The Great Debate....Mortgages
- Thread starter AdHustler
- Start date
What exactly is it that people debate about mortgages? If you want to buy a house, don't have the cash up front, and another party enables you to live there set forth by a contract you both agree on, go the fuck ahead. Otherwise buy the house in cash and move on with your life. Voluntary relationships.
Me? I'm not baller enough to buy a house outright, at least not one that isn't a piece of shit, unfortunately.
Me? I'm not baller enough to buy a house outright, at least not one that isn't a piece of shit, unfortunately.
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.
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.
Yeah I'm not too sure it's a debatable topic.
If you have the cash and don't want to pay interest, buy it outright.
If you need the cash flow for your business or whatever, finance it. (what I did)
If you can't afford to pay cash and aren't certain of your financial future, rent.
If you have the cash and don't want to pay interest, buy it outright.
If you need the cash flow for your business or whatever, finance it. (what I did)
If you can't afford to pay cash and aren't certain of your financial future, rent.
Rent or mortgage. I can get a higher return on my money than the interest rate of a mortgage so there is no point to paying in cash.
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.
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.
wish I could afford a mortgage on a house, of course the home that I wanted 8 years ago was priced at about $250k but today Its about $900k. went to the bank last year and I qualify for pretty much a dog house.
as an investment I have seen a few friends of mine make out pretty good by financing and then selling their home for profit then taking that extra cash and upgrading to a nicer place. THen you got the people that tried to do that and end up going bankrupt becuase of the economy and bad timing.
as an investment I have seen a few friends of mine make out pretty good by financing and then selling their home for profit then taking that extra cash and upgrading to a nicer place. THen you got the people that tried to do that and end up going bankrupt becuase of the economy and bad timing.
I will tell you from my perspective.
I had a mortgage on my old house, it made me felt like I HAD to do something every month for someone else ( pay the bill ).
I rented before. I felt like I HAD to do something for someone every month ( pay the bill )
I outright own my home now. I no longer have to pay a bill, but now I open myself to losing my house if someone sued me. Example, someone slips and falls on my porch and sues me and can now legally take my house since I actually own this ( and not the bank since I don't have a mortgage ). There are ways around this like umbrella insurance on top of what you already have and also putting your house in a family trust, etc.. etc.
Either way, I am glad I no longer have to make a payment on something.
I had a mortgage on my old house, it made me felt like I HAD to do something every month for someone else ( pay the bill ).
I rented before. I felt like I HAD to do something for someone every month ( pay the bill )
I outright own my home now. I no longer have to pay a bill, but now I open myself to losing my house if someone sued me. Example, someone slips and falls on my porch and sues me and can now legally take my house since I actually own this ( and not the bank since I don't have a mortgage ). There are ways around this like umbrella insurance on top of what you already have and also putting your house in a family trust, etc.. etc.
Either way, I am glad I no longer have to make a payment on something.
So heres my take on the mortgage world. First it really depedns where you live and your situation.
If you can afford to buy a house outright, would that cash be better used for building your own business and having that business generate enough money to buy out the house at a future date?
If you are buying a house and can have an income suite you can look at it like the income suite is paying the interest.
If you are buying a house to rent, then can you cover your mortgage with the money you rent it for? If so very wise as youll be owning the house without using your own money every month.
If you want an investment, buy a lot and mortgage the construction in an area that is up and coming so when your done you can sell the house pay off your mortgage and make some nice cash.
Mortgages are necessary for me because i dont have the kind of cash a house costs outright, but i would go as far as saying, if i could do this all again i would not habe bought a house i would have invested in my own business, if you can make it successful you have a very good chance of being able to buy a home outright.
Just my 2 cents
If you can afford to buy a house outright, would that cash be better used for building your own business and having that business generate enough money to buy out the house at a future date?
If you are buying a house and can have an income suite you can look at it like the income suite is paying the interest.
If you are buying a house to rent, then can you cover your mortgage with the money you rent it for? If so very wise as youll be owning the house without using your own money every month.
If you want an investment, buy a lot and mortgage the construction in an area that is up and coming so when your done you can sell the house pay off your mortgage and make some nice cash.
Mortgages are necessary for me because i dont have the kind of cash a house costs outright, but i would go as far as saying, if i could do this all again i would not habe bought a house i would have invested in my own business, if you can make it successful you have a very good chance of being able to buy a home outright.
Just my 2 cents
Some of the added costs of having a mortgage:
Significantly higher closing costs
A cash offer is significantly stronger than a financed offer of the same value. So if you have a mortgage and are competing with cash buyers, you will probably have to pay more than them just to be competitive.
You must buy insurance and usually can't shop around.
You may have to pay PMI or other insurance.
If you don't have a fixed rate mortgage, the cost could go completely crazy. Or it could be tied to something like LIBOR which the big banks were just caught outright manipulating.
Numerous other small fees, insurance, hidden costs, etc.
Significant time spent getting the mortgage, making sure payments are on time each month, possibly refinancing, etc.
Significantly higher closing costs
A cash offer is significantly stronger than a financed offer of the same value. So if you have a mortgage and are competing with cash buyers, you will probably have to pay more than them just to be competitive.
You must buy insurance and usually can't shop around.
You may have to pay PMI or other insurance.
If you don't have a fixed rate mortgage, the cost could go completely crazy. Or it could be tied to something like LIBOR which the big banks were just caught outright manipulating.
Numerous other small fees, insurance, hidden costs, etc.
Significant time spent getting the mortgage, making sure payments are on time each month, possibly refinancing, etc.
Cardine, I would love to hear a little about your investment strategy. Nothing personal but just general info (mutual funds, cd's, stocks.) I have serious trouble getting a return north of 5% which is basically the current norm for fixed mortgage rates.
I recently paid off a large piece of my mortgage after running an amortization chart. I literally went from paying $800 in monthly interest to $100 overnight. Seemed like a no brainer with the investment situation I mentioned above.
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.
My 2 million dollar umbrella policy is less than $200 a year. I usually opt for paying a little more for more insurance coverage when it is available. I remember one time my car insurance was $1 more a year to increase my liability insurance to $1 million dollars coverage.
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.
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.