True. But you seemed to state that they wouldnt be financial advisors if they werent broke. Im sure many are wealthy and not broke and peer down their nose to tell you what to so.
Paying off your house
- Thread starter EQGuy
- Start date
WOW!
We were having a real estate boom here, and that is way more than we are getting for similar older homes. (Lot being about 7500sf)
People here, (including myself) have taken a lot less, and still was happy to make 10 times what we paid.
Perfect analysis by LoboGunLeather. People pay their accountants and investments advisors for that kind of advice. Yep. Paying off any loan is like getting a guaranteed interest rate.
One of the absolutely BEST days of my life. There are a few that are better but not many. It is a "plateau" that is well worth waiting and working for and a freedom unequaled in American life. I've done it twice and still relish the memory. And it's good to know I'll never make another house payment as long as I live.
I have lived in my current house for 37 years. Just finished a 6 figure remodel and I expect to be carried out one day feet first.
I have lived in my current house for 37 years. Just finished a 6 figure remodel and I expect to be carried out one day feet first.
You are not considering the 74,000 pages of tax code and bankruptcy laws here. You're just looking at the loan interest. In that respect you are correct. In the real world, maybe not.
Donald Trump isn't broke because he uses other peoples money to operate. That guy has filed for bankruptcy 4 times that I know of. Now he's running his campaign with his own money. The way he does that is the corporations he headed up filed, he didn't personally file. LLC (Limited Liability Company)
You're point is well taken and I assure you I understand it. In most cases it's a good philosophy.
One of those cases where capitalism and socialism may look different from the top, but very much the same from the bottom?
gregintenn
Member
I don't know a lot about bankruptcy, but it sure looks like theft to me. Not my bag.
Our place isn't paid off yet, but we're paying it down as fast as we can. Sure the loan interest rate is only 3%, but there aren't many safe - or even semi-safe - investments that offer more than 3% return these days.
Sure, the interest deduction is nice, BUT it only offsets income, so you only get 15% - 25% (or whatever your tax bracket is) of every dollar you pay in interest back as a reduction in your taxes. The deduction used to add up to enough to potentially put you into the next lower tax bracket, but with the interest rates being as low as they are these days, about the only way for your interest deduction to be enough to change your bracket is if you're just barely above the bottom income in your bracket, or you have an absolutely HUGE mortgage.
So paying off your house is still a pretty good investment, especially if its appreciating. And like others have said, you have to keep a roof over your head one way or another so paying it off to ensure that it can't be taken away is still a good thing to make a priority, IMO.
Sure, the interest deduction is nice, BUT it only offsets income, so you only get 15% - 25% (or whatever your tax bracket is) of every dollar you pay in interest back as a reduction in your taxes. The deduction used to add up to enough to potentially put you into the next lower tax bracket, but with the interest rates being as low as they are these days, about the only way for your interest deduction to be enough to change your bracket is if you're just barely above the bottom income in your bracket, or you have an absolutely HUGE mortgage.
So paying off your house is still a pretty good investment, especially if its appreciating. And like others have said, you have to keep a roof over your head one way or another so paying it off to ensure that it can't be taken away is still a good thing to make a priority, IMO.
Comrad
Member
Your home is not an investment, it's a place to live.
Equity is sacred and should never be touched.
Equity is sacred and should never be touched.
Why? Thats how people make money, off of equity
We paid off our first home 5 years after we bought it. We sacrificed to do it. I haven't had a mortgage since thank the good Lord. We bought in 1980. We had a lot of unemployment in the mid 80's on in Denver. I never had to worry about making a mortgage payment. A big blessing. The stock market crashed in 87 and I had a lot of muscle cars and parts. I became "rich" lol over night. I sold it house and all in 1990 and moved to MT and bought 10 acres at the end of the road with a nice home on it. Raised our boys here. That was the best thing I ever did. Now our place is worth over 5 times what we paid for it. I am going to sell it and move to a more arid part of the west. I have asthma and the humidity here is to high for me.
I have never thought about borrowing money on my place to use it for investing. I have seen it done many times and have seen people loose thier home more times than not doing that. That isn't smart in my book. What is mine is a gift from God as I see it. We never lived beyond our means and that is the secret to living debt free. I pay off our credit card every month. Sure we never had money for all the toys others went in debt to have but we are content with what we have.
I can shoot off my deck and me and the boys have had many holiday shooting "matches" on that deck. We enjoy life here and will miss it but I will keep looking for a place to move to that is equal to this place but is more arid. Life is good if you live within your means and be happy with what God gives you and not what you want. Being debt free is the only way to live.
John
I have never thought about borrowing money on my place to use it for investing. I have seen it done many times and have seen people loose thier home more times than not doing that. That isn't smart in my book. What is mine is a gift from God as I see it. We never lived beyond our means and that is the secret to living debt free. I pay off our credit card every month. Sure we never had money for all the toys others went in debt to have but we are content with what we have.
I can shoot off my deck and me and the boys have had many holiday shooting "matches" on that deck. We enjoy life here and will miss it but I will keep looking for a place to move to that is equal to this place but is more arid. Life is good if you live within your means and be happy with what God gives you and not what you want. Being debt free is the only way to live.
John
hoosierone
Member
IMO it is foolish to borrow on your house for investment. In my banker life I recall in the early 80's gold ran up to about $800 an ounce. We had a customer borrow to "invest" in gold. He ended up buying at the top and had to wait decades to recover. Another case was a dentist who borrowed on his equity to buy stock. After the first loan, the market went up so he came back and wanted to go whole hog. I tried to talk him out of it but he was adamant. In his mid sixties he borrowed as much as he could. Shortly thereafter we had the 1987 crash. At that point he took a bath and of course still had the equity loan to repay. Finally, a retired teacher with a paid off house borrowed so his son could open a restaurant. I winced, but many times customers don't want advice, they want a check. Of course the restaurant failed and the son stiffed his father on repaying the loan. Ah the memories!
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gregintenn
Member
I make money from cash investments and hard work. The word "equity" isn't in my lexicon. I own the home in which I live.
Hey EQGUY, I spent 40 years in Silicon Valley flying satellites out of the BLUE CUBE........
After retirement in 2000 family matters prompted us to leave the state. Man, I miss the weather (or what was the weather before the drought)!!
NOT having a house payment is nice....don't let the money lenders get to you!!!
After retirement in 2000 family matters prompted us to leave the state. Man, I miss the weather (or what was the weather before the drought)!!
NOT having a house payment is nice....don't let the money lenders get to you!!!
While I agree with the sentiment, I can't 100% agree with the statements.
1) An apartment is a place to live, but it isn't an investment. If you use the common definition of "investment" - i.e. an appreciating asset that you put money into - then a home is the single largest investment most people will ever make.
2) Equity should never be used to purchase a depreciating asset or to re-invest money into something riskier than real estate. I took $20k in equity out of my first home in order to finance my education. With my degree I more than doubled my income. That was an "investment" in myself that paid off BIG time and one of the few examples where taking equity out of my home WAS a very, VERY good idea.
Taking equity out of your home to buy a new car or a boat, or to gamble it on the stock market, or finance someone else's risky business venture is NOT smart. Cars and boats and such depreciate - not appreciate. Putting a big chunk of money into the stock market is just as much gambling as putting it on a horse or the roulette wheel - and has resulted in just as many people going bankrupt. Statistically roughly half of all new small businesses fail in the first 2 years and if that isn't enough risk there is also the fact that you are "investing" in someone else's business where you have no control over how they manage - or mismanage - the business.
So there are very few things that are a good enough investment to be worth putting the equity of your home into them, but they do exist, and education is one of them IMO, as long as it is investment in marketable skills. Just my 2 cents.
Imvesting in the stock market should not be considered the lottery or gambling. It should be considered investing and done wisely. If you consider iy gambling or the lottery, then you are correct and should not be getting into it.
Though I disagree on your views of the stock market, id have to agree that id never take out a equity loan on my home to put into the stock market. Ive heard of people making tons, but the flip side is you lose all your money with bad investments and you lose your home. You may keep the shirt on your back thogh!
Road Rat
Before they tore it down I could stand on my roof and see the Blue Cube. Now they are planning on putting a homeless shelter on part of the land. There is a meeting next week concerning it. I just found out that a friend is selling his house in Redwood City and is having a house built just west of Boise. He thinks after he pays off his debt that he will have $800,000 to play with. And so it goes.
finesse_r
Member
I lost more faster in 1999 in the stock market than I would in a thousand trips to Los Vegas. Don't kid yourself, the stock market is for insiders and those that make the markets, anyone else making money there is just luck.
At least in Vegas the deal is honest, and that is something I cannot and will not say about Wall Street.
TXSWFAN
Member
Wow. A little east of me, for $785k, you could get 1000 acres in a pine forest with $450k left over for a real nice house.
Investing regularly and diversely in the stock market over time can be wise and a good investment. I've been doing that for many years. It isn't always a good investment though. Even doing it that way can be disastrous if for some reason you need to withdraw your money shortly after one of the big "corrections" we've seen the last few years. You know, when 10 or 15 years worth of gains go down the toilet overnight.
Taking the equity out of your home and dumping it into one or even a few stocks is what I was referring to - and that amounts to gambling IMO. Far FAR more people loose money than make money that way. Just like those who gamble at the track or in Vegas.
And yes, bankruptcy court will allow you to keep the shirt on your back - but not a whole lot else...
