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9/3/2016 7:38 AM

Hey guys, this looks like my 1st post but I've been a member for a few years now, never posted much though. I think my old username got nuked in a political thread or something because I haven't been able to login in a while.

I got a question that maybe someone has some experience with. I'm refinancing my house to get a lower interest rate. I owe 55k on the house and want to take 10k out cash to pay off some loans. According to Zillow my house is probably worth round 240k. I want to use my local credit union and they did get me an interest rate the I'm happy with. My problem is that Its gonna cost 3k in closing and 600 for a dang appraisal. I'd hate to add that to the debt pile for such a small loan. I'd get it if I was refinancing 200k. Is there a way around closing costs for a low mortgage amount?

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9/3/2016 10:27 AM
Edited Date/Time: 9/3/2016 10:28 AM

How many years are left on your loan and what is the current interest rate? New rate?

If you are down to $55,000.00, how much is your monthly interest at this point? How much could you possibly save per month by lowering your interest rate and adding $13,600.00 to your loan?

These other loans you speak of, how many and how much are each of them and what are their rates? Pay off the lowest one and then add that amount to double up on paying off the next one. Pay them off and then use some of that money to add to your monthly note to reduce the principle.

http://www.mortgagecalculator.org/

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9/3/2016 2:27 PM

Never get a loan to pay off a loan. Like Newman says pay off the small debt then continue to pay off the next smaller debt but doubling the payment because you already payed off the smaller one. so-on-so-forth. (Debt Snowball)

Pretty soon you'll be out of debt, beleive me it goes a lot quicker than you think. Just don't make anymore debt and pay off what you have.
Then take that money each month and put it into a savings and keep adding to it each month as if you were paying on debt then you can pay cash for whatever you want instead of having to pay interest, a lot cheaper that way.

Took this class about Ten years ago It changed my life

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9/3/2016 8:23 PM

Thanks for the help guys. With the reduction in interest rate it'll be even less of a monthly payment than I'm paying even with the cash out. So I'll be saving a few hundred per month which right now would be niiice. I'm just frustrated I gotta pay 3k for a loan amount that is the same as financing a BMW. I was just wondering if someone else has found a way around the closing cost that was ligit, not some mafia connection.

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9/3/2016 10:35 PM

Newmann?

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9/4/2016 6:05 AM

laughing I am getting the curvy body the older I get.
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9/4/2016 7:16 AM

factoryfatty wrote:

Thanks for the help guys. With the reduction in interest rate it'll be even less of a monthly payment than I'm paying even with the cash out. So I'll be saving a few hundred per month which right now would be niiice. I'm just frustrated I gotta pay 3k for a loan amount that is the same as financing a BMW. I was just wondering if someone else has found a way around the closing cost that was ligit, not some mafia connection.

What sort of difference in term are you looking at?

Seeing it strictly through the perspective of the payment is a short term view, usually. As has been mentioned, it's not normally a very good idea to take out a loan to pay off a loan. There are a few exceptions to that, of course, but it's a good rule to follow. Attaching what I'm assuming to be unsecured debts to your home loan compounds some of those worries. Especially if you lengthen the term to lower your payment.

I'd suggest listening to the Ramsey fans, start doing the "snowball" strategy, and even get a part time side job for a few hours a week if need be to pay off your debts. I'd resist adding debt to your home if there is any way possible to do so.

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9/4/2016 6:47 PM

My Tits have been getting bigger the older I getblink

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9/4/2016 7:31 PM

We really didn't have to know that. unsure

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www.alljackedupinc.com home of the Switch Hauler, the only modular hauling system www.sprocketstuff.com home of the Counter Sprocket Tool

9/5/2016 9:27 AM

Good one Joe! Nice to see somebody else into self deprecating humor.

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"My philosophy is to have a really good time and never to let anything stop me from doing what I want to do.

Michel Petrucciani

9/5/2016 9:05 PM

Also a huge fan of Dave Ramsey. I started listening to his radio show years ago, bought one of his books, and have been so much better for it ever since. I would hope than all of the younger people on Vital would look him up and follow what he preaches, your pocketbook will thank you for it when you hit your 30s, 40s, 50s...

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www.bettercallsaul.com
Die Antwoord

9/5/2016 9:50 PM

Does this Ramsey guy just preach driving a beater and paying cash for everything or does he teach actual debt management? I'll finance the hell out of things (or refi) as long as it's a money maker. If I can use someone else's money(the bank) to buy a rental and use someone else's money (the tenant) to pay the note and have minimal investment in it, then financing is a good thing right?

I refinanced my paid for business property to pay off six loans on ten pieces of property. Took commercial loan rates of 7-8.25% and dropped it all to 5.5% saving not only $500.00 a month in interest but also reducing the number of loans my name is on by five.

Cars? Well, my truck is 16 years old but the wife has always had something fairly current and or new. With car loans from 0-1.4%, it would be pretty stupid to go pay 50-70 grand cash for a vehicle when you can buy a piece of property that will rent for $800.00-1200.00 per month. Of course there are those who will refi a paid for rental property to use to pay cash for a new car or truck. Then they'll write off the interest on the rental loan. Whatever makes the most business sense. A good accountant helps. A good accountant can also confuse the hell out of you...lol.

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9/5/2016 9:52 PM

And did Dave Ramsey pay cash for his house? If so, how much do these courses of his cost?blink

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9/6/2016 12:12 PM

Quick answer is possibly but tough with that loan amount. Theoretically you can bump the interest rate a use the rebate pricing to pay the loan fees. The issue is rebate is a percentage of loan amount and with that low of a loan it's tough to do a "no fee"(to client, no such thing as an actual, no fee first mortgage). That seems high for actual one-time closing costs are you sure that $3k doesn't include the new escrow accounts?.......As a mortgage banker this would be a tough one for me to originate unless it kept you from losing your home somehow. I am a big fan of keeping fees as low as possible but that is tough with low loan amounts. Heck, the agency price hit for a loan between $50k-$75k is .5% just in itself...........

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9/6/2016 1:22 PM
Edited Date/Time: 9/6/2016 1:22 PM

We will need to see you riding the whoops pre and post modification with no shirt on. Scientific reasons strictly.

What are you guys blabbing about interest and payments?

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9/6/2016 2:23 PM

newmann wrote:

And did Dave Ramsey pay cash for his house? If so, how much do these courses of his cost?blink

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Valid. I have read Dave's book and listened to his show. And you are right, he recommends driving the beater and living an Amish-esque life with no frills. I get that but if you are not having any fun and only paying bills, what's your life worth? Sorry I can't live off ramen forever.

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9/6/2016 3:55 PM

newmann wrote:

And did Dave Ramsey pay cash for his house? If so, how much do these courses of his cost?blink

Photo

I would hope Dave Ramsey is smart enough to not tie up several million dollars (I assume) in a mortgage, when he could borrow that money at todays low interest rates-and invest the millions of dollars in something that will pull a higher ROI than the interest he's paying on the mortgage....That strategy doesn't work for your "average" American...but for higher net worth borrowers (like him) he'd be silly to do it any other way.

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9/6/2016 4:20 PM
Edited Date/Time: 9/6/2016 4:21 PM

I just refinanced my mortgage. Finally I got 80% of the value. But I was locked in to my PMI for 13 years. Small print. Whoops. So now I went from 4% to a 3.125 15 year. I pay $13 more a month. Eliminated my PMI and Knocked off 18 years on the loan. Savings of $130,000 over the life of the loan. Cost me close $4000 to close and get an appraisal.

so congress voted to change interest rates from 2 percent to 6.8. I'm tempted to take a home equity loan out for the remainder of my home loan, and just pay off the student loans. But we are paying debt with debt. But if I can go from 6.8 perfect. Down to 2-3% that's a huge win.

Should just sell the house, and live in a trailer and just pay all my debt off in 2 years. Could be done. But the Fiance doesn't like the idea of a trailer.

In my case it cost me $4000 to save $130,000. weigh the cost / over the length of the loan and see what you're really saving.

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GP740
Since 1987

9/6/2016 9:43 PM

Quicken and a few other companies offer discount closing costs. So me even free. You have to shop for it.

I work in real estate and specialize in foreclosures. I can't tell you how many homes we foreclose on that were paid off or nearly paid off and the people went and then ok out a second; a home equity line, or they bout that swimming pool they had lived there 19 years without but they just had to have. Then suddenly I'm picking through your baseball card collection to see if I recognize any names.

Refinancing is a slippery slope. About two weeks ago we rekeyed a property that the people inherited debt free. They bought cars, ATV's, and side by sides. They ran up credit card debt. When they got in deep they took out a mortgage on their house. Then a second, each time paying off the debt only to run it back up. They would have been better off paying the debt and leaving their home alone.

I've said it many times and even shown the numbers but a home is a lousy investment.

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ΚΑΤΑ ΤΟΝ ΔΑΙΜΟΝΑ ΕΑΥΤΟΥ

9/7/2016 5:42 AM

DirtyFilter75 wrote:

Quicken and a few other companies offer discount closing costs. So me even free. You have to shop for it.

I work in real estate and specialize in foreclosures. I can't tell you how many homes we foreclose on that were paid off or nearly paid off and the people went and then ok out a second; a home equity line, or they bout that swimming pool they had lived there 19 years without but they just had to have. Then suddenly I'm picking through your baseball card collection to see if I recognize any names.

Refinancing is a slippery slope. About two weeks ago we rekeyed a property that the people inherited debt free. They bought cars, ATV's, and side by sides. They ran up credit card debt. When they got in deep they took out a mortgage on their house. Then a second, each time paying off the debt only to run it back up. They would have been better off paying the debt and leaving their home alone.

I've said it many times and even shown the numbers but a home is a lousy investment.

It's a lousy investment if you use it as an ATM...buy the thing, pay off your loan, end of story, and it's a great investment.

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9/7/2016 7:07 AM
Edited Date/Time: 9/7/2016 7:11 AM

DirtyFilter75 wrote:

Quicken and a few other companies offer discount closing costs. So me even free. You have to shop for it.

I work in real estate and specialize in foreclosures. I can't tell you how many homes we foreclose on that were paid off or nearly paid off and the people went and then ok out a second; a home equity line, or they bout that swimming pool they had lived there 19 years without but they just had to have. Then suddenly I'm picking through your baseball card collection to see if I recognize any names.

Refinancing is a slippery slope. About two weeks ago we rekeyed a property that the people inherited debt free. They bought cars, ATV's, and side by sides. They ran up credit card debt. When they got in deep they took out a mortgage on their house. Then a second, each time paying off the debt only to run it back up. They would have been better off paying the debt and leaving their home alone.

I've said it many times and even shown the numbers but a home is a lousy investment.

I heard recently that buying a house is a shitty investment- can you elaborate? I am trying to decide how much to put down on a house. I don't want to sink all my cash into a downpayment and then struggle. I could invest the cash or even start a business or something.

I had a co-worker in 2007 who was buying a house. He said he was getting an equity line against the loan on the same day. I asked how he could borrow against equity when he had not even made a payment yet. He didn't really know. Only in America would we think debt is equity.

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9/7/2016 8:06 AM

One Last Comeback wrote:

I heard recently that buying a house is a shitty investment- can you elaborate? I am trying to decide how much to put down on a house. I don't want to sink all my cash into a downpayment and then struggle. I could invest the cash or even start a business or something.

I had a co-worker in 2007 who was buying a house. He said he was getting an equity line against the loan on the same day. I asked how he could borrow against equity when he had not even made a payment yet. He didn't really know. Only in America would we think debt is equity.

2007 , that was a Premix Junkie negative am sub prime specialty right there. Basically financing the downpayment in with the home loan if I remember correctly. Variable interest, 60 year note. And then it all went to shit.

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9/7/2016 10:31 AM

DirtyFilter75 wrote:

Quicken and a few other companies offer discount closing costs. So me even free. You have to shop for it.

I work in real estate and specialize in foreclosures. I can't tell you how many homes we foreclose on that were paid off or nearly paid off and the people went and then ok out a second; a home equity line, or they bout that swimming pool they had lived there 19 years without but they just had to have. Then suddenly I'm picking through your baseball card collection to see if I recognize any names.

Refinancing is a slippery slope. About two weeks ago we rekeyed a property that the people inherited debt free. They bought cars, ATV's, and side by sides. They ran up credit card debt. When they got in deep they took out a mortgage on their house. Then a second, each time paying off the debt only to run it back up. They would have been better off paying the debt and leaving their home alone.

I've said it many times and even shown the numbers but a home is a lousy investment.

Titan1 wrote:

It's a lousy investment if you use it as an ATM...buy the thing, pay off your loan, end of story, and it's a great investment.

Explain your thoughts on this. Understand how buy and flip houses for a living.

Also where do you live? Market is a contributing factor.

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ΚΑΤΑ ΤΟΝ ΔΑΙΜΟΝΑ ΕΑΥΤΟΥ

9/7/2016 11:46 AM
Edited Date/Time: 9/7/2016 11:46 AM

There's a big difference in buying a home to live in and calling it "investment" vs buying homes to resell or rent as investments.

I don't see how a guy could go wrong owning his home free and clear, then go figure out what to do with the money you are not spending on a mortgage.

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9/7/2016 11:46 AM
Edited Date/Time: 9/7/2016 11:54 AM

Simple math if I invest 100,000 in a safe investment that gives a modest 4% return and keep rolling over the dividends what do I have in 30 years?

If I invest that same 100,000.00 into a home I pay taxes of around 1800 per year on average. So for 30 years assuming they don't go up I pay 54,000 but they will go up and in reality I will pay closer to 70,000.00 in taxes on my 100,000 investment in 30 years.

Then you have maintenance issues. Water heater, HVAC, new roof, new bathrooms, new kitchens, the average homeowner spends roughly 4500.00 a year on maintenance related items. That's 135,000.00 over your 30 year mortgage.

Then you have your continued maintenance Like lawn care, landscaping, having the HVAC serviced. Let's say you are a do it yourselfer. You might keep those costs in the 300-500 range? So over 30 years you spend 9,000 on the low side.

Then we have interest. On a 100,000 loan with insurance and taxes escrowed you will be around $805.00 per month give or take depending on interest rate and credit rating etc. The total payment on your loan is $805, so $750 goes towards interest, and only $55 goes towards principal -- meaning only $55 goes towards paying back the $100,000 you borrowed. As more time goes by you will pay less interest and more principal but in the end you will pay well over $400,000 for your 100,000 house that needed all that maintenance and improvements.

The crazy thing to me is someone will sell that 100,000.00 house after 30 years for 130,000 and tell me they made 30k by living there.

All the while there is barely an investment in anyone's portfolio that won't return 3-4% annually.

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ΚΑΤΑ ΤΟΝ ΔΑΙΜΟΝΑ ΕΑΥΤΟΥ

9/7/2016 11:57 AM

500guy wrote:

There's a big difference in buying a home to live in and calling it "investment" vs buying homes to resell or rent as investments.

I don't see how a guy could go wrong owning his home free and clear, then go figure out what to do with the money you are not spending on a mortgage.

I own my home free and clear and all of our investment properties as well. There are still holding costs and I have a significant amount of cash tied up that isn't working for me it's actually working against me. We have a modest home for this reason. At the end of the day you have to live somewhere. You just want it to make as much sense as possible.

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ΚΑΤΑ ΤΟΝ ΔΑΙΜΟΝΑ ΕΑΥΤΟΥ

9/7/2016 6:34 PM

DirtyFilter75 wrote:

Quicken and a few other companies offer discount closing costs. So me even free. You have to shop for it.

I work in real estate and specialize in foreclosures. I can't tell you how many homes we foreclose on that were paid off or nearly paid off and the people went and then ok out a second; a home equity line, or they bout that swimming pool they had lived there 19 years without but they just had to have. Then suddenly I'm picking through your baseball card collection to see if I recognize any names.

Refinancing is a slippery slope. About two weeks ago we rekeyed a property that the people inherited debt free. They bought cars, ATV's, and side by sides. They ran up credit card debt. When they got in deep they took out a mortgage on their house. Then a second, each time paying off the debt only to run it back up. They would have been better off paying the debt and leaving their home alone.

I've said it many times and even shown the numbers but a home is a lousy investment.

One Last Comeback wrote:

I heard recently that buying a house is a shitty investment- can you elaborate? I am trying to decide how much to put down on a house. I don't want to sink all my cash into a downpayment and then struggle. I could invest the cash or even start a business or something.

I had a co-worker in 2007 who was buying a house. He said he was getting an equity line against the loan on the same day. I asked how he could borrow against equity when he had not even made a payment yet. He didn't really know. Only in America would we think debt is equity.

Buying a home isn't a shitty investment. It might not net as high of a return as a hedge fund can generate, but when you factor in the fact that you'd have to pay rent (which would likely rise drastically over the course of a conventional 30yr loan), it becomes even better.

Real estate in general can be a shitty investment, or a fantastic investment if you have the ability to ride out a market downturn. In a rising market it's very difficult to beat because of the leverage you can get. With most investments you have to "part" with the entire amount of the value up front. With real estate you can get the entire amount of any gains with only investing a very small portion of the value.

Let's say that you can throw money into a fund but you need $250K for the initial investment. Based on history, the fund is likely to average about 10% per year pretty regularly (obviously not guaranteed, could be vastly different the next year). So you'd make about $25K in return for "parting" with $250K (even though that's technically still your money).

Now look at real estate. You don't need to usually put the full amount down, so the value of your investment vehicle can be significantly higher. Let's say that you decide on a $500K property, and put 20% down. Now you've only tied up $100K, or 40% of the money you would have invested in the fund. Let's just say your mortgage payment falls pretty close to the $2K per month mark, so after a year your total investment would be approximately $124K. Likely, renting your property would be very close to the mortgage payment so those numbers may be a wash, but let's leave about 20% of that in because of other issues like maintenance, insurance, etc.

So now you've invested about $105K, and factor in growth at only about 50% of what you may have got from the fund. So that's about a $25K increase in value of the investment vehicle. But that's not truly a 5% return, because you didn't have to tie up the full $500K. You leveraged the entire increase by only paying a portion of the value of the investment.

So in the first scenario you made 10% return on monies invested. In the second scenario you made about 24% return on monies invested, even though the investment vehicle itself only grew at half the rate.

Leverage.

Of course, if you purchased that real estate in 2007 it certainly wouldn't have been that simple!

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9/7/2016 8:24 PM

DirtyFilter75 wrote:

Quicken and a few other companies offer discount closing costs. So me even free. You have to shop for it.

I work in real estate and specialize in foreclosures. I can't tell you how many homes we foreclose on that were paid off or nearly paid off and the people went and then ok out a second; a home equity line, or they bout that swimming pool they had lived there 19 years without but they just had to have. Then suddenly I'm picking through your baseball card collection to see if I recognize any names.

Refinancing is a slippery slope. About two weeks ago we rekeyed a property that the people inherited debt free. They bought cars, ATV's, and side by sides. They ran up credit card debt. When they got in deep they took out a mortgage on their house. Then a second, each time paying off the debt only to run it back up. They would have been better off paying the debt and leaving their home alone.

I've said it many times and even shown the numbers but a home is a lousy investment.

One Last Comeback wrote:

I heard recently that buying a house is a shitty investment- can you elaborate? I am trying to decide how much to put down on a house. I don't want to sink all my cash into a downpayment and then struggle. I could invest the cash or even start a business or something.

I had a co-worker in 2007 who was buying a house. He said he was getting an equity line against the loan on the same day. I asked how he could borrow against equity when he had not even made a payment yet. He didn't really know. Only in America would we think debt is equity.

APLMAN99 wrote:

Buying a home isn't a shitty investment. It might not net as high of a return as a hedge fund can generate, but when you factor in the fact that you'd have to pay rent (which would likely rise drastically over the course of a conventional 30yr loan), it becomes even better.

Real estate in general can be a shitty investment, or a fantastic investment if you have the ability to ride out a market downturn. In a rising market it's very difficult to beat because of the leverage you can get. With most investments you have to "part" with the entire amount of the value up front. With real estate you can get the entire amount of any gains with only investing a very small portion of the value.

Let's say that you can throw money into a fund but you need $250K for the initial investment. Based on history, the fund is likely to average about 10% per year pretty regularly (obviously not guaranteed, could be vastly different the next year). So you'd make about $25K in return for "parting" with $250K (even though that's technically still your money).

Now look at real estate. You don't need to usually put the full amount down, so the value of your investment vehicle can be significantly higher. Let's say that you decide on a $500K property, and put 20% down. Now you've only tied up $100K, or 40% of the money you would have invested in the fund. Let's just say your mortgage payment falls pretty close to the $2K per month mark, so after a year your total investment would be approximately $124K. Likely, renting your property would be very close to the mortgage payment so those numbers may be a wash, but let's leave about 20% of that in because of other issues like maintenance, insurance, etc.

So now you've invested about $105K, and factor in growth at only about 50% of what you may have got from the fund. So that's about a $25K increase in value of the investment vehicle. But that's not truly a 5% return, because you didn't have to tie up the full $500K. You leveraged the entire increase by only paying a portion of the value of the investment.

So in the first scenario you made 10% return on monies invested. In the second scenario you made about 24% return on monies invested, even though the investment vehicle itself only grew at half the rate.

Leverage.

Of course, if you purchased that real estate in 2007 it certainly wouldn't have been that simple!

I buy properties from bankrupt finance buyers every day. Leverage is another word for broke it's just a future tense. If you believe in that method of buying real estate I recommend you read rich dad poor dad by Robert Kiosaki. It's a great road map for investing that way. Many people believe in using "other people's money" to buy properties. A local investor just lost 23 properties buying with loans and he bought 30 more the next day. He's swirling the bowl as far as I'm concerned. I won't be a bit surprised when they find him slumped over in his garage because he suck started a revolver. Sure money can be made that way but money can be made at black jack. In your scenario you outlined many "it's" could he's and maybes.

I do this shit for a living. I only pay cash and I don't have deep pockets. At least not yet. I bought a property last week for $1,500.00 and sold it Tuesday for $17,500.00. I make money in real estate some days. I also have a flip house I have owned since 2014 and I over invested. I went with high end upgrades when I should have went low end and dumped it. I received an offer today that would basically put me back to break even but at least I'm out from under it. I'm going through cut bait! But guess what? There is a wrinkle they are getting a VA loan! That means I will invest another 1,000.00 to 3,000 before I can close this one.

A home is a terrible investment. I sell them every day to people who are terrible at math.

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ΚΑΤΑ ΤΟΝ ΔΑΙΜΟΝΑ ΕΑΥΤΟΥ

9/8/2016 1:36 AM

500guy wrote:

There's a big difference in buying a home to live in and calling it "investment" vs buying homes to resell or rent as investments.

I don't see how a guy could go wrong owning his home free and clear, then go figure out what to do with the money you are not spending on a mortgage.

DirtyFilter75 wrote:

I own my home free and clear and all of our investment properties as well. There are still holding costs and I have a significant amount of cash tied up that isn't working for me it's actually working against me. We have a modest home for this reason. At the end of the day you have to live somewhere. You just want it to make as much sense as possible.

I also own my house (almost) free and clear (I owe 50k on £1.2 million). I DIDN'T buy it as an investment I bought it because me and the wife loved it, and continue to love living in it to this day, after twenty years. You've got to live somewhere, so make it somewhere you really want to, otherwise your existence will be just that, an existence. As long as you don't buy something you can't afford to buy and run a house is NOT "dead money". If it makes money for you that's just a nice bonus. To have money in life is good but it's not the sole reason for living.

P.S. we're in the process of re-mortgaging to buy a nice place in France we've seen. So the house has helped us with that too.

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To be born an Englishman is to win first prize in the lottery of life.

To be born Swiss is to take the cash alternative.
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9/8/2016 6:08 AM

PalerBlue wrote: To have money in life is good but it's not the sole reason for living.



Most folks spend a lifetime chasing that dollar sign and finally wise up in their dotage to whats important and it sure as hell aint money.

If you got up this morning and everything is workin', were able to walk to the bathroom and do your business without anyone helping and got to see the sun rise on another day, you have more than money could ever buy.

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"We don't rent pigs."