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Homes provide some great tax benefits for some people though. I'm creeping very close to AMT and the mortgage deduction is greatly helping keep me out of it since that's one big deduction not added back to AMTI. I'm pretty sure if I bought a house with cash I'd be giving a lot of money back in taxes.
A lot of us are getting old and with that so go our life experiences.
I purchased a home in 1989 at 10% interest. A few of my friends who bought several years earlier tell me of mortgages at 14%.
Looking at the 2.75% now for 15 year and 3.5% for 30 year mortgages continues to amaze me. The apprentices I work with use these low rates to buy more house for the money. I mention that mortgages were in the range of 14% before and being in their mid twenties they just give me a blank stare.
I was sure they would begin a steady slow climb up but not seeing that. On another note a lot of my friends and family in their early 40's to mid 50's were able to refinance down to 15 years and keep their payment about the same.
In the grand scheme maybe we will see a lot more retirees going into retirement with their homes paid off.
A lot of us are getting old and with that so go our life experiences.
I purchased a home in 1989 at 10% interest. A few of my friends who bought several years earlier tell me of mortgages at 14%.
Looking at the 2.75% now for 15 year and 3.5% for 30 year mortgages continues to amaze me. The apprentices I work with use these low rates to buy more house for the money. I mention that mortgages were in the range of 14% before and being in their mid twenties they just give me a blank stare.
I was sure they would begin a steady slow climb up but not seeing that. On another note a lot of my friends and family in their early 40's to mid 50's were able to refinance down to 15 years and keep their payment about the same.
In the grand scheme maybe we will see a lot more retirees going into retirement with their homes paid off.
Dropping interest rates pushes the value of the homes sky high. So you're paying a lower interest rate, but it's on a much higher debt amount.
So you pay 10% on a $75,000 mortgage...or 3% on a $325,000 mortgage. The situation today is probably worse given the constant complaints about the affordability of housing. Cheap money blows the costs sky high in housing just like it did to the cost of college education.
Whether the "risk free" fed rate is near 0% (4% mortgage), or 8% (12% mortgage), you're still being charged the same risk premium.
The mass of people rushing to "lock in low rates" is just a bubble that pushes the base price higher. I'd rather wait until the fed choose to prick the housing bubble or it blows on its own, and get a decent rate with a reasonable price. Who cares if you lock in a low rate, on a pie in the loan amount?
Homes provide some great tax benefits for some people though. I'm creeping very close to AMT and the mortgage deduction is greatly helping keep me out of it since that's one big deduction not added back to AMTI. I'm pretty sure if I bought a house with cash I'd be giving a lot of money back in taxes.
but the question is would all that interest be less then the tax penalty ? that is the wild card .. spending 15k in interest to save a 10k tax penalty may not be a good thing as an example . .
We need to provide for our communities in difficult times.
you have a few hundred thousand baby boomers retiring from the tristate area with that equity from their homes living very nicely in cheapsville .
a home is not only a potential investment in the long run if you sell it , but even if you don't it can be a great cost cutter .
my ex wife lives in a co-op apartment that was our very first purchase . she pays 550 a month maintaince . that apartment would cost her 1700-1800 a month to rent today .
like any investment success is not guaranteed but for most americans their home ends up being their largest forced savings at the end .
Dropping interest rates pushes the value of the homes sky high. So you're paying a lower interest rate, but it's on a much higher debt amount.
So you pay 10% on a $75,000 mortgage...or 3% on a $325,000 mortgage. The situation today is probably worse given the constant complaints about the affordability of housing. Cheap money blows the costs sky high in housing just like it did to the cost of college education.
Whether the "risk free" fed rate is near 0% (4% mortgage), or 8% (12% mortgage), you're still being charged the same risk premium.
The mass of people rushing to "lock in low rates" is just a bubble that pushes the base price higher. I'd rather wait until the fed choose to prick the housing bubble or it blows on its own, and get a decent rate with a reasonable price. Who cares if you lock in a low rate, on a pie in the loan amount?
there is a weak tie between interest rates alone and home values . if low rates inflated home prices no one would be under water today .
the best home appreciation has been when mortgages are 6-7% because that is generally indicative of a strong economy .
rising rates up to a point have been good for home prices and spurred demand as the ole we better buy now before we can afford even less house kicks in .
Last edited by mathjak107; 04-10-2016 at 07:42 AM..
but the question is would all that interest be less then the tax penalty ? that is the wild card .. spending 15k in interest to save a 10k tax penalty may not be a good thing as an example . .
But the idea is you're investing the cash. You're paying interest of 4%, and investing the money you'd use to buy in cash which is earning you something. I think for people staring down AMT you definitely come out ahead carrying a mortgage at least at today's rates.
A lot of us are getting old and with that so go our life experiences.
I purchased a home in 1989 at 10% interest. A few of my friends who bought several years earlier tell me of mortgages at 14%.
Looking at the 2.75% now for 15 year and 3.5% for 30 year mortgages continues to amaze me. The apprentices I work with use these low rates to buy more house for the money. I mention that mortgages were in the range of 14% before and being in their mid twenties they just give me a blank stare.
I was sure they would begin a steady slow climb up but not seeing that. On another note a lot of my friends and family in their early 40's to mid 50's were able to refinance down to 15 years and keep their payment about the same.
In the grand scheme maybe we will see a lot more retirees going into retirement with their homes paid off.
actually mortgages for seniors has been rising . more seniors then ever took advantage of low rates and either took mortgages out or did not pay off what they have .
the new reverse mortgage to purchase loans that are out are great ideas .
if they allowed them to be used on co-ops i would take one and buy a co-op in this particular building that i always liked but it was out of budget .
But the idea is you're investing the cash. You're paying interest of 4%, and investing the money you'd use to buy in cash which is earning you something. I think for people staring down AMT you definitely come out ahead carrying a mortgage at least at today's rates.
there is no guarantee you will beat that mortgage payment . last year total market funds returned less then 1% along with bonds . this year isn't much better .
the reality is the small investor is terrible . as a group they do not even manage to get the returns the funds they were in got .
i would bet most folks who tried to come out a head by investing and taking a mortgage if they had a choice of buying cash would have had better outcomes paying cash with no interest at all .
1/2 of home owners can't even itemize so they get nothing back additional from their home expenses .
investing can be very variable and most folks do not invest the differences as well as suck at it .
you can see that for yourself just looking at morningstars small investor returns vs the fund returns . they track investor money in and out .
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