Sign of the Times Mortgage Anecdote

[davelj]

I have a friend who spent three years at one of the huge well-known hedge funds. After taxes he cleared almost $12 million over the period before his entire department was pushed out during an internal power struggle at the beginning of the year. My point: this guy’s got a fair amount of cake and it’s liquid.

He just moved to Greenwich, CT and bought a place for $2.8 million. The best mortgage he could get required a 50% down payment. That’s 50%. The best one.

The times they are a changin’. For the better.

[34f3f3f]

Why get a mortgage with $12m in hand?

[34f3f3f]

Why get a mortgage with $12m in hand?

[34f3f3f]

Why get a mortgage with $12m in hand?

[34f3f3f]

Why get a mortgage with $12m in hand?

[34f3f3f]

Why get a mortgage with $12m in hand?

[davelj]

[quote=qwerty007]Why get a mortgage with $12m in hand?[/quote]

This is not a universal rule (everyone’s circumstances are different), but when someone offers you 30-year money at 4% (tax-adjusted), you take it. And if rates go down you can always re-fi into an even lower rate loan.

I have a mortgage on my place which I technically don’t “need.” The rate is 6.25% pre-tax, or about 3.75% after-tax.

Bottom line: you never know what kind of opportunities will knock and how much capital will be required. If someone’s dumb enough to lend you money on silly terms for 30 years then you should probably avail yourself of that opportunity. You may be glad you had that liquidity.

[davelj]

[quote=qwerty007]Why get a mortgage with $12m in hand?[/quote]

This is not a universal rule (everyone’s circumstances are different), but when someone offers you 30-year money at 4% (tax-adjusted), you take it. And if rates go down you can always re-fi into an even lower rate loan.

I have a mortgage on my place which I technically don’t “need.” The rate is 6.25% pre-tax, or about 3.75% after-tax.

Bottom line: you never know what kind of opportunities will knock and how much capital will be required. If someone’s dumb enough to lend you money on silly terms for 30 years then you should probably avail yourself of that opportunity. You may be glad you had that liquidity.

[davelj]

[quote=qwerty007]Why get a mortgage with $12m in hand?[/quote]

This is not a universal rule (everyone’s circumstances are different), but when someone offers you 30-year money at 4% (tax-adjusted), you take it. And if rates go down you can always re-fi into an even lower rate loan.

I have a mortgage on my place which I technically don’t “need.” The rate is 6.25% pre-tax, or about 3.75% after-tax.

Bottom line: you never know what kind of opportunities will knock and how much capital will be required. If someone’s dumb enough to lend you money on silly terms for 30 years then you should probably avail yourself of that opportunity. You may be glad you had that liquidity.

[davelj]

[quote=qwerty007]Why get a mortgage with $12m in hand?[/quote]

This is not a universal rule (everyone’s circumstances are different), but when someone offers you 30-year money at 4% (tax-adjusted), you take it. And if rates go down you can always re-fi into an even lower rate loan.

I have a mortgage on my place which I technically don’t “need.” The rate is 6.25% pre-tax, or about 3.75% after-tax.

Bottom line: you never know what kind of opportunities will knock and how much capital will be required. If someone’s dumb enough to lend you money on silly terms for 30 years then you should probably avail yourself of that opportunity. You may be glad you had that liquidity.

[davelj]

[quote=qwerty007]Why get a mortgage with $12m in hand?[/quote]

This is not a universal rule (everyone’s circumstances are different), but when someone offers you 30-year money at 4% (tax-adjusted), you take it. And if rates go down you can always re-fi into an even lower rate loan.

I have a mortgage on my place which I technically don’t “need.” The rate is 6.25% pre-tax, or about 3.75% after-tax.

Bottom line: you never know what kind of opportunities will knock and how much capital will be required. If someone’s dumb enough to lend you money on silly terms for 30 years then you should probably avail yourself of that opportunity. You may be glad you had that liquidity.

[Author]

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