances.
July 28th, 2010 at 6:05:46 PM
permalink
Quote: DorothyGaleThat's one great quote!
Here are some others -- what a man he was ...
Asimov' rel='nofollow' target='_blank'>http://www.goodreads.com/author/quotes/16667.Isaac_Asimov"]Asimov Quotes
--Dorothy
The novel is riddled with witty lines by the engineer who built and pilots the submarine used in the voyage. The character attributes them to his grandfather. Two more I remember off hand are:
"It's more useful to know the thing than its name."
"There's nothing like pure water, provided you use vodka as the purifying agent."
Donald Trump is a fucking criminal
July 28th, 2010 at 8:58:53 PM
permalink
Quote: NareedTwo more I remember off hand are:
"It's more useful to know the thing than its name."
"There's nothing like pure water, provided you use vodka as the purifying agent."
I read his books as a youth (ok, 30+ years ago ...). I always liked him more, for example, than C.S. Lewis. He seemed not only genuinely smart and creative, but also to express compatible social and skeptical views to my own.
So long ago now ... there really was nothing like growing up in Kansas ...
I grew up in a good farm-house, we owned it outright. Unfortunately after the tornado, we were uninsured and had to rebuild from scratch. They didn't even have "insurance" back then, per se. It took us years to rebuild that old house, really. When they say "there's no place like home," there's always a caveat, or so I've learned.
--Dorothy
"Who would have thought a good little girl like you could destroy my beautiful wickedness!"
July 29th, 2010 at 9:03:53 AM
permalink
Quote: DorothyGaleI read his books as a youth (ok, 30+ years ago ...).
I've read pretty much all his fiction, and some of his non-fiction.
Right now I'm working over the SF works of Larry Niven.
Donald Trump is a fucking criminal
July 29th, 2010 at 9:08:28 AM
permalink
Quote: JerryLoganIf the "OP" isn't, the "OP" wouldn't make such an amateurish move as asking a bunch of unknowns advice on how to run her finances.
Non sequitir.
"Then you can admire the real gambler, who has neither eaten, slept, thought nor lived, he has so smarted under the scourge of his martingale, so suffered on the rack of his desire for a coup at trente-et-quarante" - Honore de Balzac, 1829
July 29th, 2010 at 11:03:38 AM
permalink
Quote: thecesspitNon sequitir.
Yes, it's always very difficult coming to grips with the fact that the point Jerry Logan made was correct in every way.
July 29th, 2010 at 12:14:51 PM
permalink
I like this thread! Not only was the financial part fun, but the title shows up in the forum as "completely inappropriate...(most recent poster)." Fantastic:-)
"So as the clock ticked and the day passed, opportunity met preparation, and luck happened." - Maurice Clarett
July 29th, 2010 at 12:16:32 PM
permalink
also currently appearing:
Casinos should have the...bluefire
Value of dealer errors in...Nareed
One more question about...teddys
Casinos should have the...bluefire
Value of dealer errors in...Nareed
One more question about...teddys
"So as the clock ticked and the day passed, opportunity met preparation, and luck happened." - Maurice Clarett
July 29th, 2010 at 12:29:03 PM
permalink
Quote: JerryLoganIf the "OP" isn't, the "OP" wouldn't make such an amateurish move as asking a bunch of unknowns advice on how to run her finances.
"Amateurish move"?
There is more collective mathematical brain power on this board than you could ever find at a local financial advisement business. Does every poster fit this description? Of course not. There will be some questionable advice, some really bad advice, but there will also be some great nuggets too. Asking questions and seeking advice from this board as your sole reference would be inadvisable. However, using this board as a supplement to other advice, or as a tool for learning more, is a viable option, and IMO, is a smart move.
Always borrow money from a pessimist; They don't expect to get paid back !
Be yourself and speak your thoughts. Those who matter won't mind, and those that mind, don't matter!
July 29th, 2010 at 1:43:17 PM
permalink
Quote: JerryLoganYes, it's always very difficult coming to grips with the fact that the point Jerry Logan made was correct in every way.
Appeal to Authority.
Possibly Begging the Question.
As well as Circular Reasoning, talking about yourself in the third person and changing the subject.
"Then you can admire the real gambler, who has neither eaten, slept, thought nor lived, he has so smarted under the scourge of his martingale, so suffered on the rack of his desire for a coup at trente-et-quarante" - Honore de Balzac, 1829
July 29th, 2010 at 2:29:02 PM
permalink
Quote: thecesspitAppeal to Authority.
Possibly Begging the Question.
As well as Circular Reasoning, talking about yourself in the third person and changing the subject.
Because it's programmed that way. You are conversing with an argument bot. Recognize it as inanimate text and move on.
A falling knife has no handle.
July 29th, 2010 at 3:09:12 PM
permalink
Quote: RaleighCraps"Amateurish move"?
There is more collective mathematical brain power on this board than you could ever find at a local financial advisement business. Does every poster fit this description? Of course not. There will be some questionable advice, some really bad advice, but there will also be some great nuggets too. Asking questions and seeking advice from this board as your sole reference would be inadvisable. However, using this board as a supplement to other advice, or as a tool for learning more, is a viable option, and IMO, is a smart move.
You didn't get it. All any poster does is lay themself out for criticism and possibly much more, if some of this so-called "expert financial advice" as you purport it to be, is adhered to by the requestor, acted upon as such, and the bottom falls out--regardless if other advice comes her way.
I don't go to my dentist, whom I've known for almost 15 years, for advice on buying a new car. And one certainly doesn't go to a bunch of unknown personalities on a GAMBLING-associated forum and ask for advice on how to stay out of foreclosure, or whatever problem she's hiding.
July 29th, 2010 at 3:17:20 PM
permalink
Jerry, do you think you could quit being a jerk when you post on this board? You'll notice when you posted a question you received several replies on point, without arguments, insults or political propaganda. Now, if others here treat you with respect, can't you do the same?
If you can't, then go away.
If you can't, then go away.
Donald Trump is a fucking criminal
July 29th, 2010 at 3:50:17 PM
permalink
Quote: NareedJerry, do you think you could quit being a jerk when you post on this board? You'll notice when you posted a question you received several replies on point, without arguments, insults or political propaganda. Now, if others here treat you with respect, can't you do the same?
If you can't, then go away.
The reply to "Amateurish" was hardly on point. Indeed, my response to it was a more spot-on answer while completely disarming the argument with time to spare. If you disapprove of it or don't like it, I'll date your sister for a night and I promise, you'll forget all about it.
July 29th, 2010 at 4:56:20 PM
permalink
I want to thank many here for their opinions and sharing their experiences. I have listened to the advice given here, the advice of three financial advisers, including my adviser at Fidelity and my accountant. I have also done some lengthy spread sheet computations on several scenarios.
It turns out to be a cash-flow positive decision to re-fi $417k out of the $548k at 4.0%, 0 points, 15 years, and pay the difference of $131k in cash. That is, I make more by taking the re-fi in this way than I get if I cashed out the house by paying it off. This includes all tax implications, state and federal.
I can understand, after the intense work I've done on this problem, why it really is a genuinely interesting problem. It has a solution that is unique for each individual based on a number of elements, some quantifiable, some not. In my case, I stuck to the purely quantifiable elements.
Again, thanks to all those who made a positive contribution to this discussion,
--Dorothy
It turns out to be a cash-flow positive decision to re-fi $417k out of the $548k at 4.0%, 0 points, 15 years, and pay the difference of $131k in cash. That is, I make more by taking the re-fi in this way than I get if I cashed out the house by paying it off. This includes all tax implications, state and federal.
I can understand, after the intense work I've done on this problem, why it really is a genuinely interesting problem. It has a solution that is unique for each individual based on a number of elements, some quantifiable, some not. In my case, I stuck to the purely quantifiable elements.
Again, thanks to all those who made a positive contribution to this discussion,
--Dorothy
"Who would have thought a good little girl like you could destroy my beautiful wickedness!"
July 30th, 2010 at 11:19:30 AM
permalink
Hi Dorothy,
I'm curious how a monthly mortgage payment, of which a large portion is going toward interest (at least initially), turns cash flow positive. It seems counterintuitive. Without going into specifics, are the tax benefits plus guaranteed return on the investment of the mortgage money putting you ahead?
I'm curious how a monthly mortgage payment, of which a large portion is going toward interest (at least initially), turns cash flow positive. It seems counterintuitive. Without going into specifics, are the tax benefits plus guaranteed return on the investment of the mortgage money putting you ahead?
Simplicity is the ultimate sophistication - Leonardo da Vinci
July 30th, 2010 at 11:45:02 AM
permalink
Quote: AyecarumbaHi Dorothy,
I'm curious how a monthly mortgage payment, of which a large portion is going toward interest (at least initially), turns cash flow positive. It seems counterintuitive. Without going into specifics, are the tax benefits plus guaranteed return on the investment of the mortgage money putting you ahead?
These are the basics. The complication arises because of amortization. The numbers below are not static over the life of the loan.
If I take that $400k loan, then I am paying $2950 each month to the bank.
Out of the $2950, $1625 goes to principle, which is an equity line item, leaving $1325 in interest.
Out of the $1325 in interest, which is tax deductible (I am in the 33% bracket), I get $442 back in taxes. That leaves a payment of $883.
Now, I have that $400k to invest as a result of taking the mortgage. Say I get 3% tax free in state municipal bonds. That's an annual income of $12000 from the $400k, or about $1000 per month in income.
I now MAKE $117 per month in profit by taking the loan.
The key point is how much I can make in tax free municipal bonds. At 2% I am losing, at 3% I am winning. I buy shares of FCTFX which has paid over 3.5% for as long as I remember.
FCTFX CHART
Now, if I pay off the loan, then that same $400k is with the bank and I don't get any benefits from investing it, or tax breaks, or equity increase.
--Dorothy
"Who would have thought a good little girl like you could destroy my beautiful wickedness!"
