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Well I made about $60,000 in two years by not paying off my mortgage and by investing in a well diversified portfolio of stocks, stock funds and bond funds. The mortgage payments cost me $34,000. After my tax savings I netted almost $30,000. An extra $1200/month is more than pocket change to me.
Well I made about $60,000 in two years by not paying off my mortgage and by investing in a well diversified portfolio of stocks, stock funds and bond funds. The mortgage payments cost me $34,000. After my tax savings I netted almost $30,000. An extra $1200/month is more than pocket change to me.
By the same token, if you had paid cash for the house(assuming you can afford to), you could have banked or invested $34K (instead of paying the bank) AND whatever interest you could make AND have a fully paid for house. Net assets= $334K plus, instead of $30K
By the same token, if you had paid cash for the house(assuming you can afford to), you could have banked or invested $34K (instead of paying the bank) AND whatever interest you could make AND have a fully paid for house. Net assets= $334K plus, instead of $30K
There is no logic to your thinking. If I take $300K and pay off my mortgage that is the end of the earnings (and the small tax deduction). I would lose my $15K/year income from my investments minus the mortgage. Of course the $15K/year is not a certainty. Some years I might make little or nothing and other years I might do even better.
yep , nothing is ever guaranteed. it could just as easily end up with one having to sell equities at a loss to pay that mortgage they wouldn't have if they paid it off or needing much more income then they would without the mortgage in a downturn..
life is full of things that don't work out as planned in the long run.
just because things have not happened yet does not mean they won't. you hear folks all the time , about how cheap their advantage plans cost them compared to medigap. that is true , until it isn't . like my co-worker who has 4500.00 dollar co-pays on his wife's chemo on every treatment now .. all it meant all those years was it hasn't happened yet.
that is the risk you take when you leave the carrot on the stick . while we can't live with fear we do need to understand that everything has risk to it and many times what we think is a no brainer ends up biting us in the but , it just hasn't happened yet.
Last edited by mathjak107; 05-03-2015 at 04:10 AM..
But all I need to do to come out ahead is to make about a 5% return on my investments over the long haul; i.e. for the 30 year span of the mortgage. Historically that has been easy to do. Perhaps if I was living on a very tight budget, I would need to worry. It is generally true that those who live on a tight budget have difficulty with investing because they cannot afford to handle the bad times. Without the ability to invest, the poor just stay poor. In my case, I have already won the "gamble". I have started out with a couple of good years of investment returns and like a snowball rolling down hill my portfolio just keeps growing and picking up speed.
As a retiree, I have no salaried income but depend on investments and social security. Over the long haul my lifestyle will suffer unless I can maintain investment returns of about 2% more than inflation. That gamble has also worked out very well. I have been retired 4 years and started planning my retirement about 6 years ago. Since then my assets have doubled....again like a snowball rolling downhill. Now it would take being blindsided by something as massive as the Great Depression to set me back those 6 years.
My illiterate, emigrant, peasant grandfather was smart enough to tell all the family members to put their money to work for them. Some smart, educated people just don't get it. They "feel" good if their money is in a safe place but not working for them.
There is no logic to your thinking. If I take $300K and pay off my mortgage that is the end of the earnings (and the small tax deduction). I would lose my $15K/year income from my investments minus the mortgage. Of course the $15K/year is not a certainty. Some years I might make little or nothing and other years I might do even better.
No need for your Vulcan logic Spock, it's simple math. If you had paid cash and were able to invest the monthly payment that you would have paid a bank, you would have over $334K in assets after two years. Even if you could no longer afford to invest, you would still have $300K in assets at the end of two years, and that's guaranteed. If you need cash, then do what you're doing, but your net worth is less.
It is simple math, not Vulcan logic. But I don't follow yours. No need to expound, please. The ONLY difference is an individual's comfort level investing. It has nothing to do with net worth, and everything to do with desired assets. Two totally different things.
despite the fact folks think that when the downturn comes they are going to get out giving up the 10% at the top and the 10% at the bottom , study after study shows what you think and what you do are two different things.
usually you don't know when the reversal comes as every plunge comes from new highs when things look pretty good .
by the time you realize it isn't just a correction you are usually down and tell yourself i will sell when it snaps back .
well it only worsens and you are in for the long haul.
same thing happens if you do bail. we all thought when we fell 2000 points in 2008-2009 we could get back in.
well it had 4000 more to go and once again stuck for the long haul.
so whatever you buy you better be comfortable with on the downside.
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