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View Poll Results: Mortgage or Investments
No mortgage pay 350k for house 55 52.38%
Mortgage with money in investments 50 47.62%
Voters: 105. You may not vote on this poll

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Old 09-05-2019, 11:28 AM
 
306 posts, read 237,269 times
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We are in our 40s and own our house outright. No mortgage. I know many people carry a mortgage to their death (most people I know) and have no issue with it. For us, that was not an option. We still invest and will have a good retirement. I have seen some sad and bad things happen to people later in life that they never expected to happen and they lose houses they have mortgages on (specifically they have a crisis and need to sell and can't sell or the house has lost value, etc). I don't have any interest in that worry or stress so it was most important to us to save big early and pay cash for a house. To each their own.
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Old 09-05-2019, 02:59 PM
 
6,493 posts, read 4,887,101 times
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People also lose houses that they owned outright.
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Old 09-05-2019, 03:05 PM
 
73,312 posts, read 73,092,775 times
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Quote:
Originally Posted by jrkliny View Post
People also lose houses that they owned outright.
Just track down and ask the people who’s house we were awarded in that tax lien sale we took part in .

I wrote about that adventure a few times ...it worked out terrible for us as an investment but these people did lose their house to us
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Old 09-05-2019, 03:12 PM
 
1,165 posts, read 560,921 times
Reputation: 1986
Quote:
Originally Posted by Perryinva View Post
Buying a less expensive house in a LCOL area is a pretty obvious choice, so I doubt she hasn’t considered that. The point she made was that she knows where and what she wants in a price range, AND can exchange both some new (home sale) and current taxable income savings for the mortgage debt and invest in tax advantaged income generation and RMD reduction.

However, the more obvious “fault” of this argument is that re-arranging income to be possibly lower taxable to avoid the Medicare penalty is seldom a smart move. The above $85k single income penalty is all of $660/yr. & while annoyingly frustrating to be just over the income level, which I agree is not very high at all, vs $170k for married, the more sensible and possibly already planned strategy is to convert pretax IRA to Roth, to make all (or as much as possible) of the 3-4% savings withdrawals totally tax free, which while it takes more “cost” up front, (the cost of the prepaid taxes), is a gift that keeps on giving for a very long time. Yes, I know, heck of a run on sentence.

It’s odd how it is difficult for many to reconcile that there is no difference between $500k in a pre tax IRA vs, $375k in a Roth. Both end you with the exact same net income, but having the larger taxable amount seems better, when here is an example of where it definitely is not. We just have a resistance to paying the taxes in advance, even with the current reduced rates through 2025. Also, the interest on a small $225k mortgage is not enough to break the standard deduction threshold, so not a consideration, but the increased SALT of the larger home might be worth more in income reduction.
Re-arranging income to save $600 on Medicare may not be worth it, but my re-arranging of income after not taking a mortgage has saved me an estimated 50K in health care costs since ACA inception in 2014.
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Old 09-05-2019, 03:18 PM
 
Location: Myrtle Creek, Oregon
12,578 posts, read 12,758,045 times
Reputation: 20114
There are so many variables to this question that an answer is impossible to establish.

1. What are your capital gains prospects? For a primary residence, up to a quarter million in capital gains are sheltered for a couple, $175,000 for an individual. If your spouse dies, the basis for half of the value of your entire estate resets to current market value, tax free. My state taxes capital gains as income, so my partner the gummint scalps 24% off the top of everything but my personal residence. Would I have to pay $2,000 to rent a comparable home? No, I would have to pay $2480.

2. Past performance is no indication of future earnings. Since 2009, an organ grinder with a monkey could make millions. In the future, that may not be true. I suspect you will do well to break even, but who knows? With the treasury going out to borrow trillions, rising interest rates look inevitable, so the only way to get the money out of bonds will be to hold them to term. Skimming that much out of the money supply might mean equity asset inflation will come to an end.

On the other side, 4% interest on a mortgage means you will only lose 60% of the value of the mortgage over 20 years. That would be offset by any capital gains on your home, likely a push. You have to do your own risk assessment, taking into account the advancing debility of age.

3. When you bought your house makes a difference. Would you really borrow hundreds of thousands of dollars at retirement to speculate in the stock market? I don't think so. If you retired your mortgage 10 years before you retired, you could easily add a quarter of a million to your retirement contributions, $400k with earnings. No payments does wonders for your cash flow. You may as well invest it. If you reached retirement with no home, you missed the bus.

4. Where you live makes a difference. The 13 original colonies funded operation on real estate taxes, and their property taxes are horrifying. Renting an apartment may make more sense. I know a guy from NJ who pays $6,000/month in property taxes. You aren't going to sustain that on a paltry million bucks in retirement savings.
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Old 09-05-2019, 03:34 PM
 
73,312 posts, read 73,092,775 times
Reputation: 50904
Quote:
Originally Posted by Larry Caldwell View Post
There are so many variables to this question that an answer is impossible to establish.

1. What are your capital gains prospects? For a primary residence, up to a quarter million in capital gains are sheltered for a couple, $175,000 for an individual. If your spouse dies, the basis for half of the value of your entire estate resets to current market value, tax free. My state taxes capital gains as income, so my partner the gummint scalps 24% off the top of everything but my personal residence. Would I have to pay $2,000 to rent a comparable home? No, I would have to pay $2480.

2. Past performance is no indication of future earnings. Since 2009, an organ grinder with a monkey could make millions. In the future, that may not be true. I suspect you will do well to break even, but who knows? With the treasury going out to borrow trillions, rising interest rates look inevitable, so the only way to get the money out of bonds will be to hold them to term. Skimming that much out of the money supply might mean equity asset inflation will come to an end.

On the other side, 4% interest on a mortgage means you will only lose 60% of the value of the mortgage over 20 years. That would be offset by any capital gains on your home, likely a push. You have to do your own risk assessment, taking into account the advancing debility of age.

3. When you bought your house makes a difference. Would you really borrow hundreds of thousands of dollars at retirement to speculate in the stock market? I don't think so. If you retired your mortgage 10 years before you retired, you could easily add a quarter of a million to your retirement contributions, $400k with earnings. No payments does wonders for your cash flow. You may as well invest it. If you reached retirement with no home, you missed the bus.

4. Where you live makes a difference. The 13 original colonies funded operation on real estate taxes, and their property taxes are horrifying. Renting an apartment may make more sense. I know a guy from NJ who pays $6,000/month in property taxes. You aren't going to sustain that on a paltry million bucks in retirement savings.
One son is in New Jersey and pays 10k a year .. my other son is in rye brook in westchester and pays over 20k ... nyc used to have cheap property taxes because we have a city income tax ....well this year many homes in the better areas in the boroughs are seeing 5 figure real estate taxes
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Old 09-05-2019, 03:41 PM
 
Location: SoCal
14,069 posts, read 6,730,144 times
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The numbers are off, it’s $500k per couple and $250k per individual for capital gain.
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Old 09-05-2019, 04:19 PM
 
6,493 posts, read 4,887,101 times
Reputation: 13607
Quote:
Originally Posted by Larry Caldwell View Post
There are so many variables to this question that an answer is impossible to establish.

1. What are your capital gains prospects? For a primary residence, up to a quarter million in capital gains are sheltered for a couple, $175,000 for an individual. If your spouse dies, the basis for half of the value of your entire estate resets to current market value, tax free. My state taxes capital gains as income, so my partner the gummint scalps 24% off the top of everything but my personal residence. Would I have to pay $2,000 to rent a comparable home? No, I would have to pay $2480.

2. Past performance is no indication of future earnings. Since 2009, an organ grinder with a monkey could make millions. In the future, that may not be true. I suspect you will do well to break even, but who knows? With the treasury going out to borrow trillions, rising interest rates look inevitable, so the only way to get the money out of bonds will be to hold them to term. Skimming that much out of the money supply might mean equity asset inflation will come to an end.

On the other side, 4% interest on a mortgage means you will only lose 60% of the value of the mortgage over 20 years. That would be offset by any capital gains on your home, likely a push. You have to do your own risk assessment, taking into account the advancing debility of age.

3. When you bought your house makes a difference. Would you really borrow hundreds of thousands of dollars at retirement to speculate in the stock market? I don't think so. If you retired your mortgage 10 years before you retired, you could easily add a quarter of a million to your retirement contributions, $400k with earnings. No payments does wonders for your cash flow. You may as well invest it. If you reached retirement with no home, you missed the bus.

4. Where you live makes a difference. The 13 original colonies funded operation on real estate taxes, and their property taxes are horrifying. Renting an apartment may make more sense. I know a guy from NJ who pays $6,000/month in property taxes. You aren't going to sustain that on a paltry million bucks in retirement savings.
A bunch of nonsense here ^^^.
1. This thread has nothing to do with deciding to buy or rent. It is about getting a mortgage when buying.
2. There is lots and lots an lots of data on investing including risks under the worst possible conditions. Retirees are typically well familiar with the 4% rule and the supporting data.
3. Financing in retirement in order to avoid tying up money in a house and to be able to invest has nothing to do with being retired. If it makes good sense for someone working, it also makes sense for someone retired.
4. Again this post has nothing to do with deciding to buy or rent.
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Old 09-05-2019, 07:07 PM
 
Location: Myrtle Creek, Oregon
12,578 posts, read 12,758,045 times
Reputation: 20114
Quote:
Originally Posted by jrkliny View Post
A bunch of nonsense here ^^^.
1. This thread has nothing to do with deciding to buy or rent. It is about getting a mortgage when buying.
2. There is lots and lots an lots of data on investing including risks under the worst possible conditions. Retirees are typically well familiar with the 4% rule and the supporting data.
3. Financing in retirement in order to avoid tying up money in a house and to be able to invest has nothing to do with being retired. If it makes good sense for someone working, it also makes sense for someone retired.
4. Again this post has nothing to do with deciding to buy or rent.
It's in there, you just have to think about it. You remind me of all the GenX-ers bragging about how rich they were in the '90s, positive that the gravy train would never end.

If you had ever studied statistics, you would know that statistical data about a population tells you nothing about any individual member of that population. Any individual has to make their own choices.

If you choose to borrow to speculate in the market, that is certainly your choice. Only time will tell if that's a good choice. For the last decade it has worked well. We have no idea if it will continue to work well. You may think you have discovered an absolute truth, but you haven't.
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Old 09-05-2019, 09:46 PM
 
6,493 posts, read 4,887,101 times
Reputation: 13607
Quote:
Originally Posted by Larry Caldwell View Post

If you choose to borrow to speculate in the market, that is certainly your choice. Only time will tell if that's a good choice. For the last decade it has worked well. We have no idea if it will continue to work well. You may think you have discovered an absolute truth, but you haven't.
Some people just have to think investing is "speculating" or gambling. Right now mortgages are a bit over 3%. Do you really think it is speculative to expect to make that level of return over years of investing?
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