What is your house value/current unpaid principal?
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Anonymous
|
310k
225K |
Anonymous
|
Here: $850K/$$550K
Beach: $450K/$350K Both at 3.5% fixed. Free money. |
Anonymous
|
$325K
$94K |
Anonymous
|
775K
400K |
Anonymous
|
$625k
owe $400k I'm happy. |
Anonymous
|
$450k
$365k We've been in the house just under 4 years. |
Anonymous
Can you please explain your thinking here, because I don't understand your math. I totally get that interest rates are very low right now, not to mention the home mortgage interest deduction, and so it may make lots of sense to invest your income rather than aggressively paying down your mortgage (depending on your risk tolerance of course). I also get that if you can buy and rent out the property, that might be great ROI (but it's highly dependent on the specific situation). But here's where your logic confuses me: You seem to be suggesting that because interest rates are low, it's smart to load up on extra houses and mortgages, as if that's improving your financial picture. That doesn't make sense to me ... or perhaps I'm not understanding you. Take your 2nd house, for example. If you had $380k in your bank account (the amount of equity in your house #2), why do you think it's better to invest that money in house #2, rather than just put it in the market? By investing $380k in house #2, you're earning just 3% appreciation per year, and you're paying interest on the mortgage amount ($195k in your case). But if you invest that same $380k into the market, you're likely earning 5% or more. So why buy property with that money; why not invest in the market instead? It seems like you're taking on a lower ROI option, simply because it's a good borrowing opportunity. Indeed, unless you're getting rental income from house #2 (or perhaps hedonistic benefit from holding it as a vacation house), it seems you'd be better off selling it to free up more cash to invest in the market. You claim that as an 8% net return on house #2, but I don't get your math there. I understand you are claiming 3% for the home appreciation, but where do you gain the other 5%? Is that supposed to me a return from investing in the market? If so, I don't think you can claim that extra 5% return on top of the equity you invested in the house, because that house equity is not in the market. For money you invest in the market rather than into house equity, you can get a return of the market ROI (~5%) minus the interest you're paying on the mortgage (~4% before accounting for the home interest mortgage deduction, but likely ~3% after HMID). So in the end, you're definitely better off (by about 2%) to invest your monthly excess income into the market rather than into extra mortgage payments. However, I don't see how taking out additional mortgage (or more mortgage than you need) is a smart move. It seems you're better off buying just the house you need, and putting more money into the market. And as an aside, your property value appreciation figure is debatable, because many experts suggest home value stays at effectively 0% appreciation, if you take into account taxes, interest on the mortgage, maintenance, etc. Another thought: I totally get your point if you can somehow extract money from your home equity, and instead invest it in the market. For example, if you could open a HELOC at a favorable rate, and then simply write yourself a check for $100,000 to generate cash which you could invest in equities, that makes total sense to me. Perhaps I've totally misunderstood your logic. If so, please forgive me, and please make me smarter on how to squeeze more value out of my mortgage! TIA. |
Anonymous
| $670k and $200k. We could pay it off, but no reason to when we're down to mostly principle. |
Anonymous
|
$1.5 million
$950K |
Anonymous
|
Home 1: 550k, owe 159k
Home 2: 475k, owe 44k (rent exceeds mortgage) Home 3: 495k, owe 200k (rent equals mortgage) Home 4: 550k, owe 100k (rent exceeds mortgage) Home 5: 1,200,000, owe 550k |
Anonymous
| I'm fucking poor |
Anonymous
|
Main house:
$1,200,000 $275,000 Rental condo: $350,000 $0 |
Anonymous
|
$0
$0 |
Anonymous
| 750, 550. |
Anonymous
|
House value depends on what I can get a sucker I mean buyer to pay.
Zero owed. |