| paying off my house....good idea?? |
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go2self
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Pay off your house in full, if you need security take out a HELOC and only use it if you need.
With 80% equity available, even if income stops you have cash in the bank (your house) that you can still tap into.
If you have $100,000 today, the same $100,000 would be worth only $50,000 in 15 years. Inflation eats the rest. A retirement account must realistically adjust for inflation.
Even if you sell your property, what could you buy for that same amount?
Answer - you couln't even buy the property you just sold unless you are able to time the sale at the top of the market, then wait for the market to slow and turn down prices to where it was.
hmmm... has that ever happened?
You got the right idea...900 per month invested today and every month thereafter, will build that nestegg and with emergency funds in the form of a standby HELOC how can you lose?
Time is our most volatile resource that if not used immediately is lost instantly
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Fri Oct 13, 2006 4:18 am |
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mxjbt
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I would suggest reading Missed Fortune 101 by Andrew R. Douglas. He shows you how to use your house as a cash cow. Never leave more than 20% equity in your home. He also explains 401k's and Government Qualified plans. I'm completely confused as to why someone would invest in a 401k unless they are getting matched dollar for dollar. He gives numbers to back up his ideas for all you mathematical genius'. Read the book!!!
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Sun Nov 19, 2006 12:34 pm |
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go2self
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yeah... but all this works only if you have the cash flow to cover payments as well as unforeseen events.
"No doubt some can do better, and the actual result would be somewhere in between. The only thing certain is that most people will be disappointed, perhaps disastrously, with the consequences of exchanging home equity or tax-deferred retirement accounts for life insurance."
see whole review
Time is our most volatile resource that if not used immediately is lost instantly
Last edited by go2self on Mon Nov 20, 2006 7:59 am; edited 1 time in total |
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Mon Nov 20, 2006 12:34 am |
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mxjbt
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hence taking the equity out where its safe and liquid. A house thats paid off and goes thru what happened in Raleigh NC a week ago will be gone. If equity is in the house, when the house goes the equity is lost. Someone who has the equity liquid can rebuild the house. A paid off house with no cash on hand means you have paid into the home to pay it off and have nothing to show for it.
This covers your cash flow and unforeseen events.
Seeing how the above reviewer missed the entire concept of percentage rates you are actually paying and getting in return is disturbing. How can you say something doesn't work when you miss the very first part of the equation? I do not think his statements are credible since he missed such an easy concept as soon as it got started.
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Mon Nov 20, 2006 12:52 am |
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go2self
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quote:
Originally posted by mxjbt
Seeing how the above reviewer missed the entire concept of percentage rates you are actually paying and getting in return is disturbing. How can you say something doesn't work when you miss the very first part of the equation? I do not think his statements are credible since he missed such an easy concept as soon as it got started.
Please read this independent review and factor in capital gains and other investments costs to get actual numbers versus hypothetical.
Time is our most volatile resource that if not used immediately is lost instantly
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Mon Nov 20, 2006 8:03 am |
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mxjbt
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You may need to point this out to me cause he's talking about Universal life which barely outpaces inflation. Using this vehicle as his example to explain how Douglas' approach doesn't work is misleading. For someone who doesn't know the levels of insurance this makes all products using Universal in its title to yield low percentage rates. So what am I missing here?
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Mon Nov 20, 2006 8:30 am |
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mxjbt
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An EIUL would work cause yuo would never lose your principal. Since its been performing on avg 12% this far outpaces inflation and mortgage rates. Its currently at 10.5%. For example, if you have a $2000/mth mortgage, for the 1st 10 yrs you are mostly paying interest, right? So $1600 would go to interest and $400 would go to principal. When you send that $400 to the bank what rate of return do they give you? Nothing, right? It would be awesome if they did though. So what if you take that $400 and put it into an account that earns 8, 10, 12%. Are you going to pay the house off quicker if the $400 is making money instead of going to the bank?
A common misconception with the EIUL is that the monthly premiums continue to rise as you get older. I am 30, non smoker and in good health. My monthly premium for a $500k policy is $267/mth. Since I started this early, at age 30, my premiums are now FIXED for the life of the policy. I need insurance regardless of what I do with the home. SO I pay my premium and put the principal that I was paying to the bank ($400) into the cash value side and getting 8, 10, 12%. That money will grow and will be worth more down the road where I can then pay off my home in 15-18yrs tax free. Make sense? I am already paying my premium monthly so that extra $400 in principal I put into the cash value is untouched by insurance costs. It grows tax free (as long as I don't cancel).
From what I read of the independent review this entire concept was misrepresented so now its ALWAYS a negative.
Any ?'s or disagreements?
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Mon Nov 20, 2006 11:58 pm |
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coaster
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With a level-premium policy, you pay more than the cost of the insurance up front, you pay less than the cost of the insurance at the end. Two things to keep in mind about that: first is that the cash value builds more slowly, because more comes out of the policy to cover the insurance and commissions at the beginning; second is who's most likely to benefit: the insured or the insurer? (ie it's a certainty that the insurer gets the higher premiums in the beginning; but it's uncertain the insured might get cheaper cost of insurance toward the end -- it's more likely he'll be dead or have cancelled by that point.)
~Tim~
Eye Candy : Why Whimsy
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Tue Nov 21, 2006 12:16 am |
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mxjbt
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Correct, it builds slower if you do it that way. But what Douglas suggests is put in idle equity dollars in the account. Now does $100k compound quicker than $267/mth? Yes. 100k to 200k to 400k to 800k to 1.6m to 3.2m! Regardless. I need insurance. Term, all my money is gone...definitely 100% for the insurer. Term you pay less in the beginning and more at the end. I personally don't have a problem paying more now when I'm actually working and paying less in the future when I'm not. So a portion of my premium is going to cash value and the other to the insurer but when I put in extra it goes to cash value.
A female friend of mine is 20yrs old in perfect health. She pays $100/mth. Yeah she could get term for $5.47/mth but can she get term at age 65 for $100/mth? Its a long term thing. If she waits til 40 to start the policy it is more expensive. She 's planning ahead while she's young so she doesn't have to think about it when she's retired. An EIUL is not a get rich quick scheme. It is a very effective retirement vehicle if used correctly.
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Tue Nov 21, 2006 12:47 am |
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GotGoalz
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i just paid my home off last week and it is a great feeling!
now... major questions was never asked of the thread starter:
what kind of loan do you have, and how far along are you into the loan?
what a lot of people don't realize is, the banks are scam artists! they get their money in a mortgage loan at the beginning.
as many of you guys already know, a fixed rate mortgage is "front end loaded" with interest. so the first few years of the loan is practically all interest.
if someone has a monthly principlal and interest payment (excluding insurance and taxes) of $1,000, in the first year of the loan, about 100 dollars goes to the principal and 900 goes towards interest!
i was 4 years into a 20 year fixed loan and i saved almost $90,000 by paying it off early!
so i would say, it depends of what kind of loan he has and how far into the loan he was to make the smartest descision.
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Tue Mar 27, 2007 1:56 pm |
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coaster
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Congratulations on paying off your mortgage!! That's got to be an especially good feeling in these times when news about foreclosures is often on the news.
~Tim~
Eye Candy : Why Whimsy
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Tue Mar 27, 2007 2:11 pm |
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GotGoalz
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thanks tim.
i have a great sense of peace knowing that it's behind me and now we're gonna have about 2 k per month to save and invest for our retirement!
i love this forum! 
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Wed Mar 28, 2007 1:47 am |
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