Finance Question

[coposrv]

Why not a nice chunk down and 15 years instead of 30? You’d save a ton on interests.

Because Money now is worth more than money in years 20-30 of the loan.


Sent from my iPhone using the svtperformance.com mobile app

 

[coposrv]

I just bought a property down in FL. I went conventional with 25% down and a 15 year loan at 3%. Its 2 apartments and I’m converting a detached garage into another apartment. One is already rented and my wife is living the other one. I’ll buy a house using a VA loan before retirement in 6 months and use those 3 apartments as passive income. I’m planning on paying them off a lot sooner than 15. Considering how high property insurance is in FL, I’ll have the option to drop it.

Lol rentals and passive income. Yeah. Right.


Sent from my iPhone using the svtperformance.com mobile app

 

[PIPO]

Lol rentals and passive income. Yeah. Right.

They have been for me for the past 10 years.

 

[nxhappy]

They have been for me for the past 10 years.

I don't understand his logic on real estate ....

 

[Kevins89notch]

I'm not a financial adviser, I would have thought about going 20% down and getting the house paid off ASAP, but I'm really looking at the numbers and having a hard time justifying it. I suppose one hand is full security with a half full glass. The other is a full glass with some risk associated. I cant see the stock market tanking for 30 years, but you never know.

Just a though. Putting 0 down means you have more money if the housing market tanks. Then you use that money to grab yet another house.

 

[ON D BIT]

Just a though. Putting 0 down means you have more money if the housing market tanks. Then you use that money to grab yet another house.

No it does not. It means you pay when you sell the house.

 

[Kevins89notch]

No it does not. It means you pay when you sell the house.

I mean 0% down, on said house vs putting down 150K (just making up a number). Market tanks in 3 years, it's still a good rental, but you have that 150K free now to buy a second house to use as a rental.

 

[Iamchris]

It's hard to build wealth having debt...

I would put down as much as I could on the conventional loan at a 15-20 year note and then bang out the mortgage as fast as possible, all while investing 15% of my income.

Your opinion on what to do is appreciated, but I disagree with your first statement. It depends entirely on the type of debt. For arguments sake, if I took a loan from you at 3% and lend it to my friend at 10%, who is making more money, me or you?
Investments make you the lender. There is risk of course.
The point of the question here was not if it is profitable to invest, or if risk is tolerable, but if I the numbers were making sense in this particular scenario.

 

[Iamchris]

Agreed that money today is worth more than money tomorrow, damn website didnt include the quote.

 

[ON D BIT]

I mean 0% down, on said house vs putting down 150K (just making up a number). Market tanks in 3 years, it's still a good rental, but you have that 150K free now to buy a second house to use as a rental.

Let use your number $150k as a 20% down payment on $750k house. You hold on and instead put 0 down.
The market drops 20% know you owe about $750k on a house worth $600k.
But you still have that $150k.
What bank will put up a second mortgage when you are $150k upside down in your first loan?

If you can find a house for $150k to pay in full on a second house you are correct you could do this.

 

[nxhappy]

Your opinion on what to do is appreciated, but I disagree with your first statement. It depends entirely on the type of debt. For arguments sake, if I took a loan from you at 3% and lend it to my friend at 10%, who is making more money, me or you?
Investments make you the lender. There is risk of course.
The point of the question here was not if it is profitable to invest, or if risk is tolerable, but if I the numbers were making sense in this particular scenario.

look at the dow jones market brother. we have gone from 10,000 in 2010 to almost 30,000. SOOO much money to make if you just hold on. Housing might only put out 3-7% return. The stock market can put out so much more. If you stick with 5% down on a VA loan, that gives you way more money to play with. If the house value drops, that is ok b/c long term you will make money no matter what (housing will always be short and human race will always grow).

 

[coposrv]

look at the dow jones market brother. we have gone from 10,000 in 2010 to almost 30,000. SOOO much money to make if you just hold on. Housing might only put out 3-7% return. The stock market can put out so much more. If you stick with 5% down on a VA loan, that gives you way more money to play with. If the house value drops, that is ok b/c long term you will make money no matter what (housing will always be short and human race will always grow).

Oh dear god I think we may agree on something here.


Sent from my iPhone using the svtperformance.com mobile app

 

[nxhappy]

Oh dear god I think we may agree on something here.


Sent from my iPhone using the svtperformance.com mobile app

borat voice : very nice

 

[ford fanatic]

Your opinion on what to do is appreciated, but I disagree with your first statement. It depends entirely on the type of debt. For arguments sake, if I took a loan from you at 3% and lend it to my friend at 10%, who is making more money, me or you?
Investments make you the lender. There is risk of course.
The point of the question here was not if it is profitable to invest, or if risk is tolerable, but if I the numbers were making sense in this particular scenario.

I get your argument, I've heard it many times before. I do get how it's hard to prove my point when the market is as hot as it is. When it tanks and you're left with debt and your portfolio is in the negative, you'll see. As you said, it's all about risk. Good luck...

 

[ON D BIT]

look at the dow jones market brother. we have gone from 10,000 in 2010 to almost 30,000. SOOO much money to make if you just hold on. Housing might only put out 3-7% return. The stock market can put out so much more. If you stick with 5% down on a VA loan, that gives you way more money to play with. If the house value drops, that is ok b/c long term you will make money no matter what (housing will always be short and human race will always grow).

Would you borrow $500k just so you could invest in the market?

 

[ford fanatic]

Would you borrow $500k just so you could invest in the market?

I love to see people back pedal when you ask them that question. Obviously you wouldn't, but the way they think, you never know...

 

[RunninHorse]

As far as interest paid, the 0% down loan is 193k, the 20% down loan is 154K.

Are you sure about those interest calculations? I ran it through USAA's calculator. 348k mortage, 30 years, and assumes 3.25% fixed interest rate.

• 0% down - $1,514 monthly payment - $545,227 total payments - $197,227 interest paid
• 20% down - $1,211 monthly payment - $436,179 total payments - $88,179 interest paid

The right thing to do really depends on you. If you're going to sell the house before it's paid off, then don't put a lot down. If putting 20% down exhausts your savings and/or emergency fund, then put less down.

In general it's better to pay down debt that will cost you more interest, than it is to invest/hold that money where it would earn you less interest.

We're planning to stay where we're at, so we chose to put 20% down and we're making extra monthly payments. We'll have our 30 year mortgage paid off in less than 15 years total and that's going to save us a lot of money on interest.

You're a veteran, so maybe see what USAA's financial advisers recommend. Don't take my advice. I think it's a good idea to dump a bunch of money into cars and sell them at a loss. lol

 

[Iamchris]

Are you sure about those interest calculations? I ran it through USAA's calculator. 348k mortage, 30 years, and assumes 3.25% fixed interest rate.

• 0% down - $1,514 monthly payment - $545,227 total payments - $197,227 interest paid
• 20% down - $1,211 monthly payment - $436,179 total payments - $88,179 interest paid

The right thing to do really depends on you. If you're going to sell the house before it's paid off, then don't put a lot down. If putting 20% down exhausts your savings and/or emergency fund, then put less down.

In general it's better to pay down debt that will cost you more interest, than it is to invest/hold that money where it would earn you less interest.

We're planning to stay where we're at, so we chose to put 20% down and we're making extra monthly payments. We'll have our 30 year mortgage paid off in less than 15 years total and that's going to save us a lot of money on interest.

You're a veteran, so maybe see what USAA's financial advisers recommend. Don't take my advice. I think it's a good idea to dump a bunch of money into cars and sell them at a loss. lol

Our numbers are very similar, you figured for 3.25, I figured for 3.2. I didnt include the total paid in payments and interest in the post, but it is on my spreadsheet. The same money is invested in each scenario (both 0% down, and 20% down), the house ends up paid off after 30 years either way. The difference is the extra money in both scenarios goes to investments, which returns a lo 5%, and the 0% down investment money added up to more in the end.
What I want to crunch next is 15 vs 30, with the expectation that all of the money after the house is paid off is then diverted into an investment account. I have a feeling it will be even worse for the 15yr loan because you lose the time value of money... in other words, you are so busy paying off debt, that you wouldnt be making any savings/interest.

 

[Iamchris]

Would you borrow $500k just so you could invest in the market?

I defer to my earlier statement. If I borrow 10k from you for 10 years and pay you 3% interest on it, then lend that money to my friend at 10% interest, I am the smarter lender. The reason that many people will say no is not because the math doesn't make sense, it is because there is a risk and people are rightly averse to that risk.

 

[ON D BIT]

I defer to my earlier statement. If I borrow 10k from you for 10 years and pay you 3% interest on it, then lend that money to my friend at 10% interest, I am the smarter lender. The reason that many people will say no is not because the math doesn't make sense, it is because there is a risk and people are rightly averse to that risk.

It’s not a math problem. It’s an immaturity and risk problem. Today tell me what bank or anyone will guaranty 10% on a loan?

People are not in debt by $100k plus because of math. Math says you don’t have it you don’t buy it.
To your response hundreds of thousands have lost their homes because they thought they could make the 10% plus on borrowed money and lost.