Would you have done this?

[Alex_angel]

Just keeping that money in the bank at 5% interest and taking money from it to pay the difference in his monthly mortgage would have been a better idea. Of course he would have to be disiplined and not spend , but I’d rather have $400k cash than own a home that on paper is worth $400k profit.

[Alex_angel]

Just keeping that money in the bank at 5% interest and taking money from it to pay the difference in his monthly mortgage would have been a better idea. Of course he would have to be disiplined and not spend , but I’d rather have $400k cash than own a home that on paper is worth $400k profit.

[sdcellar]

He would certainly pay a higher interest rate on the extra borrowed $400K. That is, he’s not going to get the non-jumbo 6 and whatever percent that’s the going rate today. Rather, something like 7 or 8 percent. In the long run, he’d pay more and end up chewing up the principal anyway (or at least most people would).

Also, doubt he had $400k down. Considering transaction costs, it was probably more like $350-$360. I’ll bet his monthly payments (even with the big down) aren’t as low as he’s telling you either.

[sdcellar]

He would certainly pay a higher interest rate on the extra borrowed $400K. That is, he’s not going to get the non-jumbo 6 and whatever percent that’s the going rate today. Rather, something like 7 or 8 percent. In the long run, he’d pay more and end up chewing up the principal anyway (or at least most people would).

Also, doubt he had $400k down. Considering transaction costs, it was probably more like $350-$360. I’ll bet his monthly payments (even with the big down) aren’t as low as he’s telling you either.

[NotCranky]

It would scare the heck out of me to have my house 25% or 50% paid off right now. I would not be able to sleep even though I have some considerable safety net. Other people are perfectly fine with it as they view the world differently. Some people prefer lack of debt over a combination of debt and investments other smart people love leverage and many people from both camps do fine, although, I bet more get screwed in the latter camp than the former.
Back to the topic. If Alex’s friend handles most of his business this way, which he probably does because he didn’t heloc out profits he is in the top percentage of his neighbors in the wisdom and finacial security factor. Lets hope he has a rainy day fund and it doesn’t rain beyond the norms too much.

[NotCranky]

It would scare the heck out of me to have my house 25% or 50% paid off right now. I would not be able to sleep even though I have some considerable safety net. Other people are perfectly fine with it as they view the world differently. Some people prefer lack of debt over a combination of debt and investments other smart people love leverage and many people from both camps do fine, although, I bet more get screwed in the latter camp than the former.
Back to the topic. If Alex’s friend handles most of his business this way, which he probably does because he didn’t heloc out profits he is in the top percentage of his neighbors in the wisdom and finacial security factor. Lets hope he has a rainy day fund and it doesn’t rain beyond the norms too much.

[SD Realtor]

Guys…

I try to confine my answers to the parameters of the original post.

Let’s try again…

The original post mentioned putting the money into the home, or putting it into a mutual fund or Berkshire Hathaway…

So given those parameters I like and still stick with my answer.

*******

Now given the deviations mentioned since my post let’s see…

lending – I agree that bad things do happen. I do not believe it is prudent to sock every last penny you have into the downpayment of a home. I absolutely agree with you there. No matter what your lifestyle is, you should ALWAYS have at least 6 months MINIMUM cash reserves available to deal with life in case of emergencies. Now the post did not state whether this person stuck every penny he had into the downpayment or not. It said nothing about other reserves he may have. While you assumed he put every penny he had (even outside the sale of his other home) into this house, I assumed opposite. So perhaps both of us our correct given our independent assumptions.

*******

Regarding putting it in a savings account and getting 5%. Please do not conveniently omit that he will be taxed on that interest. Also again, we don’t know what the difference is in what his payment would be, whether he got a jumbo or not. So again, it is speculative without more data to say if putting the move in a savings account or not would be better.

SD Realtor

[SD Realtor]

Guys…

I try to confine my answers to the parameters of the original post.

Let’s try again…

The original post mentioned putting the money into the home, or putting it into a mutual fund or Berkshire Hathaway…

So given those parameters I like and still stick with my answer.

*******

Now given the deviations mentioned since my post let’s see…

lending – I agree that bad things do happen. I do not believe it is prudent to sock every last penny you have into the downpayment of a home. I absolutely agree with you there. No matter what your lifestyle is, you should ALWAYS have at least 6 months MINIMUM cash reserves available to deal with life in case of emergencies. Now the post did not state whether this person stuck every penny he had into the downpayment or not. It said nothing about other reserves he may have. While you assumed he put every penny he had (even outside the sale of his other home) into this house, I assumed opposite. So perhaps both of us our correct given our independent assumptions.

*******

Regarding putting it in a savings account and getting 5%. Please do not conveniently omit that he will be taxed on that interest. Also again, we don’t know what the difference is in what his payment would be, whether he got a jumbo or not. So again, it is speculative without more data to say if putting the move in a savings account or not would be better.

SD Realtor

[NotCranky]

Alex, invite him to the blog. LOL

[NotCranky]

Alex, invite him to the blog. LOL

[lendingbubblecontinues]

fair enough, SD R

[lendingbubblecontinues]

fair enough, SD R

[sdrealtor]

I wasnt commenting on the buy/don’t buy decision either. based upon his deciding to buy after selling I would have done exactly the same thing. He took his chips from the roulette wheel and moved them over to the blackjack table rather than getting up from the roulette table going out for a nice dinner, buying his wife a diamond necklace and pulling out another marker to play some blackjack.

[sdrealtor]

I wasnt commenting on the buy/don’t buy decision either. based upon his deciding to buy after selling I would have done exactly the same thing. He took his chips from the roulette wheel and moved them over to the blackjack table rather than getting up from the roulette table going out for a nice dinner, buying his wife a diamond necklace and pulling out another marker to play some blackjack.

[lendingbubblecontinues]

sdr-would you really roll every penny (my assumption) into the purchase of your next house, though?

[Author]

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