Searching "comments":
| # | Comment | Survey |
|---|---|---|
| 51 | The problem is that people assume it's normal to live in a $200,000 house with a $50,000 mortgage, when they easily could have survived with a $150,000 house and no mortgage. Borrowing should be avoided unless absolutely necessary. One should not borrow in order to pay for a luxury. People's tendency to do this get's them exploited by the banks and financers. | When purchasing an automobile, what has your method of payment been? |
| 52 | Like I said, it may be necessary for low-income people to mortgage, but it is still part of the system by which the rich get richer. They themselves would be happy to tell you how they could have done it better-- ask them some time. :). I don't prefer to talk about your personal situation because it's kind of rude, but, seeing as you brought it up, the advice I already offered would have probably worked for them. Your mom's decision to move out at 18 wasn't a good one. I'm not suggesting that they should have moved in with the parents AFTER marriage, god no! I'm suggesting that the good financial decisions needed to start long before then in order to accomodate the purchase of a property later on. There were certainly less than $70,000 properties available some number of years ago (10? 15?) in America... there are to this day. I can't so for certainty that you could find something in EEEENGland, but certainly in America there are one-bedroom reasonably sized condos that sell for <$40,000... TODAY. And I found fifteen 2 bedroom, 2 bath, condos in Las Vegas for <$50,000. There are a handful of one bedrooms selling for <$25,000 Ten years ago you could have gotten a 2 bedroom in Vegas for about $35,000. And I also only searched the safer zip-codes in Vegas, I'm sure that in the Ghetto there are some HOUSES for $40,000. It may not be prudent but you can generally get a small house (1500 sq. ft.) in a rural area here for less than $60K. I don't know, your property values might be different. My parents didn't have any money when they got married, either. Because they did what I said they ended up with a LOT of money by the time they were in their 50's. They started to get old and senile around that point and some bad decisions were made. There's no reason anyone should ever have a $100,000 home-loan, that's all I'm getting at. It's idiotic. | When purchasing an automobile, what has your method of payment been? |
| 53 | Let's do a thought experiment. Many people pay about $700 a month for a nice one-bedroom apartment in Las Vegas. (Others pay in excess of 1,200, I won't even get into THOSE geniuses). Usually, they dream of owning a home, and eventually get the "credit" to buy a house and clear for a loan. They get married and move into a 150,000 home with a thirty year mortgage, and unless they get rich in the lottery they spend the rest of their lives paying it off. Let's assume one of these fools gets some sense and INSTEAD buys a $30,000 condo on loan. First, the interest rate is significantly less than on a large house because the loan is smaller in relation to income. Putting $600 a month towards this loan at 7.5% interest...(the other $100 goes to homeowners fees and insurance and prop-tax and accounts for closing costs on the laon), they'll pay it off in exactly 5 years. Now, after five years, they OWN A CONDO! What do they do now, move to disney land? Hell no, they move into a new one and rent the old one for $400 a month-$100 a month in expenses and they earn 300 a month on the place. So now they have $900 a month to put towards the new condo loan. Do they A) Buy a bigger condo. or B) HELL NO! They buy another $30,000 condo. B is the correct answer. They buy another $30,000 condo, and pay this one off after just over 3 years. Eight years into the fiasco they have a net worth of $60,000, just from paying their rent! They marry someone who did the same thing, sell the condos, move into a $120,000 house, game over. Never pay rent or mortgage again for the rest of their life. Or we can extrapolate the situation further. Instead of moving into a house they get married and buy a $50,000 2-bedroom condo on loan. They keep on renting their old shacks out for a total monthly income $1200, leaving them with $2400 to put towards the new condo after the personal $600 contributions are each made. They pay off in 2 years. Here we are, 10 years into the thought-experiment, and these folks now own a combined $170,000 in property, just for paying their rent. They move into a 100,000 condo now in a nice area, and frankly are living the high life. Their friends have long since moved into 150,000 dollar "homes" and they get flak for not having a garage... They'll show them. :) They rent the $50,000 condo for 500 a month, and pocket 400 after dealing with expenses. They now have income of 1600 a month. 2800 a month towards the new condo and it is payed off in 3.5 years. They have kids now and need to move into a house. They pay $270,000 for it, and own it straight out, never making another payment in their life. This is 13.5 years from the start date after 1200 a month in payments... or a total of $194,400 investment. How'd that happen? I guess Romkey is right, you can benefit from a home loan... anyways. Again, we can continue the scenario, assuming the kids still but now renting the $100,000 condo for 700, leaving 600 in income, they now have 2200 a month income. With personal contributions they can pay 3400 towards a loan. What happens is that people get tempted to take out a 30-year mortgage on a $1/2 Million dream home at this point, and that's why there aren't many billionaires in the world... but let's keep them smart for a few more rounds. They now buy a slightly less than $150,000 home. Big enough for baby-sized kids and parents. They own this one in 4 years. 17.6 years in, net-worth $420,000. They rent it again. 900 a month and take 800 on that. 3000 a month in income, 4200 a month towards a new loan on a $175,000 house, and 4 years later they own it. Net worth $600,000.. 21.6 years in. Renting the 175,000 yields a take of $900 monthly. 5100 a month towards the next loan. 200,000, 4 years. Kids are 12. They rent the 200,000 for a take of 1000 a month... 6100 a month towards the next loan. They go crazy, buy a $350,000 house. They pay it off in 6 years. The kids are 18, they are worth $950,000. 27.6 years in. Total investment? 600 a month per person-- rent money. Additional benefits? Somewhere to live during the whole period, no rent payments. Amazingly, and against all wisdom, there are people stupid enough to rent $350,000 homes. You can expect to flirt with over 2,500 a month over such an absurd affair. $8,600 a month is now free for the new loan. $1.25 Million amortized over thirty years is the size of the house they can retire in. Maybe they are nice. They give their kids each a house. Let's snap to the couple who took the 30-year mortgage. They are a few years short of paying off their $175,000 house. This is why it is done this way. Now, I know you're thinking, "You're nuts Cody, if that really worked, EVERYBODY would do it..." I answer that by saying... do you think the 5% of Americans who are worth more than $1 Million dollars got there by working? Ha! Tens of millions of people do this exact process! And how does it work? There are always suckers who are willing to rent... and take out big loans. (A variation on this whole scheme is that the individuals started ISSUING mortgage notes.) And again, these people never had a roomate or anything. There are variations on the scheme I could run through involving room-mates at every level up until the family level, where they would end up with over $2 million after 30 years on the same investment. And let's not even get into what the children of these millionaires can do with a little help during the early years... | When purchasing an automobile, what has your method of payment been? |
| 54 | Obviously it is a trade off. You have to accept undesirable short-term outcomes for financial benefit, and most people aren't willing to. The question becomes-- Is money the most important goal in your life? Most people will say "no" for obvious reasons, and therefore they make bad financial decisions in exchange for other benefits. The most obvious problem is that people (especially males) want to LIVE RICH while they are young because they correctly assert that it will make them more attractive to members of the opposite sex to own a big house or a great apartment, than say, to live in a small condo would. My solution for that problem is simply running through the calculations with a girl after you get to know each other... "I don't understand," she says, "You're a lawyer and you live in a $30,000 condo in North-Town?" That's when you get out good-ol Excel and she says... "Oh, I see." | When purchasing an automobile, what has your method of payment been? |
| 55 | And ya'll have "Condo"s Biggles, just like everywhere else-- you even call them that. It's just an apartment that is sold instead of rented-- like a "flat". | When purchasing an automobile, what has your method of payment been? |
| 56 | I looked at property values before I made the original post. In general you are right, but there are also cheap properties in the UK... And I hate to take a pot-shot, but I'm going to... *Everything* is cheaper here because our economy is better due to our being a capitalist country where freedom is rampant. That being said, ya'll have lower expectations for size and quality, and since homes (like cars, clothes, etc.) are generally purchased with the intent of displaying social status, you can be just as upper-class there for $200,000 as you can here... http://news.bbc.co.uk/1/hi/business/1841835.stm There are towns where the AVERAGE house is $60,000. Are you telling me you can't find a $35,000 condo in one of those places? How about 10 years ago...? The dynamics of the situation are slightly different, yes, but the reality remains that there is no need for big loans-- here or there-- just a desire for them because people have high demands and want to live in certain areas. The more you make, the more you want to spend. People who can't afford $100,000 houses, here or there, make do with less and do fine, and people who can, refuse to make do with less. Essentially you're inventing in your mind major differences between the UK and here in terms of this issue, when there really aren't any. People here say the same thing.., "Oh, there's no way you could ever find a condo for $30K. Besides, it's not the type of place you want to live." You missed my point about the fact that the good financial decisions need to start early if you don't want to be fudgeed by the time you HAVE a family. | When purchasing an automobile, what has your method of payment been? |
| 57 | Jaja! I don't care to speculate about Romkey's financial situation. It's irrelevant to whether or not having a big house on loan is an "investment" that a TYPICAL person (not Jimmy... err... Warren Buffet) can benefit from. The typical person can never hope to benefit from such an arrangement because like I said, they are being lured into what seems like an appealing arrangement... The PRACTICAL interest on the home loan is less than the APPARENT interest on say, a B rating bond. But the bond is unsecured and therefore given enough generations will eventually default, and the home loan is secured so you'll never get to make off with the money. For this reason (and a few others), the fiscally sound decision for an individual is to live in the smallest possible house... which WAS obvious to everyone until the idea that Romkey proposes started floating around without anyone ever having done a good analysis of it... It just plain doesn't work, and won't. Sure, there is the odd fellow out there who can make it work, but in that case we are talking about the type of person who can make ANYTHING work. It's a variation on the old idea... "Borrow money from someone else at low interest, and then loan it to a third party with the goal of making more interest than you are paying...". When it is presented like that it is obvious that it isn't going to work. But what happens instead is that people start talking about the tax benefits of the interest payments on the home loan... and now it gets too sticky for most people to plow through. The key is realizing that you PAY taxes on any money you earn on investments, so the decrease in effective interest % you experienced by getting a tax deduction on the loan is approximately equal to the decrease in effective interest % you experience by having to pay taxes on your capital gains. So at this point you are betting that YOU have more financial sense than the individuals who are issuing mortgage notes... you are claiming you can get a better return than they can. If you genuinely can, the scheme will work. But does the typical man on the street have more investment skill than the bank? HELL NO! What happens is that you CAN find higher rate returns than what you are paying on the loan, but this is a pipe-dream when you realize that you are going to have to loan the money to a less savory third party in order to out-do the interest that you are paying, and therefore there is a risk of the loan defaulting. I know a fellow who had income of around $300,000 a year (interestingly as a chemical engineer... kind of strange) who fell into a variation on the trap by playing with options. He was making loads of cash every month and then one month... I acknowledged that it isn't only a financial decision. The psychology of the situation is that the human mind thinks that the life-span is much shorter than it really is, and therefore people have a tendency to make decisions with short-term benefits but which cause long-term harm. Loans of any sort other than business loans are intended to exploit this fault in the human neuro-cognitive system. Now if you want to talk about how you can fudge the system through investing STUDENT loans, then I can agree with you, because you pay like 5% and the loans aren't secured. ;). It's illegal though. | When purchasing an automobile, what has your method of payment been? |
| 58 | And it doesn't bother me. Take the damn loans. Le' Chatlier's principle dictates that the equillibrium of the Supply/Demand markets will be restored even in the presence of additional borrowers... by an increase in interest rates which will attract more investors. As an investor, this will benefit me. In fact, fudge it, I encourage you to take out EVERY LOAN imaginable. Please. It's for your own good. | When purchasing an automobile, what has your method of payment been? |
| 59 | I know everybody can't be like me, Anon, but at least the other people who were tormented by this fact sought professional help... | When purchasing an automobile, what has your method of payment been? |
| 60 | And as long as we are on the subject, you should avoid leaving personally identifiable verbal patterns in your anonymous comments if you don't wish to betray your identity. | When purchasing an automobile, what has your method of payment been? |
