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Old 12-01-2012, 07:20 AM
 
16,117 posts, read 10,915,619 times
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Renters ins is cheap, i would have that if i rented.
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Old 12-01-2012, 03:33 PM
 
134 posts, read 278,063 times
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Quote:
Originally Posted by housingcrashsurvivor View Post
Keeping in mind that I do not presume growth in this economy, however, in your given scenerio & question, the answer is because money invested can grow over time via compound interest (assuming reinvested dividends) while money borrowed on a fixed rate reduces in value over time via typical inflation.

So if you have a $400/month mortgage payment during a typical period of 3.5% inflation, then the first year you pay $4800 and the second & third & so on years you also pay $4800; but the second year your $4800 is only worth $4632 and the third year it is worth $4469 and the third year it is worth $4313 so that in 10 years your original $4800 is now worth only $3360. In other words, the very same 4800 now would buy 30% less goods and services than it would have bought you 10 years ago, yet this is the only money you need to use to pay off a debt which used to cost you the full $4800/year which used to buy $4800 worth of goods & services.

Whereas, if you invest $400/month which grows 6% annually then in 10 years you've got not $400 x 12 months x 10 years, which would be $48,000, but rather you'd have ~$75,660 or about 37% more (minus inflation, of course).
This is not true. In a typical mortgage, though your payments never change the interest does in fact compound. That's why in the first few years of a mortgage you are paying essentially all interest while in the last few years you're paying mostly principal.

So, the 6% interest rate is compounding just like the 7/8% investment. I am of the opinion that it doesn't make sense to take a risk for 7/8% return on investment when you can assure yourself the easy 6% by paying down the mortgage.

Look at your mortgage payment and see how much interest your paying each month - probably $700 - $1,500. I am amazed how people talk about cutting expenses but gloss right over that huge interest expense each month. If you want to get ahead financially, pay off your mortgage. Nothing like an asset worth a few hundred thousand dollars on the balance sheet, and the peace of mind of no mortgage payment.
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Old 12-01-2012, 04:53 PM
 
Location: Places you dream of
23,941 posts, read 13,748,191 times
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Quote:
Originally Posted by CHASLS2 View Post
Renters ins is cheap, i would have that if i rented.
yes it is,, having a house period is expensive,,, all they way around. I have owned 4 in my life time and never again... Course at this point in my life- for what? nah-- let some one else worry and if goes to crap- I can move!
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Old 12-07-2012, 03:12 PM
 
1,830 posts, read 2,280,552 times
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Beware that construction costs are increasing every day. In most areas it is now cheaper to buy old than new. The local government in your area will not let you live in a damaged home while you repair it. You may not be allowed to put a trailer on the property during repair either. If you do not repair it you may be charged for clearing the lot. I would say if you cannot take care of the property which includes insurance,etc. then either donate or sell the property to avoid future liability.
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Old 12-07-2012, 03:23 PM
 
5,982 posts, read 13,818,131 times
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Only one third of the people that were affected by hurricane Sandy in NJ and NY had flood insurance. Most of these people do not have a mortgage and have never had a problem with storms damaging their homes.

Sadly many homes are gone completely, many people are homeless. One 76 yo womans' home was damaged so much it was condemned. She lived there for 36 years and never had a problem with storms. No flood insurance. Her homeowner insurance gave her $5,000 and FEMA $1,700. She has no money to rebuild as she has only SS as income.

A friend who lives on LI had flood insurance on his home (good thing) as he had 3 feet of water. BUT only carried liability on his car. Oops. So it's a crap shoot, a chance you take. Never say never.
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Old 12-09-2012, 09:08 AM
 
Location: Toledo, OH
1,725 posts, read 3,103,530 times
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I would also like to add that while I am no fan of Insurance Companies, I think Home Owners Insurance is required.

While I want to have my investment insured, I am also concerned about someone having an accident on my property. Some young kid rides his bike through the yard, loses control and crashes into something and requires medical attention, THAT IS GOING TO COST YOU!!!

I can find better ways to save 100 to 150 dollars a month.
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Old 12-09-2012, 10:13 AM
 
16,117 posts, read 10,915,619 times
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Quote:
Originally Posted by gulfer View Post
I would also like to add that while I am no fan of Insurance Companies, I think Home Owners Insurance is required.

While I want to have my investment insured, I am also concerned about someone having an accident on my property. Some young kid rides his bike through the yard, loses control and crashes into something and requires medical attention, THAT IS GOING TO COST YOU!!!

I can find better ways to save 100 to 150 dollars a month.
$100 to 150 a month? In west Pasco county it cost around 4k a year to insure a house that is worth less than 30K a year west of US19.
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Old 12-09-2012, 10:17 AM
 
Location: Toledo, OH
1,725 posts, read 3,103,530 times
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While in some locations that may be true, and you may be required to have Flood or Sinkhole Insurance if you have a mortgage, I am talking only about Home Owners Insurance.
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Old 12-09-2012, 10:41 AM
 
Location: Spring Hill Florida
12,135 posts, read 13,924,735 times
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Hey, if you've got the funds to duplicate the house you have now along with everything in it, go ahead and invest your $ some where else besides the insurance. If you simply cant afford to replace everything in the house and the house itself, you need to invest in the insurance.

When I was in Winter Park I left a pot of cooking oil on the stove to heat to frying temperature. I went back to what I was doing. It wasnt too long before the smoke alarms went off and I was able to put out the flames myself. The smoke damage to the entire house cost several thousand dollars to resolve. New kitchen cabinets to replace the burned ones above the stove. Many other items replaced due to the smoke or heat damage. I forget what the total bill for the claim was but it was certainly over $10k. In those days we werent paying the crazy hurricane coverage rates we have today, but the claim easily exceeded the amount of premiums I had paid to that date.
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Old 12-09-2012, 10:42 AM
 
Location: Spring Hill Florida
12,135 posts, read 13,924,735 times
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Nobody is going to back a mortgage that does not have the basic HOI policy on it.

Flood and non-catastrophic insurance may be required indeed. Depends on the lender.


Quote:
Originally Posted by gulfer View Post
While in some locations that may be true, and you may be required to have Flood or Sinkhole Insurance if you have a mortgage, I am talking only about Home Owners Insurance.
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