IndyWS6
Well-known member
That’s fucking insane
Geo
Well-known member
What was not considered here yet is if shit really hits the fan and unemployment goes sky high, the banks don't care and they are going to take your house.
So there is risk to having a mortgage on anything during normal times.
So there is risk to having a mortgage on anything during normal times.
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rsm
Well-known member
when the market is paying 3x or more in returns vs my mortgage interest rate, I'll take the market returns.
Have cash to pay it off if needed; and interest on that cash is nearly a wash vs my mortgage interest rate.
As I posted before, a 2026 US dollar will be worth between $0.88 - $0.91 in 2030; future payments on my mortgage are using cheaper dollars.
HELOC interest rates are higher, on average, than SBLOC rates; but you also have the risk of margin calls for maintenance, forced liquidation of assets, etc., i.e., higher risks than HELOCs...but high risks provide greater rewards; as long as you are well prepared for prolonged market downturns. Current interest rates for a $1M SBLOC are between 2.35% to 2.9%, and even lower if your account value is higher vs 7.2% - 7.3% for HELOCs.
If your SBLOC is structured correctly, you're paying off the loan with investment dividend income at long term capital gain rates, or with cash if the market drops below your planned floor forcing a maintenance call - which, again, is covered by cash that's also earning 3.5% or more in interest. Yes, you lose some value to inflation having cash, but that's the cost of its liquidity - and it's a good use for a HELOC vs cash.
IMO
Have cash to pay it off if needed; and interest on that cash is nearly a wash vs my mortgage interest rate.
As I posted before, a 2026 US dollar will be worth between $0.88 - $0.91 in 2030; future payments on my mortgage are using cheaper dollars.
HELOC interest rates are higher, on average, than SBLOC rates; but you also have the risk of margin calls for maintenance, forced liquidation of assets, etc., i.e., higher risks than HELOCs...but high risks provide greater rewards; as long as you are well prepared for prolonged market downturns. Current interest rates for a $1M SBLOC are between 2.35% to 2.9%, and even lower if your account value is higher vs 7.2% - 7.3% for HELOCs.
If your SBLOC is structured correctly, you're paying off the loan with investment dividend income at long term capital gain rates, or with cash if the market drops below your planned floor forcing a maintenance call - which, again, is covered by cash that's also earning 3.5% or more in interest. Yes, you lose some value to inflation having cash, but that's the cost of its liquidity - and it's a good use for a HELOC vs cash.
IMO
rsm
Well-known member
much appreciated; just sharing what I'm learning so we don't have to learn the hard way.I'm going to give you a call on some of this if that's OK?
Thanks for posting this thread. You always have great advice
if a paid off mortgage works for you vs investing the money in the market, that's great; it's not for me...and there are other options that are worth considering vs the "conventional wisdom"
311boogieman
Well-known member
much appreciated; just sharing what I'm learning so we don't have to learn the hard way.
if a paid off mortgage works for you vs investing the money in the market, that's great; it's not for me...and there are other options that are worth considering vs the "conventional wisdom"
I'd rather pay the minimum to the bank and stretch it out as long as I can vs the old days when people raced to pay off a 15yr mortgage. Every $100 I don't give my bank now is $100 more dollars making money in my portfolio.
Geo
Well-known member
That seems to be the preferred approach of finance people but don't forget you start out at a deficit. The money you pay in interest will never come back to you.I'd rather pay the minimum to the bank and stretch it out as long as I can vs the old days when people raced to pay off a 15yr mortgage. Every $100 I don't give my bank now is $100 more dollars making money in my portfolio.
it's nice to give the banks less money and keep more.
rsm
Well-known member
I've mentioned a few times, here and other posts, that I keep cash on the side for several reasons. It doesn't seem to be common, at least not the extent I do it.
So I decided to see if there was info on holding cash vs paying off mortgages, investing it, etc.
I found a few, but this one is very close to what I do, and why; and it explains it well, so even a useless idiot libtard may understand it.
Not financial advice, not recommending it even though I do this; it's just an alternative to consider.
I have the same 3 levels, but I add a 4th level for fun money, so if I see an expensive item I want to buy, it comes out of here without impacting the other cash levels and purpose.
So I decided to see if there was info on holding cash vs paying off mortgages, investing it, etc.
I found a few, but this one is very close to what I do, and why; and it explains it well, so even a useless idiot libtard may understand it.
Not financial advice, not recommending it even though I do this; it's just an alternative to consider.
I have the same 3 levels, but I add a 4th level for fun money, so if I see an expensive item I want to buy, it comes out of here without impacting the other cash levels and purpose.
311boogieman
Well-known member
^ @rsm - I'm going to watch that later this morning for sure.
You are not wrong. Each situation is different. Someone can correct me if I'm wrong here as I am not a financial expert. But if you have a fixed rate interest loan for say 30 years, your initial payments are all going toward interest and not principle. So yes, from that perspective that is the traditional way to look at it. As you move through time the balance of interest and principle changes in the opposite direction. We've been paying on our home the traditional way and for most people that is just fine. We were young, had kids here, and didn't have a lot of disposable income.
What we did do that I recommend to everyone is pay more than your monthly minimum because every dollar you pay over the minimum goes straight to principle. We have been paying $500 more per month ever since we got the house. What that does is shorten the length of the loan and get you to equity quicker. Then you get to a point where the opposite starts to occur, where it makes sense to keep your money in the bank (portfolio) because it can make you more money. There is a graph I've seen that shows this visually - I will try to find it.
You are not wrong. Each situation is different. Someone can correct me if I'm wrong here as I am not a financial expert. But if you have a fixed rate interest loan for say 30 years, your initial payments are all going toward interest and not principle. So yes, from that perspective that is the traditional way to look at it. As you move through time the balance of interest and principle changes in the opposite direction. We've been paying on our home the traditional way and for most people that is just fine. We were young, had kids here, and didn't have a lot of disposable income.
What we did do that I recommend to everyone is pay more than your monthly minimum because every dollar you pay over the minimum goes straight to principle. We have been paying $500 more per month ever since we got the house. What that does is shorten the length of the loan and get you to equity quicker. Then you get to a point where the opposite starts to occur, where it makes sense to keep your money in the bank (portfolio) because it can make you more money. There is a graph I've seen that shows this visually - I will try to find it.
Geo
Well-known member
The major thing for me when I was 26 and paid off my moms mortgage was freedom.
No matter what happened I was able to keep the family housed inexpensively. No job, no problem, I can push carts around at Shoprite if I had to.
This led to me taking a risk, telling my slave driving employer to get bent and I wound up at a job that I liked and doubled my salary.
A mortgage is a way to trap you, force you to show up everyday at a job you hate, that's the way I look at it.
Stumplegriltskin
Well-known member
When my 600k house is ready to sell, guarantee the housing market will crash. Pro Tip guys, you aren't going to win against the system.
Geo
Well-known member
Prices always go up and down. When you are ready to sell, the house you want to buy is going to be less expensive as well.
If you are speculating, do it without selling your house.
