The Great Debate....Mortgages



mont7071 said:
There are some asset protection and lawsuit-avoidance advantages to having a mortgage. If someone is looking to sue you for something related to your online business, they are much more likely to come after unencumbered real estate vs if you have a mortgage on the property (even if its a small one, all they see is the secured interest, not the amount). A simple property search will tell the bad guys all they need to know, and if you own your nice home outright, that can be the equivalent of painting a giant "look, I have monies for the taking" bullseye on your chest.

Also, with fixed mortgage rates down around 3-4%, and the mortage interest deduction US residents get, you can be paying an effective rate of around 2.5%. That's pretty cheap money. If you are halfway decent at investing, even if you have the cash in the bank to pay the mortgage off in full, its a better use of those funds to invest anywhere you could beat that ~2.5% return.
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thats why your assets are held by nevis llcs
 
Mont is right, except mortgages aren't liquid and home prices aren't stable, particularly post 2008.
 
ks1905 said:
I am surprised that no one has mentioned the nice tax deduction that you get for the interest on the mortgage. I'm not sure how much longer that will be available through the Federal government. It seems kind of ridiculous to be able to deduct thousands of dollars a year from your taxes because you pay the bank interest.
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Who cares...you only get back 30-40% of what you spend so its a negative ROI
 
kingofsp said:
I'm actually in the process of helping my mom buy a house right now. I think they're okay. The interest rates seem too low, tbh. What I don't like is all of the headaches and back and forth between the seller/lender/escrow. It's like a full-time job.

For example, I spent like 5 days trying to account for an extra $700 in her bank account that we couldn't readily explain. It was like everything was on pause until I could give the lender some kind of written explanation of how that $ got there. Sort of ridiculous when we're putting down $100k, but whatever. Protocol, I guess.

I think mortgages are a necessary semi-evil.

I would be afraid to roll around in dollar bills in her new basement. Dark and scary and full of spiders.
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You bought the house in LA? If so, what part of LA if you don't mind me asking, just curious.
 
mont7071 said:
There are some asset protection and lawsuit-avoidance advantages to having a mortgage. If someone is looking to sue you for something related to your online business, they are much more likely to come after unencumbered real estate vs if you have a mortgage on the property (even if its a small one, all they see is the secured interest, not the amount). A simple property search will tell the bad guys all they need to know, and if you own your nice home outright, that can be the equivalent of painting a giant "look, I have monies for the taking" bullseye on your chest
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To play devils advocate (and yes i know your a lawyer and certainly know much more about legal strategies then I do): Let's say your net worth is $500,000. 2 scenarios

1) You own a $400,000 house outright and have $100,000 in the bank

2) You own a $400,000 house with a $300,000 mortgage and have $400,000 sitting in the bank.

How are you any more protected from having a lawsuit eat up your assets if your money is in the bank over it being in the house? To the layman like me it doesn't seem more protected.
 
yeah but don't you have to pay for some place to live?

mont7071 said:
There are some asset protection and lawsuit-avoidance advantages to having a mortgage. If someone is looking to sue you for something related to your online business, they are much more likely to come after unencumbered real estate vs if you have a mortgage on the property (even if its a small one, all they see is the secured interest, not the amount). A simple property search will tell the bad guys all they need to know, and if you own your nice home outright, that can be the equivalent of painting a giant "look, I have monies for the taking" bullseye on your chest.

Also, with fixed mortgage rates down around 3-4%, and the mortage interest deduction US residents get, you can be paying an effective rate of around 2.5%. That's pretty cheap money. If you are halfway decent at investing, even if you have the cash in the bank to pay the mortgage off in full, its a better use of those funds to invest anywhere you could beat that ~2.5% return.
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I fucking hate estate agents and the mortgage rates.

Due to estate agents encouraging fucked up inflated prices, I resent paying 150,000€ for an apartment that should have cost something like 90,000€. Then, by the time I've paid the mortgage off over 25-30 years, it will actually have cost me around 300,000€ for 80 square meters of shitty breeze-block and concrete, where I can hear an old guy snoring through the fucking wall, and some bitch upstairs clacking around in high heeled boots and getting fucked every night at 2 or 3am.

Considering nearly everybody in the country needs a mortgage at some point, I think they are greedy fucking bastards with the rates, and entire system is tantamount to modern day slavery....

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I don't like real estate agents either. There should be more competing services for selling real estate. 2 to 6 percent of the sale is way too high, especially considering most of the time they just put it in the mls and do nothing else.
 
Bofu2U said:
Have a mortgage, don't plan on paying it off unless I plan on staying in it long term.

I got it because it was a good investment, good place to live - but I don't see myself there 10 years from now.

If I was going to stay there "the rest of my life" I wouldn't have an issue paying it off rather than keeping monthly payments, but the timing & situation has to be right.
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So you're renting but with the added risk of property price and interest rate fluctuation. Why not just rent it then?
 
Chianti said:
I fucking hate estate agents and the mortgage rates.

Due to estate agents encouraging fucked up inflated prices, I resent paying 150,000€ for an apartment that should have cost something like 90,000€. Then, by the time I've paid the mortgage off over 25-30 years, it will actually have cost me around 300,000€ for 80 square meters of shitty breeze-block and concrete, where I can hear an old guy snoring through the fucking wall, and some bitch upstairs clacking around in high heeled boots and getting fucked every night at 2 or 3am.

Considering nearly everybody in the country needs a mortgage at some point, I think they are greedy fucking bastards with the rates, and entire system is tantamount to modern day slavery....
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Gas goes up a few cents, then the milk goes up, then the shampoo at walmart goes up...then my rates go up! :thumbsup:
 
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What about property taxes? I don't know the US situation but in many countries you pay high property taxes even if you own your house, so you never really break clear from someone owning your house.
 
There is no better Fealing of security knowing other than the government can ever take your house away. If you somehow loose everything you will always have a place to live. That and why would you want to pay interest if you don't have to? Taxes? Find another deduction
 
dmnEPC said:
There is no better Fealing of security knowing other than the government can ever take your house away. If you somehow loose everything you will always have a place to live. That and why would you want to pay interest if you don't have to? Taxes? Find another deduction
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ORLY? You never heard of repossession? Don't pay your property taxes and guess what happens to "your" house.
 
Its a pretty simple formula. If the cost of your mortgage (including interest, insurance) is less than the ROI you can make on your money then get the mortgage. If you suck at making money on your money then buy the house outright.

There is a certain feel good feeling to knowing your house is "paid for outright" but lets be honest you never really own it with property taxes so you still have to get up every morning and go to work.

I own 7 homes (rentals and personal home) and 3 are mortgaged even though there is cash in the bank to pay them off. Mortgage rates are disgustingly low, and I can invest my money in my own business and make far more. Plus I like having big cash on hand for when sweet opportunities arise. Never forget opportunity costs.

"Luck is when preparation and opportunity meet"

If you own your home outright you'd be somewhat of a fool not to stick it in a trust. A homeless man could catch his nutsack on a rusty nail sticking out of your old wooden fence while he's jumping your fence to steal your water hose and sue you for every penny you've got, including the value of your home.
 
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