U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
Old 04-20-2015, 09:00 AM
 
12,705 posts, read 9,964,692 times
Reputation: 9515

Advertisements

Quote:
Originally Posted by honobob View Post
Nope! First, if I'm TRYING to out earn a 3.75-4.25% mortgage I'm probably not a good investor.
It depends on the market.

Quote:
Originally Posted by honobob View Post
Second, I'll spend the first 15 years spending the $200,000 plus its earnings and inflation will take care of the last 15 years. OR sweet, sweet death.
If you spend your money, then the return on the investment is 0. Therefore you did not beat the mortgage rate.

Quote:
Originally Posted by honobob View Post
Doesn't that sound better than plowing all that liquidity into an asset and then turn around and plow any savings into a low paying investment in small increments over 15+ years?
It depends on what your goals are. Some people place more emphasis on current lifestyle, others on security, and still others on leaving a legacy behind. The relative importance of those factors determines what strategy is best, not a "one size fits all" approach necessarily.
Reply With Quote Quick reply to this message

 
Old 04-20-2015, 12:02 PM
 
7,795 posts, read 4,383,926 times
Reputation: 11588
It's ALWAYS better to pay off your mortgage... Isn't that a no-brainer?

I was referring to real estate in addition to a paid-off primary residence.
Reply With Quote Quick reply to this message
 
Old 04-20-2015, 12:04 PM
 
6,239 posts, read 4,721,373 times
Reputation: 12773
Quote:
Originally Posted by ncole1 View Post
I tried it and I am not getting the results you claim. You said that your mortgage plus portfolio is a guaranteed win, which means it should in 100% of the runs maintain a positive net value after taking mortgage payments out. I put in $200K portfolio and for annual spending I used 12 * the monthly payment on a $200K 30-year mortgage at 3.75% APR. So this is $200K portfolio and $11,115 annual spending. It shows a couple of runs going negative before year 30, even after turning off the inflation adjustment to account for the fact that the mortgage payments are fixed in nominal terms.

Which is to say, your mortgage arbitrage is not guaranteed.
Remember paying off the mortgage means starting at -$200k. To do better, someone with a mortgage would do better if they beat that number after 30 years of payments.
Reply With Quote Quick reply to this message
 
Old 04-20-2015, 02:22 PM
 
Location: The Triad (NC)
28,490 posts, read 62,120,010 times
Reputation: 32158
Quote:
Originally Posted by otterhere View Post
It's ALWAYS better to pay off your mortgage... Isn't that a no-brainer?
Nope. None of the truisms are universal.

There are a LOT of very good reasons to have/keep or seek a new mortgage
at all ages and stages of life whether for personal use residence or as investment prop.

Of course the people who understand this are generally comfortable with OTHER
and BETTER and MORE LUCRATIVE investment models like stock market & bonds.
Reply With Quote Quick reply to this message
 
Old 04-20-2015, 03:10 PM
 
12,705 posts, read 9,964,692 times
Reputation: 9515
Quote:
Originally Posted by jrkliny View Post
Remember paying off the mortgage means starting at -$200k. To do better, someone with a mortgage would do better if they beat that number after 30 years of payments.
No, you start with $200k in cash. You can either pay off the mortgage immediately and have $0, OR you can invest it and then pull the mortgage payments out of it each month. $200k initial, and draw out $11,115/year.
Reply With Quote Quick reply to this message
 
Old 04-20-2015, 03:42 PM
 
29,774 posts, read 34,856,103 times
Reputation: 11687
Liquidity, Liquidity, Liquidity would you really want to be retired with no liquid assets when you could have some?
Reply With Quote Quick reply to this message
 
Old 04-20-2015, 03:59 PM
 
71,511 posts, read 71,674,131 times
Reputation: 49088
nothing like liquidity in retirement . being house rich and cash poor in retirement can make for a pretty stressful miserable retirement.

you can't always get enough from a reverse mortgage because of the power of compounding reverse interest working against you.
Reply With Quote Quick reply to this message
 
Old 04-20-2015, 05:25 PM
 
6,239 posts, read 4,721,373 times
Reputation: 12773
Quote:
Originally Posted by mathjak107 View Post
nothing like liquidity in retirement . being house rich and cash poor in retirement can make for a pretty stressful miserable retirement.

you can't always get enough from a reverse mortgage because of the power of compounding reverse interest working against you.
Paying off a mortgage does not create liquidity.
Reply With Quote Quick reply to this message
 
Old 04-20-2015, 05:27 PM
 
6,239 posts, read 4,721,373 times
Reputation: 12773
Quote:
Originally Posted by ncole1 View Post
No, you start with $200k in cash. You can either pay off the mortgage immediately and have $0, OR you can invest it and then pull the mortgage payments out of it each month. $200k initial, and draw out $11,115/year.
That sounds correct.
Reply With Quote Quick reply to this message
 
Old 04-20-2015, 06:25 PM
 
Location: Myrtle Creek, Oregon
12,230 posts, read 12,491,644 times
Reputation: 19374
Quote:
Originally Posted by ncole1 View Post
If you spend your money, then the return on the investment is 0. Therefore you did not beat the mortgage rate.
It depends on what you spend your money on. I am planning on building a shop outbuilding on my ranch. It will cost me about $50,000, for nothing more than more space to piddle around. Yes, it will raise the eventual sale value of my home, if I live long enough to sell it. Meanwhile I'll be paying more property taxes, so it will be a continual drain on cash flow. The ROI will be more than zero, though.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top