MAMEWorld Forums - The Loony Bin - Re: So if you had of listened to your Loony Bin Financial Advisor

> > > Yeah.. you loose the tax write off... if you have to have debt, it should be in
> the
> > > deductible form... your house... but still better not to have debt in the first
> > > place.
> > >
> >
> > WORST reason ever to have a loan...
> >
> > Since I paid mine off people have said this to me 'but what about the deduction?!'
> > All shocked that I dont have it.
> >
> > Then I show them the math.
>
> EXACTLY! I've had this same discussion with multiple people and they INSIST that I
> have no idea what I'm talking about.
>
> Think about it this way. If I get a 30-year mortgage at current rates for $200,000,
> after thirty years, I've paid $400,000 total when you figure in the interest.
>
> If I pay cash for a house at $200,000, after 30 years, I've still only paid $200,000.
> Which means I SAVED $200,000 over the other scenario.
>
> I guess the first scenario wouldn't be so bad if the house was worth $400,000 after
> 30 years, but that's not going to happen. In fact, considering the current economic
> trajectory of the housing market, you'll be lucky if the house is worth what you paid
> for it after 30 years.
>
> Then people always say... "well, if you had invested the money instead, and gotten a
> 30-year mortgage, I'd make out way better."
>

Lets say you have 200k cash and a possibility to buy a house. There are very few investments out there that are 100% (bonds being close). So a 200k house is about 1000-1200 per month. There are very few investments that would make you 14400 per year. As it is not only the interest rate but the principle you need to overcome. At 1000 per month for 30 years you are signing up to pay 360,000. Will your house be worth that in 30 years? Maybe, depends on inflation and scarcity.

This way I have a house. The other way I have a lot of scrambling that I *might* make more money. That does what? I have what I need now and lots of extra cash now to do what I want. Money is no good if you dont buy anything with it. It is just a high score then.

My credit cards are gone. My savings is good. My 401k looks swell. No one can convince me that paying off a house is a bad idea. The only way it *might* be a bad idea is if inflation was higher than my interest rate. I now have the ability to plan my spending instead of scrambling to pay bills.

Interest rates are the little evils that steal your money. People pay a lot more in interest than they think (it is how banks make money). Then wonder why they can never get ahead (I know I was there at one point). Its simple you are giving money to pay for the privilege of having money at some previous date.

Also you will see people saying 'oh you can make 10%'. Show me anyone who does that without having millions to play the s&p 500/nasdaq and many of the stocks in there. To average out the good bets and bad bets. That is why I let my 401k do that sort of thing. They have billions to mess with and can meet the averages.