Home › Forums › Housing › foreclosure wave about to hit — again! — and with a thunderous roar no less (per TG’s ladyfriend)
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April 10, 2010 at 8:29 PM #538986April 10, 2010 at 10:32 PM #538064MostlyLurkParticipant
Could you explain this further – for “they” to be better off financially in ten years by not paying off their mortgage, would they have to be in the later years of their mortgage, as in the example being discussed?
I am asking because I have a hard time analyzing when it is better to take on or pay off debt.
Doesn’t the analysis of whether one is better off paying off debt or not have to take into account what use the capital will be put to if it isn’t used to pay off the debt?
I’m sure your right, but I don’t understand how to calculate – what the analysis is for seeing that
one “pays off” a huge chunk of a loan via currency debasement alone.I understand the concept of opportunity cost…but it seems like you are saying the relationship between the loan and inflation alone are enough in the equation.
(Obviously I don’t have the hang of commenting yet, I meant to direct this question at Rich’s comment, above.)
April 10, 2010 at 10:32 PM #538186MostlyLurkParticipantCould you explain this further – for “they” to be better off financially in ten years by not paying off their mortgage, would they have to be in the later years of their mortgage, as in the example being discussed?
I am asking because I have a hard time analyzing when it is better to take on or pay off debt.
Doesn’t the analysis of whether one is better off paying off debt or not have to take into account what use the capital will be put to if it isn’t used to pay off the debt?
I’m sure your right, but I don’t understand how to calculate – what the analysis is for seeing that
one “pays off” a huge chunk of a loan via currency debasement alone.I understand the concept of opportunity cost…but it seems like you are saying the relationship between the loan and inflation alone are enough in the equation.
(Obviously I don’t have the hang of commenting yet, I meant to direct this question at Rich’s comment, above.)
April 10, 2010 at 10:32 PM #538654MostlyLurkParticipantCould you explain this further – for “they” to be better off financially in ten years by not paying off their mortgage, would they have to be in the later years of their mortgage, as in the example being discussed?
I am asking because I have a hard time analyzing when it is better to take on or pay off debt.
Doesn’t the analysis of whether one is better off paying off debt or not have to take into account what use the capital will be put to if it isn’t used to pay off the debt?
I’m sure your right, but I don’t understand how to calculate – what the analysis is for seeing that
one “pays off” a huge chunk of a loan via currency debasement alone.I understand the concept of opportunity cost…but it seems like you are saying the relationship between the loan and inflation alone are enough in the equation.
(Obviously I don’t have the hang of commenting yet, I meant to direct this question at Rich’s comment, above.)
April 10, 2010 at 10:32 PM #538750MostlyLurkParticipantCould you explain this further – for “they” to be better off financially in ten years by not paying off their mortgage, would they have to be in the later years of their mortgage, as in the example being discussed?
I am asking because I have a hard time analyzing when it is better to take on or pay off debt.
Doesn’t the analysis of whether one is better off paying off debt or not have to take into account what use the capital will be put to if it isn’t used to pay off the debt?
I’m sure your right, but I don’t understand how to calculate – what the analysis is for seeing that
one “pays off” a huge chunk of a loan via currency debasement alone.I understand the concept of opportunity cost…but it seems like you are saying the relationship between the loan and inflation alone are enough in the equation.
(Obviously I don’t have the hang of commenting yet, I meant to direct this question at Rich’s comment, above.)
April 10, 2010 at 10:32 PM #539016MostlyLurkParticipantCould you explain this further – for “they” to be better off financially in ten years by not paying off their mortgage, would they have to be in the later years of their mortgage, as in the example being discussed?
I am asking because I have a hard time analyzing when it is better to take on or pay off debt.
Doesn’t the analysis of whether one is better off paying off debt or not have to take into account what use the capital will be put to if it isn’t used to pay off the debt?
I’m sure your right, but I don’t understand how to calculate – what the analysis is for seeing that
one “pays off” a huge chunk of a loan via currency debasement alone.I understand the concept of opportunity cost…but it seems like you are saying the relationship between the loan and inflation alone are enough in the equation.
(Obviously I don’t have the hang of commenting yet, I meant to direct this question at Rich’s comment, above.)
April 10, 2010 at 10:58 PM #538074Rich ToscanoKeymasterYes MostlyLurk, you’ve pretty much nailed it — you have to do something with the capital with a rate of return that exceeds the mortgage rate. But my point is that that is exceedingly easy in a time of serious currency debasement. If there’s enough of that even the rate of return in a bank account could exceed the mortgage rate over that time period.
Rich
April 10, 2010 at 10:58 PM #538196Rich ToscanoKeymasterYes MostlyLurk, you’ve pretty much nailed it — you have to do something with the capital with a rate of return that exceeds the mortgage rate. But my point is that that is exceedingly easy in a time of serious currency debasement. If there’s enough of that even the rate of return in a bank account could exceed the mortgage rate over that time period.
Rich
April 10, 2010 at 10:58 PM #538664Rich ToscanoKeymasterYes MostlyLurk, you’ve pretty much nailed it — you have to do something with the capital with a rate of return that exceeds the mortgage rate. But my point is that that is exceedingly easy in a time of serious currency debasement. If there’s enough of that even the rate of return in a bank account could exceed the mortgage rate over that time period.
Rich
April 10, 2010 at 10:58 PM #538760Rich ToscanoKeymasterYes MostlyLurk, you’ve pretty much nailed it — you have to do something with the capital with a rate of return that exceeds the mortgage rate. But my point is that that is exceedingly easy in a time of serious currency debasement. If there’s enough of that even the rate of return in a bank account could exceed the mortgage rate over that time period.
Rich
April 10, 2010 at 10:58 PM #539026Rich ToscanoKeymasterYes MostlyLurk, you’ve pretty much nailed it — you have to do something with the capital with a rate of return that exceeds the mortgage rate. But my point is that that is exceedingly easy in a time of serious currency debasement. If there’s enough of that even the rate of return in a bank account could exceed the mortgage rate over that time period.
Rich
April 11, 2010 at 9:02 AM #538094temeculaguyParticipantNo advice can be given in a vaccuum, the other factors in play need to be considered. As Rich pointed out, currency debasement and interest rates should be considered when deciding on a strategy. For the last few years, rate of return for cash has been extremely low, if CD’s were paying 10%, you would be better off with that investment than paying off a 5% mortgage. But that is not what is happening today, so Les is making a sound move today. For the rest of us, for those of us with more mortgage than cash, we need to wait and see.
In the 1970’s, here in So Cal, you could buy a nice house for 30k, by the 1980’s, that 30k would buy you a nice car. During that span, there were periods of 10% return for pedestrian investments. If we enter a similar time period, which we might, you need to change your strategy.
Many people have investments other than retirement accounts while maintaining a mortgage. Each day my investments rise in value, while my mortgage debt decreases. There will come a day, when these two numbers cross paths, when the liquid value of my investments equal my mortgage debt (not including retirement accounts). Will I sell my investments and pay off my mortgage, the answer is “I don’t know.” It all depends on what is going on when that day comes.
I personally think that currency debasement, high inflation and high interest rates are likely in the coming decade, so I keep my options and my eyes open. But if that day was today, I’d do what Les is doing, unfortunately that day for me is not today, so I will keep my eye on the ball until that day comes.
April 11, 2010 at 9:02 AM #538215temeculaguyParticipantNo advice can be given in a vaccuum, the other factors in play need to be considered. As Rich pointed out, currency debasement and interest rates should be considered when deciding on a strategy. For the last few years, rate of return for cash has been extremely low, if CD’s were paying 10%, you would be better off with that investment than paying off a 5% mortgage. But that is not what is happening today, so Les is making a sound move today. For the rest of us, for those of us with more mortgage than cash, we need to wait and see.
In the 1970’s, here in So Cal, you could buy a nice house for 30k, by the 1980’s, that 30k would buy you a nice car. During that span, there were periods of 10% return for pedestrian investments. If we enter a similar time period, which we might, you need to change your strategy.
Many people have investments other than retirement accounts while maintaining a mortgage. Each day my investments rise in value, while my mortgage debt decreases. There will come a day, when these two numbers cross paths, when the liquid value of my investments equal my mortgage debt (not including retirement accounts). Will I sell my investments and pay off my mortgage, the answer is “I don’t know.” It all depends on what is going on when that day comes.
I personally think that currency debasement, high inflation and high interest rates are likely in the coming decade, so I keep my options and my eyes open. But if that day was today, I’d do what Les is doing, unfortunately that day for me is not today, so I will keep my eye on the ball until that day comes.
April 11, 2010 at 9:02 AM #538684temeculaguyParticipantNo advice can be given in a vaccuum, the other factors in play need to be considered. As Rich pointed out, currency debasement and interest rates should be considered when deciding on a strategy. For the last few years, rate of return for cash has been extremely low, if CD’s were paying 10%, you would be better off with that investment than paying off a 5% mortgage. But that is not what is happening today, so Les is making a sound move today. For the rest of us, for those of us with more mortgage than cash, we need to wait and see.
In the 1970’s, here in So Cal, you could buy a nice house for 30k, by the 1980’s, that 30k would buy you a nice car. During that span, there were periods of 10% return for pedestrian investments. If we enter a similar time period, which we might, you need to change your strategy.
Many people have investments other than retirement accounts while maintaining a mortgage. Each day my investments rise in value, while my mortgage debt decreases. There will come a day, when these two numbers cross paths, when the liquid value of my investments equal my mortgage debt (not including retirement accounts). Will I sell my investments and pay off my mortgage, the answer is “I don’t know.” It all depends on what is going on when that day comes.
I personally think that currency debasement, high inflation and high interest rates are likely in the coming decade, so I keep my options and my eyes open. But if that day was today, I’d do what Les is doing, unfortunately that day for me is not today, so I will keep my eye on the ball until that day comes.
April 11, 2010 at 9:02 AM #538780temeculaguyParticipantNo advice can be given in a vaccuum, the other factors in play need to be considered. As Rich pointed out, currency debasement and interest rates should be considered when deciding on a strategy. For the last few years, rate of return for cash has been extremely low, if CD’s were paying 10%, you would be better off with that investment than paying off a 5% mortgage. But that is not what is happening today, so Les is making a sound move today. For the rest of us, for those of us with more mortgage than cash, we need to wait and see.
In the 1970’s, here in So Cal, you could buy a nice house for 30k, by the 1980’s, that 30k would buy you a nice car. During that span, there were periods of 10% return for pedestrian investments. If we enter a similar time period, which we might, you need to change your strategy.
Many people have investments other than retirement accounts while maintaining a mortgage. Each day my investments rise in value, while my mortgage debt decreases. There will come a day, when these two numbers cross paths, when the liquid value of my investments equal my mortgage debt (not including retirement accounts). Will I sell my investments and pay off my mortgage, the answer is “I don’t know.” It all depends on what is going on when that day comes.
I personally think that currency debasement, high inflation and high interest rates are likely in the coming decade, so I keep my options and my eyes open. But if that day was today, I’d do what Les is doing, unfortunately that day for me is not today, so I will keep my eye on the ball until that day comes.
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