Any Advantage To A Mortgage?

[Pat]

Egon, Don't bother looking for the 100K. I found it and spent it on my house.

The numerical analog to illiterate is innumerate. Are you claiming innumeracy?

[img]/forums/images/icons/smile.gif[/img] Pat

[egon]

Uhh - not quite sure what you are talking about but now I'm really confused [img]/forums/images/icons/confused.gif[/img] Still can't figure out how you got the 100K when it didn't seem to exist and then the descriptions have me reaching for explanations I can't comprehend?? [img]/forums/images/icons/confused.gif[/img]

Egon

[Pat]

Egon, It is a bit like my experience/use of square radians. In working problems in Physics some calculations ended up with various units including some square radians (which we just discarded/ignored.) Other problems would have you taking the square root of something with no square radians but the answer had to be in radians, SO... I took some of the square radians discarded in a previous problem and recycled them.

This plus the whole idea of the tooth fairy and certain other metaphysical concepts and VOILA it sort of clicks into focus.

Got it now?

For me, a lot of this financial hocus pocus is like having a swarm of bees buzzing around inside my head, but well, there they are!

[img]/forums/images/icons/smile.gif[/img] Pat [img]/forums/images/icons/smile.gif[/img]

[BlueRidge]

<font color="blue"> Put your equity into a Equity Indexed whole life policy. </font color>



The only people recommending whole life as an investment are:

1: People selling whole life.
2: People selling books to gullible people.
3: Sophisticated investment advisors who know that in some RARE situations rolling an IRA into a whole life policy can have some tax advantages.

Hmmm. People in category 3 are ALSO in category 1...

Hmmmm.

Whole life is a rip-off. As for the Katrina example.... More idiocy. If your house is properly insured, you don't have a problem. If your house is NOT properly insured, you have to replace it. Where will you get the money? Uh, how about that nice "investment" that you bought with your equity? Did we forget that the mortgage on that original underinsured house STILL has to be paid off?

TANSTAAFL.

Where's the "disgusted" smiley here, anyway?

[BlueRidge]

<font color="blue"> One thing I have heard is taxes. I know you can deduct the interest from the taxes, </font color>

It's amazing to me how many people don't understand something so simple. Tax deductions reduce the amount of tax you pay. They DON'T put money in your pocket. If you are at a 15% tax rate, and you find a $1,000 deduction, you reduce the tax you owe by 15% of $1,000, or $150. So if you had to spend that $1,000 anyway , and you can deduct it, great. You saved $150. But if you go out and deliberately SPEND $1,000 to get that deduction, you just spent $850 that you didn't need to spend! You paid out $1,000, and got back $150 of it.

Hey, for anybody who thinks that's a good deal, I've got a better one for you. You send ME the $1,000, and I'll send you back HALF of it! That's even better! You pay out $1,000, and get back $500! I'll take as many of those deals as I can find! No limits! Any amount! As often as you want! Call now! Operators are standing by! [img]/forums/images/icons/grin.gif[/img]

Taking deductions on money you have to spend reduces your tax bill. SPENDING money unnecessarily to CREATE deductions makes you poor.

Period.


<font color="blue">Another thing I have heard is interest rates. If you can put the money to work and make more in interest than the mortgage costs you, you should do it because you are using someone else's money to work for you. If this is possible, it sounds too good to be true. Is it? </font color>

It's too good to be true. No debt is ALWAYS your best investment, no matter what the numbers SEEM to say. A lot of people have gone broke using the "use other people's money" philosophy. A lot of people have gotten rich selling it on tapes and in seminars, though.

<font color="blue">So, can someone explain to me in simple terms any advantage to having a mortgage VS paying it off as fast as possible.</font color>

There is none. See above. If all goes perfectly, the truth is you CAN sometimes make more money in the short term by investing borrowed money, which is exactly what you are doing when you carry a mortgage and invest your cash. If you borrow at 10% and invest at 12%, you are making 2%. But most investments that will return more than a mortgage are risky investments. And if the economy takes a downturn, the more in debt you are, the more likely you are to lose it ALL. THere is ZERO risk in being debt free.

Over the long haul, those who avoid debt are the safest and richest.

Here's some good reading:

www.daveramsey.com

[stumpfield]

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So, can someone explain to me in simple terms any advantage to having a mortgage VS paying it off as fast as possible.
#################################
There is none. See above. If all goes perfectly, the truth is you CAN sometimes make more money in the short term by investing borrowed money, which is exactly what you are doing when you carry a mortgage and invest your cash. If you borrow at 10% and invest at 12%, you are making 2%. But most investments that will return more than a mortgage are risky investments. And if the economy takes a downturn, the more in debt you are, the more likely you are to lose it ALL. THere is ZERO risk in being debt free.

Over the long haul, those who avoid debt are the safest and richest.
#################################
BlueRidge:
You are 99% correct. But if you are already rich (with very high income) then you can take advantage of a mortgage to make more money. This is why the IRS limits the amount of mortgate interest deduction to $1 million. See example in my previous post... This is the only case where you can borrow money at 12% to invest in a relatively risk free investment of 10% return and still come out ahead of the game. You will have to commit to a long term investment though. NOT short term! But in general, like you said, it's better to be debt free.

[BlueRidge]

Yep, it's the old adage - it takes money to make money. Rich men can afford to play games that are not wise for we ordinary folks. If Gates loses 100 million on an investment, it makes ZERO difference to his quality of life.

For most of us, losing a mere $100,000 would break us.

[stumpfield]

This is not mortgage related but the same applies to your real hard earned money....

Found this in the la times.

Here's the link

Corrected bad link and deleted included text from the article.

Click on link to read the article.

[BlueRidge]

I hate these people.

I once overheard a conversation (among some retired folks)about retirement options, and one woman almost angrily proclaimed that, "I bought an ANNUITY!", and glared around at everyone as if to challenge anyone to say anything bad about them. She'd been sold, and you could tell she sure didn't want anyone to upset her financial utopia.


A creature that would take advantage of a senior citizen just to make a buck is a pretty sorry excuse for a human being.