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Old 05-16-2009, 04:06 PM
 
11,715 posts, read 40,441,334 times
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Quote:
Originally Posted by suzie02 View Post
Are you calling people who use credit responsibly idiots?
Sounds like it. To say that intelligent people don't use credit is ridiculous. Good example: I know a guy who's retired, owns his home outright, and has plenty of money. But still financed a car. Why? Because the manufacturer was financing it at a lower APR than his investments were making him. I guess he should have done the "smart" thing and taken his money out to pay cash for the car.
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Old 05-16-2009, 04:20 PM
 
3,735 posts, read 8,064,868 times
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Escapecalifornia, amortization schedules is all I do every day. Interest is paid right at the beginning. That is why your payments go down as time goes by.

If you take too much time to save up to purchase your home cash then it would be a moving target. But often times people can and should find rentals where they can save up 60% of their net income. But people get into rentals which cost them an arm and a leg for one reason or another and then can't save. Again, both my parents paid cash for their homes and they have no debt. In the state of CA and elsewhere homes are becoming more affordable and will remain so for some time. Buying a house cash wouldn't be risky to me at all. Having a mortgage payment is a bit more risky. Having a mortgage is not for me, if it is for you then it is for you.

Suzie02, I was responding to someone elses comment. Why take things out of context? Why continue this in a direction that doesn't benefit us getting our points across?

Your friend that has lots of cash who bought a car on credit. That is his choice and one I don't agree with. It doesn't make sense why he would use the credit to buy a new car. But why do I want to debate that?
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Old 05-16-2009, 04:33 PM
 
3,735 posts, read 8,064,868 times
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Also, I will say that if you start a company and get set up as a corporation, get a DUNS #, and get credit that is the only time when I think credit works well in your favor.
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Old 05-16-2009, 04:36 PM
 
11,715 posts, read 40,441,334 times
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Quote:
Originally Posted by bayarea-girl View Post
Escapecalifornia, amortization schedules is all I do every day. Interest is paid right at the beginning. That is why your payments go down as time goes by.
Since when? I've never seen a 30 year mortgage or 5 year car loan have decreasing payments. The payment is fixed for the life of the loan.

Quote:
Originally Posted by bayarea-girl View Post
Your friend that has lots of cash who bought a car on credit. That is his choice and one I don't agree with. It doesn't make sense why he would use the credit to buy a new car. But why do I want to debate that?
Borrow at 2%, invest at 5%. I'd do that all day long and make a ton of money in the process. How can you deny that?
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Old 05-16-2009, 04:36 PM
 
Location: SoCal
14,530 posts, read 20,112,106 times
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Quote:
Originally Posted by bayarea-girl View Post
Lovehound, calm down. I never said that mortgages are so terrible and I do realize that people use them. But I prefer to not have debt and pay cash. ... In this country saving money for people is like speaking a foreign language (people don't want to do and or don't see the benefits of doing so)...
You're preaching to the choir. I saved up 20% down payment and bought my house, paid off my 30 year mortgage in 15 years, and then after that I saved the equivalent of my mortgage payments and my accelerated payments together, and still have that money today. I've paid cash for every car I've ever owned (6 of them) and bought every one brand new. Mortgage debt can be reasonable, but auto purchase debt and credit card debt are ridiculous.

And I am calm!!! Dammit!

Quote:
Originally Posted by bayarea-girl View Post
In terms of inflation I'm not sure what you are talking about. Here is a site that lets you measure the value of the dollar and fluctuation of the dollar over years: Inflation Calculator - Value of a Dollar over Time
I was using a government site inflation calculator just yesterday in this post, discussing California's budget expressed in today's dollars.

Nevertheless you dodged my question. Tell me what year in the last 50 years inflation actually went down. The answer is that inflation went up every year, and every year money has less buying power, has less value. Inflation is not a law of economics, but we have been in an inflationary period for at least 50 years.

Quote:
Originally Posted by bayarea-girl View Post
You don't pay interest for 30 years. How much you get back on the interest you claim is not the same year after year.
I don't get anything now, because I paid off my mortgage. That's one of the reasons I paid it off, because after 10-12 years the deduction was trivial. It was easier to just pay the damned thing off than to bother with house payments every month. Nevertheless most people move more frequently that, and they stay in the "sweet spot" of being able to deduct their mortgage insurance. As long as the government is subsidizing your buying a house you might as well use it.

Quote:
Originally Posted by bayarea-girl View Post
I'm not a big advocate for mortgages after seeing what's been happening in our country with the foreclosures and the realization that a lot of why people are in the situation they are in is because they bought into the idea of debt and the marketing around home ownership. ...
What's happening to our country and the foreclosures are due to a "get rich quick" mentality and "I had better buy before they go up so high I can't afford them" mentality, combined with mortgage lenders "looking the other way" and not verifying income. The reason the lenders did that is because they were dumping all the mortgages, selling them to investment funds who packaged the loans as financial derivatives and sold them. They were able to sell them because insurance companies rated those investments as good investments because they got paid if they rated them as good, and because the insurance companies were competing with each other. But unfortunately they had no real historic data on these mortgage derivatives because they had only recently been invented, so they decided to just be optimistic and cash in. And blame it on Barney Frank in Congress who thought all Americans should be able to own houses. But it isn't because Americans bought into "the idea of debt." They bought into a house of cards, that's what they bought, and it all came crashing down.
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Old 05-16-2009, 04:46 PM
 
3,735 posts, read 8,064,868 times
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Escapecalifornia, auto loans and mortgages are completely different. Yes the 30 year mortgage payments change. In today's time the rates went up and people couldn't afford to pay them. Hence, the current mess we are in today.

Again, I don't understand your car payment theory. It just doesn't work.
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Old 05-16-2009, 04:52 PM
 
3,735 posts, read 8,064,868 times
Reputation: 1944
Lovehound, Didn't mean to dodge your inflation question. I saw your other thread. But we aren't talking about athletes or someone who wins the lotto and has a choice of getting paid over time or all at once. I'm just putting the home costs into perspective of our declining housing market and the benefits of paying in cash. But the dollar will have to go up it can't be worthless or we'd be considered a 3rd world country???

There was the get rich people but there were also the people that bought into now I can finally own my own home. I know too many people who thought that buying cash was crazy and guess what they have either foreclosed and or can't sell their homes. They believed that they would never be like their parents and pay off their home. I agree with your take on the foreclosures in this country but it has some many combination of problems to go over in an afternoon.
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Old 05-16-2009, 04:55 PM
 
Location: SoCal
14,530 posts, read 20,112,106 times
Reputation: 10539
Another thing I don't believe in is variable interest rates, less than 30 year mortgages, less than 20% down payment, or any of that creative financing stuff. We wouldn't be in the trouble we have today if people had paid 20% down and had been forced to normal and reasonable income verification and held to house payments being only a fraction of their income. (One third of monthly? It's been so long that those considerations all went out the window.)
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Old 05-16-2009, 05:08 PM
 
11,715 posts, read 40,441,334 times
Reputation: 7586
Quote:
Originally Posted by bayarea-girl View Post
Escapecalifornia, auto loans and mortgages are completely different. Yes the 30 year mortgage payments change. In today's time the rates went up and people couldn't afford to pay them. Hence, the current mess we are in today.

Again, I don't understand your car payment theory. It just doesn't work.
You've never heard of a fixed rate mortgage?

Loan me $100 at 2% interest. I'll take your $100 and invest it at 5%. At the end of the year, I'll collect $5, pay you $2, and be ahead $3. Got it? Taking money out of an investment that's earning a higher rate than you'd be paying on the car loan costs you money. Google opportunity cost.
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Old 05-16-2009, 05:14 PM
 
3,735 posts, read 8,064,868 times
Reputation: 1944
Escapecalifornia, of course I have heard of fixed rate mortgages. My thoughts on the matter has not changed.

The other part of what your are saying I don't agree with either. Mainly because it seems like creative stuff and there is always a catch which you will some how be paying more for in the long run.

Lovehound, I don't believe in that creative financing stuff at all.
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