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    WTF is the matter with people

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    Horseballs

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    Re: WTF is the matter with people

    Post  Horseballs on Thu Apr 18, 2013 2:05 pm

    Investment real estate works great, as long as there is stability. Of course, I got absolutely jobbed on my investment property, though that was bubble-related.
    What other investment can you own 20% of, yet get 100% of the growth when you sell?
    If I had copious amounts of cash, I'd dabble in it. Unfortunately, I don't.
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    Poe4soul

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    Re: WTF is the matter with people

    Post  Poe4soul on Thu Apr 18, 2013 3:54 pm

    Horseballs wrote:Investment real estate works great, as long as there is stability. Of course, I got absolutely jobbed on my investment property, though that was bubble-related.
    What other investment can you own 20% of, yet get 100% of the growth when you sell?
    If I had copious amounts of cash, I'd dabble in it. Unfortunately, I don't.

    What is the chances that it's going to correct lower from this point forward? Pretty slim. When it does take off, it will see double digits for a few years. What other loan can an individual right of the interests?
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    Poe4soul

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    Re: WTF is the matter with people

    Post  Poe4soul on Thu Apr 18, 2013 3:59 pm

    FamousDavis wrote:
    Poe4soul wrote:
    FamousDavis wrote:
    Horseballs wrote:I refinanced in September last year for 2.75% 15 yr fixed no points. It's truly unbelievable the financing deals out there for qualified people. I've always been a bit conservative about keeping fixed costs low, like paying cash for cars instead of financing. But I was able to get .9% financing on cars bought in 2010 and 2011. Of course I'm going to do that.

    I'll need to look into that but again I really need to take a hard look at how long I believe I'll be in my current home. No doubt I'll pay off more principal with a 15 year vs. 30 year but it's an additional $400/month that's mainly going toward interest in the beginning.

    One thing I've learned is to be skeptical when it comes to financial advice. A lot of advice is based on theory and opinion and there are many different ways of looking at an investment.

    One opinion I disagree with, and that I believe has recently been proven wrong, is the one that states that you should borrow as much as possible when purchasing a home. The theory is that you can put the money that would have gone toward the down payment into a mutual fund and earn 8% to 10% a year rather than have it sit as a downpayment. In theory, that sounds good if you invest all that money in an S&P 500 fund and let it sit for 30 years.

    However, if you would have done that in 2006 the value of that money, in 2008, would be almost half of what it originally was. Further, if you lost your job at that time, like many Americans did, you might need to sell your house that is now worth 30% less with an upside down mortgage. What if you needed to relocate?

    With refinancing, it's not always a no brainer although the 2.75% sounds pretty darn good, especially with no fees. Still, you need to make sure that the extra monthly payment vs. the 30-year isn't going to hurt too much and that you're sure you'll be living in the house for quite awhile.

    I agree that auto financing at 1% is the right thing to do. I once financed a car at around 6% and felt like I was throwing money away.

    Another theory that's been proven wrong is that real estate is a great investment. If you take inflation into account along with interest payments, homeowners insurance, repairs, HOA (if applicable) and property taxes it's really not that great of an investment. Of course, owning a home brings you a certain amount of joy that renting does not.

    I know plenty of people that did just fine investing in houses. Granted they've been down for a few years but the smart ones don't get overleveraged and cut their loses. Like the stock market, the rule is to buy low and sell high. Right now all of those people are investing in houses, at least they are in the Portland market. It's really an easy equation if you have the money to invest. Houses are at a all time low and many markets are moving pretty good right now. You just have to be smart about it. Many of the homes in our neighborhoods are be bought by investors and renting them out. Because of the low interest rates many of the homes are renting high enough to break even or show a profit. When the housing gets moving these homes will see double digit profits with little investment. You just have to have money or access to money.

    As far as your loan, you need to consider other options if you don't want to make the extra $400 payment. Look into the 20 year or even refinance a 30 year. If the fees are very low, which they were for me, the only equation you have to consider is how long it take to pay off the cost of the loan with your interest savings. Every month after the cost is paid off is money in your pocket. It's really not rocket science.

    It's certainly more complicated than you are making it out to be. For example, you mention me refinancing with a 30-year loan. I also have to take into consideration that I'm already 3 years into that loan and I've been paying on that loan for 3 years. Starting over with a new 30 year adds another 3 years of payments and it means I'll have my house paid off 3 years later than my situation now.

    Buying low and selling high? Yeah, that sounds great when you look back in time. Most people I talked to back in 2003 thought the Calfornia housing bubble was about to burst at any time. It took 3 more years for that to happen. The home I bought in Los Angeles for $540,000 in 2003 sold for $750,000 exactly one year and 4 months later.

    You cannot predict when a market is "low" or "high". That is only something people do in hindsight and they pretend that they knew it all along.

    I love it when I hear people talk about their stocks and they say "Yeah, I knew the market was going to tank in 2007 so I got out early. How did you do?". These people are insufferable asses and pretend as if they have some deeper knowledge and can accurately predict the market. Most of them are broke and full of sh!t.

    You did say you have an MBA, Right? WTF? Were you smoking dope the whole time?

    Here's a quick comparison using made up numbers that are close to yours. I made the assumption that you would keep paying the same payment and just pay additional $'s to buy down your principal. I had to guess on your loan origination date and what percent you would get for a 30 year rate but it should be close. I hope this helps.



    Last edited by Poe4soul on Thu Apr 18, 2013 5:52 pm; edited 1 time in total
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    Kiwigolfer

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    Re: WTF is the matter with people

    Post  Kiwigolfer on Thu Apr 18, 2013 4:05 pm

    You definitely win in real estate if you are in it for the long haul. If it's shorter term you need to time the market fluctuations. I have a house I live in but I also own an investment property in Auckland. Property values peaked in 2007 and crashed in 2008. With the benefit of hindsight I guess I should have sold in 2007 and bought another property in 2009. If I had been forced to sell 2008-2010 I would have lost out big time but I was able to stay in the market and now values are back at 2007 levels and growing. I also kept a house in Auckland because property values there are much higher than the rest of the country and once you leave it's unaffordable for many to buy back into that market. Having a property in that market at least gives me a foot in the door if/when I decide to return to Auckland.

    Also the other great thing about NZ property investment is that there is no capital gains tax so when you sell the profit is tax free, even on investment properties. It's a no brainer really.

    The other thing I managed to do was structure my affairs so that all my borrowing is on the investment property meaning it's fully tax deductible even though in reality the loan was to buy my home. Don't you love scamming the tax man!
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    Poe4soul

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    Re: WTF is the matter with people

    Post  Poe4soul on Thu Apr 18, 2013 4:53 pm

    FamousDavis wrote:
    Poe4soul wrote:
    FamousDavis wrote:
    Horseballs wrote:I refinanced in September last year for 2.75% 15 yr fixed no points. It's truly unbelievable the financing deals out there for qualified people. I've always been a bit conservative about keeping fixed costs low, like paying cash for cars instead of financing. But I was able to get .9% financing on cars bought in 2010 and 2011. Of course I'm going to do that.

    I'll need to look into that but again I really need to take a hard look at how long I believe I'll be in my current home. No doubt I'll pay off more principal with a 15 year vs. 30 year but it's an additional $400/month that's mainly going toward interest in the beginning.

    One thing I've learned is to be skeptical when it comes to financial advice. A lot of advice is based on theory and opinion and there are many different ways of looking at an investment.

    One opinion I disagree with, and that I believe has recently been proven wrong, is the one that states that you should borrow as much as possible when purchasing a home. The theory is that you can put the money that would have gone toward the down payment into a mutual fund and earn 8% to 10% a year rather than have it sit as a downpayment. In theory, that sounds good if you invest all that money in an S&P 500 fund and let it sit for 30 years.

    However, if you would have done that in 2006 the value of that money, in 2008, would be almost half of what it originally was. Further, if you lost your job at that time, like many Americans did, you might need to sell your house that is now worth 30% less with an upside down mortgage. What if you needed to relocate?

    With refinancing, it's not always a no brainer although the 2.75% sounds pretty darn good, especially with no fees. Still, you need to make sure that the extra monthly payment vs. the 30-year isn't going to hurt too much and that you're sure you'll be living in the house for quite awhile.

    I agree that auto financing at 1% is the right thing to do. I once financed a car at around 6% and felt like I was throwing money away.

    Another theory that's been proven wrong is that real estate is a great investment. If you take inflation into account along with interest payments, homeowners insurance, repairs, HOA (if applicable) and property taxes it's really not that great of an investment. Of course, owning a home brings you a certain amount of joy that renting does not.

    I know plenty of people that did just fine investing in houses. Granted they've been down for a few years but the smart ones don't get overleveraged and cut their loses. Like the stock market, the rule is to buy low and sell high. Right now all of those people are investing in houses, at least they are in the Portland market. It's really an easy equation if you have the money to invest. Houses are at a all time low and many markets are moving pretty good right now. You just have to be smart about it. Many of the homes in our neighborhoods are be bought by investors and renting them out. Because of the low interest rates many of the homes are renting high enough to break even or show a profit. When the housing gets moving these homes will see double digit profits with little investment. You just have to have money or access to money.

    As far as your loan, you need to consider other options if you don't want to make the extra $400 payment. Look into the 20 year or even refinance a 30 year. If the fees are very low, which they were for me, the only equation you have to consider is how long it take to pay off the cost of the loan with your interest savings. Every month after the cost is paid off is money in your pocket. It's really not rocket science.

    It's certainly more complicated than you are making it out to be. For example, you mention me refinancing with a 30-year loan. I also have to take into consideration that I'm already 3 years into that loan and I've been paying on that loan for 3 years. Starting over with a new 30 year adds another 3 years of payments and it means I'll have my house paid off 3 years later than my situation now.

    Buying low and selling high? Yeah, that sounds great when you look back in time. Most people I talked to back in 2003 thought the Calfornia housing bubble was about to burst at any time. It took 3 more years for that to happen. The home I bought in Los Angeles for $540,000 in 2003 sold for $750,000 exactly one year and 4 months later.

    You cannot predict when a market is "low" or "high". That is only something people do in hindsight and they pretend that they knew it all along.

    I love it when I hear people talk about their stocks and they say "Yeah, I knew the market was going to tank in 2007 so I got out early. How did you do?". These people are insufferable asses and pretend as if they have some deeper knowledge and can accurately predict the market. Most of them are broke and full of sh!t.

    Picking the high is harder than pick a low, especially lows that are driven by fear. Post 9/11 was a no brainer, when the market hit 6600 and change in 2009 was a no brainer. I didn't pick the absolute bottom on both of those but I did throw some money in when it was low.
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    Pky6471

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    Re: WTF is the matter with people

    Post  Pky6471 on Thu Apr 18, 2013 6:58 pm

    FamousDavis wrote:
    Obviously you are missing my point. I never said that I couldn't put together an Excel spreadsheet to figure out the pros and cons of a refinanced mortgage.

    Jump in Dow market at 8000 would have been a very gơod deal, I wish I did, I pumped in $20,000 at Dow 10000, still very deal, Dow is 14,000+ now so it's a great return (but only on paper until I get my money out)... Dow will cycle about every 5-6 yrs, you could do well if you follow that cycle... Save when you are young, let "time" work for us... That's my advice to those younger than 30
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    Poe4soul

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    Re: WTF is the matter with people

    Post  Poe4soul on Thu Apr 18, 2013 8:38 pm

    FamousDavis wrote:
    Obviously you are missing my point. I never said that I couldn't put together an Excel spreadsheet to figure out the pros and cons of a refinanced mortgage.

    Then what was your point? I'm a bit obtuse in regards personal relationships. I might have missed some ques along the way. I just thought you needed to reality to show how much money it is in a short period of time. 8 years = $25K, pretty amazing. And we're talking low interest rates. It's no wonder people dig themselves into serious holes with high interest notes like credit cards rates.
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    Fluffy

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    Re: WTF is the matter with people

    Post  Fluffy on Fri Apr 19, 2013 3:07 am

    I dont have money..... Crying or Very sad

    Talking about this money you guys are making me feel suicidal.... bom
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    Poe4soul

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    Re: WTF is the matter with people

    Post  Poe4soul on Fri Apr 19, 2013 8:13 am

    Fluffy wrote:I dont have money..... Crying or Very sad

    Talking about this money you guys are making me feel suicidal.... bom

    I didn't have money when I was 25 either. If I did I probably would be dead.
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    FamousDavis
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    Re: WTF is the matter with people

    Post  FamousDavis on Fri Apr 19, 2013 10:48 am

    Poe4soul wrote:
    FamousDavis wrote:
    Obviously you are missing my point. I never said that I couldn't put together an Excel spreadsheet to figure out the pros and cons of a refinanced mortgage.

    Then what was your point? I'm a bit obtuse in regards personal relationships. I might have missed some ques along the way. I just thought you needed to reality to show how much money it is in a short period of time. 8 years = $25K, pretty amazing. And we're talking low interest rates. It's no wonder people dig themselves into serious holes with high interest notes like credit cards rates.

    No, I appreciate you putting the spreadsheet together. Can you do another one? Please do one comparing my 27 years remaining on a 30 year loan at 4.375% vs. a 15 year loan at 2.75%, no fees. Just do it by year. Thanks, I would do the spreadsheet myself but I just caught a delicious sea bass and I'm letting it breathe.
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    Poe4soul

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    Re: WTF is the matter with people

    Post  Poe4soul on Fri Apr 19, 2013 12:43 pm

    FamousDavis wrote:
    Poe4soul wrote:
    FamousDavis wrote:
    Obviously you are missing my point. I never said that I couldn't put together an Excel spreadsheet to figure out the pros and cons of a refinanced mortgage.

    Then what was your point? I'm a bit obtuse in regards personal relationships. I might have missed some ques along the way. I just thought you needed to reality to show how much money it is in a short period of time. 8 years = $25K, pretty amazing. And we're talking low interest rates. It's no wonder people dig themselves into serious holes with high interest notes like credit cards rates.

    No, I appreciate you putting the spreadsheet together. Can you do another one? Please do one comparing my 27 years remaining on a 30 year loan at 4.375% vs. a 15 year loan at 2.75%, no fees. Just do it by year. Thanks, I would do the spreadsheet myself but I just caught a delicious sea bass and I'm letting it breathe.

    Sure, I'll get right on that boss.

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    Kiwigolfer

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    Re: WTF is the matter with people

    Post  Kiwigolfer on Fri Apr 19, 2013 12:58 pm

    Poe4soul wrote:
    Fluffy wrote:I dont have money..... Crying or Very sad

    Talking about this money you guys are making me feel suicidal.... bom

    I didn't have money when I was 25 either.

    Ditto ...
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    Kiwigolfer

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    Re: WTF is the matter with people

    Post  Kiwigolfer on Fri Apr 19, 2013 1:09 pm

    Just a question for you guys talking about 15-30 year finance. Are you locked into that arrangement for that time? What if you want to sell your house and break the loan. Is the finance fixed to your home/business or to you personally and transferable to new or other assets? The longest I have ever fixed a loan for is 3 years. My current loan is only two years though I always have a mix of floating and fixed rates. The longest I ever considered fixing was 5 years when the rates were at an all time low in 2003 but in the end couldn't bring myself to fix for that long.
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    Mongrel

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    Re: WTF is the matter with people

    Post  Mongrel on Fri Apr 19, 2013 1:26 pm

    U.S. home loans are typically mortgages secured with deeds of trust with the home (real estate) as the only collateral for the loan. If you want to sell your house, you just pay off the balance of your mortgage at the closing. In some cases, there may be a pre-payment penalty for paying it off early but the deals are written so that the pre-payment penalty clauses expire after a couple of years. Exceptions might be pre-payment clauses in owner-financed deals where the owner (seller) was looking for a fixed long-term yield.

    American homeowners typically will re-finance their loans at regular intervals when the values of their real estate have gone up and when the market mortgage interest rates are lower than what they got when they made the last loan. U.S. tax law gives a break to those who refinance their mortgages and take cash out of the deal because that tax is not taxed.

    Of course when your house is worth less now than it was when you bought it and your mortgage balance exceeds the market value of the real estate, you are under-water and your lender is under-collateralized. Refinancing under these circumstances is about impossible but there is the magic of U.S. Bankruptcy Code Chapter 13 wherein you can file the case and hopefully the Court will persuade the lender to reduce the amount of your indebtedness. After that happens, you keep on making the newly reduced payments and then at some point in time in the future the value of houses (including yours) goes back up and maybe you can refinance it and get some cash out of the deal and the cycle begins anew.
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    Poe4soul

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    Re: WTF is the matter with people

    Post  Poe4soul on Fri Apr 19, 2013 1:39 pm

    Kiwigolfer wrote:Just a question for you guys talking about 15-30 year finance. Are you locked into that arrangement for that time? What if you want to sell your house and break the loan. Is the finance fixed to your home/business or to you personally and transferable to new or other assets? The longest I have ever fixed a loan for is 3 years. My current loan is only two years though I always have a mix of floating and fixed rates. The longest I ever considered fixing was 5 years when the rates were at an all time low in 2003 but in the end couldn't bring myself to fix for that long.

    As mongrel posted for private residence. My busines property loan resets every five years to the a wall street published rate plus a point. The loan does have a minimum or floor rate as well.
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    FamousDavis
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    Re: WTF is the matter with people

    Post  FamousDavis on Fri Apr 19, 2013 2:17 pm

    Kiwigolfer wrote:Just a question for you guys talking about 15-30 year finance. Are you locked into that arrangement for that time? What if you want to sell your house and break the loan. Is the finance fixed to your home/business or to you personally and transferable to new or other assets? The longest I have ever fixed a loan for is 3 years. My current loan is only two years though I always have a mix of floating and fixed rates. The longest I ever considered fixing was 5 years when the rates were at an all time low in 2003 but in the end couldn't bring myself to fix for that long.

    No, you get a mortgage with no prepayment penalty. I think you guys must do things differently in New Zealand.
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    FamousDavis
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    Re: WTF is the matter with people

    Post  FamousDavis on Fri Apr 19, 2013 2:20 pm

    Poe4soul wrote:
    FamousDavis wrote:
    Poe4soul wrote:
    FamousDavis wrote:
    Obviously you are missing my point. I never said that I couldn't put together an Excel spreadsheet to figure out the pros and cons of a refinanced mortgage.

    Then what was your point? I'm a bit obtuse in regards personal relationships. I might have missed some ques along the way. I just thought you needed to reality to show how much money it is in a short period of time. 8 years = $25K, pretty amazing. And we're talking low interest rates. It's no wonder people dig themselves into serious holes with high interest notes like credit cards rates.

    No, I appreciate you putting the spreadsheet together. Can you do another one? Please do one comparing my 27 years remaining on a 30 year loan at 4.375% vs. a 15 year loan at 2.75%, no fees. Just do it by year. Thanks, I would do the spreadsheet myself but I just caught a delicious sea bass and I'm letting it breathe.

    Sure, I'll get right on that boss.


    Have it on my desk before EOB. I'll be interested to see your finished work product. Let's hope for your sake it's better than your last performance. Remember, weekends are not automatic. You must earn them.

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