Buying a house

[Anders]

[ QUOTE ]
[ QUOTE ]
This is poor advice imho, I have many friends that are older than I and have more funds(way more), when I "baught" my first house(2nd property), they all told me the same thing, buy the biggest you can afford.

[/ QUOTE ]

That's what mortgage brokers and realtors tell everyone, shouldn't be hard to figure out why.

Better advice, IMO, is to buy a more resonable house that suits your needs, and pay it off way early. Then you take your former mortgage payment and invest it in whatever.

And don't give me tax deductible interest blah blah, why would I want to pay 10K in interest to save 3K in taxes?

Debt = risk.

[/ QUOTE ]

My understanding is that ALL of the interest on a mortgage is tax deductible.

[LondonBroil]

[ QUOTE ]
Better advice, IMO, is to buy a more resonable house that suits your needs, and pay it off way early. Then you take your former mortgage payment and invest it in whatever.

think about what you typed. then think about it some more. then think about what the stock market generally returns if you are long term investor. then think about what a typical mortgage interest rate is. then tell me again why paying your mortgage off early is smart?

[/ QUOTE ]

For some people it's a huge psychological burden lifted off their shoulders. Also, a lot of people don't expect the market to return as much as the past average over the course of the next few decades.

[tylerdurden]

[ QUOTE ]
My understanding is that ALL of the interest on a mortgage is tax deductible.

[/ QUOTE ]

It is. It's a *deduction* not a credit. If you pay $10k in interest, that means you *deduct* $10k from your income used to figure your taxes. Not deduct $10k from your tax bill.

[LondonBroil]

All of the interest IS tax deductible. Say you make $50,000 and can deduct $10K in interest charges. In that case, you only pay taxes on $40K, instead of $50K, which would be about $3,000 less.

You don't get to pay $10K less in taxes if that's what your thinking.

[ScottTheFish]

[ QUOTE ]

think about what you typed. then think about it some more. then think about what the stock market generally returns if you are long term investor. then think about what a typical mortgage interest rate is. then tell me again why paying your mortgage off early is smart?

[/ QUOTE ]

No need for the insulting tone, I understand all that. It's all about your risk tolerence level I guess. Debt = risk.

If my mortgage rate is 5%, and I can get 8-9% from mutual funds (Don't tell me about the 20% returns you got in the last week, i invest for the long term) The 3% extra I get for those few years is worth less to ME that the peace of mind and awesome cash flow I can get from living in a paid off home. YMMV.

I'm not talking about 15 years, I'm talking about paying it off in 7 or 8. That's the beauty of not buying "the biggest house you can possibly afford"

If your portfolio is so huge that the 3% extra over 8 years comes out to a huge amount, I see your point.

[sublime]

didnt mean to come across as insulting [img]/images/graemlins/frown.gif[/img]

sorry bout that.

you are also forgetting about the other benefits. such as tax deductions on your loan, the fcat that your house is growing in value, while the bank actually owns most of it etc....

[hogua]

[ QUOTE ]
ALL of the interest on a mortgage is tax deductible

[/ QUOTE ]

DING! DING!

[NoTalent]

[ QUOTE ]
you are also forgetting about the other benefits. such as tax deductions on your loan, the fcat that your house is growing in value, while the bank actually owns most of it etc....

[/ QUOTE ]

This is not the always the case, things could decrease in value. It's my opinon that the housing market is going to 'correct' itself in the next few years.

[otctrader]

[ QUOTE ]
This is not the always the case, things could decrease in value. It's my opinon that the housing market is going to 'correct' itself in the next few years.

[/ QUOTE ]

I think this is a simple generalization that can't accurately be made. So I don't sound like an egotistical jackass, I had the same opinion three years ago. Problem now is when that correction comes, it will set you back maybe a year or two, and those who made purchases back then will still be better off than a bargain hunter waiting for the "collapse."

While regional real estate markets will suffer (i.e., I wouldn't touch Palo Alto or any waterfront property in Palm Beach), demographics in other areas such as metro-NY/NJ suburbs dictate demand for housing will remain strong despite external factors such as rising interest rates.

Many years of trying to outmaneuver stock markets, bonds, and real estate have taught me that asset/market timing is futile versus the benefits of getting in and realizing the value of compounding at an early age with a long time horizon.

[BigBaitsim (milo)]

The wife and I quit our jobs, sold our office and house, moved to MN and bought a house with no job and 10% down. No problem if you've got good credit.