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Old 11-26-2013, 07:18 AM
 
4,483 posts, read 7,951,431 times
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Quote:
Originally Posted by misterno View Post
This is not much. I would rather get 30yr mortgage... the problem is I am not earning much on my savings, at least not more than 4%
Where bank are you getting 4% at?

Cash would save you alot. Lets say its a $100,000 property at 4.3% interest, 30 years. Thats $78,153.72 in interest alone, for a total of $178,153.72. Paying a bank $3 in interest to save $1 in taxes with interest write offs doesn't make sense.

In this scenereo, based on a guess of your marginal tax rate of 25.0%, you can expect to save $19,538 in taxes over the life of the loan, 30 years. But you paid the bank $78,153.72 in interest. So $78,153.72 (interest) minus $19,538 (tax savings) Its $58,615.72 more expensive to have a mortgage.

If you can pay cash, do it.

Calculator
What are the tax savings for my mortgage?

Last edited by 399083453; 11-26-2013 at 07:27 AM..
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Old 11-26-2013, 07:22 AM
 
Location: DFW - Coppell / Las Colinas
29,970 posts, read 34,577,096 times
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Quote:
Originally Posted by 399083453 View Post
If you can pay cash, do it.
Absolutely, unless you have higher interest debt that could be paid first.
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Old 11-26-2013, 07:39 AM
 
909 posts, read 1,037,482 times
Reputation: 578
143K income household income
Have over 50 credit cards I keep doing APORAMA and churning but no debt on them
$500/month student loan ending July 2015
Have $250K cash sitting in the bank earning almost no interest
Another 70K in 401K, maybe I should maximize 401K contribution to 17.5K/year but laziness, I did not do it
My credit score is probably over 700 never checked never needed to. Whenever I apply for a credit card, it is always approved

I must be crazy I live in a small crampy 1bedroom. Need a change in my lifestyle.
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Old 11-26-2013, 07:52 AM
 
4,630 posts, read 7,213,065 times
Reputation: 4735
50 credit cards??????????? All active???
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Old 11-26-2013, 07:54 AM
 
4,483 posts, read 7,951,431 times
Reputation: 6415
I have no idea what APORAMA means, but you only really need 1 credit card (maybe another for backup) If you're paying them off every month and collecting the points, it's much easier to track expenses. It seems like some kind of hobby for you.

Getting approved for a credit card means nothing. It's not a status symbol.
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Old 11-26-2013, 08:13 AM
 
16,524 posts, read 17,581,310 times
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If you have a mortgage you only get to deduct about 1/3 of the interest. You're STILL paying out 2/3 of that interest to the bank. So you save 2/3 of your total interest. So yeah there are advantages and disadvantages to a mortgage.

Buying cash also usually means you can offer LESS sometimes substantially less compared to a financed offer

You gotta have home insurance anyway. Pretty stupid not to have it

You won't have PMI if you buy cash.

You can take what you would normally be your monthly house payment and invest that.

Most of all buying cash no mortgage gives you little to No risk. Your house is paid off all you gotta pay is property taxes and insurance.

Do the math on what you will pay over 30 years in interest for a 250k house and what your advantage on taxes of that interest vs the RISK of that mortgage

The way people get in trouble is by putting themselves in debt thinking they can carry a mortgage, stretch a heloc borrow to buy a car. And at that point they work forever to pay off and they never finish. One job loss or cut hours and they are sliding down the road of losing it all. Buy cash if you can swing it
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Old 11-26-2013, 08:18 AM
 
Location: Southern California
4,350 posts, read 4,942,333 times
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Quote:
Originally Posted by 399083453 View Post
Where bank are you getting 4% at?
Cash would save you alot. Lets say its a $100,000 property at 4.3% interest, 30 years. Thats $78,153.72 in interest alone, for a total of $178,153.72. Paying a bank $3 in interest to save $1 in taxes with interest write offs doesn't make sense.
In this scenereo, based on a guess of your marginal tax rate of 25.0%, you can expect to save $19,538 in taxes over the life of the loan, 30 years. But you paid the bank $78,153.72 in interest. So $78,153.72 (interest) minus $19,538 (tax savings) Its $58,615.72 more expensive to have a mortgage.
If you can pay cash, do it.
Calculator
What are the tax savings for my mortgage?
Interest is lost money, the more you spend the more you save kind of marketing.

Yes it is possible to get rates below 4% for a 30 , but it might cost a lot to do it and why even get in to the specifics of a mortgage type, 5 year ARM today are under 3%. I've also seen 7 year jumbo arms at under 3.5%. This is not a rate quote.


Quote:
Originally Posted by misterno View Post
143K income household income
Have over 50 credit cards I keep doing APORAMA and churning but no debt on them
$500/month student loan ending July 2015
Have $250K cash sitting in the bank earning almost no interest
Another 70K in 401K, maybe I should maximize 401K contribution to 17.5K/year but laziness, I did not do it
My credit score is probably over 700 never checked never needed to. Whenever I apply for a credit card, it is always approved

I must be crazy I live in a small crampy 1bedroom. Need a change in my lifestyle.
If you accept you are lazy and don't want to do anything with your cash , go pay all cash, because if you are lazy, your cash in hand will never make more than the mortgage interest rate. IF you don't want to have lazy money , go higher someone to manage some of your money, chances are , even after fees, you'll be making more than your are making now. It is a good idea to use and pay for professional services if you can't do the job as well as them.

You have a 401K which is money already in the markets, how has that been growing?

To each their own with their personal finance and investing.
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Old 11-26-2013, 08:26 AM
 
4,483 posts, read 7,951,431 times
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Quote:
Originally Posted by thelopez2 View Post
Yes it is possible to get rates below 4% for a 30 , but it might cost a lot to do it ....
I think he was saying he was getting 4% on his savings, not mortgage rate. Maybe he meant 0.04%.
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Old 11-26-2013, 09:12 AM
 
Location: MID ATLANTIC
7,603 posts, read 17,648,062 times
Reputation: 8099
If you don't see the benefits of taking out a mortgage, right off, pay cash. If the reasons to mortgage haven't been obvious to you, chances are there would be minimal benefit of borrowing. You may be able to find a no cost HELOC after you close that will allow you to access you equity in an emergency.

As for the 50 credit cards, that is insane and just puts you at extreme risk for identity theft.
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Old 11-26-2013, 12:11 PM
 
909 posts, read 1,037,482 times
Reputation: 578
Quote:
Originally Posted by 399083453 View Post
I think he was saying he was getting 4% on his savings, not mortgage rate. Maybe he meant 0.04%.
MY bank used to have 4% interest checking now it is 2.5% upto 25K but no new customers are accepted

sorry for the confusion

Here are new questions

1) Would you get mortgage if there is high possibility to sell it in 2-3 years and move to another state

2) Except for the 20% downpayment, is there another way to avoid PMI?

3) Am I qualified for HUD or something else as a first time home buyer? Is there an advantage with these programs?
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