This is highway robbery!!!

I'm in the boat where I have waited too long to start down the path you discuss. And how do you find a GOOD planner, not one that just thinks he/she is good? Again, I've worked for Corps before with stock plans and it drove me nuts. I just don't have the aptitude to deal with the fluctuations.

We bought our house in '87, and due to all of the re-finances between then and now, we haven't paid down anything. This January, we re-fied again at the original price we paid for the house. But we have a 15 year loan. So we are knocking it out, paying MUCH extra now. If I can continue to earn as much as I do now and we continue to pay extra like we are, we should have it paid off in 5 to 6 years. Will we do that? Hard to ever know. We're trying to get it paid off before I hit 60. Likely, we'll continue at a high repayment level for a couple more years at least if not all of that time. Then, since we are incorporated, we can funnel off large quantities into tax-deferred investments of one type or another. Or maybe a couple of years from now we'll split it up in a more balanced approach. Time will tell.

Since we currently have no unsecured debt or vehicle debt or anything else other than the house related, we're in pretty good position to doing the paydown. However being a computer consultant, that whole thing is risky. We do have savings salted away and a second equity account on the house with a $0 balance, so we are somewhat prepared for unemployment for a while.

But what it may end up being is that our house is our retirement plan. Here in Sacto, CA area, housing is booming and we probably have $200k in equity right now. Of course, that could change, but I haven't ever seen the housing market drop much either.

So push comes to shove, we sell the house and move to <insert really cheap place to live here>.

Maybe not the smartest approach, but at least one I'm comfortable with. We have given it a lot of thought tho.

 

You're right Hedwig .
Why save $100,000 on the home loan and loose 2 or 3 times that in a side fund.?

 

Hedwig,

I agree with everything you've said and it would've been a great plan if I had started doing that 20 years ago.

Basically, I am retired early. I started my own business, I don't make what I used to, I do live more conservatively. I am not in a position to invest in anything other than my own home.

I think what you're saying is a great idea if you have the time and if you start young.

It was my plan at one point in my life, but things just didn't work out as per plan.

Now I have a new plan.

 

I have friends in Clearwater, also. They love it there.

 

RichC. I am in similar situation to you. The reason I started my own business is because there is no security in a job anymore. The reason I won't invest in other companies just my own property (or other investment property - just land) is because land is the only thing I trust anymore.

Land doesn't go out of business, file bankruptcy, or lose value. Yes, a building can lose value, but home values have consistently gone up (as the stock market has).

I also think I am beyond the point of investing and letting it sit for 20 years. I worked very hard all the years I worked for someone else and frankly, I'd rather live more simply than ever work that hard again.

And to Hedwig's point about maintenance and taxes on property...it's a heck of a lot easier to afford the maintenance when you're not making a debt payment also.

I also don't have a car loan (mine is paid off) and I don't have anything else financed. And don't plan to.

The reason my business growth is slow is because I only do what I can afford to do in cash. But there is income, no debt. My fiance also works and plans to start his business in 13 years. (his children are younger and he is staying with his company until they are older for insurance purposes) But we already have a plan for his business when we are no longer responsible for the children's insurance. (Oh, and if he is injured he will be paid for life with the insurance he has at work, so I'm not worried about something making us unable to make the payments)

The other thing is that he has an inheritance coming that will likely pay off our house in less than 10 years (but I'm not counting on that - not putting all the eggs in that basket). If it comes before the house is paid off - the house gets paid off - if it comes after, it will be his company startup money.

Hedwig, please don't get me wrong, I'm not trying to argue with you at all. I just think some plans are right for some and not for others, depending on their comfort level with certain risks, the ability to not touch investments for a long period of time, or even having a long period of time to let it sit and draw interest.

It is a perfect plan if you start when you're young, stick to it throughout the years, and never have to spend it all through financial hard times or family emergencies.

Some of us are just beyond the point where that's really feasible for our situations.

 

IT IS FOR 30 YEARS...AND IT IS NOT A CREDIT CARD THAT USUALLY IS PAID OFF IN A FEW YEARS...

...AND we are talkin' $150,000...not $5,000 over 3 years...

You can cut many years off by just increasing the payment $50-$200/month towards PRINCIPAL...if things get TIGHT...just do the "NORMAL" payment...ALL THE YEARS YOU CUT WILL NEVER RETURN!!!

GRANDMA sends $1,000 for your anniversary present...graduation from college...birth of the baby...or WHAT-EVER gift...YOU WOULD BE SURPRISED WHAT ONE LUMP SUM WILL DO TO THE YEARS LEFT...

 

But you're going to change that real quick by making him an authorized user, right? (assuming it's not the older good closed stuff

Unless you set up a HELOC when you can and leave it untapped for just such a purpose. They are very cheap/free to both set up and maintain. Unless your home value tanks at the same time : (

Let's forget about 10%! Scratch that. Let's say that, conservatively, over the same (long haul) time period as your mortgage you can only count on achieving the exact same return on investment you would have as when paying down on principal at the 4% interest rate (considering interest paid on your primary residence is tax deductible).

The return on investment being equal, let's focus on the fact that "if you can get it in a tax deferred account, you're building wealth."

What would YOU rather be doing, investing $77 or $100 per month at 4%?

Anyone care to calculate the difference between $100 per month at 4% and $77 extra principal payment each month over however long it would take to pay off a $100,000 mortgage @ 4% paying $77 extra principal each month?

Edit: Anyone care to do the same calculation with employer contribution matching?

How about those interest only payment loans? LOL

 

All my "old good stuff" is closed. I had a paid off mortgage, paid off car, several small personal loans, almost all of these from the same bank I did business with when I lived in the midwest. (and I'm cleaning up HIS credit first. He will probably add me as AU when he get's his first non-sub-prime card - and by the way we have no credit cards at all right now and aren't planning on even trying for one until after the mortgage)

I would like to hear more about these HELOCs. I'm assuming it's an home equity line of credit. Never set one up before though.

and you didn't mention this, but you can also pay a little extra for mortgage insurance so that the mortgage is paid in event of disability or death, so I really don't think those things ought to be an issue either.

One thing I DO believe in is having insurance.

 

I said "How about those interest only payment loans? LOL"

I said that because interest rate on those, though variable, is less then 4% so considering tax deduction it's what? ...2%? 3%? Can we do better than that in our 401K over the "long haul"?

You can allways make extra principal payments on those too.

 

Re: Re: This is highway robbery!!!

Well that's where I live and do business as a REALTOR®. So please come here as soon as possible and don't worry about interest rate. Life is too short. Enjoy it !!!

 

Re: Re: This is highway robbery!!!

I feel so embarrassed now. Talking all this.... and I can't even deduct 33 form 100.

Make that $67 vs. $100.

I'm going to have to start making as extensive use of a calculator as I do of http://www.spellonline.com

 

Re: Re: This is highway robbery!!!

They are basically like a credit card with a check book. During the draw period of typically 5-15 years you draw as much as you want when you want and pay interest on the balance you carry. Most I'd say are interest only, some offer both options (PENFED.COM) and some require principal payment (BankOne). Then you either have a balloon (PENFED.COM) or more commonly a repayment period of 10-20 years.

They cost anywhere from say $33 to $500 or so + any specific state taxes to set up, with a notable exception of PENFED.COM who won't charge you for state taxes, but do require a $350 (or $400?) walk in appraisal if you don't want it based on your tax value. $50-$75 yearly fee is common though some don't charge it and some wave it if you carry a certain yearly average balance (Wells Fargo $20,000+). Rates are variable, tied to prime and generally range from prime -.05% @ up to 90% LTV or prime + .875% @100% LTV to 7%, though some lenders, like Wells Fargo Financial, will try to get 9+ even if your score is prime.

There are those that offer 3(BofA), 8(Wells Fargo) and even unlimited (BankOne) number of conversions to fixed rate during the draw period for a $50 fee each.

Only two that I know of offer stated income HELOCs. quickenloans.com do stated up to 80% @640 90%@660 and eloan.com who I believe offer stated HELOCs from 620 though their rates are higher than quickenloan.com. Some lenders "don't check at all unless score is low and/or amount is high"

Most will do electronic appraisal such as
http://www.bankofamerica.com/loansandhomes/index.cfm?template=hc_home_worth

They also reportedly "DONT have rules such as increasing your APR if you dont pay your CC bills on time."

This was a summary of what I found out from fatwallet and through my own research. For a wealth of information on HELOCs do a search for HELOC in the title in the finance forum (direct link doesn't work):

http://www.fatwallet.com/forums/search.cfm

 

I am amazed you did know this after 650 posts and searches on here. Loan shark rates, highway robbery on 7.5%? Not really

SouthParkDiva I remember the day I realized this also, I was 18. We all learn about different things at different ages I guess. My problem was I didn't follow through knowing this.

 

A very interesting point, but:

(1) Inheritance of financial debts isn't the norm;

(2) I doubt if God would need to borrow a dollar;

(3) I'm sure that Mary's financial resources exceed $452 million by now.

 

SoParkDiva,

Thanks. Our payment is $1240 a month and we're kicking in an extra $1700. That should do some damage. Florida huh? I was thinking more of a third world country, lol. Course to some, Florida IS a third world country.

Rhondak,

Sounds very similar indeed. We have a couple of possibilities on inheritance, but like you, we are not including that in any of our calculations. If it (or they) happen, then so much the better. Up until we re-fied in January, we were in the 800 club with Transunion and Experian, and in the low 700 club with Equifax, who had 2 faulty items (paid collection and an unpaid collection which is why I learned about this site) that are now gone. While we use a credit card, we pay it off every month (earning airline miles). My contract is going to be extended for another 9 months, so we'll stay on top, as long as I stay healthy. I bicycle to work which keeps me in shape but we have some crazy motorists here in CA so you never know.

We were considering some financial planning. I'm very thankful we did not go forward with it. It was in the summer of 2001, just before 9/11. We would have lost our shirt.

And with the way terrorism is, it could happen again. I'm just not prepared to take that kind of risk.

GEORGE,

Right on. Even $100 would work somewhat, especially at the beginning of the loan. We're actually hopeful that by the end of this year, the loan with be back to what it was when we first re-fied back in 89.

Platinum,

A Realtor in FL. Oh No!! I'm contracting with the State of Calif, Department of Real Estate doing software development for them. I hope the realtors in Florida are better than the ones we have out here.

Been to Florida a number of times (in fact we lived near Montgomery Ala for a while). Not sure that that would be high on my places to move it. Never got used to the june bugs or hurricanes or the roaches or the...well you get the picture.

 

Re: Re: This is highway robbery!!!

SoParkDiva,

I stand corrected. Most of my experience is from the panhandle.

But not all hurricanes come off the Atlantic. While we were living in Ala, one came up the gulf, headed toward Mobile, which was where I was trying to do some work that week, and ended up taking out Panama City big time. This was back in '75 and I really haven't kept up with the 'canes since then.

Course, I guess I shouldn't be talking. Living here in Calif, we have earthquakes every other day with people dropping into crevices just about that often. In fact I think SF is on the schedule for tomorrow.

As to the roaches, the ones we saw were as big as a cat. You must be referring to some pretty mean ones (cats that is) down in Clearwater.

Actually, we were down in the St. Pete area in 75. To be honest, I really don't remember much about the area. But if you state it's wonderful, then it must be.

 

Re: Re: Re: This is highway robbery!!!

SoParkDiva & RichC,

You guys are funny and right and wrong both of you. I had some good laugh this morning.

Why you are both right and wrong ???

SoParkDiva,

It's not so perfect here as you described. We get hurricanes and roaches but we are surviving.


RichC,


I never saw the roach as big as cat. Are you sure you were not drinking when you saw it.