Here's a question for those who pay with cash
Elmer J Fudd
9 years ago
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Acadiafun
9 years agoemma
9 years agoRelated Discussions
What items would you pay cash for?
Comments (14)I read someplace about how items purchased and installed by your builder will be covered by their warranty and items you purchase and have them install may not be. I think the example I read was about plumbing. If a faucet you bought and they install leaks and ruins your hardwood, they might not have to fix the mess. However, if their faucet leaks and ruins your hardwood, they would be responsible for fixing/replacing the faucet and your floors. I'm sure someone else around here is way more knowledgeable about this than I am, but I did worry about buying big ticket items on my own. Of course, I did end up buying my farmhouse sink and a few faucets online- I saved a couple hundred dollars that way. Even my builder was impressed with the price I got on a moen faucet on amazon. It definitely wasn't worth it to buy all te plumbing fixtures though. Yes, it might have cost a bit more per item, but at least the builder can deal with all the issues if something needs another drain or connector or if something is broken. Same with light fixtures- we bought a few important ones but left the rest to the lighting store. Not worth the time and effort to save a few bucks. One more thing- appliances. I told the builder I was shopping online and thought we might just want a 7k credit. When he sent us a price list for the appliances we selected, the prices were so close to what I could find online that it wasn't worth the effort. I kind of wonder if we got better pricing because I was shopping online and they knew we expected better prices? Maybe? I guess it depends on the relationship you have with your builder. I have many old posts about my annoyance with tile selections. I wish we could have just bought our own and hired our own people to install it, but that's not the type of custom build we're doing. I sucked it up, picked cheap but live able stuff, and we plan to replace it all in a couple years....See MorePaying for property with cash?
Comments (43)this conversation is mostly dead, but i wanted to sound my two bits. my credentials, i am a financial planner. first i hope you did not sink you money into the stock market. i have been in cash for almost a year now and i am no market genius (those who are still in have been shorting the market and making millions all year). it is shocking how many "planners" and brokers urged their clients to "invest for the long term" and hold in the market. if your planner or broker has been saying this this last year, you should fire them. the stock market is not a long term investment. in needs to be watched daily and adjusted daily. money is never lost in the market. it only changes hands. if you lose somebody else won. the winners are those who know what is going on and adjusting their strategy daily. if this is not something you can do, hire somebody who can, get out, or suffer the cost of ignorance as those who know (major investors and fund managers) take your money. Second, i hope you did not bury your cash in a coffee can in the back yard�"in other words, pay cash and hold no mortgage. paying cash is a very expensive way to own a house. the reason being you are burying you money. you will realize appreciation but that is pointless from the standpoint of cash flow and you have to sell to get it. this money could have easily generated more than the cost of holding the mortgage. there are also tax savings on the mortgage debt if you pay it off. this is know as a lost opportunity cost. it is as real of a figure to be calculated just as an fees or interest paid. example: if i pay no interest i loose nothing. right? wrong. i loose out on what i could have done. if i could have made 8% and it cost me 6% for the mortgage i made 2% plus tax savings. FYI i am a lazy investor with most my money managed by others and i make (yeild not average) 24% with no loss of principle risks. with effort you can do better. for me to have this money in my house would be a compounding loss of 18% plus the loss of my mortgage right off. cost of money is important, but is just part of the equation, not the answer to it. the spread or the margin in the number that matters, not the cost. paying off a mortgage can cost you your retirement. the most important part of any financial plan is time. if you spend the first half of you career paying down a mortgage rather than investing, you are shorting yourself. paying down your mortgage faster is almost as bad. mortgage interest is front loaded. you only get the promised rate if you go the term. pay it of faster and the percent paid is higher. what i would recommend people do in such a situation is pay it cash and forgo all the fees associated with financed closings. then immediately after, open a HELOC for the maximum amount possible and start looking for ways to reinvest and grow that capital all the while controlling the real estate. there is no cost to have the HELOC and usually no fee to open it. you can go in and out as much as you want and use it like a private bank. leave non working mey in the realestate, but have access to it to use for opportunities. you only pay interest on what is out and are only required an interest only payment. my house equity actually pays for the house debt and then some because it is working. right now would be a great time to have access to those funds. real estate and stock investment are all on fire sale. if you don't understand the market find someone who does. if you don't understand real estate, read some books and attend some seminars. if you are lazy, look into hard money lending or payday lending for 18-36% interest. buy some rental properties and cash flow them (rents are on the rise) and reap even more tax advantages. there are so many great places to earn money on your money rather than "burying" it. I would recommend the same with permanent life insurance and even investing some funds in it. just do something, actually do lots of different things. risky? i think keeping the money out of the banks control is the best way to minimize risk. give it up to the financial institutions and they will happily follow the the model i am recommending only they won't be sharing the profit with you. to most, this sounds like terrible advice. well most people in this country are not wealthy and have no idea how to become such. learn to act like a rich person, not by spending like one per se, but by understanding that money is not math, it is a commodity and needs to be treated as such. you cannot park it nor can you settle for small returns. personal financial models are worthless. you need to learn business finance principles and apply them to you personal finances. this is then main difference between the wealthy and the non. it is not the amount of money the have (net worth) it is about how much they have to spend (cashflow). many rich people are terribly poor on the books but have plenty to spend. why is that? they understand money and the laws that govern it. your first dollar should be spent on education. build a network of advisers and mentors and for goodness sake don't listen to the talking heads and radio "gurus". if they are so good at making money, why are they working for a radio station and who is paying the bills (banks and investment houses who want your money buying ads). all that said. this opinion is based on the person applying these principles being trustworthy with money. if you can't discipline yourself, pay off the house and invest in a 401k. if you are disciplined, stay away from both. books i would recommend, eye openers all of them: rich dad poor dad (kiosaki) who took my money (kiosaki) LEAP (castiglione) killing sacred cows (gunderson) sorry for the rant and the poor spelling. some of the philosophies presented, even by those with letters after their name were disturbing to me. such advice has cost millions of people billions of dollars this year. any wanting a larger book list or wanting to discuss any of this "crazy" advice further, feel free to contact me off forum or invite me into another discussion. i love this topic and love to offer my opinions. the fee i charge for personal planning advice is zero. one of my personal beliefs is that you don't pay for financial advice. i do what i do because somebody once taught me and i am paying it forward. so you can dismiss any hidden agendas. my opinions are what i personally believe and practice but by no means the only way to the goal. great discussion all-even those i disagree with. thanks for the thread and the interest in helping each other. kendal.liddle@gmail.com...See MorePay cash and get mortgage?
Comments (10)Hello, Bellamy. Here are the reasons: 1. At the price point I'm looking at, there will be some substantial repairs needed. The longer those are delayed, the more damage will occur and the more they will cost, so they should be done right away. Leaky plumbing is different from an ugly kitchen as far as how soon it must be dealt with. A nicer kitchen can easily wait till I get everything paid off. Structural stuff can't. 2. I'm not considering the mortgage deduction at all in deciding whether or not to do it this way, although I would prefer to do the loan as a mortgage so that it's deductible. If I'm paying some interest, why not have it be at least partially deductible, if it can be? I know what you're saying, though. My mother had a friend who was fairly well off and her accountant kept urging her to pay off her older mortgage, which was at a higher interest rate. She wouldn't, because she wanted the deduction, since it was the only big deduction she had. That was silly. 3. Yes, I could pay cash for the house and for the repairs, but it would put me in a position where I would feel very uncomfortable if I had a catastrophic medical situation, for example, and the total cost of the mortgage over its lifetime at the current interest rate would be approximately $4K, plus whatever fees. While it would be nicer not to have to put out that kind of money, to me it would be worth it to know that I could do this and still be set for emergencies and not making a huge dent in my retirement savings (I'm self-employed). I can live hand to mouth and have done that, but it's much pleasanter not to. I totally hate debt, but I've looked at this from a number of different angles and in the long run I think that buying will be cheaper than continuing to pay rent, since I live in a winter resort area and the only places where rents are going down proportionately to the drop in sale prices are those where the owners are in pre-foreclosure and desperate for any income. I don't want to get into that kind of situation. If my income level continues to be what it is now, I should be able to pay off the loan in four or five years at the most, and at worst I could scrape by on minimum wage and still make the basic payment as well as HOA, taxes, insurance. If I could pay cash for everything, if I stayed 6 or 7 years I could give the place away at to charity at the end of that time and really not be out more than I would if I continued to rent the same amount of time. The mortgage interest means I would need another year or so to get to the same place....See MoreAre we better off paying Cash or getting a Mortgage ????
Comments (67)The idea of front loaded interest on mortgages is a bit of a misconception, while you pay more interest in the early years that is only because you owe more money (If you have a 3.9% mortgage then you pay 3.9%/12 on the outstanding balance you owe each month). While that may sound pertinent, the discussion is really about effective interest versus compounding interest. As you pay on your principle you pay less interest, so over time the interest charges are smaller because your principle is smaller. While on an investment you start with a principle and if left alone for some period of time the interest continues adding to the principle and therefore pays more interest. This discussion is largely around the idea of people who have some income coming in and some ability to make payments. While, I could note that guaranteed payment annuities are about equal to house payments, they are no more liquid than houses so not really an investment that is better than a house. In the end, we are discussing people who want to be done with the headache of a mortgage and not people who simply don't have the income to continue paying a mortgage. Edit: It is also important to remember that a 15 year mortgage doesn't mean you have to make 15 years of payments. Making even a few years of payments before liquidating the investments to pay off the balance will typically result in gains. I think a lot of people focus too much on the stress of coming up with the money for monthly payments and forget that any time you get tired of stressing over payments, you can simply liquidate your investment and pay off the loan. While I have said the same thing jn3344 has many times, I have a completely different conclusion. When you have a paid off house and little money in the bank you have no options for dealing with uncertainty. Cash gives you options, the farther you get from cash the less options you have, and nothing is farther from cash than a house. Think of it this way. My father was just this week presented with a treatment option for a medical condition that was not covered by Medicare, the time sensitive treatment was going to cost $35,000, but it would greatly improve his quality of life. What allowed my father to make that decision was having access to $35,000, if he paid for his house outright and didn't have any money then he couldn't make that decision. Now suppose spending this $35,000 means my father will not be able to continue paying his mortgage and will have to move out of his house into a smaller apartment. I feel confident he will tell you walking around his smaller apartment beats not being able to walk around his bigger house. Edit: Many people have a false sense of security from a home. The only real security a paid off home provides is the equity (the access to cash). Homes are fairly inefficient domiciles, the taxes, maintenance and less efficient utilities minimize any real savings over renting. The path to homeless has nothing to do with a paid off house and a lot to do with not enough cash....See Morechristopherh
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