Tax Write-Offs: Go to any income tax site and figure out what tax bracket you're in. While you're there, write down the different brackets. Go out and do something that's "a write-off". It's free, right? That's how "those rich people do it", right? I'm in the 33% bracket. Let's write-off a $200 item: so now I don't have to pay taxes on that $200 bucks. How much does that save me? 200 x 0.33 = $66. The moral? Write off what you must spend money on, but never, ever spend money to get "a write-off".

Mortgage Interest Deduction: Such a good deal paying off a mortgage is a fool's dream, right? Let's look at a $200,000 mortgage balance at 6%. No matter where you are in the life of the loan, the interest paid for that year is (balance x interest rate), in this case 200,000 x .06 = $12,000 interest paid this year. But we get to deduct that from our income taxes!! Hooray!! $12,000 x (tax rate) = $4,000 in taxes we didn't have to pay!! So those mental giants who tell you not to pay down or pay off your mortgage because the deduction is just so very valuable are suggesting you should continue to send the bank $12,000 in order to avoid sending Uncle Sam $4,000.

Deductions and Write-Offs II: Neither of the above apply unless you itemize your deductions at tax time, which 78% of Americans do not do.

Amortization: Touched on above. "The interest is all paid up front". How many times have you heard that? Wrong. The amount of interest paid is outstanding balance times interest rate - no matter whether you got the mortgage yesterday or 25 years ago.

ARMs (Adjustable Rate Mortgages): in the 1970s interest rates went through the roof. Money markets were paying 12%! Savings accounts around 9%! Well, the banks had previously leant money out for mortgages at 7 or 8%. So they were losing. Banks don't lose. They invented the ARM. No longer would they have risk in rising interest rate environments - all the risk gets transferred to the mortgage holder - you. Ever wonder why they were spending billions of dollars advertising "low introductory rates" a couple of years ago? Interest rates dipped to and remained at 45-year lows. Which way are they going to go? Up. Who's gonna pay? You. How much? Well, the teaser rate can rise by up to 2%. .02 x 200,000 = $4,000 per year or 334 extra dollars per month. Surprise!!

That's an intro. A later installment will cover the stupidity of car payments, the real story on rental homes, who wins with credit cards, and how the most successful marketing campaign in the history of mankind has the majority of Americans believing they cannot have what they want if they don't borrow the money for it.

Why would I do this selfless thing? Because someone must tell the children about Stevie Ray and how money works, so they can afford the Gixxers of their choice and multiple copies of "Texas Flood".

So where's the second installment? If what you're saying is true, and I trust it is, I like to hear these types of things. Keep going.

By the way Stevie kicks ass (my roomate and I constantly disagree about this, but I'm with you!)

Yeah, lets here some more. These are practical and enjoyable to read.

I agree with nearly all of what you wrote and DEFINITELY would like to hear your input on the others.

Amortization: Touched on above. "The interest is all paid up front". How many times have you heard that? Wrong. The amount of interest paid is outstanding balance times interest rate - no matter whether you got the mortgage yesterday or 25 years ago.

True, but if you do the math, first payment is mostly interest, 330th payment is mostly principle. What does NOT change, however, is the amount of the actual payment.

Other than that, you're right on target.

--Wag--

I agree with nearly all of what you wrote and DEFINITELY would like to hear your input on the others.



True, but if you do the math, first payment is mostly interest, 330th payment is mostly principle. What does NOT change, however, is the amount of the actual payment.

Other than that, you're right on target.

--Wag--
You are correct, it would not be 12000 in the equation he posted above, but he's probably fairly close. It would acutally go like this:

$200,000 Starting Principal Balance
6% Interest Rate
Approximate $1200.00 Monthly P & I Payment (give or take a few dollars on a conventional mortgage)


............................Prin....... Int............. Balance
Payment 1: $200.00..$1000.00..... $199,000.00
Payment 2: $205.00..$995.00........$198,795.00
Payment 3: $206.02..$993.98........$198,588.98
Payment 4: $207.05..$992.95........$198,381.93
Payment 5: $208.09..$991.91........$198,173.84
Payment 6: $209.13..$990.87........$197,964.71
Payment 7: $210.18..$989.82........$197,754.53
Payment 8: $211.2 ...$988.77 .......$197,543.30
Payment 9: $212.28..$987.72........$197,331.02
Payment 10: $213.3..$986.66........$197,117.68
Payment 11: $214.41..$985.59......$196,903.27
Payment 12: $215.48..$984.52......$196,687.79

So in the first year you'd pay $10,899.07 and you'd pay less each subsequent year. It usually takes about 2/3 of your loan before you pay more principal than interest each month.


But to Dorkfish's point, I work for a bank and over the years I've seen many many many wealthy people take out a loan when they have more than ample money to buy a property outright. I've never received a reason that made perfect sense.

. . . over the years I've seen many many many wealthy people take out a loan when they have more than ample money to buy a property outright. I've never received a reason that made perfect sense.

I've seen the same thing. I never could figure that one out.

--Wag--

Sorry for the delay, guys. I lost the piece of paper I had my brain storm on it. So, soon as I remember what I was going to say, I'll start another thread.

Originally Posted by LowItalian
. . . over the years I've seen many many many wealthy people take out a loan when they have more than ample money to buy a property outright. I've never received a reason that made perfect sense.

I don't know much about the money market, but let's say these wealthy people had their money in investments/ CD's etc that were yielding higher intreast than the mortgage is costing, wouldn't they be winning? Since they're wealth I'm sure they would have a really low intreast rate. If they were to buy a section 8 property for a tax break and it was only costing them say 6%, but their investments were double the intreast they were paying and sold the property within 5-10 years after buying, wouldn't the equity be more of an offset than just paying cash?

Like I said, I don't really know, this is just how I think.. I'm really liking dork fish's reads..

The difference between a savings and debt is earning something and just taking something. By taking something, in the end, you are always paying for it.

So where's part II? That's some good common sense stuff there. I'll be looking at a car loan sometime soon, so I'd like to see you lay out the facts on them. I'm still young yet and a financial novice at best, so I'm sure I'm missing some points somewhere.

What's the latest Dorkfish?

Jonny

Mortgage Interest Deduction: Such a good deal paying off a mortgage is a fool's dream, right?
possibly!

say you can borrow equity out of your house at 7% and invest it in cd's at 6%. looks like you lose money each year, eh? [both get reduced by taxes, so ignore that]
no:nono
1. the investment compounds, but the mortgage interest does not. if you can make the first few payments without touching the cash from the equity loan, in few years you are earning more than you are paying. if you can get the average of the stock market, say 10%, your quality of life in retirement may be a lot better.
2. if you lose your job, the bank will not extend you a home equity loan. in other words, wouldn't yo like to have the money available for an emergency?
3. if you lose your job and cannot make payments, the bank is much more likely to foreclose if you have a small mortgage than if you have a large one. why, because the will want to work with you if you have a large one, because they don't want to lose money.

now why would you want to pay off your house?:shifty

"i have seen wealthy people with plenty of money borrow money to buy a house, and I dont understand why" (not actual quote but close enough)

They arent wealthy for nothing, they gotz skeelz ;-) Besides, they rather have the cash handy, just in case.

I prefer to use OPM whenever I can (other peoples money). Whether it be for a personal purchase or an investment. However, here is one scenario to think about....

I want to buy a car (i will use this because its easier, but could be a house, boat, whatever) and I have $200,000 in the bank. If I get a loan for the car my payment might be $600 month (nice car of course). Instead of taking out $45,000 of MY cash (thats probably earning me approx. 6% just sitting in the bank anyways) I am going to look for an investment that will pay for that new car. If I find a 4-plex for $150,000 that each unit is renting for $500 month ($2000 total). I put down 10% (15,000) and purchase it at 7% interest (Rough est. payment $1000). I use the remaining monthly income from this investment to pay for my car, while also putting a small portion every month away for potential repairs on the property ($1000 payment on 4-plex, $600 car payment, $400 put away for a few months for potential repairs = $2000 rent). Other people are paying for me to have a nice new car. In 5 years (or sooner) when the car is paid for, I now have my wonderful car AND I have this 4-plex thats generating me an additional $1000 month, and I bought them both for $15k of my money, which I can replace now from the rents on the 4-plex and potential appreciation.

This is one scenario, and the numbers are rough, but I hope it makes sense. There are other options as well ;-)

You are correct, it would not be 12000 in the equation he posted above, but he's probably fairly close. It would acutally go like this:

$200,000 Starting Principal Balance
6% Interest Rate
Approximate $1200.00 Monthly P & I Payment (give or take a few dollars on a conventional mortgage)


............................Prin....... Int............. Balance
Payment 1: $200.00..$1000.00..... $199,000.00
Payment 2: $205.00..$995.00........$198,795.00
Payment 3: $206.02..$993.98........$198,588.98
Payment 4: $207.05..$992.95........$198,381.93
Payment 5: $208.09..$991.91........$198,173.84
Payment 6: $209.13..$990.87........$197,964.71
Payment 7: $210.18..$989.82........$197,754.53
Payment 8: $211.2 ...$988.77 .......$197,543.30
Payment 9: $212.28..$987.72........$197,331.02
Payment 10: $213.3..$986.66........$197,117.68
Payment 11: $214.41..$985.59......$196,903.27
Payment 12: $215.48..$984.52......$196,687.79

So in the first year you'd pay $10,899.07 and you'd pay less each subsequent year. It usually takes about 2/3 of your loan before you pay more principal than interest each month.


But to Dorkfish's point, I work for a bank and over the years I've seen many many many wealthy people take out a loan when they have more than ample money to buy a property outright. I've never received a reason that made perfect sense.

Make 1 or 2 extra payments directly to the principle balance and you will cut roughly 7 years off a 30 yr amort term mortgage

"i have seen wealthy people with plenty of money borrow money to buy a house, and I dont understand why" (not actual quote but close enough)

They arent wealthy for nothing, they gotz skeelz ;-) Besides, they rather have the cash handy, just in case.



What the wealthy do is leverage their money. They borrower money to buy a house at say a 6% interest rate because the money they have in the bank can possible earn them a higher rate of interest than 6% in a nother investment. This is the power of leverage but it take some discipline.

Leverage is the key for sure.

Most people are of the mindset that debt is bad....BUT, not ALL debt is bad. Its all about how you manage the money/credit available to you. Always have an asset to offset any liens you may have. (Car isnt really an asset if you owe $25k and its worth $18k, its a liability) Your house CAN BE an asset, if there is significant equity. But if its just a place your living, and isnt producing you income, its a liability. Yes, you get the appreciation, and in the long run thats great! But in the short term, you pay out for it every month, and it makes you little ;-)

Leverage is the key for sure.

Most people are of the mindset that debt is bad....BUT, not ALL debt is bad. Its all about how you manage the money/credit available to you. Always have an asset to offset any liens you may have. (Car isnt really an asset if you owe $25k and its worth $18k, its a liability) Your house CAN BE an asset, if there is significant equity. But if its just a place your living, and isnt producing you income, its a liability. Yes, you get the appreciation, and in the long run thats great! But in the short term, you pay out for it every month, and it makes you little ;-)

Leverage is the way almost all real state millionaires make their money. They use other people money to buy the properties and float it for a few months before the can flip if for a decent spread after paying the investor off. OTHER PEOPLE'S MONEY, just use it right

Make 1 or 2 extra payments directly to the principle balance and you will cut roughly 7 years off a 30 yr amort term mortgage

1 extra payment a year you mean?

1 extra payment will not cut 7 years off your loan, and the longer you wait to make your principal curtailment the less benifit(time/interest savings) it has to you.

You are correct, it would not be 12000 in the equation he posted above, but he's probably fairly close. It would acutally go like this:

$200,000 Starting Principal Balance
6% Interest Rate
Approximate $1200.00 Monthly P & I Payment (give or take a few dollars on a conventional mortgage)


............................Prin....... Int............. Balance
Payment 1: $200.00..$1000.00..... $199,000.00
Payment 2: $205.00..$995.00........$198,795.00
Payment 3: $206.02..$993.98........$198,588.98
Payment 4: $207.05..$992.95........$198,381.93
Payment 5: $208.09..$991.91........$198,173.84
Payment 6: $209.13..$990.87........$197,964.71
Payment 7: $210.18..$989.82........$197,754.53
Payment 8: $211.2 ...$988.77 .......$197,543.30
Payment 9: $212.28..$987.72........$197,331.02
Payment 10: $213.3..$986.66........$197,117.68
Payment 11: $214.41..$985.59......$196,903.27
Payment 12: $215.48..$984.52......$196,687.79

So in the first year you'd pay $10,899.07 and you'd pay less each subsequent year. It usually takes about 2/3 of your loan before you pay more principal than interest each month.


But to Dorkfish's point, I work for a bank and over the years I've seen many many many wealthy people take out a loan when they have more than ample money to buy a property outright. I've never received a reason that made perfect sense.

here's one: why put $300k down when you could get the loan for lowest rate available (assuming the wealthy person has prime credit rating) let's say 7%. You could take the remaining $250k (after $50k down) and invest in tax free municipal bonds to ensure future income with a real yield of 10 to 15%.

I agree that owning one's home outright is way to go. But, for those lucky enough to have cash reserves to do so, there are financial instruments out there to park cash into. Of course, that applies to about 10% or less of all Americans.

You need to look more carefully at returns on tax free muni bonds.

The "borrow to invest" idea doesn't work because, once corrected for taxes and risk, the math on the whole thing comes unwound.

Plus, what do you get to use the income from the invested capital for? That's right! Paying your mortgage! By the time the smoke clears this idea nets beer and pizza money.

And it is simply a myth that "leverage" is what wealthy people do. Typical wealthy people in this country have done it by building successsful small businesses piece by piece over the course of 20-25 years. The "wealthy" people in real estate using OPM are all too often a couple of market hiccups away from bankruptcy. Nice watch, nice Benz, big house, all the right cards in the wallet, likes to buy lunch, cell phone glued to ear. Find a guy who's been in real estate investing for 30 years without going broke and you'll find the opposite of "leverage". You'll find a guy who knows it's better to own 5 paid-for $200,000 houses that to have $50,000 equity in each of 20 houses.

1 extra payment a year you mean?

1 extra payment will not cut 7 years off your loan, and the longer you wait to make your principal curtailment the less benifit(time/interest savings) it has to you.

Starting from year 1, if you make 2 extra mortgage payments and apply them directly to your principle balance (no interest) you will cut roughly 7 years off you mortgage assum,ing you have a 30 fixed Convention loan

"And it is simply a myth that "leverage" is what wealthy people do.......You'll find a guy who knows it's better to own 5 paid-for $200,000 houses that to have $50,000 equity in each of 20 houses."

I have to disagree (cuz its my right and all). Leverage is definitly the way to go, but you have to be careful. You do have MANY multi-millionaires in this country from small business, no doubt about it. This is a great way to get where you want to be for people who have a love of their business. But it isn't the only way or best way for everyone.

I would rather be the man with 20 houses myself....and here is why-
Joe has 5 $200k houses as stated above. These are paid off ($1,000,000). Lets say, for ease of calculations, over the next 30 years, these appreciate 10%. Joe now has 5 $220k houses paid off ($1,100,000), increasing his value by $100k. Bob has 20 $200,000 properties that he bought by leveraging his $1,000,000. He owns $4,000,000 in property (albeit $3,000,000 is mortgaged). In 30 years, he gets the same 10% appreciation, and his tenants pay off these mortgages, he now has $4,400,000 worth of property...paid off. (yes, there are repairs etc. along the way that might cut into some of his equity situations, but this is just to be easy)

Oh, but there is a down side, what if they market goes south....Joes property DEPRECIATES 10% and each of his 5 houses is now only worth , $180k. Now his $1,000,000 (which was his initial CASH investment in his 5 houses) is only $900k
Bob is in the same market and had the same hit. His 20 houses are only worth $180k a piece. His $1,000,000 investment is now worth $600k. OUCH Bob. However, Bob is smart and knows that the housing market (based on historical trends) does not always stay down, so he sticks it out and recovers later.

This is, however, why you must be careful of how you buy, and what you buy. If you are careful enough to buy right, a down market will not hurt you and leverage is your friend. A smart real estate investor, will not buy something at market value, but rather get it 20-30% below value, then any down turn will not effect his investment.

It really depends on your goals and where you are in your life. If you are just starting out, leveraging is a good thing (IF used wisely) if you are in your later years, and are preparing to retire, the cash reserves are more handy, since you dont have the time to let the $$ build up.

Bob: 5 paid-for $200,000 houses. Each rented at $1,200/month. Monthly cash flow - $6,000 which Bob saves in a money market at 3.5%. In 32 months, Bob buys another paid-for $200k house. Monthly cash flow now $7,200. In 28 months, Bob buys another paid-for $200,000 house. Now it's $8,400/month and another new house in 23 months. Now 9600/month; new house in 20 months. Now 10,800/month; new house in 18 months. Now 12,000/month; new house in 16 months.... and so on until you hit the 30 year mark.

I got bored doing the math all the way through, because by the 22 year point, Bob is buying a new $200,000 house with cash every 6 months. So let's just say for the last 5 years of the 30, Bob just puts the rent money in the money market and leaves it alone.

Bob thusly arrives 30 years hence with 29 paid-for houses. If none of them appreciated at all, they would be worth (29x200,000)=$5,800,000. Rent from them equals (29x1,200)=$34,800/month or $417,600/year. The rent money Bob just saved instead of buying more rentals is now $2,237,000.

Joe has 20 mortgages of $150,000 at 6% on each of 20 $200,000 houses. He rents them all out for $1,200/month. The mortgage payment is $900/month for the same $6000/month. In all honesty, you can take that money and do lots of productive things with it giving Joe a pretty good chance against Bob. More houses, mutual funds whatever. Apparently, Joe is in pretty good shape.

It's in reality that Joe finds trouble: in reality, renters don't always pay. Local economies sometimes falter. Sometimes interest rates fall so far that anyone can buy a house and the bottom falls out of rent pricing. Sometimes banks decide you've got too much debt and call your notes. Sometimes the housing market falls and your low-equity position (not what is described for Joe, but all too common nonetheless) means you have to write a check to sell the houses. Sometimes developers come in and build nice apartment complexes with full amenities right next to your rental. In other words, there is a jillion things that can go wrong in assuming that it'll always be easy to pay the mortgages. If a third of Joe's renters suddenly lost their jobs and quit paying - he's in trouble. Right now, today. Long before you can get them evicted and get the house re-rented, it's panic sale time and there's Bob standin there with cash. Bob has been a pretty happy-go lucky guy throughout this deal. Renter's a deadbeat? Find another one - no hurry there's no bank to scream at me. Housing market collapsing - hey, good time to buy more. Need to lower rent by a bunch to keep the place occupied - hey, no problem, I just slow my plan down for a while instead of imploding.

Debt adds tremendous amounts of risk to any type of transaction. Most older real estate professionals who have seen the good times and the bad are not nearly as enamored of "leverage" as the younger ones are. But a very large number of the youngsters are currently heading for a huge crash. If, instead of using the often half-baked concept of OPM or leverage, I go slow, take my time getting only the best bargain, get a little fixer-upper for cash, get it rented, get more cash flowing, carefully find another, more cash, learning every nook and cranny of local real estate, ear to the ground, save up, find another great deal, and so on; not only am I building a business that can be successful in any market condition, I'm developing self-discipline and control, patience, and money handling habits that guarantee prosperity. It may take a dozen years or so, but when you get there, the foundation is so much stronger without debt that it's not even comparable.

I agree with your figures completely.

In reality (which is where I live too) I buy properties (5 or 6) far below market, fix them up, rent them, sift through the bad, sell off 2 or 3, keep 2 or 3, take the proceeds and buy another. Each time, I pay down the other mortgages on the kept ones, decreasing the term.

The key to your response is all in "TAKE IT SLOW". Both scenarios work and work well, you just have to know your market and know yourself (mostly yourself).

I prefer not to buy (as I said before I think) at market or even close. Example, last property i bought appraised at $71k (I live in alabama, so this is an actual appraisal hehe) 3br 2ba. I picked it up for $42k (mortgaged $38k) When done my total (including the $42k) will be $52k. Its on the market for $68k. If it doenst sell in 3 months, I will rent it for $650, if it does sell, I walk away with approx. $12k (after fees etc.)

You make money buying your property, not when you sell it.

(side note)
This is oddly my favorite thread to date....yes...I am a funky geek lol

[quote=Dorkfish
Debt adds tremendous amounts of risk to any type of transaction. Most older real estate professionals who have seen the good times and the bad are not nearly as enamored of "leverage" as the younger ones are. But a very large number of the youngsters are currently heading for a huge crash. If, instead of using the often half-baked concept of OPM or leverage, I go slow, take my time getting only the best bargain, get a little fixer-upper for cash, get it rented, get more cash flowing, carefully find another, more cash, learning every nook and cranny of local real estate, ear to the ground, save up, find another great deal, and so on; not only am I building a business that can be successful in any market condition, I'm developing self-discipline and control, patience, and money handling habits that guarantee prosperity. It may take a dozen years or so, but when you get there, the foundation is so much stronger without debt that it's not even comparable.[/quote]

Debt free the way to be...

I can wait for your other installments, I couldn't agree with your more and find your posts very interesting.

How to do better than having your house stay debt free. Example:

1. Borrow $200,000, using an interest only mortage , 6.5% 30 years. This is a current rate and product.

2. Invest the $200,000 in three categories:
a. 20% - safe interest and dividend producing. enough to cover 5 years of payments. this bucket of funds can be used to make the payments if the market drops and effects the other investments that are exposed to market fluctuations. you never want to withdraw funds in a down market. this way you can wait up to five years for the stock market to return. if it takes longer, you have the second category that will maintain your investment indefinitely.
b. 30% - investments that will prosper in a good stock market, but be protected in a down market by returning your principle: principle protected structured equity notes and variable annuities (tax deferred)
c. 50% - stocks (mutual funds & unit investment trusts). these will have the highest returns over time, but need to be left alone in down markets.

With this investment mix and loan payment strategy, you could repay the loan at any time and conservatively expect an average return of 9%.

If you cashed out after 30 years, (ignoring taxes, not an insignificant drain, but there is a way to invest tax free - for another post...) you would have an extra $722,000. Now if you invested well and get the returns that institutional investors average, you would have well over $2,500,000. Meanwhile, you still get the appreciation of the value of the house. Which of course could be used along the way to refinance and use even more equity...:biggrin

Debt adds tremendous amounts of risk to any type of transaction. Most older real estate professionals who have seen the good times and the bad are not nearly as enamored of "leverage" as the younger ones are. But a very large number of the youngsters are currently heading for a huge crash. If, instead of using the often half-baked concept of OPM or leverage, I go slow, take my time getting only the best bargain, get a little fixer-upper for cash, get it rented, get more cash flowing, carefully find another, more cash, learning every nook and cranny of local real estate, ear to the ground, save up, find another great deal, and so on; not only am I building a business that can be successful in any market condition, I'm developing self-discipline and control, patience, and money handling habits that guarantee prosperity. It may take a dozen years or so, but when you get there, the foundation is so much stronger without debt that it's not even comparable.

all good advice! especially "learning every nook and cranny of local real estate" & "self-discipline and control, patience".

i would strike the word "tremendous" from your description of debt. it does indeed, need to be managed, though.

a doberman, a .45 and a gixxer can all add tremendous amounts of risk, but personally, i choose to manage them all...

what successful firm has no debt? your real estate dealings are indeed a business. if you managed your debt differently, it could reward you. however, everyone needs to be able to sleep at night and taking half of your portfolio for sleeping pills is not a good strategy:lol

Sorry Rip, I'm stickin with "tremendous". I haven't analyzed your deal yet, but off the top of my head I'd say there's no possible way I'm going to put the home where my children live at risk in order get involved in any type of "can't lose" investment. For another thing, I can't see how $200,000 invested at 9% pays the 6.5% mortgage on $200,000 and ends up with over 700k at the end.

http://www.usatoday.com/money/companies/2002-08-21-debt-free_x.htm

http://www.buffettsecrets.com/warren-buffett-debt.htm

Most good investments contain risk. I cant (off the top of my head) think of an investment with a good return thats risk free. Its just a matter of how you manage that risk and attempt to mitigate it to the best of your ability.

Wealth does not come overnight (there are those who hit on the "golden ticket" and are exceptions) And if it does come over night, usually its gone just as fast as it arrived, because these people do not know how to handle their funds and use the same spending habits they had before they had money.

Everyone would like to be debt free, with a multitude of investments, but most people do not have $2000 much less $200,000 to invest. When starting out, using the OPM method is a good way to go IF it is managed correctly and the individual does not step outside of their comfort zone. Many tend to want to grow to fast, and over extend. This leads to their downfall quickly.

Does someone want to buy me a house :)

I love these threads by the way, keep up the good debate...I mean work. :thumbup

Starting from year 1, if you make 2 extra mortgage payments and apply them directly to your principle balance (no interest) you will cut roughly 7 years off you mortgage assum,ing you have a 30 fixed Convention loan

Wrong.

Director Loan Calculator
Loan Number:
Mortgagor Name:
Amortization Data Amortization Results
Principal Balance: 200,000.00 New P & I: 1,329.52
Loan To Value: 0.000000 Interest Change: 262,204.96
Interest Rate: 7.000000 Payment Change: 1,329.52
Start Date: 06/22/2007 New Maturity Date: 03/22/2036
Maturity Date: 06/21/2037 New Curtailment: 0.00
Payment Frequency: Monthly
Curtailment: 2,600.00

# Date Interest ($) Principal ($) Balance ($)
1 06/22/2007 2600.00 197400.00
2 06/22/2007 1151.50 178.02 197221.98
3 07/22/2007 1150.46 179.06 197042.92
4 08/22/2007 1149.42 180.10 196862.82
5 09/22/2007 1148.37 181.15 196681.67
6 10/22/2007 1147.31 182.21 196499.46
7 11/22/2007 1146.25 183.27 196316.19
8 12/22/2007 1145.18 184.34 196131.85
9 01/22/2008 1144.10 185.42 195946.43
10 02/22/2008 1143.02 186.50 195759.93
11 03/22/2008 1141.93 187.59 195572.34
12 04/22/2008 1140.84 188.68 195383.66
13 05/22/2008 1139.74 189.78 195193.88
14 06/22/2008 1138.63 190.89 195002.99
15 07/22/2008 1137.52 192.00 194810.99
16 08/22/2008 1136.40 193.12 194617.87
17 09/22/2008 1135.27 194.25 194423.62
18 10/22/2008 1134.14 195.38 194228.24
19 11/22/2008 1133.00 196.52 194031.72
20 12/22/2008 1131.85 197.67 193834.05
21 01/22/2009 1130.70 198.82 193635.23
22 02/22/2009 1129.54 199.98 193435.25
23 03/22/2009 1128.37 201.15 193234.10
24 04/22/2009 1127.20 202.32 193031.78
25 05/22/2009 1126.02 203.50 192828.28
26 06/22/2009 1124.83 204.69 192623.59
27 07/22/2009 1123.64 205.88 192417.71
28 08/22/2009 1122.44 207.08 192210.63
29 09/22/2009 1121.23 208.29 192002.34
30 10/22/2009 1120.01 209.51 191792.83
31 11/22/2009 1118.79 210.73 191582.10
32 12/22/2009 1117.56 211.96 191370.14
33 01/22/2010 1116.33 213.19 191156.95
34 02/22/2010 1115.08 214.44 190942.51
35 03/22/2010 1113.83 215.69 190726.82
36 04/22/2010 1112.57 216.95 190509.87
37 05/22/2010 1111.31 218.21 190291.66
38 06/22/2010 1110.03 219.49 190072.17
39 07/22/2010 1108.75 220.77 189851.40
40 08/22/2010 1107.47 222.05 189629.35
41 09/22/2010 1106.17 223.35 189406.00
42 10/22/2010 1104.87 224.65 189181.35
43 11/22/2010 1103.56 225.96 188955.39
44 12/22/2010 1102.24 227.28 188728.11
45 01/22/2011 1100.91 228.61 188499.50
46 02/22/2011 1099.58 229.94 188269.56
47 03/22/2011 1098.24 231.28 188038.28
48 04/22/2011 1096.89 232.63 187805.65
49 05/22/2011 1095.53 233.99 187571.66
50 06/22/2011 1094.17 235.35 187336.31
51 07/22/2011 1092.80 236.72 187099.59
52 08/22/2011 1091.41 238.11 186861.48
53 09/22/2011 1090.03 239.49 186621.99
54 10/22/2011 1088.63 240.89 186381.10
55 11/22/2011 1087.22 242.30 186138.80
56 12/22/2011 1085.81 243.71 185895.09
57 01/22/2012 1084.39 245.13 185649.96
58 02/22/2012 1082.96 246.56 185403.40
59 03/22/2012 1081.52 248.00 185155.40
60 04/22/2012 1080.07 249.45 184905.95
61 05/22/2012 1078.62 250.90 184655.05
62 06/22/2012 1077.15 252.37 184402.68
63 07/22/2012 1075.68 253.84 184148.84
64 08/22/2012 1074.20 255.32 183893.52
65 09/22/2012 1072.71 256.81 183636.71
66 10/22/2012 1071.21 258.31 183378.40
67 11/22/2012 1069.71 259.81 183118.59
68 12/22/2012 1068.19 261.33 182857.26
69 01/22/2013 1066.67 262.85 182594.41
70 02/22/2013 1065.13 264.39 182330.02
71 03/22/2013 1063.59 265.93 182064.09
72 04/22/2013 1062.04 267.48 181796.61
73 05/22/2013 1060.48 269.04 181527.57
74 06/22/2013 1058.91 270.61 181256.96
75 07/22/2013 1057.33 272.19 180984.77
76 08/22/2013 1055.74 273.78 180710.99
77 09/22/2013 1054.15 275.37 180435.62
78 10/22/2013 1052.54 276.98 180158.64
79 11/22/2013 1050.93 278.59 179880.05
80 12/22/2013 1049.30 280.22 179599.83
81 01/22/2014 1047.67 281.85 179317.98
82 02/22/2014 1046.02 283.50 179034.48
83 03/22/2014 1044.37 285.15 178749.33

84 04/22/2014 1042.70 286.82 178462.51
85 05/22/2014 1041.03 288.49 178174.02
86 06/22/2014 1039.35 290.17 177883.85
87 07/22/2014 1037.66 291.86 177591.99
88 08/22/2014 1035.95 293.57 177298.42
89 09/22/2014 1034.24 295.28 177003.14
90 10/22/2014 1032.52 297.00 176706.14
91 11/22/2014 1030.79 298.73 176407.41
92 12/22/2014 1029.04 300.48 176106.93
93 01/22/2015 1027.29 302.23 175804.70
94 02/22/2015 1025.53 303.99 175500.71
95 03/22/2015 1023.75 305.77 175194.94
96 04/22/2015 1021.97 307.55 174887.39
97 05/22/2015 1020.18 309.34 174578.05
98 06/22/2015 1018.37 311.15 174266.90
99 07/22/2015 1016.56 312.96 173953.94
100 08/22/2015 1014.73 314.79 173639.15
101 09/22/2015 1012.90 316.62 173322.53
102 10/22/2015 1011.05 318.47 173004.06
103 11/22/2015 1009.19 320.33 172683.73
104 12/22/2015 1007.32 322.20 172361.53
105 01/22/2016 1005.44 324.08 172037.45
106 02/22/2016 1003.55 325.97 171711.48
107 03/22/2016 1001.65 327.87 171383.61
108 04/22/2016 999.74 329.78 171053.83
109 05/22/2016 997.81 331.71 170722.12
110 06/22/2016 995.88 333.64 170388.48
111 07/22/2016 993.93 335.59 170052.89
112 08/22/2016 991.98 337.54 169715.35
113 09/22/2016 990.01 339.51 169375.84
114 10/22/2016 988.03 341.49 169034.35
115 11/22/2016 986.03 343.49 168690.86
116 12/22/2016 984.03 345.49 168345.37
117 01/22/2017 982.01 347.51 167997.86
118 02/22/2017 979.99 349.53 167648.33
119 03/22/2017 977.95 351.57 167296.76
120 04/22/2017 975.90 353.62 166943.14
121 05/22/2017 973.83 355.69 166587.45
122 06/22/2017 971.76 357.76 166229.69
123 07/22/2017 969.67 359.85 165869.84
124 08/22/2017 967.57 361.95 165507.89
125 09/22/2017 965.46 364.06 165143.83
126 10/22/2017 963.34 366.18 164777.65
127 11/22/2017 961.20 368.32 164409.33
128 12/22/2017 959.05 370.47 164038.86
129 01/22/2018 956.89 372.63 163666.23
130 02/22/2018 954.72 374.80 163291.43
131 03/22/2018 952.53 376.99 162914.44
132 04/22/2018 950.33 379.19 162535.25
133 05/22/2018 948.12 381.40 162153.85
134 06/22/2018 945.90 383.62 161770.23
135 07/22/2018 943.66 385.86 161384.37
136 08/22/2018 941.41 388.11 160996.26
137 09/22/2018 939.14 390.38 160605.88
138 10/22/2018 936.87 392.65 160213.23
139 11/22/2018 934.58 394.94 159818.29
140 12/22/2018 932.27 397.25 159421.04
141 01/22/2019 929.96 399.56 159021.48
142 02/22/2019 927.63 401.89 158619.59
143 03/22/2019 925.28 404.24 158215.35
144 04/22/2019 922.92 406.60 157808.75
145 05/22/2019 920.55 408.97 157399.78
146 06/22/2019 918.17 411.35 156988.43
147 07/22/2019 915.77 413.75 156574.68
148 08/22/2019 913.35 416.17 156158.51
149 09/22/2019 910.92 418.60 155739.91
150 10/22/2019 908.48 421.04 155318.87
151 11/22/2019 906.03 423.49 154895.38
152 12/22/2019 903.56 425.96 154469.42
153 01/22/2020 901.07 428.45 154040.97
154 02/22/2020 898.57 430.95 153610.02
155 03/22/2020 896.06 433.46 153176.56
156 04/22/2020 893.53 435.99 152740.57
157 05/22/2020 890.99 438.53 152302.04
158 06/22/2020 888.43 441.09 151860.95
159 07/22/2020 885.86 443.66 151417.29
160 08/22/2020 883.27 446.25 150971.04
161 09/22/2020 880.66 448.86 150522.18
162 10/22/2020 878.05 451.47 150070.71
163 11/22/2020 875.41 454.11 149616.60
164 12/22/2020 872.76 456.76 149159.84
165 01/22/2021 870.10 459.42 148700.42
166 02/22/2021 867.42 462.10 148238.32
167 03/22/2021 864.72 464.80 147773.52
168 04/22/2021 862.01 467.51 147306.01
169 05/22/2021 859.29 470.23 146835.78
170 06/22/2021 856.54 472.98 146362.80
171 07/22/2021 853.78 475.74 145887.06
172 08/22/2021 851.01 478.51 145408.55
173 09/22/2021 848.22 481.30 144927.25
174 10/22/2021 845.41 484.11 144443.14
175 11/22/2021 842.58 486.94 143956.20
176 12/22/2021 839.74 489.78 143466.42

177 01/22/2022 836.89 492.63 142973.79
178 02/22/2022 834.01 495.51 142478.28
179 03/22/2022 831.12 498.40 141979.88
180 04/22/2022 828.22 501.30 141478.58
181 05/22/2022 825.29 504.23 140974.35
182 06/22/2022 822.35 507.17 140467.18
183 07/22/2022 819.39 510.13 139957.05
184 08/22/2022 816.42 513.10 139443.95
185 09/22/2022 813.42 516.10 138927.85
186 10/22/2022 810.41 519.11 138408.74
187 11/22/2022 807.38 522.14 137886.60
188 12/22/2022 804.34 525.18 137361.42
189 01/22/2023 801.27 528.25 136833.17
190 02/22/2023 798.19 531.33 136301.84
191 03/22/2023 795.09 534.43 135767.41
192 04/22/2023 791.98 537.54 135229.87
193 05/22/2023 788.84 540.68 134689.19
194 06/22/2023 785.69 543.83 134145.36
195 07/22/2023 782.51 547.01 133598.35
196 08/22/2023 779.32 550.20 133048.15
197 09/22/2023 776.11 553.41 132494.74
198 10/22/2023 772.89 556.63 131938.11
199 11/22/2023 769.64 559.88 131378.23
200 12/22/2023 766.37 563.15 130815.08
201 01/22/2024 763.09 566.43 130248.65
202 02/22/2024 759.78 569.74 129678.91
203 03/22/2024 756.46 573.06 129105.85
204 04/22/2024 753.12 576.40 128529.45
205 05/22/2024 749.76 579.76 127949.69
206 06/22/2024 746.37 583.15 127366.54
207 07/22/2024 742.97 586.55 126779.99
208 08/22/2024 739.55 589.97 126190.02
209 09/22/2024 736.11 593.41 125596.61
210 10/22/2024 732.65 596.87 124999.74
211 11/22/2024 729.17 600.35 124399.39
212 12/22/2024 725.66 603.86 123795.53
213 01/22/2025 722.14 607.38 123188.15
214 02/22/2025 718.60 610.92 122577.23
215 03/22/2025 715.03 614.49 121962.74
216 04/22/2025 711.45 618.07 121344.67
217 05/22/2025 707.84 621.68 120722.99
218 06/22/2025 704.22 625.30 120097.69
219 07/22/2025 700.57 628.95 119468.74
220 08/22/2025 696.90 632.62 118836.12
221 09/22/2025 693.21 636.31 118199.81
222 10/22/2025 689.50 640.02 117559.79
223 11/22/2025 685.77 643.75 116916.04
224 12/22/2025 682.01 647.51 116268.53
225 01/22/2026 678.23 651.29 115617.24
226 02/22/2026 674.43 655.09 114962.15
227 03/22/2026 670.61 658.91 114303.24
228 04/22/2026 666.77 662.75 113640.49
229 05/22/2026 662.90 666.62 112973.87
230 06/22/2026 659.01 670.51 112303.36
231 07/22/2026 655.10 674.42 111628.94
232 08/22/2026 651.17 678.35 110950.59
233 09/22/2026 647.21 682.31 110268.28
234 10/22/2026 643.23 686.29 109581.99
235 11/22/2026 639.23 690.29 108891.70
236 12/22/2026 635.20 694.32 108197.38
237 01/22/2027 631.15 698.37 107499.01
238 02/22/2027 627.08 702.44 106796.57
239 03/22/2027 622.98 706.54 106090.03
240 04/22/2027 618.86 710.66 105379.37
241 05/22/2027 614.71 714.81 104664.56
242 06/22/2027 610.54 718.98 103945.58
243 07/22/2027 606.35 723.17 103222.41
244 08/22/2027 602.13 727.39 102495.02
245 09/22/2027 597.89 731.63 101763.39
246 10/22/2027 593.62 735.90 101027.49
247 11/22/2027 589.33 740.19 100287.30
248 12/22/2027 585.01 744.51 99542.79
249 01/22/2028 580.67 748.85 98793.94
250 02/22/2028 576.30 753.22 98040.72
251 03/22/2028 571.90 757.62 97283.10
252 04/22/2028 567.48 762.04 96521.06
253 05/22/2028 563.04 766.48 95754.58
254 06/22/2028 558.57 770.95 94983.63
255 07/22/2028 554.07 775.45 94208.18
256 08/22/2028 549.55 779.97 93428.21
257 09/22/2028 545.00 784.52 92643.69
258 10/22/2028 540.42 789.10 91854.59
259 11/22/2028 535.82 793.70 91060.89
260 12/22/2028 531.19 798.33 90262.56
261 01/22/2029 526.53 802.99 89459.57
262 02/22/2029 521.85 807.67 88651.90
263 03/22/2029 517.14 812.38 87839.52
264 04/22/2029 512.40 817.12 87022.40
265 05/22/2029 507.63 821.89 86200.51
266 06/22/2029 502.84 826.68 85373.83
267 07/22/2029 498.01 831.51 84542.32
268 08/22/2029 493.16 836.36 83705.96
269 09/22/2029 488.28 841.24 82864.72
270 10/22/2029 483.38 846.14 82018.58
271 11/22/2029 478.44 851.08 81167.50
272 12/22/2029 473.48 856.04 80311.46
273 01/22/2030 468.48 861.04 79450.42
274 02/22/2030 463.46 866.06 78584.36
275 03/22/2030 458.41 871.11 77713.25
276 04/22/2030 453.33 876.19 76837.06
277 05/22/2030 448.22 881.30 75955.76
278 06/22/2030 443.08 886.44 75069.32
279 07/22/2030 437.90 891.62 74177.70
280 08/22/2030 432.70 896.82 73280.88
281 09/22/2030 427.47 902.05 72378.83
282 10/22/2030 422.21 907.31 71471.52
283 11/22/2030 416.92 912.60 70558.92
284 12/22/2030 411.59 917.93 69640.99
285 01/22/2031 406.24 923.28 68717.71
286 02/22/2031 400.85 928.67 67789.04
287 03/22/2031 395.44 934.08 66854.96
288 04/22/2031 389.99 939.53 65915.43
289 05/22/2031 384.51 945.01 64970.42
290 06/22/2031 378.99 950.53 64019.89
291 07/22/2031 373.45 956.07 63063.82
292 08/22/2031 367.87 961.65 62102.17
293 09/22/2031 362.26 967.26 61134.91
294 10/22/2031 356.62 972.90 60162.01
295 11/22/2031 350.95 978.57 59183.44
296 12/22/2031 345.24 984.28 58199.16
297 01/22/2032 339.50 990.02 57209.14
298 02/22/2032 333.72 995.80 56213.34
299 03/22/2032 327.91 1001.61 55211.73
300 04/22/2032 322.07 1007.45 54204.28
301 05/22/2032 316.19 1013.33 53190.95
302 06/22/2032 310.28 1019.24 52171.71
303 07/22/2032 304.33 1025.19 51146.52
304 08/22/2032 298.35 1031.17 50115.35
305 09/22/2032 292.34 1037.18 49078.17
306 10/22/2032 286.29 1043.23 48034.94
307 11/22/2032 280.20 1049.32 46985.62
308 12/22/2032 274.08 1055.44 45930.18
309 01/22/2033 267.93 1061.59 44868.59
310 02/22/2033 261.73 1067.79 43800.80
311 03/22/2033 255.50 1074.02 42726.78
312 04/22/2033 249.24 1080.28 41646.50
313 05/22/2033 242.94 1086.58 40559.92
314 06/22/2033 236.60 1092.92 39467.00
315 07/22/2033 230.22 1099.30 38367.70
316 08/22/2033 223.81 1105.71 37261.99
317 09/22/2033 217.36 1112.16 36149.83
318 10/22/2033 210.87 1118.65 35031.18
319 11/22/2033 204.35 1125.17 33906.01
320 12/22/2033 197.79 1131.73 32774.28
321 01/22/2034 191.18 1138.34 31635.94
322 02/22/2034 184.54 1144.98 30490.96
323 03/22/2034 177.86 1151.66 29339.30
324 04/22/2034 171.15 1158.37 28180.93
325 05/22/2034 164.39 1165.13 27015.80
326 06/22/2034 157.59 1171.93 25843.87
327 07/22/2034 150.76 1178.76 24665.11
328 08/22/2034 143.88 1185.64 23479.47
329 09/22/2034 136.96 1192.56 22286.91
330 10/22/2034 130.01 1199.51 21087.40
331 11/22/2034 123.01 1206.51 19880.89
332 12/22/2034 115.97 1213.55 18667.34
333 01/22/2035 108.89 1220.63 17446.71
334 02/22/2035 101.77 1227.75 16218.96
335 03/22/2035 94.61 1234.91 14984.05
336 04/22/2035 87.41 1242.11 13741.94
337 05/22/2035 80.16 1249.36 12492.58
338 06/22/2035 72.87 1256.65 11235.93
339 07/22/2035 65.54 1263.98 9971.95
340 08/22/2035 58.17 1271.35 8700.60
341 09/22/2035 50.75 1278.77 7421.83
342 10/22/2035 43.29 1286.23 6135.60
343 11/22/2035 35.79 1293.73 4841.87
344 12/22/2035 28.24 1301.28 3540.59
345 01/22/2036 20.65 1308.87 2231.72
346 02/22/2036 13.02 1316.50 915.22
347 03/22/2036 5.34 915.22 0.00

Hindsight is 20/20 it's going forward we all want to understand.
yes borrow when rates are 12% buy anything bonds stocks real estate and it's a home run in the past 25 years.

One problem here is the bias that the fed will always print money.
increasing the money supply after 1970's we decided to float off the gold standard allowing the fed the ability to inject money into the system faster when needed. Now that we have accellerated this process by creating the debt instruments and derivitaves we have effectivly grown the money supply at a multiple of the feds growthrate in the form of purchasing power. All the while interest rates have fallen for the past 20+ years. Give everyone more money and they will all pay more than the guy next to them.
Yes the bias is that prices always rise.
As prices rise on assets people aquire more bidding up the price and hold longer because they are paid to do so in appreciation.
As long as there is another sucker willing to pay a bit more for the momentum of the higher value till it all reverses. Then everyone finds out what things are really worth.

As well Inflation is another bias as long as the fed can induce or manufacture inflation in a controlled way there will be a bias to borrow and lever the return on assets since they only cost more in the future. If that cycle ever reverses even for a few years the unwind of assets purchased with fixed debt and a negative return will leave Dorkfish overwhelmed providing advice.

As the boomers head to retirement as opposed to aquiring assets they will be monitizing them. Who is going to buy all their crap?
This will be a real problem in this country add to that our record debt loads both consumer and federal and looking at asset values it is only rational to assume they can move either up or down...not just up.

what successful firm has no debt? your real estate dealings are indeed a business. if you managed your debt differently, it could reward you. however, everyone needs to be able to sleep at night and taking half of your portfolio for sleeping pills is not a good strategy:lol

BRKA Berkshire Hathaway
MSFT Microsoft

What money manager compounded capital at close to 20% per year through the great depression is the better question.

Wrong.

Director Loan Calculator
Loan Number:
Mortgagor Name:
Amortization Data Amortization Results
Principal Balance: 200,000.00 New P & I: 1,329.52
Loan To Value: 0.000000 Interest Change: 262,204.96
Interest Rate: 7.000000 Payment Change: 1,329.52
Start Date: 06/22/2007 New Maturity Date: 03/22/2036
Maturity Date: 06/21/2037 New Curtailment: 0.00
Payment Frequency: Monthly
Curtailment: 2,600.00

# Date Interest ($) Principal ($) Balance ($)
1 06/22/2007 2600.00 197400.00



Wrong.

You forgot to add the extra 2 principle payments (every year) which would tremendously reduce paid intreast. Therefore, reducing the amount paid. The 30 year term wont change, but the amount needed to pay the extra intreast could amount to a few years.

Wrong.

You forgot to add the extra 2 principle payments (every year) which would tremendously reduce paid intreast. Therefore, reducing the amount paid. The 30 year term wont change, but the amount needed to pay the extra intreast could amount to a few years.

He said make 2 in year one. Read his post.

He said make 2 in year one. Read his post.

He is basically saying paying biweekly instead of bimonthly. 26 Payments vs. 24 payments... Make sense now? Every 12 years you pay an extra year plus you lower the principle...

He is basically saying paying biweekly instead of bimonthly. 26 Payments vs. 24 payments... Make sense now? Every 12 years you pay an extra year plus you lower the principle...

I am familiar with the concept. At my bank we actually charge people to enter a program that does it automatically (most people don't realize that you are simply making 1 extra payment a year).

We used to use an outsource company called Aegis/Paymap to handle biweekly payments. We now have turned the duty over to our telemarketing dept. Sounds weird i know, but our telemarketing group is cross trained to perform a number of different functions when they aren't making outbound calls.

I am familiar with the concept. At my bank we actually charge people to enter a program that does it automatically (most people don't realize that you are simply making 1 extra payment a year).

We used to use an outsource company called Aegis/Paymap to handle biweekly payments. We now have turned the duty over to our telemarketing dept. Sounds weird i know, but our telemarketing group is cross trained to perform a number of different functions when they aren't making outbound calls.

Arent you making 2 extra payments? Isn't the fee minimimal?

Arent you making 2 extra payments? Isn't the fee minimimal?

The fee is $379.

2 Half payments yes. What I meant was that you could achieve nearly the same results simply by doubling up a payment once a year and save yourself $379.

It isn't exacatly the same but it's close enough, really, the difference is negligible . . . .

I'll shut up now.

:D

--Wag--