Investment Gurus, Question

[Angry ginger]

19 minutes ago, spin_dry said:

I’m suggesting that he take a portion of the money that he has and use it as a down payment. That way the monthly payment would equalize out between the 15 and 10 year. He could also fetch a little better rate than 5%. Using the term points was misguided on my part. 

my assumption would be this isn't $150k that came out of nowhere but 150k that is already invested in the market so when you said this (Take the rest of the money and invest it in order to take advantage of the exceptional growth opportunities right now. ) it really confused me what you meant and whether you were saying he should increase his leverage or not.  now getting say a 150k inheritance then a balance of paying it partway down perhaps could be the best choice or live the american dream and go out and blow it through excessive consumption.  10 year loans in the high 3's right now so there is a rate benefit but not necessarily a huge one when you run the numbers.  

 

[Angry ginger]

19 minutes ago, spin_dry said:

I’m suggesting that he take a portion of the money that he has and use it as a down payment. That way the monthly payment would equalize out between the 15 and 10 year. He could also fetch a little better rate than 5%. Using the term points was misguided on my part. 

my assumption would be this isn't $150k that came out of nowhere but 150k that is already invested in the market so when you said this (Take the rest of the money and invest it in order to take advantage of the exceptional growth opportunities right now. ) it really confused me what you meant and whether you were saying he should increase his leverage or not.  now getting say a 150k inheritance then a balance of paying it partway down perhaps could be the best choice or live the american dream and go out and blow it through excessive consumption.  10 year loans in the high 3's right now so there is a rate benefit but not necessarily a huge one when you run the numbers.  

 

[ArcticCrusher]

1 minute ago, Angry ginger said:

my assumption would be this isn't $150k that came out of nowhere but 150k that is already invested in the market so when you said this (Take the rest of the money and invest it in order to take advantage of the exceptional growth opportunities right now. ) it really confused me what you meant and whether you were saying he should increase his leverage or not.  now getting say a 150k inheritance then a balance of paying it partway down perhaps could be the best choice or live the american dream and go out and blow it through excessive consumption.  10 year loans in the high 3's right now so there is a rate benefit but not necessarily a huge one when you run the numbers.  

 

It took it as he was being a sarcastic dick.

[ArcticCrusher]

21 minutes ago, revkevsdi said:

I'd agree with Dave.  Debt free is great.

DriftBitch claims the stocks average 8% if you look back 5 years they have climbed far above that average.  So one would think your next 5 won't average 8%.   

With stocks high and interest rates low, worst case scenario you buy in before a market correction and interest rates go back to average rates. The result would be you'd be pissed off at the money you lost and you're paying a much higher mortgage rate.

If the rates stay the same, you'd have to work out your taxes on the investment and whether you can write off your mortgage interest. Is the still something you are allowed to do in the US.?

At the end of the day, if your house is paid for not much can hurt you. That peace of mind has value. 

 

It is paid, the question is can he do better.  You have to look but there are investments with long term returns (30 years) of more than 13%.  At 5% he needs better than  10% in fixed income or 7.5% in equities to do better.  

[Anler]

Refi the amount for 10 years at 3%. Invest the rest of the money. 

Reduce your term and total amount spent by saving 10 years of interest.

Still keep tax advantage for interest.

Lower interest rate

Your house can be a liability, you can limit them if you don't own it outright.

[Dave]

14 minutes ago, ArcticCrusher said:

It is paid, the question is can he do better.  You have to look but there are investments with long term returns (30 years) of more than 13%.  At 5% he needs better 

 

than 10% in fixed income or 7.5% in equities to do better.  

All speculation...i like not having a mortgage and then playing.

[steve from amherst]

2 hours ago, Im4snow said:

$150k at 8% for 20 years is $699k.   

Coerect 549k plus 150 699

[ArcticCrusher]

33 minutes ago, DAVE said:

All speculation...i like not having a mortgage and then playing.

I know, that is why I won't say do this or that.  You can forget 10% in fixed anytime soon.  In the 90's Canadian's debt levels were at about 85% of income, today they are more than twice that so most are paying the same interest as a % of income as the folks back, so if interest rates were to double, it will kill our economy.  You would need to be in equities and while the long term return is doable, it involves risk and I can't speculate on someone else's tolerance.  Most people shit their pants at the thought of losing 2% (RevkevSDI).

If most people waited til their mortgage was paid and only used disposable income our economy wouldn't be where it is today and entrepreneurs would never get off the ground .

[steve from amherst]

1 hour ago, Snoslinger said:

this. he could get a shorter, lower interest rate ARM loan. I call BS on his little story here.

Fuck an ARM. they are for suckers and rookies.

[hwytohell]

1 hour ago, Nazipigdog said:

Refi the amount for 10 years at 3%. Invest the rest of the money. 

Reduce your term and total amount spent by saving 10 years of interest.

Still keep tax advantage for interest.

Lower interest rate

Your house can be a liability, you can limit them if you don't own it outright.

Sound advice if you are not going to pay off your home. The only outside thugs you have to worry about is the yearly tax man and your personal  home owners insurance policy, if you allow the property to become un - insurable .

[Angry ginger]

44 minutes ago, steve from amherst said:

Fuck an ARM. they are for suckers and rookies.

 ARMS are an emotional trigger for many because they don't understand them.  Huge difference between a traditional ARM and the payment option and neg am arms that caused issues a decade ago.  Fixed rate mortgages are a security blanket for an american borrower but most borrowers would have been better off in a traditional 1 year ARM  ( 1 year CMT or LIBOR based 2/6 capped ) than a 390 year FRM taken out at almost any point i have been in this business (since 1993) on an average time people hold loans which is a 5-6 year window.  Americans are scared of changing rates but even today an adjustable based on libor would have a fully indexed rate of 4-4.25 depending on margin better than a 30 year FRM

 

[steve from amherst]

A lot of folks got toasted on em in the meltdown of the late 80,s.

[Snoslinger]

1 hour ago, steve from amherst said:

Fuck an ARM. they are for suckers and rookies.

not all the time. it's a pretty good tool if you're either planning to move before too long or you can swing a higher payment in a shorter amount of time, saving more interest. I just checked ARM rates and they're not low as I expected. but I think you get the best of both worlds in this case. my second option would be get rid of the damn mortgage payment now.  

[Angry ginger]

6 minutes ago, steve from amherst said:

A lot of folks got toasted on em in the meltdown of the late 80,s.

people need to be prepared for a rise in payment rather than thinking it's always going to be the same so for a more sophisticated borrower it usually is better than for someone living paycheck to paycheck where a 1-2% increase is going to be a big difference maker to their lives.  Its why when dealing with an ARM borrower we don't push limits like we do with fixed. 

[steve from amherst]

Just now, Snoslinger said:

not all the time. it's a pretty good tool if you're either planning to move before too long or you can swing a higher payment in a shorter amount of time, saving more interest. I just checked ARM rates and they're not low as I expected. but I think you get the best of both worlds in this case. my second option would be get rid of the damn mortgage payment now.  

I could see it short term. Even knowing the average person stays in their home 7 yrs. I always think longer term. Like I said before I saw a lot of folks get burned by them in late 80's , early 90's .

[Angry ginger]

1 minute ago, Snoslinger said:

not all the time. it's a pretty good tool if you're either planning to move before too long or you can swing a higher payment in a shorter amount of time, saving more interest. I just checked ARM rates and they're not low as I expected. but I think you get the best of both worlds in this case. my second option would be get rid of the damn mortgage payment now.  

we are in a weird spot with arms right now,  not enough spread IMO to make them generally worthwhile although if someone had a defined exit timeframe it might be worth it

[Snoslinger]

1 minute ago, Angry ginger said:

we are in a weird spot with arms right now,  not enough spread IMO to make them generally worthwhile although if someone had a defined exit timeframe it might be worth it

yeah I was pretty shocked at how high they were.

[Whiskey Tango Foxtrot]

Pay it off. Best feeling in the world using that last bank mortgage statement as firestarter for the wood stove. Start banking and investing, and have the ability to take a month off and blow some coin on a new toy or fun activity without knowing you need to come up with X amount for the first of the month. Also with the %100 equity, you could take a home equity line of credit at %2 interest, for %80 of your home value and get the XxXK to invest with, at %3 less than you're paying now. If that's the route you wanted to go. Debt free is the way to be, IMO... 

[racer254]

 

11 hours ago, Whiskey Tango Foxtrot said:

Pay it off. Best feeling in the world using that last bank mortgage statement as firestarter for the wood stove. Start banking and investing, and have the ability to take a month off and blow some coin on a new toy or fun activity without knowing you need to come up with X amount for the first of the month. Also with the %100 equity, you could take a home equity line of credit at %2 interest, for %80 of your home value and get the XxXK to invest with, at %3 less than you're paying now. If that's the route you wanted to go. Debt free is the way to be, IMO... 

Being debt free is worth a hell of a lot.  There would be a hell of a lot of less stress in the world if everyone believed that debt free was the way to go.

Edited April 6, 2018 by racer254

[revkevsdi]

23 hours ago, ArcticCrusher said:

I know, that is why I won't say do this or that.  You can forget 10% in fixed anytime soon.  In the 90's Canadian's debt levels were at about 85% of income, today they are more than twice that so most are paying the same interest as a % of income as the folks back, so if interest rates were to double, it will kill our economy.  You would need to be in equities and while the long term return is doable, it involves risk and I can't speculate on someone else's tolerance.  Most people shit their pants at the thought of losing 2% (RevkevSDI).

If most people waited til their mortgage was paid and only used disposable income our economy wouldn't be where it is today and entrepreneurs would never get off the ground .

Don’t equate investing in the stock market with entrepreneurs. 

If he pays off his mortgage he has a guaranteed 3% return. 

If you invest in yourself and a business idea you believe in you take all of the risk and the rewards. 

If you invest in the markets you have to rely on the businesses to report honestly, market forces that can be unpredictable etc. 

 

[Mileage Psycho]

On 4/5/2018 at 11:57 AM, spin_dry said:

You could refinance the home for a better rate. Use some of the money to buy some points and drop into a 10yr mortgage. Take the rest of the money and invest it in order to take advantage of the exceptional growth opportunities right now. Sort of a mix of ideas. The market is pretty fucking good right now. 

Spin makes a whole lot of sense  

17 hours ago, racer254 said:

 

Being debt free is worth a hell of a lot.  There would be a hell of a lot of less stress in the world if everyone believed that debt free was the way to go.

 

I'm like Trump  

 

[ArcticCrusher]

1 hour ago, revkevsdi said:

Don’t equate investing in the stock market with entrepreneurs. 

If he pays off his mortgage he has a guaranteed 3% return. 

If you invest in yourself and a business idea you believe in you take all of the risk and the rewards. 

If you invest in the markets you have to rely on the businesses to report honestly, market forces that can be unpredictable etc. 

 

He has that regardless.  Put it in fixed income is a slow death, so he might as well pay off the mortgage.  He could try equities. but there is risk no doubt.  He could also start a business or take one over from someone wanting out.  He could take half 75K and put it down on a rental for say 350K  that caries itself and then do it again.  Now he has two 350K properties each gaining 3% >10K per year on a 75K x2 investment, plus rent goes up.  In 20 years when all properties are paid  do you think he would be further ahead by paying off the mortgage?

 

[1jkw]

18 hours ago, racer254 said:

 

Being debt free is worth a hell of a lot.  There would be a hell of a lot of less stress in the world if everyone believed that debt free was the way to go.

 

I think you answered your own question. Not having the stress of a house payment is a great feeling, you can take that same amount and invest it all or most of it and enhance your life with bigger or better things. 

[revkevsdi]

18 minutes ago, ArcticCrusher said:

He has that regardless.  Put it in fixed income is a slow death, so he might as well pay off the mortgage.  He could try equities. but there is risk no doubt.  He could also start a business or take one over from someone wanting out.  He could take half 75K and put it down on a rental for say 350K  that caries itself and then do it again.  Now he has two 350K properties each gaining 3% >10K per year on a 75K x2 investment, plus rent goes up.  In 20 years when all properties are paid  do you think he would be further ahead by paying off the mortgage?

 

I think he would be better off paying off the house than buying into an overheated stock market. But I don’t know how US taxes effect him. 

I know that that having zero debt is  awesone. 

[ArcticCrusher]

7 minutes ago, revkevsdi said:

I think he would be better off paying off the house than buying into an overheated stock market. But I don’t know how US taxes effect him. 

I know that that having zero debt is  awesone. 

He is though.  If you have a property with a 200K mortgage and 2 million invested separately, do you consider yourself to not be debt free?  Holy shit!!!

150K is not a lot, but certainly enough to look at options.  Paying off the mortgage is good very conservative advice.