bye bye, sweet brz.

[Irace86.2.0]

Originally Posted by e30kawi

To the op, I wish someone would have gave me this advice when I first bought my home, but go for the 15 year note if you can swing it. That 30 year mortgage is a scam. We refinanced to a 15 year note a couple years ago, what a difference it made every month. Actually closing on our second refinance this Saturday.

You pay more interest, but it isn’t really a scam. Take the extra money you are putting into a 15 year note at 4%, and with a market average return of 7%, a person could build 3% interest.

Originally Posted by Adam_L

Historically, rent tends to only increase in price (cost) over time.

Over the long term it does but it is proportional to inflation. Watch the video I posted above too; it explains how a renter could possibly save/invest more than a home buyer builds in a home. Remember that the average home owner is renting money to buy, something they pay a lot of interest on. They also can pay HOA fees which increases over time, property tax which increases over time, insurance which increases over time, and home repairs. Also, buying can limit job mobility. Overall, it ends up better for most for investing, but it isn’t the smart thing for some people’s lifestyle or personality, and doesn’t guarantee a better outcome.

[Coachrhino11]

Originally Posted by Adam_L

They increase for a variety of reasons...inflation, land lords ( slum lords), can then take that investment property....and buy more investment properties, pay down debt ( think " I'm Tommy Vu...and I can make you rich too!!")

Either way you slice and dice it, most people need one car. If that one car is your BRZ / FRS....enjoy it, drive it. If you bought it new, hopefully you drive it 10-15+ years...spread the cost of ownership over that many years, in the end it shouldn't be too costly. It's the people who buy new, sell after 1-4 years, that get hit with the major depreciation. ...now that is a bad "investment". Think about all the thousands of people who do this 1-4 year car ritual, of buying something new...or even a few years old, only have the vehicle for a short period 1-4 years, the sell/ trade in for the next latest and greatest on the lot. Now that is the vicious cycle, car manufacturers want people to get into....like a drug habit

Very true, but damn it’s fun driving different cars and not same shit year after year. Pay to play.

[Coachrhino11]

Originally Posted by e30kawi

To the op, I wish someone would have gave me this advice when I first bought my home, but go for the 15 year note if you can swing it. That 30 year mortgage is a scam. We refinanced to a 15 year note a couple years ago, what a difference it made every month. Actually closing on our second refinance this Saturday.

Disagree. It’s a lot of interest if you actually take 30 years to pay off mortgage but we’ve always got longest car loan for very low rate to have flexibility in case something happens so you aren’t locked into large mandatory monthly payments, same with mortgage philosophy. We’ve often paid off cars in 6 months to year but finance longer. You can pay off the 30 year mortgage in 15 on your own and pay same rate.

[e30kawi]

Originally Posted by Irace86.2.0

You pay more interest, but it isn’t really a scam. Take the extra money you are putting into a 15 year note at 4%, and with a market average return of 7%,

Scam isn't the right word, but different strokes for different folks. Depends if you want to potentially get a 7% return or actually pay your debt off faster. When I first got the loan and only seeing $70 come off of the principle every month was sickening and I would have ended up paying over three times what the house was purchased for.

[e30kawi]

Originally Posted by Coachrhino11

Disagree. It’s a lot of interest if you actually take 30 years to pay off mortgage but we’ve always got longest car loan for very low rate to have flexibility in case something happens so you aren’t locked into large mandatory monthly payments, same with mortgage philosophy. We’ve often paid off cars in 6 months to year but finance longer. You can pay off the 30 year mortgage in 15 on your own and pay same rate.

True, you don't have to just pay the full term of 30 years, but the interest paid is vastly higher at the start of the 30 year term than 15.

[Coachrhino11]

Well, I’ve been crushing 7% returns on our investments for some time now. The difference when we bought a few years ago between a 30 vs. 15 wasn’t that much. At that time, we had other debts we wanted to focus on before house. Now, no student loans, no cc debt, no car payments. It’s a damn good feeling, next is house. Of course I’m looking at 2nd car, lol. Debt free is great, but living life is too!

[e30kawi]

When we bought the interest rates were so high and we refinanced at just over half the prior rate.

Ultimately the op needs to do some research and decide what is right for him.

The fifteen year note isn't a big stretch for my wife and I. Sounds like we might be in a similar spot in life. No debt aside from the house payment.

[Coachrhino11]

Originally Posted by e30kawi

When we bought the interest rates were so high and we refinanced at just over half the prior rate.

Ultimately the op needs to do some research and decide what is right for him.

The fifteen year note isn't a big stretch for my wife and I. Sounds like we might be in a similar spot in life. No debt aside from the house payment.

Lol, yeah wife really wants me paying cash for this second car. I’ve been saving a bundle every month the past few months. My options are buy cash used this summer, like a 15-16k FRS with very low miles or used Miata or put down around 15k on new RF or BRZ and pay off very quick, like around Christmas or slightly after. Obviously if I go with option one used, I free up cash towards other things instead of paying on depreciating asset. What to do.

[Irace86.2.0]

Originally Posted by e30kawi

Scam isn't the right word, but different strokes for different folks. Depends if you want to potentially get a 7% return or actually pay your debt off faster. When I first got the loan and only seeing $70 come off of the principle every month was sickening and I would have ended up paying over three times what the house was purchased for.

Yea, that would be hard to swallow because, like you said, you pay the interest up front. If paying it off faster make someone feel better to have that off their books then that is good. That person has some different types of flexibilities, but what they aren't doing is saving as much as that same person who put money into a home and house. Like I said, not only is the return likely to be higher than the interest paid on a home loan, but the money is growing at compound interest, which is highly dependent on time. The later example would grow the compound interest over 30 years versus the 15 years for the person who paid off their home early then started saving.

Example:

Person 1:

--Buys a home for $200k at 5% interest for 15 years.
--Pays $1582/month for a total of $284,686 over 15 years.

--Invests $1582/month after that into the market at 8% return over 15 years.
--401k/ira balance after 15 years is $522,407

Person 2:

--Buys a home for $200k at 5% interest for 30 years.
--Pays $1074/month for a total of $386,512 over 30 years.

--Invests $508/month (the difference between a 15 and 30 year loan) into the market at 8% return for 30 years.
--401k/ira balance after 30 years is $718,197.

Moral of the story: compound interest. Person 2's home is worth the same amount of money after 30 years as Person 1's home, so don't be confused by the total amount paid for the home. They both have a home worth X; they both were paying $1582 a month for 30 years. Person 2 walked away with an extra $195,790 by investing for longer time because of compound interest, and because they made that 3% difference between the 5% loan and the 8% market for a long time too.

Edit note: The 15% loan would likely have a lower interest rate like 4.5%, but the difference wouldn't offset the numbers enough to change the point.

[Irace86.2.0]

One other note, home prices can't keep going up at the rate they have been going up. The current state of the market may not be the peak of the bubble, but it can't keep going up forever. But someone may argue like perryair did, if demand outpaces supply then home prices/values will keep going up; if there are more new home buyers entering the market than there are new homes being built then demand will outpace supply, and homes will continue to rise. This is true, but only in a system with infinite income.

Buyers don't have infinite income to keep paying more and more for homes. Eventually, regardless of the demand... for homes, there won't be any supply... of buyers... who can afford to buy. This will be a problem for anyone unable to buy a home and for anyone wanting to sell a home. There needs to be market mobility, so people can buy a new home when changing job locations, or when people need to upsize or downsize. Buyers will be forced to lower prices to sell. Of course, the way out is to increase supply... by building more homes. Perhaps we can turn hotels and motels into cheap housing or replace the locations with homes, since their business has been hit by AirBNB and those homes are now being used as hotels.

[Dadhawk]

Originally Posted by Irace86.2.0

Yea, that would be hard to swallow because, like you said, you pay the interest up front. If paying it off faster make someone feel better to have that off their books then that is good.

You are forgetting the part where Person1 in your example has a paid for house for 15 years, eliminating a huge risk in their life (they now have a roof over their head regardless of what else happens except straight up financial collapse on their part) and that completely changes how you do things, and how you sleep at night, and it creates flexibility.

For example, if both want to move at year 16 (or year 5 for that matter), there is a major difference in the amount of equity available to roll into a new house.

Each person has to decide for themselves what the long-term goal is, and what they are most comfortable with in the long term.

[Dadhawk]

Originally Posted by Coachrhino11

Lol, yeah wife really wants me paying cash for this second car. I’ve been saving a bundle every month the past few months. My options are buy cash used this summer, like a 15-16k FRS with very low miles or used Miata or put down around 15k on new RF or BRZ and pay off very quick, like around Christmas or slightly after. Obviously if I go with option one used, I free up cash towards other things instead of paying on depreciating asset. What to do.

You are leaving out an option. Pay cash for the used car, drive it for 12 months, continue saving money then sell used car, take cash and upgrade. Yes you'll lose a little in the year on the value of the car but you can get where you want to go, and basically the cost of driving the car is the cost of the deprecation between buying and selling for the next roll-over.

[Coachrhino11]

Originally Posted by Dadhawk

You are leaving out an option. Pay cash for the used car, drive it for 12 months, continue saving money then sell used car, take cash and upgrade. Yes you'll lose a little in the year on the value of the car but you can get where you want to go, and basically the cost of driving the car is the cost of the deprecation between buying and selling for the next roll-over.

Nice, the Dave Ramsey way, lol

[Coachrhino11]

Unfortunately wife not gonna support me getting to keep that much money every month for a “me” purchase on going.