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Old 07-22-2012, 08:17 PM   #99
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Very well said.

With freedom comes choice and with choice comes responsibility...
and consequences.

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Old 07-22-2012, 11:00 PM   #100
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It does now for those folks in Florida who lost 40% of the value of their house and are now $200,000 underwater on their house they bought with 3% down. Lots of very stupid decisions made before the housing bubble burst of 2006.

Bought the end of '08 with 20% First time home buyer program that never needs to be paid back as long as we live here for 15 years or sell to somebody else that qualifies (but its not likely to find somebody who will jump through as many hoops as we did).

Even though their homes may have lost their value for right now, that shouldn't affect them unless they were expecting to refinance or sell within this period of time... otherwise just hold out and the market will come back & then some.
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Old 07-23-2012, 01:08 AM   #101
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Our IRA, and other investments are managed by the largest brokerage firm in the country. Over the last couple of years we have exceeded 6.5% growth (going back a few years we did a lot better than that).

Our MH interest rate is 4.5% at the Credit Union

Altho we could pay cash for the MH WHY??


PHESPE


Why? Your "6.5%" return in your portfolio is taxable (sans IRA). Probably means a true return of around 4% net (but how much do you pay the money manager?). Your camper's interest rate of 4.5% is paid with after tax dollars. That means if you have a $1,000/month payment, you had to make $1,400 or so before tax... That might be offset by $200-300 in tax "savings".

Real dollars in and real dollars out; it's real tough to make a good argument to finance an RV, boat, car, etc...
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Old 07-23-2012, 10:31 AM   #102
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For what it's worth, the MH interest is pre-tax as well, since it's deductible (as long as certain conditions are met) as a second home.
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Old 07-23-2012, 10:40 AM   #103
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And then whoever buys it used gets to pay tax on it as well which doesn't seem right to me.
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Old 07-23-2012, 11:10 AM   #104
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$400,000.00 at 6% for 180 months equal $607,577.40

Not for me.

Dick
I unserstand this is an over simplification, but did I calculate this right?

$400k in the bank earning 5% over 180 months = $831,571.27
$400k amortized @ 6% over 180 months = $607,577.40 (your number)

So, taking my $400K out of the 5% investment account to pay cash for the motor home flushes $233,993.87 down the toilet over 15 years.
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Old 07-23-2012, 11:20 AM   #105
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I unserstand this is an over simplification, but did I calculate this right?

$400k in the bank earning 5% over 180 months = $831,571.27
$400k amortized @ 6% over 180 months = $607,577.40 (your number)

So, taking my $400K out of the 5% investment account to pay cash for the motor home flushes $233,993.87 down the toilet over 15 years.
On the "cash" option, it all depends what one does with the cash flow that would have been used to service the mortgage. If it's reinvested at 5% over the 180 months to rebuild the cash account, you'd have to look at the value of that investment at the end of the period to make a complete assessment. IOW, you'd be paying yourself instead of the bank for use of the money.

Conversely, if one were going to service the mortgage with earnings (and principal as needed) from the $400K 5% investment account, then it wouldn't be worth $831,531.27 at the end of 180 months, right?

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Old 07-23-2012, 12:02 PM   #106
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On the "cash" option, it all depends what one does with the cash flow that would have been used to service the mortgage. If it's reinvested at 5% over the 180 months, you'd have to look at the value of that investment at the end of the period to make a complete assessment.

Rusty
So, the annual payment on the amortized amount is $40,505.16. If I were to start with $400k, and add that to the investment account over the 15 years, the final value of that account is $1,749,316.60

Even if I start with $0 and add the $40.5k annually for 15 years, I'd still end up with $917,745.33.

In fact, to service a 15 year mortgage on $400k at 6%, payments will be $3,375.43/mo. If I pay myself that same payment into a 5% investment account, I only have to pay for 8 years to earn $406k.

So, make the monthly payment to the bank on a 400k coach, and pay 607k for it, or make the SAME monthly payment to MYSELF, and pay $324k for it?
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Old 07-23-2012, 12:15 PM   #107
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Old 07-23-2012, 12:46 PM   #108
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We pay cash for everything. I do not want to be in debt. Life has a different feeling for me when I owe no one. We are fans of Dave Ramsey who says, "The borrower is slave to the lender." I know there are those of you out there who manage your debt fine and probably won't get into financial trouble, but I just breathe easier knowing what I have I own. What we have may not be the best or most expensive, but it's ours.
Dave Ramsey? There is lots on that in the good book written long ago:
What Does the Bible Say About Borrowing Money?

Quoted: Proverbs 22:7
The rich rule over the poor, and the borrower is servant to the lender.
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Old 07-23-2012, 02:49 PM   #109
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Y'all really do get in a pi$$ing match on some of these threads. I thought Rving was supposed to be fun????
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Old 07-23-2012, 02:57 PM   #110
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Old 07-23-2012, 04:53 PM   #111
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Ideally, you would withdraw the money from the Acct monthly to make the payments. You would still be earning money every month on the moony that remained in the account. At the end of the term you would have money left over. I have no idea how much, and I am now in the hospital on drugs, and am in no condition to figure it out. A long time ago I wrote a program to show the comparison, and now I am brain dead.
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Old 07-23-2012, 05:15 PM   #112
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Ideally, you would withdraw the money from the Acct monthly to make the payments. You would still be earning money every month on the moony that remained in the account. At the end of the term you would have money left over. I have no idea how much, and I am now in the hospital on drugs, and am in no condition to figure it out. A long time ago I wrote a program to show the comparison, and now I am brain dead.
Well, yes, in this scenario if you are investing at a 6% return and are paying 5% and you are paying the loan out of the investment account you would have 1% per year on a decreasing balance. Not a lot.
My point is the 5% you're garanteed to pay, the 6% return on investment is what I have a problem with.
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