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sdcellar
ParticipantGood luck Clint! My wife and I have discussed moving up there. Maybe we’ll run into you some day.
ParticipantGood luck Clint! My wife and I have discussed moving up there. Maybe we’ll run into you some day.
ParticipantAre you asking what b-4 means?
before.
ParticipantAre you asking what b-4 means?
before.
ParticipantAN– When you look at those rates you should look at the APR as that’s the actual cost of the money. I also assume for arguments like this that it’s unlikely that you can usually get the “best” rate (or whatever number you’re looking for). Not saying it’s impossible, just that when you need to look at the boundary conditions to make your math work, probably not the best place to be (gives you zero margin for, well, anything).
Yes, the title is “Would you have done this?” and I’ve pretty much made it clear that I would. I’m sorry, I was under the impression we could debate the basis of our answers.
And, yes, I know that you didn’t think those opportunities were conservative. I’m just picking on you because you’re contradicting your own arguments again (remember the liquid/not liquid thing?)
Hey, I get it. If I could have my house paid for *and* have close to a half-mil in the bank I’d be stoked. If you step back and think about it for a minute, that’s the kind of flexibility you’re arguing for. We both hate the idea of having that much money locked up to it either way.
ParticipantAN– When you look at those rates you should look at the APR as that’s the actual cost of the money. I also assume for arguments like this that it’s unlikely that you can usually get the “best” rate (or whatever number you’re looking for). Not saying it’s impossible, just that when you need to look at the boundary conditions to make your math work, probably not the best place to be (gives you zero margin for, well, anything).
Yes, the title is “Would you have done this?” and I’ve pretty much made it clear that I would. I’m sorry, I was under the impression we could debate the basis of our answers.
And, yes, I know that you didn’t think those opportunities were conservative. I’m just picking on you because you’re contradicting your own arguments again (remember the liquid/not liquid thing?)
Hey, I get it. If I could have my house paid for *and* have close to a half-mil in the bank I’d be stoked. If you step back and think about it for a minute, that’s the kind of flexibility you’re arguing for. We both hate the idea of having that much money locked up to it either way.
ParticipantAN– Whew, you’re tiring me out. First, I understand perfectly what you’ve been saying. For example, I’m working with 30-year fixed assumptions, so no need to tell me that the loan rate won’t change (especially since I already made that point). You seem to missing concepts like loans above $417,000 carry higher interest rates. For me a good guideline on current non-Jumbo rates can be found here.
Now, if you expect me to speculate what savings rates will be over the next 30 years, I’m just not going to do it. Sure it seems like they’ll go up tomorrow and for some number of days after that. Do we know what it will be a year from now? Two? Five? You’re speculating, plain and simple. And frankly, that’s your choice.
I knew it was only a matter of time before you mentioned having the cash available for a GREAT opportunity. Perhaps you’re thinking internet stocks or Krispy Creme franchises or something. The funny thing is that you think your approach is conservative.
ParticipantAN– Whew, you’re tiring me out. First, I understand perfectly what you’ve been saying. For example, I’m working with 30-year fixed assumptions, so no need to tell me that the loan rate won’t change (especially since I already made that point). You seem to missing concepts like loans above $417,000 carry higher interest rates. For me a good guideline on current non-Jumbo rates can be found here.
Now, if you expect me to speculate what savings rates will be over the next 30 years, I’m just not going to do it. Sure it seems like they’ll go up tomorrow and for some number of days after that. Do we know what it will be a year from now? Two? Five? You’re speculating, plain and simple. And frankly, that’s your choice.
I knew it was only a matter of time before you mentioned having the cash available for a GREAT opportunity. Perhaps you’re thinking internet stocks or Krispy Creme franchises or something. The funny thing is that you think your approach is conservative.
ParticipantAN– First, I must admit an error and note that the annual cost with the last example was $2,611.81. Sorry, had referenced the wrong cell on one of the calcs. Now, onto your latest plea to support your case…
If savings rates go up, so will loan rates. I understand that following loan inception, the loan rate stays what it is and what happens with the savings rate happens, but all we can start with is what the rates are today and I think you’re really pushing it. Please tell me where you can get a plain old savings account at 5.5% and a jumbo loan at 6.2% (really!)
Even so, I’ll entertain your new criteria. The cost would now be $1,325.46 annually, 110.45 monthly. If you keep making up rates you can’t get, we should be able to get it to break even…
And no, it’s not worth it to me at even $200 bucks a month to keep $400K liquid. As I mentioned before, I’d certainly keep an emergency fund and sdrealtor’s suggestion about a line of credit isn’t a bad one if I was really worried I might need to come up with a few hundred kilobucks suddenly.
If it’s equity erosion you’re worried about, whatever happens with that, happens with that. If your house loses $200K (or more), you will be out that money if you need to sell–doesn’t matter if it’s in equity or the bank. The *only* thing that would make that different is a willingness to walk away from a house if you were sufficiently underwater. I’m hoping that’s not your rationale.
ParticipantAN– First, I must admit an error and note that the annual cost with the last example was $2,611.81. Sorry, had referenced the wrong cell on one of the calcs. Now, onto your latest plea to support your case…
If savings rates go up, so will loan rates. I understand that following loan inception, the loan rate stays what it is and what happens with the savings rate happens, but all we can start with is what the rates are today and I think you’re really pushing it. Please tell me where you can get a plain old savings account at 5.5% and a jumbo loan at 6.2% (really!)
Even so, I’ll entertain your new criteria. The cost would now be $1,325.46 annually, 110.45 monthly. If you keep making up rates you can’t get, we should be able to get it to break even…
And no, it’s not worth it to me at even $200 bucks a month to keep $400K liquid. As I mentioned before, I’d certainly keep an emergency fund and sdrealtor’s suggestion about a line of credit isn’t a bad one if I was really worried I might need to come up with a few hundred kilobucks suddenly.
If it’s equity erosion you’re worried about, whatever happens with that, happens with that. If your house loses $200K (or more), you will be out that money if you need to sell–doesn’t matter if it’s in equity or the bank. The *only* thing that would make that different is a willingness to walk away from a house if you were sufficiently underwater. I’m hoping that’s not your rationale.
ParticipantAN– Using your numbers, 6.5% loan, 5.3% return, 37% tax bracket, you’ll lose $3,926 in the first year or $217.65 a month.
ParticipantAN– Using your numbers, 6.5% loan, 5.3% return, 37% tax bracket, you’ll lose $3,926 in the first year or $217.65 a month.
ParticipantWow AN, you’re really fighting hard to support your case. The rates are now even more favorable to your position, you’ve got liquidity and a long term capital gains rate thrown in (it’s got to be one or the other). Heck, if you used Excel, then your deduction should be $972 or something, not a hundred dollar range (let me guess, it was lower than you thought…)
Some of your points are valid (e.g. savings earning rate likely to go up), but for the here and now, you’d be losing money *and* you’d need considerable income to cover the higher payments (or I forgot, are you liquid or not?!).
As far as the tax benefit going down as you deduct more and more, it brings your effective income down, so the last dollar of deduction won’t usually be at the same rate as the first dollar.
And whoa, I don’t even get what you’re talking about regarding prolonging the tax write-off (and I suspect you don’t either). Finally, compound interest, taking advantage? How do you think a mortgage works? I think it might be taking advantage of you…
ParticipantWow AN, you’re really fighting hard to support your case. The rates are now even more favorable to your position, you’ve got liquidity and a long term capital gains rate thrown in (it’s got to be one or the other). Heck, if you used Excel, then your deduction should be $972 or something, not a hundred dollar range (let me guess, it was lower than you thought…)
Some of your points are valid (e.g. savings earning rate likely to go up), but for the here and now, you’d be losing money *and* you’d need considerable income to cover the higher payments (or I forgot, are you liquid or not?!).
As far as the tax benefit going down as you deduct more and more, it brings your effective income down, so the last dollar of deduction won’t usually be at the same rate as the first dollar.
And whoa, I don’t even get what you’re talking about regarding prolonging the tax write-off (and I suspect you don’t either). Finally, compound interest, taking advantage? How do you think a mortgage works? I think it might be taking advantage of you…
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