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Old 09-19-2011, 12:02 AM
 
391 posts, read 665,020 times
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I think StealthRabbit is a pretty shrewd dude (in a good way). I'd listen to him if I did not go ADD in the first two sentances!

Personally, we paid off any properties and do not re-finance. If we need the money, we can always take it out as a line of credit. Problem is, I just dont know what to invest in that would make any money. We spend the mortgage payments now on living better.

It depends on age. Do you want to spend your mortgate payment on a better lifestyle now or do you want it working for you to make more money down the road?

If you invest the money, you need to make more than 3-5% plus you are taxed on any profits you make. So you need to make at least 5% before you start making money!

Also depends on how much money we are talking about here. If its $100k, you are not talking about much difference in terms of interest earned or paid. $100k is a big number but its not a number that will generate much interest.

Use real numbers intstead of percentages. You may find out you are getting all worried over $1,000 per year. Unlikely to affect you much either way.

I grew up beliving owning was better than renting. Maybe thats dumb in todays world.

I'm no expert by any stretch but this is what we have done but we're not rich either.

Last edited by mjd2k; 09-19-2011 at 12:44 AM..
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Old 09-19-2011, 12:24 AM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,689 posts, read 40,050,764 times
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Quote:
Originally Posted by GLS View Post
...If the attitude in this sentence were taught to every young high school and college student, we wouldn't be worried about Social Security running out in the future.

Success is not ez to measure or communicate with HS and College kids (I just finished a grad school program, young buck-a-roos are strange creatures).

My own kids are very angry that I did not fund a dime of their EDU... For grades 9 and 10 (homeschool) I had them design and build from scratch their own houses on rural acreage. (they didn't like that one bit ).
(did freshman and sophomore yrs @ college INSTEAD of HS, compliments of WA State Running Start program, which I fund with tax $$ ).
When they headed to U as full jrs @ age 18 , they each had $25k+ in their ROTHS (I had matched their wages $ for $ since age 12), and they each had $ 70k from the sale of their homes, (which I spent A LOT of time helping them with). I THOUGHT I had them prepared to figure out how to pay for college, as they were 'on-their-own' @ age 18.... They both got loans instead of touching their equities or investments AND they consolidated their total loans (~$16k @ 2.7 and 4% for 20 yrs). For some reason I don't feel at all sorry for them, BUT they, and many in their generation do not give a rip about a work ethic or long term planning / pain. They are good kids, citizens, and employees. BUT they do MINIMUM to get by and INSIST on a better 'quality-of-life' that they had growing up.

They are in for a BIG surprise . Nothing a lifetime of counseling and meds won't alleviate.

LIFE IS NOT FAIR, free lunches are not for the 'worker-bee-class' (only the poor by choice, and the politicians, and a few needy recipients).

OT,
Quote:
Planning to retire next year and will rent in our new town before buying, as we're not sure what part of town will work best for us.
Quite honestly... I would be buying SOMETHING in that locale NOW and financing it ASAP (definitely while you have JOBS / income!). It is a good time to lock in good rates and cheap digs. not sure it is gonna improve on both fronts for purchasers. The housing market will likely languish for many more yrs, but cheap money does not come everyday or often, (contrary to last 10 yrs). WE have had it VERY good. Payback is on it's way.

I find bankers not too willing to lend on anything unconventional, especially to borrowers w/o JOBS. Bankers have a real tough time thinking 'out-of-the-box'. I would like to be able to offer 5% returns to all my senior friends who are getting 0.05%. The bank wants 7-8% for commercial lending, but they won't lend to me (no job). I would be happy to provide 5% returns to private lenders (seniors withering on the vine, while cost of care shoots through the roof, and income plummets. The BANKS HAVE to be getting rich on this one . I cannot make 'offerings' to seniors w/o getting in hot water with the SEC.... hello Bernie Madoff, my new cellmate...
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Old 09-19-2011, 07:10 AM
 
29,829 posts, read 34,912,438 times
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Quote:
Originally Posted by Escort Rider View Post
Part of the answer has to do with what you would be doing with the cash if you get the mortgage. The stock market is risky for retirees and the interest rates on CD's are close to zero right now. If the cash will be just a "cushion" (and I am a great believer in having a cushion), then the extra cash flow from not making the mortgage payment every month can also become your cushion. Just put aside that amount each month and it'll mount up quickly.
The op hasn't stated their debt to income ratio with or without the mortgage. Nor do we know what other assets they have and the amounts of their investments. Nor do we know the exact sources of all their retirement income and when they kick in. That can all make for a very personal decision. For instance if the are talking about a 250 K house and 100K or more in pension and SS along with say 1 million in investments their situation is very different then the norm.
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Old 09-19-2011, 10:21 AM
 
8,089 posts, read 4,429,397 times
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This makes sense to me. The real numbers are not that big for most people.
Quote:
Originally Posted by mjd2k View Post
Also depends on how much money we are talking about here. If its $100k, you are not talking about much difference in terms of interest earned or paid. $100k is a big number but its not a number that will generate much interest.

Use real numbers intstead of percentages. You may find out you are getting all worried over $1,000 per year. Unlikely to affect you much either way.
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Old 09-21-2011, 09:13 AM
 
Location: Florida -
8,769 posts, read 10,867,395 times
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Perhaps you can do both! - Pay cash instead of a mortgage... and, at the same time, establish a good line of credit with a low, indexed interest rate. That way, if you do run into an investment opportunity that will pay more than today's CD's, T-Bills, equities, etc., you are in a position to act on it. Otherwise, you simply live mortgage-free and save the 4.5% prox. interest you would otherwise be paying.
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Old 09-21-2011, 09:20 AM
 
Location: Prospect, KY
5,288 posts, read 17,976,431 times
Reputation: 6544
For us it didn't makef financial sense to pay cash for our retirement house - three years ago we sold our home in Southern California, had some investments come to maturity at the same time that we retired thus raising our income for that year to a whole other tax bracket (the taxes were in the killer range). We decided to mortgage our new house for 10 years (we are actually going to pay it off in less than 9 years because we are making extra payments). At the time, it was what we were advised to do.

Last edited by Cattknap; 09-21-2011 at 10:30 AM..
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Old 09-21-2011, 02:15 PM
 
Location: Toronto, Ottawa Valley & Dunedin FL
1,409 posts, read 2,358,064 times
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Myself I would never take out a mortgage at this stage in life (we're both in our mid-60's and own 3 properties.)

What I would do is pay cash, then get the largest line of credit you can, against the property. Don't use that LOC unless you have to, or use it only to smooth out cash flow issues around financing things like trips and a new car.

We have an LOC that we use in just this way.
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Old 09-22-2011, 10:25 AM
 
Location: SW MO
23,605 posts, read 31,524,402 times
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One possible consideration for "ease of handling" since savings interest rates are below pathetic and mortgage rates are low. Take out a very small, easily handleable mortgage for for the convenience of an impound account for taxes and insurance. Two less things to think about monthly, quarterly or annually.
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Old 09-22-2011, 11:21 AM
 
Location: SW Missouri
33 posts, read 70,363 times
Reputation: 42
For me having my place paid for is great peace of mind, and knowing my wife won't have to worry about making a payment, if I die first.
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Old 09-22-2011, 12:10 PM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,689 posts, read 40,050,764 times
Reputation: 23833
Quote:
Originally Posted by Curmudgeon View Post
... for the convenience of an impound account for taxes and insurance. Two less things to think about monthly, quarterly or annually.
won't work for all... my mortgage payment = $346/mo, taxes $997/mo. I'm not gonna be impounding TAX $$ and let them get the interest on that too!

Quote:
Originally Posted by dhuntz View Post
For me having my place paid for is great peace of mind, and knowing my wife won't have to worry about making a payment, if I die first.
I use very cheap term insurance for that (and any other outstanding debt... none at the moment)

As someone mentioned there is the benefit of paying back mortgage with inflated dollars. I have been using my Mortgage principle since 1974 as leverage to make other RE investments. That $1. in 1974 is worth $0.21 today, (I refi'd a few times, but really lucked out with rates (usually adjustable, which is not too comforting today). Of course I owe $500k 1974 dollars to pay it back, BUT it has allowed low tax LTCG of over $1m (RE Investments) AND sheltered equity (tax free) of ~ $550k (primary residence)+ interest deductability during my high earning yrs. (not that I like paying $5k to a BANK to get $1k credit on IRS bill) . But I don't get a meaningful deduction at this age / income level
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