Liquid Assets and Expensive Car Purchase

[_Snake_]

I found out my inheritance is a little less than expected ($215k not $250k) and it will not over my mortgage payoff. I don't think it would be very wise to drain my existing savings account to cover the difference, but I'm open to discussion.

As amazing as it would feel to not have a mortgage anymore, and live 100% debt free, I think realistically, I'll throw a large sum ($100k) at the principle, which will greatly increase my equality and refinance to drop my monthly payment, put another $100k in investments and use the remainder on a toy.

I always appreciate everyone's advise. One of the many things I love about SVTP is the wealth knowledge in virtually every facet of life from its members.

Couple of thoughts....

1. Don’t deplete your savings. Keep 3-6 months of take home income readily available for emergencies. Use anything you save past that (after investing) for toys and vacations.

2. Check to see how much it will cost to refinance and if you’ll save money over the life of your mortgage (compare your current loan to the refinance).

Sounds like you have a good plan though.

 

[Ghoust]

I would buy a car that I can enjoy and be able to maintain without too much hassle and money. My decision of sticking with Mustangs has always been around practicality. I want to be able to do most of the general maintenance stuff myself and if parts break, they are usually a couple of hundred dollars to replace.

I also don’t look at cars as an investment. If I am buying a car, I am driving it as intended otherwise, there are way better things to do with money.

Ultimately, your grandma willed you her money so that you can live a more comfortable life. So don’t create unnecessary risk by getting a car that will end up costing you lots of money in the long run.

Buy your toy and invest the rest.


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[Steve@TF]

muscle/pro touring cars are just as bad as any other car. unless you're buying one already built off some guy who really needs cash. if you build your own, you'll dump a bunch of $ into to make it good. and if/when you go to sell, you'll recoup a small portion of what you have into it. at least with the new cars you can pull off the go fast parts and sell them separately.

unless you plan to buy a muscle car and drive it as is. but i doubt many here would want to do that lol.

my vote goes to a C6Z and invest the rest. i say invest in property if you can. depending on your area. heck, buy an apartment building if you can. or fixer uppers and put your construction knowledge/connections to good use. let your money work for you. as long as youre not buying while the market is high...

or pay off the house as suggested. or maybe throw a huge chunk at it to shave off a ton of interest, while still keeping the mortgage. and look into which is more beneficial? writing off the interest or not paying interest on the balance?

 

[96 cobra]

I'll throw a large sum ($100k) at the principle, which will greatly increase my equality and refinance to drop my monthly payment, put another $100k in investments and use the remainder on a toy.

Just make sure to be abundantly clear to the mortgage company your $100k is to ONLY be applied to the principal, otherwise they would love to put the vast majority of it towards future interest, and a tiny portion to paying down the actual principal...

 

[Logan2003Cobra]

Invest it all (most mutual funds through Fidelity return greater than 10%) and finance what your budget can afford.

 

[nickf2005]

I found out my inheritance is a little less than expected ($215k not $250k) and it will not over my mortgage payoff. I don't think it would be very wise to drain my existing savings account to cover the difference, but I'm open to discussion.

As amazing as it would feel to not have a mortgage anymore, and live 100% debt free, I think realistically, I'll throw a large sum ($100k) at the principle, which will greatly increase my equality and refinance to drop my monthly payment, put another $100k in investments and use the remainder on a toy.

I always appreciate everyone's advise. One of the many things I love about SVTP is the wealth knowledge in virtually every facet of life from its members.

You just contradicted yourself here. First you say that it can't pay off your mortgage, but then say you live 100% debt free. Sorry, not possible. Even though a mortgage is looked upon as "good" debt, it's still debt. You owe somebody for the money they lent you.

I'm not saying you shouldn't have a little fun with the new found funds. However, I think the growing consensus here is to get that mortgage gone. Make sure your savings is padded with AT LEAST 6 months expenses, if not 12. Make a big principal payment on your mortgage. Maybe step down the car purchase something cheap yet fun for the moment. Get the mortgage paid off over the next few years, then take your mortgage payment and start socking it away. 5-6 years from now your sitting with no car payment on a Vette and no mortgage. Now, that's 100% debt free living.

 

[Dr. Gonzo]

Where is the contradiction in this statement?

As amazing as it would feel to not have a mortgage anymore, and live 100% debt free, I think realistically, I'll throw a large sum ($100k) at the principle

 

[nickf2005]

Where is the contradiction in this statement?

I hadn't drank my coffee yet and I read it wrong. My fault.

 

[Dr. Gonzo]

It's all good

 

[ON D BIT]

I found out my inheritance is a little less than expected ($215k not $250k) and it will not over my mortgage payoff. I don't think it would be very wise to drain my existing savings account to cover the difference, but I'm open to discussion.

As amazing as it would feel to not have a mortgage anymore, and live 100% debt free, I think realistically, I'll throw a large sum ($100k) at the principle, which will greatly increase my equality and refinance to drop my monthly payment, put another $100k in investments and use the remainder on a toy.

I always appreciate everyone's advise. One of the many things I love about SVTP is the wealth knowledge in virtually every facet of life from its members.

Make it a 10 or 15 year mortgage. It will save a ton on interest like 60%.
100k on your mortgage another 50k in savings and now you have 50-70k to enjoy life with.

Don't drop your mortgage payment. If you can find a fixed ten year rate, close 3% fixed thats insane.
250k 30 year at 4.5% fixed, 1200 a month is 450k+ total
150k 10 year at 3% fixed, 1400 a month is less than 175k total.

Only 25k in interest on a home mortgage!
Then you take the other 175k in interest your not paying the banks and you collect interest on that through investments. Set for life!

 

[mike99]

Paying off your mortgage is not bad advice but it may not be the best advice for everyone. In my case, I have a mortgage that is less than 3% and the interest is tax deductible. My equity is around 75% versus the loan amount because I bought in a good neighbor hood and spent a lot of my time and money fixing up the property. With that ratio, it was easy to get a HELOC at less than 3% which I used for cars, kids college, etc... and its tax deductible. I'm making 15% on investments and 401K funds and my house value is going up 5-10% a year. No interest in paying off my home loan early to save an effective interest payment of around 2%. My home interest deduction comes off the top of my gross income which mean it reduces the tax payment at the higher tax rate. This is just my situation and it does not apply to everyone.

 

[ricardoa1]

Show me how a mortgage is completely tax deductible, when you do your taxes show me how much of that interest is coming back, this is misinformation and a way for ppl to hold on to mtgs with the idea you get it back, it’s nominal. Paying off the house allows you to have cash flow I know most ppl are not disciplined enough to stay in a budget but invest the amount of mtg payment, you now freed off and call me in 10 years. You would have been better off. But I understand most ppl need the structural payments and schedule to be in a budget. But having the choice I’m all set turning a 250,000 Ioan into 250,000 in interest at the end of 30 years. Leave leaveraging to invest to sophisticated investors and even they get it wrong during market downturns.


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[mike99]

The INTEREST you pay on your home loan is a deduction if you do the long form (not the short form with the standard deduction). This is widely known and in fact is frequently talked about because left wing politicians are always trying to take it away. That and charitable donations are the only two common deductions left.
Like I said, paying off your mortgage may be best for one person but not another. General "one size fits all" statements are rarely correct. You can figure it for yourself or can also visit a reputable financial advisor for advice. Just trying to pass along some advice - take it or leave it : )

 

[ricardoa1]

Thanks Mike Im well aware and while just wanted elaborate on the fact on it’s not a great amount if you look at the numbers in the grand scheme.


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[ricardoa1]

http://www.investopedia.com/article...e/11/calculate-the-mortgage-interest-math.asp


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[mike99]

No problem ricardoa1! I live in "Silicon Valley" and lots of home owners here have loans above a million dollars! Its nuts, I know... The interest paid and reported on form 1098 is often over 50K. There are 7 tax brackets with the top 2 rates being 35% and 39.6%. Using 35% of 50K means saving 17.5K in taxes. These folks usually have lots of money in their company stock which is what they rely on and what drove up home prices.
And as a correction, there is one more deduction (this time the right is trying to take it away) that may get taken away. Deducting state taxes on your federal return. This one screws CA and NY the most!

 

[ricardoa1]

I live in MA so property taxes have sky rocketed, industrials, tech and health care are booming. Fundamentals don’t make sense right now but still owning a home outright has huge benefits, and if you were to invest the potential payment. Monthly average cost basis helps you during down times. But the market is bull so leveraging with the mortgage seems logical to some. But the average not so much.


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[ON D BIT]

No problem ricardoa1! I live in "Silicon Valley" and lots of home owners here have loans above a million dollars! Its nuts, I know... The interest paid and reported on form 1098 is often over 50K. There are 7 tax brackets with the top 2 rates being 35% and 39.6%. Using 35% of 50K means saving 17.5K in taxes. These folks usually have lots of money in their company stock which is what they rely on and what drove up home prices.
And as a correction, there is one more deduction (this time the right is trying to take it away) that may get taken away. Deducting state taxes on your federal return. This one screws CA and NY the most!

I would rather have a paid off house and the money that would have been used for interest in Google and Apple than trying to collect a tax write off. But that's just me.

 

[Blackness03]

If I walked into 250k, i'd pay off any debt and invest the rest. If I wanted a car i'd buy a foxbody roller and put a coyote in it.

 

[blk02edge]

The smartest guys I know, including the one who owned a purple mustang GT in 1998 and now owns his second Noble, after moving through corvettes, several Vipers, Porsche GT3s and several Ferrari's, don't get burdened by debt. They buy good cars opportunistically, drive the piss out of them for a relatively short while, and sell them while they're still gaining value. They move the profits into better/more valuable cars. They make good livings but aren't Google-rich. In the early days when they can't afford super-cars, they're saving money while enjoying their cars, so they can trade up a level, every single time. 20 years later they're driving Ferrari's. Buy low, sell high, bing bang boom.

I know a couple dudes exactly like this as Well, I just wonder when the investment car thing will crash, when I look at the new gen of kids I see interest in cars dying hard. I'm the 2nd youngest member at our private race track at 28 years old lol, hardly any young people involved anymore