Les
Well-Known Member
Bill V, what you wrote makes no sense at all...
If you are are paying $1000 a month for your mortgage, and another $500 a month for your Sport Trac loan, and all you can afford is $100 a month to save/invest, you will be saving/investing a hell of a lot less money than you could if you paid off your mortgage and your Sport Trac. If you paid off your debts, you could save $1600 a month-- which is going to give you a hell of a lot more money (net return) than you will get with your saving $100 a month - high RIO scenario you keep talking about.
Maybe we should all get a bunch of credit cards and play the stock market or casinos. You know, if the RIO is better, it all makes sense to go into more debt.
Maybe we should all get a bunch of credit cards and play the stock market or casinos. You know, if the RIO is better, it all makes sense to go into more debt.
TJR, well said throughout. Especially when you consider that if you invest the money and get 10%, rather than paying off the 5% mortgage, not only are you getting a better return, but you also can deduct the mortgage interest on your taxes. If you pay off the debt, you lose out on both the 10% return and the mortgage deduction, and just get 5% return.
Not true. In your example, if you paid off your debts, then the $1600 wouldn't be saving money in the sense of increasing your net value, it would be simply replenishing the assets you previously had, that you had used to retire your debt. Paying off those debts means depleting your other assets--and if those assets are capable of earning more by being invested, than the interests costs they would avoid by being used to retire the debt, you're better off leaving them as investments.
I understand RIO, but my point is that if you are not using a bunch of your income paying debt, you can then use that money to invest. By investing a lot more money, you are going to both save and earn a whole lot more than if you are paying a mortgage.
That's a good point, but a moot point. Several times I tried to reframe, restate, and refocus the argument to the scenario at hand; that being that you have a mortgage, and therefore you already have a pretty large monthly recurring debt; and you are posed with the choice of taking a few extra hundred dollars each month and paying that mortgage down.
In that scenario most can find better investments for that few extra hundred dollars a month.
TJR
How are you going to build wealth if you have a mortgage to pay for?
This thread was about mortage questions. Some said to pay down the mortgage early if there is extra money in an attempt to save money. If mortgage interest rates were around 12% and it was hard to find long-term investments that netted any higher returns, then I would agree. But with easy to find long-term investment returns above 10% and mortgage rates still at decade low 5 and 6% range, that old advice simply isn't that sound.
Bill V, you are NEVER better off having debt. Since I DON"T have a mortgage, and I DON"T owe on my ST, T-Bird, or Harley, then I guess I am missing out on the benefits of being in debt !!! Maybe I need to go get some...debt that is...
This thread was about mortage questions. Some said to pay down the mortgage early if there is extra money in an attempt to save money. If mortgage interest rates were around 12% and it was hard to find long-term investments that netted any higher returns, then I would agree. But with easy to find long-term investment returns above 10% and mortgage rates still at decade low 5 and 6% range, that old advice simply isn't that sound.
The better deal would be for the Tommy to pay off his bike as fast as he can, and then take the money he was using for the bike payment, plus the "extra" 5 cents and make loans to Stevie, Billy, and Georgie.
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