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#61 | |
"TRF" Member
Join Date: Apr 2013
Location: U.S.A.
Posts: 2,796
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Quote:
Perhaps my experience is unique, but I'd be in no particular hurry to retire a long term 3.5% loan, especially when it's tax deductible. ![]() |
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#62 | |
"TRF" Member
Join Date: May 2013
Real Name: Dave
Location: USA
Watch: Rolex SS Daytona
Posts: 2,710
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Quote:
An example: let's say you paid your mortgage lender $5,000 in interest over the course of a year and you're income level places you in the 25% tax bracket. Uncle Sam will allow you to claim the $5,000 as a deduction, meaning that you'll get $1,250 (25% of $5,000) back as a refund. If you think in terms of a balance sheet, you've spent $5,000 in order to get back $1,250 meaning that the total cost was $3,750. If own the property outright, you'll simply not get the deduction meaning that instead you'll have paid only $1,250. The next big goal for the wife and me is to pay off the mortgage. We already have a 15 year note with a really low interest rate, but I work in a volital industry and we'll sleep much better at night if we own the house outright. |
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#63 | |
"TRF" Member
Join Date: Dec 2015
Real Name: Kent
Location: Texas, U.S.A.
Posts: 611
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The Credit Fix
Quote:
Only if itemizing beats the standard deduction. If you have low mortgage payments and/or low interest rate it often does not.
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"Bond reflected that good Americans were fine people and that most of them seemed to come from Texas." -Ian Fleming, Casino Royale Rolex Sea-Dweller 126600 | Omega Seamaster 300 MC | Breitling Navi 01 |
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#64 | |
"TRF" Member
Join Date: Apr 2013
Location: U.S.A.
Posts: 2,796
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Quote:
Being able to borrow so much money at such a low rate is a once in a lifetime opportunity that many - myself included - have a hard time passing up. When interest rates climb, and they will, this will look like free money. Some of you must be old enough to remember CD's of 5%, 7%, or higher? Does anyone seriously think interest rates will stay this low for the next 30 years?? Imagine a time in the not so distant future where you can get 5-7% return at virtually no risk. Wouldn't you love to have a 30yr fixed mortgage at 2% at that point, or is the emotional attachment of paying it off still too compelling? |
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#65 | |
"TRF" Member
Join Date: Dec 2013
Location: FL
Watch: platinum sub
Posts: 15,884
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Quote:
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If you wind it, they will run. 25 or 6 to 4. |
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#66 | |
Banned
Join Date: Aug 2014
Location: Calumet Harbor
Watch: ing da Bears
Posts: 13,565
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I agree with others that a mortgage on your primary residence is not a great investment. But, it can facilitate good investments. My mortgage interest is lower than the average annual growth of my retirement accounts. For me, it was better to leave my cash invested and borrow cheap money for the house.
If your mortgage costs more than you earn on your cash, it's not a particularly good investment. The deduction makes the home purchase more friendly, but the math doesn't work out very well as an investment. ![]() Quote:
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#67 |
"TRF" Member
Join Date: Oct 2014
Real Name: Chadri
Location: LI, NY
Watch: 116610LV
Posts: 11,358
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I don't know much about this but I do know that credit utilization is a contributing factor to your score. From what I've seen a low percentage untilization will positively affect your credit score.
Meaning, let's say you have $80,000 in credit and you have overall balances of $8000. You're at 10% utilization, which is good. Now you open a new card with a $20k limit. Your overall limit has just jumped to $100k and if you still have an overall balance of $8k your utilization percentage just dropped to 8% which could theoretically increase your credit score. Just one idea. |
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#68 | |
2025 TitaniumYM Pledge Member
Join Date: Jan 2011
Real Name: gus
Location: East Coast
Watch: APK & sometimes Y
Posts: 26,817
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Credit has always been somewhat simple in my head...
borrow regularly but not erratically and pay things off on time, remember the little things count. A magazine subscription is the only footprint I had when I got my first card. Not sure if it was mentioned but discover card now delivers your monthly statement complete with your credit score Quote:
The mortgage also locks you into a monthly housing cost, if you have to rent at market rates you are at the mercy of inflation.
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#69 |
"TRF" Member
Join Date: Apr 2013
Location: U.S.A.
Posts: 2,796
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I get it fellas. There is a strong emotional gratification of having your mortgage paid off. Just don't let it blind you to financial reality.
We live in troubled and volatile economic times, but the ability to borrow dirt cheap money for a long period of time is one of the greatest economic gifts our generation is likely to ever see. Don't take my word for it, ask your financial advisor. |
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#70 | |
"TRF" Member
Join Date: Aug 2012
Location: Chicago
Posts: 2,036
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Quote:
I am certainly no expert, but Google'd one of the craziest property markets in the country, full of volatility, Palo Alto CA. Median 2-bedroom home price is $1.74 million. Median 2-bedroom rental price is $3806. What happens if you put a total of $1.74 million into an account over 30 years in monthly installments, that has a 6% return annually, and pay rent for 30 years, with built-in assumptions for inflation? What happens if you take a mortgage at 30-year rates as they stand today and make that your investment? Let's assume tax law doesn't change too. I'm guessing there will be a pretty broad range depending on assumed parameters, but I'm curious where you'd come out at the end. In my situation, purchasing made sense as a primary residence is an asset that is harder to come after in case of a lawsuit, and I'm not confident of my income beyond a 5-year horizon. We also bought in 2010 when nobody was building in our area, and builders were practically begging for business, so we got in near the nadir of the market. We did a 15-yr fixed and a second 10-year loan at favorable rates. But I've always wondered if, as you suggest, we could have been in an even better position had we rented and invested elsewhere. |
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#71 | |
"TRF" Member
Join Date: Dec 2015
Real Name: Kent
Location: Texas, U.S.A.
Posts: 611
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Quote:
I researched the heck out of this when I was considering whether to pay off my mortgage or not. If you just look at the numbers, locking in a low rate for a long time makes sense if and only if 1) you are confident values won't dive and you find yourself underwater if/when it's time to sell and 2) you can find a place to park the money where you are confident it will make better returns (for a long time) than your mortgage rate. The income tax deduction for the mortgage interest always seemed to be a bit of a red herring, as most people don't have enough deductions to make itemizing worthwhile. The imponderable is the peace of mind in outright ownership of the roof over your head. Granted, you still have home-related payments like property taxes. Sent from my iPhone using Tapatalk
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"Bond reflected that good Americans were fine people and that most of them seemed to come from Texas." -Ian Fleming, Casino Royale Rolex Sea-Dweller 126600 | Omega Seamaster 300 MC | Breitling Navi 01 |
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#72 |
"TRF" Member
Join Date: Oct 2016
Real Name: henry
Location: JCNJ
Watch: bluesy, 114060, br
Posts: 76
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#73 | |
"TRF" Member
Join Date: Oct 2016
Real Name: henry
Location: JCNJ
Watch: bluesy, 114060, br
Posts: 76
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Quote:
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#74 |
Liar & Ratbag
Join Date: Nov 2009
Real Name: Renato
Location: NYC / Miami Beach
Watch: Rolex Daytona
Posts: 5,344
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After 3 pages, I'm sure someone else mentioned it but with new line of credit being reported without any balance (yet), your utilization percentage contributes to the increased FICO.
I just realized how old this thread is |
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#75 | |
Liar & Ratbag
Join Date: Nov 2009
Real Name: Renato
Location: NYC / Miami Beach
Watch: Rolex Daytona
Posts: 5,344
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Quote:
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